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JAMAICA
Karyn Gayle
[email protected]
March 4, 1999
I.
STATISTICAL OVERVIEW 1
A. Geography
Land area
Major cities2
Climate
B. Demography
Population
Population growth rate
Fertility rate
Mortality rate
Life Expectancy
C. Political
Type of government
Party or person in power
D. Economic
Currency
Exchange rate (per US$)3
Fixed/Floating exchange rate
GDP PPP (US$)
GDP per capita (US$)
GDP growth rate
Inflation rate4
Unemployment rate
Major imports
Major trading partners: imports
Major exports
1The
10,830 square kilometers; slightly smaller than
Connecticut
Kingston, Spanish Town, Portmore, Montego Bay
Tropical; hot, humid; temperate interior
2,634,678 (July 1998 est.)
0.7% (1998 est.)
2.33 children born/woman (1998 est.)
5.45 deaths/1,000 population (1998 est.)
Men: 73.01 years
Women: 77.84 years
Parliamentary democracy
Prime Minister Percival James (P.J.) Patterson
I Jamaican Dollar (J$) = 100 cents
US$1 = J$37.5100 (March 4, 1999)
Floating
$9.5 billion (1996 est.)
$3,660 (1996 est.)
-1.4% (1996 est.)
12% (1997 est.)
16% (1996 est.)
Machinery and transport equipment, construction
materials, fuel, food, chemicals
US 52%, Trinidad & Tobago 8%, Japan 6%, UK 4%,
Canada 3%
Alumina, bauxite, sugar, bananas, rum
Central Intelligence Agency, The World Factbook”, http://www.odci.gov/cia/publications/factbook/jm.html
2
The Statistical Institute of Jamaica, “Latest Information at a Glance”, http://www.statinja.com/Facts.htm
3
The Universal Currency Converter, http://www.xe.net/currency/, March 4, 1999
4
Jamaica: Economics Policy and Trade Practices Report (1997),
http://www.state.gov/www/issues/economic/trade_reports/latin_america97/
2
Major trading partners: exports
E. Socio-Cultural
Major religions
Literacy rate
Languages spoken
Ethnic groups
II.
US 37%, UK 13%, Canada 12%, Netherlands 9%,
Norway 7%
Protestant 61.3%, Roman Catholic 4%, Other,
including some spiritual cults 34.7%
Total Population: 85%
Male: 80.8%
Female: 89.1% (1995 est.)
English, Creole
Black 90.4%, East Indian 1.3%, White 0.2%, Chinese
0.2%, Mixed 7.3%, Other 0.6%
Current Issues
Economy
Jamaica is essentially an import-oriented economy with imports of goods and services representing approximately
two-thirds of GDP.5 Its major industries are tourism (13.3% of GDP); bauxite/alumina (9.2 percent); and
manufacturing (such as apparel, sugar processing, beverages, and tobacco – 18.1 percent). These three sectors
combined accounted for about 76% of the country’s foreign exchange earnings. Although the manufacturing sector
remains crucial to the Jamaican economy, about 58 percent of the workforce are employed in the service sector,
contributing to about 76.7 percent of GDP. Agriculture accounts for 8% of GDP, and employs 23 percent of the
workforce. Recently, the manufacturing sector has begun to contract; some factors that contributed to this
occurrence are as follows:

The small size of the Jamaican economy

Relatively high production costs due to high domestic interest rates

Lower-cost foreign production (particularly in apparel manufacturing)
Tourism is Jamaica’s most important industry, and has been the island’s primary foreign exchange earning industry
since 1983.6Tourism revenues exceed $US1 billion yearly, and almost 2 million visitors visit Jamaica each year. 7
5
Jamaica: Economic Policy and Trade Practices Report (1997),
http://www.state.gov/www/issues/econmomic/trade_reports/latin_america97/
6
7
NCB Group: Jamaican Financial Sector, “Overview of Tourism in Jamaica”, http://www.jncb.com/NCB-Financial-Sector.htm
3
Massive upgrades in tourism infrastructure are ongoing, and room capacity is being expanded in the hospitality
industry. There is potential for growth in such tourism segments as ecotourism, health tourism, heritage tourism,
attraction tourism, and entertainment/culture. Expanding into these segments would constitute an upward movement
along the industry product life cycle. Special incentives are also available for potential investors in tourism under
the Hotel Incentives Act.8
Since 1992, the current government under Prime Minister P.J. Patterson (PNP) has done much to eliminate most
price controls, streamline tax schedules, and privatize government enterprises. 9 In addition, the government has
instituted tight fiscal and monetary policies to help curb inflationary pressures and stabilize the exchange rate. The
current exchange rate of 12% seems dangerously high by western standards, but considering that the inflation rate in
1992 was over 80%,10 it becomes obvious that substantial improvements have been made. The tight fiscal and
monetary controls have resulted in a significant economic slowdown for the country’s economy. The nation
experienced negative growth in 1996 and 1997. This trend is expected to continue due to the following causes 11:

