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FDI in Jamaica
By Jeraurd Richardson
Econ 340-02 10:00-10:50 am MWF
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Background Info: Jamaica’s History
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The very first people to come to Jamaica were the Arawaks
and they were from Venezuela
The discovery of Jamaica was credited to Columbus but the
Arawaks were their on the land first
When Columbus returned to the island for his second voyage,
the Arawaks vanished after 70 to 80 years, which was due to
the diseases such as smallpox and etc.
Majority of the natives passed away after the Spanish arrived
and the ones that didn’t, they were tortured and threatened by
Columbus and his men
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Background Cont’d:
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After Columbus and in about 1510, the Spanish Europeans
took over Jamaica and the Spanish ruler at the time, was Juan
de Esquivel and he treated the Jamaicans worse than
Columbus did
The Spanish inhabited an area in the vicinity of St. Ann’s Bay
and molded it into a settlement named New Seville
The townspeople had to relocate because of the region’s
climate and marsh conditions and the townspeople then settled
into a present day Spanish Town
Now none of this city remains anymore, it has rotted away
after years of neglect and disuse and nowadays Jamaica is an
independent country and has been ever since 1962, they gained
their full independence within the British Commonwealth
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Background Info Cont’d:
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Nowadays Jamaica is an independent country and has been
ever since 1962, they gained their full independence within the
British Commonwealth
They went through deteriorating economic conditions in the
1970s, which led to recurring violence and a drop off in
tourism
The elections of 1980 witnessed the democratic socialists
voted out of office. Political violence tarnished elections
during the 1990s
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Geography:
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Located: Caribbean and the Caribbean Sea, south of
Cuba
Jamaica’s total area is 10,991 sq km and the land area is
10,831 sq km and the water area is 160 sq km
Jamaica’s land area is slightly smaller than Connecticut
Climate: Tropical, it is also hot and humid
Current Environment Issues: Heavy rates of
deforestation; coastal waters polluted by industrial
waste, sewage, and oil spills; damage to coral reefs; air
pollution in Kingston results from vehicle emissions
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Geography:
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Geography:
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Demographics:
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Population: 2,713,130
Percentage Ethnic Groups: Black 90.9%, East Indian 1.3%,
white 0.2%, Chinese 0.2%, mixed 7.3%, other 0.1%
Percentage of Religions: Protestant 61.3% (Church of God
21.2%, Baptist 8.8%, Anglican 5.5%, Seventh-Day Adventist
9%, Pentecostal 7.6%, Methodist 2.7%, United Church 2.7%,
Brethren 1.1%, Jehovah's Witness 1.6%, Moravian 1.1%),
Roman Catholic 4%, includes some spiritual cults 34.7%
Languages: English and patois English
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Government:
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Government: Constitutional parliamentary democracy
Capital: Kingston
Jamaica received their independence on August 6, 1962 from
the UK and they adopted their constitution the same date also
Jamaica’s legal system is based on English common law but it
has not accepted compulsory ICJ jurisdiction
Chief of State: Queen Elizabeth II and she has been ever since
February 6, 1952
She is represented by Governor General Sir Howard Felix
Cooke and has been ever since August 1, 1991
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Gov’t. Cont’d. :
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Head of government : Prime Minister Percival James Patterson
and has been ever since March 30, 1992
The cabinet which is appointed by the governor general on the
advice of the prime minister and in elections the monarch is
hereditary; the governor general is appointed by the monarch
on the recommendation of the prime minister; following
legislative elections, the leader of the majority party or the
leader of the majority coalition in the House of
Representatives is appointed prime minister by the governor
general; the deputy prime minister is recommended by the
prime minister
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Economy:
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Jamaica’s economy is heavily dependent on services, which
now account for 70% of GDP and the country continues to
obtain most of its foreign exchange from tourism, transfer of
funds, and bauxite/alumina.
