«Productive Development Policies in Jamaica Mónica Panadeiros Warren Benfield Inter-American Development Bank Department of Research and Chief ...»
E-Powering Jamaica 2012 has been adopted as the foundation for the ICT sector plan within the long-term development plan for Jamaica’s Vision 2030. It is being spearheaded by the Planning Institute of Jamaica (PIOJ). This new five-year NICT Strategy is the result of extensive consultations and background research, as recommended by major multilateral organizations.
The consultation effort included participation from industry leaders, government executives, planners, industry analysts, civil society, and the broader public, through direct interviews, electronic surveys, key influencers group meetings and round table discussions, and public forums held in Montego Bay, Ocho Rios, and Kingston. The background research undertaken consisted of the analysis of approaches used by several other countries in the development of their policies and strategies. The idea was to benchmark Jamaica’s unique approach against countries that are more or less parallel in a similar stage of economic and social development, such as Ghana and CARICOM partners Barbados and Trinidad and Tobago, those that have moved dramatically forward by leveraging the development opportunities presented by ICTs, such as Chile, Ireland, Malaysia and Singapore, well as more advanced economies, such as Canada and New Zealand.
The agreed objectives for the update project were to significantly increase the number of citizens that are educated and computer literate and improve their access to the ICT networks at affordable prices in order to generate more active use of the Internet for education, business development and public administration. The aim is to improve Jamaica’s position as a leader in the delivery of ICT-enhanced services and new investment opportunities within the Caribbean.
The Ministry was responsible for the Telecommunications Act 2000 which governed the liberalization of the sector.
It requires improving the access and ownership of computers throughout the society, enhancing Internet penetration by establishing a more widely dispersed ICT infrastructure and deep broadband penetration (in publicly accessible spaces, including government buildings and housing developments, libraries, post offices, schools, and cyber centers), ensure involvement of rural Jamaica and inner city communities in the implementation of the NICT Strategy with the creation of Community Access Points (CAPs), and promoting greater use of Free and Open Source Software (FOSS) across all sectors of society.
There are several interlinked strategic thrusts within this stratagem, including education and training, expansion and diversification of wired and wireless broadband networks, and the establishment of an optimal e-governance framework. This is in addition to the promotion of ebusiness and ICT industry development with the assistance of JTI, and the promotion and search for financing for the development of a National ICT Research and Innovation Centre.
Table 6. E-Powering Jamaica 2007-2012, Strategic Thrusts and Objectives
The Education and Training strategic thrust is positioned at the top to emphasize its fundamental importance. This prioritization is supported by feedback derived from the consultation process, where stakeholders emphasized the development of human capacity from pre-primary to tertiary levels and beyond, so as to cultivate a highly educated, well-trained workforce available to the ICT sector. The main policy goals in this area are to integrate computer education into the pre-primary, primary and secondary school curricula, encourage open access to learning materials in support of teachers and students, develop an integrated network to serve schools and other educational institutions, encourage public-private sector partnerships in ICT training and structure programs for industry, facilitate learning, and implement incentives to attract and retain highly trained IT specialists locally and from the Jamaican diaspora.
Education and Training, Network Readiness and Infrastructure Development (which refers to extending the reach and range of broadband wired and wireless network infrastructures), 48 and Legislative and Policy Framework (which seeks to build confidence in the secure use of ICT infrastructure and services by enacting and enforcing related regulations) 49 are considered the three most strategic thrusts. They that are cross-cutting and they represent areas of strategic development that should be successfully implemented and established in order to give rise to effective advancement in all other areas, such as promoting e-government, eBusiness and ICT Industry Development, research and innovation, 50 and supporting the building of Brand Jamaica in the digital world (Cultural Content and Creativity).
The strategies to achieve the goals under the policy in progress include reviewing tax and duty policies for ICT in order to attract major specialized corporations to invest in Jamaica, expanding ICT-focused business parks for major service providers, developing financial and non-financial incentives and resource pools for Jamaican FDI, and creating incentives for rapid adoption and use of new generation networks. The official consideration of the ICT sector as one of Jamaica’s top contributors to GDP leads to the adoption of a strategy-driven approach that focuses on the need to identify and deliberately promote key areas of ICT industrial development. These sub-sectors have been chosen to exploit indigenous capabilities and foster sustainable growth of a knowledge-based economy.
The Ministry of Energy, Mining and Telecommunications recently led the development of the revised draft Telecommunications Policy 2007 to provide an updated policy framework for the sector. The policy has declared as its mandate the establishment of an island-wide modern telecommunications network, universal service for all Jamaicans, and wide deployment of broadband services.
The Electronic Transactions Act 2006 was enacted in April 2007 to promote confidence and security in electronic transactions. The government is also developing other companion legislations to further enhance the development of the sector, including the Data Protection Bill and the Cyber Crime Bill.
It includes funding for the development of a National ICT Centre of Excellence, driven by collaboration between universities and colleges, private and public sector, local research and development institutions, and international partners.
E-Powering Jamaica 2012, coordinated by CITO, is being implemented in a decentralized manner through an effective partnership of the respective government ministries, departments, and agencies with businesses, educational and training institutions, and communities across the country, as well as with regional partners and programs including CARICOM, the IDB, CIDA and the World Bank. 51 The consensus view is that the most appropriate mechanism for the implementation, operation, and management of a government communications network is a PPP, following the model successfully applied by a number of countries including Canada, Chile, Singapore, and Trinidad and Tobago.