High interest rates

Increased foreign competition

Weak financial health of many businesses

Shift in investments to short-term, high-yield instruments

Pressured exchange rate

Widening trade deficit

Growing level of internal debt
Jamaica’s financial sector has experienced a multitude of troubles in recent years. The government has
spent over US$500 million to close or take over three financial groups and to “shore up” four insurance companies. 12
Reasons for these bank and insurance failures include the anti-inflationary monetary policies, revaluation of the
currency, the lack of deposit insurance, ineffective regulatory controls on financial entities, as well as overinvestment in real estate.13 In addition, the practice of “connected lending” allowed persons connected with the
financial institution access to unsecured credit. This practice also contributed to the financial crises of other
countries, such as Malaysia and Indonesia.14
8
NCB Group: Jamaican Financial Sector, “Overview of Tourism in Jamaica”, http://www.jncb.com/NCB-Financial-Sector.htm
9
The Central Intelligence Agency, The World Factbook”, http://www.odci.gov/cia/publications/factbook/jm.html
10
Vogel, Jr., Thomas T. “International: Jamaica is Hit Hard by a Financial Crisis; Ill-Conceived Economic Reforms
Undermine Banks, Insurers”. Wall Street Journal, April 29, 1997, 19.
11
The Central Intelligence Agency, The World Factbook”, http://www.odci.gov/cia/publications/factbook/jm.html
12
Vogel, Jr., Thomas T. “International: Jamaica is Hit Hard by a Financial Crisis; Ill-Conceived Economic Reforms
Undermine Banks, Insurers”. Wall Street Journal, April 29, 1997, 19.
13
Economic Trends and Outlook, “Principal Growth Sectors”,
http://infoserv2ita.doc.gov/tcc/Interne…/e0a7468be2897866852565590071331c?OpenDocument
14
Wessel, David. “Waiting to explode: Next Economic crisis May Stem from Woes of the world’s Banks; Experts Cite a Long
List of Shaky Institutions, Mostly in Poorer Nations; The Perils of Rapid Change”. Wall Street Journal, May 7, 1997, 1.
4
The financial crisis ahs spawned a “crisis” of confidence in Jamaica. To combat this problem, Jamaican legislators
passed a measure to provide deposit insurance of US$5,700 per account.15 Again, when measured by American
standards, the figure seems tiny, but it is estimated that the insurance will adequately cover approximately 97% of all
bank accounts in Jamaica.16 In addition, corrective legislation to enhance monitoring and regulation of the financial
sector is under consideration. These measures, though reassuring, have diverted resources, which would have been
used to promote growth.17
Political
Jamaica essentially has a two-party political system, consisting of the People’s National Party (PNP) and the
Jamaican Labour Party (JLP). The PNP is traditionally socialist in orientation, and supported close ties with Cuba.
The JLP supports free enterprise in a mixed economy. However, since being elected as Prime Minister in 1992, P.J.
Patterson has helped move the PNP toward free-market policies such as privatization and trade liberalization.
Elections are held by popular vote, and are generally perceived to be fair, although small outbreaks of violence and
accusations of corruption occasionally mar the event.
Socio-Cultural
In Jamaica, there is a prevailing belief that schooling is the only way to reduce poverty and increase social mobility.
This has lead to a large, government-sponsored investment in education. In fact, expenditures on education comprise
the largest single component of the government budget after debt services. The average share of the government’s
expenditures on education was roughly 13% in the 1990s.18 Jamaica’s educational system is patterned after the
British system. (Jamaica achieved independence from Britain in 1962, after over 300 years of colonization.) It has a
history of educational achievement, and schooling indicators such as gross enrollment, adult literacy, and female
enrollment are consistently higher than many other countries with similar levels of per capita GNP. 19 Primary
enrollment is universal, but access to the best secondary is competitive and limited. Jamaica’s secondary schools can
be divided into three tiers; scores on the Common Entrance Examination (CEE) determine entry. The lower two
tiers provide a mostly vocational training; students from these tiers generally do not attend a university. The third
tier secondary schools accept the best students and are, as a result, the most prestigious. These schools prepare
15
Deveney, Paul J. “International: World Watch”. Wall Street Journal. March 30,1998, 13.
16
Deveney, Paul J. “International: World Watch”. Wall Street Journal. March 30,1998, 13.
17
Economic Trends and Outlook, “Principal Growth Sectors”,
http://infoserv2ita.doc.gov/tcc/Intern…/e0a7468be2897866852565590071331c?OpenDocument
18
Handa, Sudhanshu. “The Determinants of Teenage Schooling in Jamaica: Rich vs. Poor, Females vs. Males”. Journal of
Developmental Studies, April 1996, v32, n4, 554.
19
Handa, Sudhanshu. “The Determinants of Teenage Schooling in Jamaica: Rich vs. Poor, Females vs. Males”. Journal of
Developmental Studies, April 1996, v32, n4, 554.
5
students for the exams required to pursue tertiary schooling, although it has been alleged that these schools have an
urban bias, and that admission is largely dependent on income levels and parental education.20
It has also been stated that the secondary system perpetuates social inequalities and in fact, reduces social mobility.
A system that breeds inequality is detrimental to Jamaica, whose income distribution is among one of the most highly
skewed in the world. Over thirty percent of households live below the poverty line; poverty is generally
concentrated in the rural areas, where over half of the population lives.
20
Handa, Sudhanshu. “The Determinants of Teenage Schooling in Jamaica: Rich vs. Poor, Females vs. Males”. Journal of
Developmental Studies, April 1996, v32, n4, 554.
6
III. Important Issues in Doing Business
Investment Climate21
Jamaica welcomes foreign investment, and foreign investors are encouraged to invest in almost any area of the
economy. Although joint ventures are the most preferred mode of entry, 100% foreign ownership is allowed in every
sector except insurance, where individual cases of investors wishing to own over 49% are assessed on their own
merit. Government is considering lifting this restriction, but the current faltering of the financial sector may delay
this process.
There are no restrictions on the repatriation of profits. Also, the government of Jamaica offers many attractive
incentives to investors. These incentives are typically granted to companies that meet any of the following criteria:

Earning foreign exchange

Using Jamaican raw materials

Creating employment opportunities

Introducing new technology
Tax incentives include tax holidays and the duty-free entry of raw materials and capital equipment for
approved incentives periods. Businesses locating in lesser-developed regions of the island are also eligible for tax
holidays.
Since 1991, the government eliminated foreign exchange controls to allow for free competition in the
foreign exchange market. The only remaining restriction is that all foreign exchange transactions must be done
through an authorized dealer.
21
“Investment Climate”, Trade Compliance Center,
http://infoserv2.ita.doc.gov/tcc/Interne…/36e60402f276bca18525655590072d7e7?OpenDocument
7
Attractive Sectors for Investment22
As stated earlier, Jamaica is an import-oriented economy, due to its small size, among other factors. Foreign
exporters of goods and services have the potential to earn substantial profits in industries where there is no local or
significant third-country competition. these industries include:

Chemicals and related products

Machinery and transport equipment

Manufactured goods and raw materials (such as paper products, furnishings, telecommunications, steel,
and iron
Other attractive sectors include automobiles, pharmaceuticals, computers, and fast foods. Fast food franchises such
as McDonald’s, Burger King, KFC, Pizza Hut, and TCBY Yogurt have been extremely successful in Jamaica.
Culture/Common Business Practices
Jamaican culture, though truly unique, has been shaped by many influences. Many cultural behaviors are
“borrowed” from its many influences. As previously stated, Jamaica is a former British colony; this British
influence causes Jamaicans to be a little more formal than North Americans. On the first meeting, a friendly
“Good…morning/afternoon/evening,” will earn more response and respect than a casual “Hi”. However, after
businesspeople are acquainted, Jamaicans respond quite favorably to informality. 23 Personal contacts are very
important when attempting to develop positive working relationships. Certain similarities to North American culture
also exist because of the proximity, common language, and strong influence; North American businesspersons are
often pleasantly surprised to learn that strategies that prove successful in North America are generally used
successfully in Jamaica.24 In addition, most of the top mangers in industry have studied abroad; this experience
helps to create smoother working relationships between Jamaican managers and foreign businesspeople. Jamaicans
have a reputation for being warm and affable; this, coupled with the strength of the tourism sector, points to a
workforce that is well suited to the service sector.
22
“Leading Sectors for U.S. exports and Investment”, Trade Compliance Center,
http://infoserv2.ita.doc.gov/tcc/Interne…/0300c0bfe01ba6258525655900719024?OpenDocument
23
“Business Travel”, Trade Compliance Center,
http://infoserv2.ita.doc.gov/tcc/Interne…/f5909c69c04d77d852565590073909c?OpenDocument
24
“Marketing US Goods and Services”, Trade Compliance Center,
http://infoserv2.ita.doc.gov/tcc/Interne…/e2b3af5f3eac5e598525655900716d13?OpenDocument
8