A global economic slowdown happened, particularly after the
terrorist attacks in the United States of America September 11,
2001
Since then they’ve had an underdeveloped economic growth
but the economy bounced back moderately in 2003, with one
of the best tourist seasons on record today
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Economy Cont’d. :
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But the economy still faced serious long-term problems such
as high interest rates; increased foreign competition; a
pressured, sometimes sliding, exchange rate; a sizable
merchandise trade deficit; large-scale unemployment; and a
growing internal debt, the result of government bailouts to
ailing sectors of the economy
The ratio of debt to GDP is close to 150% and inflation is
formerly a bright spot and is expected to remain in the double
digits
Depressed economic conditions have resulted into increased
civil unrest, including gang violence that was heightened by
the drug trade
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Economy Cont’d. :
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In 2004, the government of Jamaica faced the difficult
prospect of having to achieve fiscal discipline in order to
preserve the debt payments while simultaneously attacking a
serious and growing crime problem that is hindering economic
growth in Jamaica
Jamaica’s purchasing power parity is $10.61 billion which is
the most current since 2003
Jamaica’s GDP real growth rate is 1.9% and their GDP per
capita and purchasing power parity is at $3,900 which is most
current since 2003
Jamaica’s unemployment rates stands at 15.9% which is the
most current as of 2003
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Economy Cont’d. :
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The Budget: Revenues $2.596 billion, and Expenditures
$3.111 billion, which include Capital Expenditures of $236
million
Public debt: 145.6% of GDP
Agriculture products: Sugarcane, bananas, coffee, citrus, yams,
vegetables, poultry, goats, milk, crustaceans, and mollusks
Money Making Industries: Tourism, bauxite/alumina, textiles,
agro processing, wearing apparel, light manufactures, rum,
cement, metal, paper, chemical products, and
telecommunications
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Economy Cont’d. :
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Current Account Balance: $842 million which is the most
current as of 2003
Export: $1.355 billion f.o.b is most current as well
Export Commodities: Alumina, bauxite, sugar, bananas, rum,
coffee, yams, beverages, chemicals, wearing apparel, and
mineral fuels
Exporting Partners Percentage: US 29.6%, UK 11%, Canada
10.8%, France 7.9%, Norway 6.8%, Germany 6.2%, China
6%, and Netherlands 4.4% which is the most current since
2003
Imports: $3.265 billion f.o.b as of 2003
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Economy Cont’d. :
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Import Commodities: Food and other consumer goods,
industrial supplies, fuel, parts and accessories of capital goods,
machinery and transport equipment, construction materials
Import Partner By Percentage: US 39.8%, Trinidad and
Tobago 9.7%, Germany 5.6%, Venezuela 4.5%, France 4.5%,
and Japan 4.2%
Currency: Jamaican dollar (JMD)
Exchange Rates: Jamaican dollars per US dollar 57.7409 in
2003, 48.4159 in 2002, 45.9962 in 2001, 42.7011 in 2000, and
39.0435 in 1999
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Transnational Issues:
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International Disputes: None
Illegal drugs which are a major transshipment point for
cocaine from South America to North America and Europe;
illicit cultivation of cannabis; the government has an active
manual cannabis eradication program; corruption is a major
concern though; substantial money-laundering activity;
Colombian narcotics traffickers favor Jamaica for it’s illicit
financial transactions
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(FDI) Foreign Direct Investment
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Is among a small number of countries in the region, which
have experienced growth in Foreign Direct Investment (FDI)
in 2003
Top 3 Investors: National Assets Recovery Services, Iberostar,
and Verizon Global Solutions
Top 3 Destination Sectors: Hotels, tourism and leisure, real
estate, and financial services
Top 3 Business Functions: Construction, customer support
centre, and manufacturing
Top 2 Source Countries: US and Spain
World Investment Report 2002 ranked Jamaica 2nd in
CARICOM, and 5th in the Latin American and Caribbean
region in Foreign Direct Investment (FDI) inflow performance
in 2001
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(FDI) Foreign Direct Investment Cont’d:
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The report cites that of the 140 United Nations (UN) member
countries, ranging from developed nations such as the United
States to developing economies like Rwanda, Jamaica was
ranked 26th overall in attracting foreign investment inflows,
according to JAMPRO
The increase is very significant because a decade ago they
were ranked 33rd
The World Investment report showed that of all the countries
in the Latin American region, Jamaica was ranked 9th in