In sum, Jamaica has sought to identify new areas of competitive advantage in service exports, partially as a response to unfavorable prospects for traditional exports. One of the sectors identified for export development is ICT, as the size of the international information services market has grown, and Jamaica has already demonstrated significant potential in this area. Jamaica has been experiencing an explosion of interest from companies abroad as a preferred location for business process, customer contact and information technology outsourcing. This interest, due in part to natural comparative advantages, has also been facilitated by a deliberate government ICT strategy to develop capabilities in a wide range of services and to market and promote Jamaica as a premier location for offshore ICT services.
The government is committed to the development of a strategy for export growth in ICT, but at the same time it has indicated the need for a notable private sector involvement.
From a theoretical point of view, there is justification for promoting the use of ICT, especially in Jamaica. One argument is the presence of economy-wide externalities associated with this particular productivity-enhancing public good. In addition, Jamaica seems to have comparative advantages in ICT services. According to Rodriguez-Clare (2005), the best industrial policy entails the direct promotion of clustering in sectors in which the country has comparative advantages. Jamaica has emphasized strategic collaboration with the private sector concerning the design-related issues of the ICT promotion policy. This satisfied the most modern concept of industrial policy recommendations, as governments do not know what public inputs they need to provide (an “information problem” per Hausmann and Rodrik, 2008).
At present a number of ministries are developing ICT plans, jointly with CITO, including the Ministry of Education (E-learning) and the Ministry of National Security.
4.5. Export Promotion Export promotion policies have acquired a fundamental role in overall economic strategy and policy orientation in Jamaica. Export Free Zones (EFZ) represent one of the main instruments for this purpose (See Section 4.2). EFZs are generally defined as geographically delimited areas administered by a single body, offering certain incentives (generally duty-free importing and streamlined customs procedures, for instance) to businesses which physically locate within the zone.
In Jamaica, EFZs are governed by the Jamaica Export Free Zones Act of 1982. Before an enterprise can take advantage of the concessions made available by this act, it has to be registered in Jamaica, export at least 85 percent of its production outside the CARICOM area in the case of a manufacturing company and 100 percent in the case of non-manufacturing companies, conduct all transactions in U.S. currency, and be located within the free zone area.
The "free-zone" status enables manufacturers and service providers to benefit from the indefinite exemption from income tax on profits as well as import duties, licensing and quantitative restrictions, with customs procedures being reduced to a minimum. A special provision under this Act also permits the repatriation of foreign exchange by overseas investors to its parent company without any form of recourse on the part of the Jamaican government.
Incentives associated to EFZs also include location facilities. Approved activities are warehousing and storing, manufacturing, trans-shipment operations, exporting, importing, services operations, assembling, processing, refining, and merchandising.
Changes to this legislation introduced in 1996 permitted enterprises that are publicly managed free zones, free zones under the control of private sector development and management, and single entity free zones (SEFZ) outside the EFZ to apply for free zone status (that is, individual companies designated as free zones).
The first EFZ, Kingston Free Zone (784,000 square feet), was established in 1976. It was later followed by Montego Bay Free Zone (488,110 square feet), Garmex Free Zone (697,000 square feet), Cazoumar Free Zone 52 (70,000 square feet, created in 2000) and Portmore Free Zone. All zones, except the Cazoumar Free Zone, are publicly owned.
Perhaps the most notable trend over the past 15 years has been the growing number of privately owned, developed, and operated zones worldwide. Available data suggest that private zones are less expensive to develop and operate than their public counterparts, and yield better economic results (FIAS, 2008).
The Port Authority of Jamaica, in collaboration with the Ministry of Foreign Affairs and Foreign Trade, is presently looking for investors with the objective of creating a massive logistical center, including a free zone (Caymanas Multi-Purpose Industrial Park/ Caymanas Economic Free Zone). The EFZ will house business entities drawn from some of the key growth sectors of the Jamaican economy, namely, ICT), manufacturing and agro-processing, and creative industries. The Economic Free Zone will also house a research institute and business incubation centers.
The relevance of FTZ in Jamaica policy design is increasing as international trade liberalization advances. Traditional trade policy focuses on market access by guaranteeing preferential access to developed countries’ markets. As a consequence, Jamaica participates in
four main preferential schemes:
• Caribbean Basin Initiative (CBI): 28 Central American and Caribbean countries receive duty-free access to the U.S. market for a specified list of products;
• CARIBCAN: Commonwealth Caribbean countries receive duty-free access to the Canadian market for most products except textiles and apparel as long as they satisfy the specific requirements of rules of origin;
• Generalized System of Preferences (GSP): several industrialized countries allow for duty concessions to exports originated in developing countries. The magnitude of the duty concession and the number of countries covered vary among countries. Jamaican products are accorded GSP benefits by Australia, Austria, Canada, the Czech Republic, the European Union, Japan, New Zealand, Poland, the Slovak Republic and Switzerland; and
• ACP: Jamaica is member of the African, Caribbean and Pacific group of states that benefit from the Cotonou agreement with the EU. In the case of Jamaica covers trade in bananas, sugar and rum. These preferential trading agreements have been replaced by Economic Partnership Agreements, free trade areas that will enter fully into force in 2020. Trade liberalization is considered a major economic concern over the next years as many products –mainly from agricultural sector- are losing their preferential market access.
Smallness has important implications for export performance and the development of an export strategy. Small economies’ inability to reap benefits from economies of scale and scope leads to higher unit costs as a result of sub-optimal firm size, lack of complementary in tradable activities, domestic production of inputs, and inefficient spatial productive hierarchy. Due to their insularity, transport costs are higher per unit of traded goods than for other countries.
Moreover high transport costs constrain the development of productive activities such as agriculture and manufacturing that are dependent on imported inputs.