Normal business hours are 8:30 a.m. to 5:00 p.m., Monday through Thursday, and are 8:30 a.m. to 4:00 p.m. on
Fridays. Government offices are closed on Saturday and Sunday. Most businesses are open on Saturday, but few are
open on Sunday. A 40-hour workweek with 8-hour days is standard. The government and society are highly
intolerant of the practice and use of child labor, and children under the age of twelve are prohibited from
employment (although some children are observed peddling goods and services). 25
Legal26
Foreigners are advised to retain a local attorney in the early stages of a business venture to ensure compliance with
local laws. A lawyer can be obtained by contacting the Jamaica Bar Association.
Other “Tips”
In Jamaica, it is useful to remember:

Jamaicans are usually prompt in business environments, but do not emphasize promptness in their leisure time.

Informal class systems still exist; social mobility is possible, but difficult.

Jamaicans are extremely fond of the arts and entertainment; business contacts are often entertained to build
business relationships.

“Higglers”, or street vendors can be found on most urban streets. Expect to be approached often.

Avoid stereotypes. All Jamaicans do not look like Bob Marley.
25
“Investment Climate”, Trade Compliance Center,
http://infoserv2.ita.doc.gov/tcc/Interne…/36e60402f276bca18525655590072d7e7?OpenDocument
26
“Marketing US Goods and Services”, Trade Compliance Center,
http://infoserv2.ita.doc.gov/tcc/Interne…/e2b3af5f3eac5e598525655900716d13?OpenDocument
9
Bibliography
“Business Travel”. Trade Compliance Center.
http://infoserv2.ita.doc.gov/tcc/Interne…/f5909c69c046d77d852565590073909c?OpenDocumen
t
“CIA World Factbook”. Central Intelligence Agency.
http://www.odci.gov/cia/publications/factbook/jm.html
Deveney, Paul J. “International: World Watch”. Wall Street Journal. March 30, 1998, 13.
“Economic Trends and Outlook”. Trade Compliance Center.
http://infoserv2.ita.doc.gov/tcc/Interne…/e0a7468be2897866852565590071331c?OpenDocumen
t
Handa, Sudhanshu. “The Determinants of Teenage Schooling in Jamaica: Rich vs. Poor, Females vs. Males”.
Journal of Development Studies, 1996, v32, n4, 554.
“International Business Practices in Jamaica”.
http://smartbiz.com/sbs/arts/bpr40.htm
“Investment Climate”. Trade Compliance Center.
http://infoserv2.ita.doc.gov/tcc/Interne…/36e60402f276bca1852565590072d7e7?OpenDocumen
t
“Jamaica: Economic Policy and Trade Practices Report”.
http://www.state.gov/www/issues/economic/trade_reports/latin_america97/
“Leading Sectors for US Exports and Investment”. Trade Compliance Center.
http://infoserv2.ita.doc.gov/tcc/Interne…/0300c0bfe01ba6258525655900719024?OpenDocumen
t
“Marketing US Products and Services”. Trade Compliance Center.
http://infoserv2.ita.doc.gov/tcc/Interne…/e2b3af5f3eac5e5e598525655900716d13?Opendocume
nt
NCB Group: Jamaican Financial Sector.
http://www.jncb.com/NCB-Financial-Sector.htm
10
The Statistical Institute of Jamaica.
http://www.statinja.com/Facts.htm
Vogel, Jr., Thomas. “International: Jamaica is Hit Hard…” Wall Street Journal. April 29, 1997, 19.
Wessel, David. “Waiting to Explode: Next Economic Crisis…” Wall Street Journal. May 7, 1997, 1.
11