outward FDI flows in 2001, outperforming countries such as
Argentina, Brazil, Bermuda, Costa Rica and the Dominican
Republic
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(FDI) Foreign Direct Investment Cont’d:
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Outward FDI flows increased from an average of US
$51million in 1990 through1995, from US $89million in 2001,
and it peaked in 1999 at US $95million
During 2003, Jamaica recorded a record level of FDI inflows,
a trend that shows no sign of slowing, particularly in the
tourism sector
Jamaica is a key member of the Caribbean Common Market,
which is strategically located just 1000 miles from the US and
it provides investors with access to both of these markets
A range of goods produced by Jamaica also enjoys
preferential access to the EU
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(FDI) Foreign Direct Investment Cont’d:
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Free Trade Area of the Americas agreement in 2005 will open
up markets across these regions
United Nations World Investment Report in 2004 reported that
Latin America and the Caribbean last year, experienced a
decline in FDI flows for the fourth consecutive year, with
inflows falling by three percent to $50 billion, the lowest since
1996
Jamaica remained one of the few regional economies, which
showed an overall growth in FDI flows over the last four
years, in addition to an increase of inflows for the 2003 period
over 2002
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(FDI) Foreign Direct Investment Cont’d:
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To help investors to capitalize on opportunities, Jamaica offers
a range of investor-friendly incentives, good infrastructure and
a highly skilled workforce
Improvements to infrastructure include the liberalization of the
telecommunications sector and substantial investment in the
Kingston Containerised Trans-shipment Port, a state-of-the-art
hub between North and South America
The road network has also been upgraded, stimulating
development in areas close to new routes
Jamaica has a long history of stable democracy and has one of
the most liberalized and modern regulatory environments in
the western hemisphere
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(FDI) Foreign Direct Investment Cont’d:
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There aren’t any constraints to capital flows in and out of the
country; exchange controls have been removed; and the
government has implemented legislation to protect the
integrity of the financial system
Investment Sectors: IT, tourism, agribusiness, manufacturing,
minerals and chemicals, and textiles
The Development Minister, Dr. Paul Robertson, spoke at the
UN report at JAMPRO’s headquarters on Trafalgar Road this
past September 23, 2004 and he pointed to statistics from the
Bank of Jamaica (BoJ), which showed that Jamaica attracted a
record FDI inflow of US$720.4 million in 2003 representing
an even greater amount than the preliminary estimate of
US$520 million
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(FDI) Foreign Direct Investment Cont’d:
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Dr. Robertson said that Jamaica, with its advantage of location,
had benefited from the global shift in FDI flows toward
services, benefiting from investment in tourism, information
and communication technology
He credited the country’s ability to attract growth in these
areas, to government’s initiatives to liberalize the
telecommunications sector, the privatization of state-owned
companies, growth in the tourism industry and putting
incentives in place to attract private capital.
“Our reality is that the service economy is our real economy,”
he stated.
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Conclusion Cont’d:
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Dr. Robertson maintained that the strength of the economy lay
in its geography, its location and closeness to certain markets
and its advances in the ICT and tourism sectors
He said that by 2010, tourism would be more evenly spread
across the island and also stood to be totally transformed based
on local and foreign investment
JAMPRO’s President Patricia Francis, announced that next
fiscal year, the country should begin to benefit from the
European Union-funded private sector development
programme, which would see a total of 28 million Euros being
spent over a three-year period to develop the services sector
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Conclusion Cont’d:
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Furthermore, she said, a service sector survey has been
commissioned to provide critical information on strategies to
be adopted to ensure maximum impact
According to the “capacity theory” in economics that projects
future investment based on the current share of capital stock to
output, this experience presents Jamaica’s future in attracting
FDI inflows into a positive light
The investment will provide for the implementation of various
sector development programmes and the employment of a
corporate finance broker, who will be charged with
restructuring domestic investment
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The End:
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