Country Brief JAMAICA by url15344

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									                                                                           Country Brief

                                                                             JAMAICA
                                                                          February 5, 2009


Highlights

Positive Trends

•   Jamaica is a democracy. Civil Liberties are respected and elections are free and fair.
•   The foreign investment framework is very liberal.
•   There has been an active privatization program that has fully or partially privatized
    many state companies.

Negative Trends
•   The large national debt is a great burden on the economy.
•   The current account deficit is very high.
•   High unemployment has resulted in a “brain drain.”


Geography

Jamaica is an island nation in the Caribbean that is located south of Cuba. It has a tropical
climate and is slightly smaller than Connecticut. The population is 2.804 million. The capital,
main port and the largest city is Kingston, which has a population of about 650,000. Arable land
accounts for 15.8 percent of the area of the country, 53.1 percent of the population lives in
urban areas and 31.3 percent of the country is covered by forests. There are 1,022 kilometers
(655 miles) of coastline and 10.0 percent of the land area is devoted to permanent crops.
According to the CIA Factbook, 32 percent of the population was under 15 in 2008, 7.4 percent
of the population was 65 years old or older and the median age was 23.4 years. UNDP data
puts the population growth rate at just 0.5 percent (estimate for 2005-2015). The time zone is
five hours behind Greenwich meantime. English is the official language. Jamaica is a former
British colony that received its independence on August 6, 1962.

Economic Overview

Distributive trade was the largest sector of the economy in 2007, accounting for 19.6 percent of
the total. Manufacturing was in second place with a 12.3 percent share, transportation storage
and communication represented 11.5 and government services were 11 percent. Agriculture,
forestry and fishing were just 5.2 percent. The services sector employs 64 percent of the labor
force, industry 19 percent and agriculture 17 percent.

The unemployment rate in April 2008 was 11.9 percent. The limited employment opportunities
has prompted a migration of people, particularly to the US, the UK and Canada in search of jobs
or higher paying employment. According to World Bank data, the stock of emigrants in 2005
was 1,037,599.


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Among the crops grown are limes, grapefruits, oranges, sugar cane, bananas, pineapple,
papaya, cocoa, coffee and yams. The major natural resources are bauxite, gypsum and
limestone. Tourism, bauxite mining, food processing, rum, cement, paper and chemical
products are the principle industries.

The economy rose at an annual rate of 1.3 percent between 1999 and 2008 (IMF estimate for
2008). This compares to annual increases of 0.9 percent for Haiti, 2.0 percent for Barbados and
5.4 percent for the Dominican Republic. According to the IMF, the per capita income in 2007
was $4,135, which was 39.5 percent above the level of 1998. This placed it 83 of the 179
nations and territories that the IMF compiles data for.

Energy Sector

Jamaica has no indigenous sources of coal, oil and natural gas. It consumes about 27 million
barrels of oil a year (73,973 barrels per day), a third of which is used by the bauxite/alumina
sector. Oil is responsible for generating 96.9 percent of electricity and hydro-power 1.6 percent.
Of the total energy requirement, oil provides 86.5 percent, biomass 12.2 percent, coal 1.0
percent and hydro, solar, wind and geothermal 0.3 percent.

In December 2006, the government announced the opening of offshore and onshore sites for oil
exploration. This was the third major attempt since 1955 to discover hydrocarbons. The
government offered a generous package of incentives to investors, including “the ability to
recoup production costs” and “defray tax and royalty obligations, before sharing profits with the
government.” However, the response by international oil companies was disappointing and no
oil or natural gas has been found.

To diversify its energy sources, the government announced at the end of January 2008 that it
will construct a liquefied natural gas facility. It is also involved in projects to develop alternative
energy resources. A 120 megawatt co-generation facility is being built that will run on petroleum
coke, which is a blend of oil and bio-gas. The project is estimated to cost US$500 million and is
scheduled for completion in 2013. The government has also announced its intention of taking
over an ethanol refinery in May 2009 in Kingston that is jointly operated by the Brazilian and
Jamaican governments as part of a program to establish a viable ethanol industry. Several wind
farm projects meanwhile are under construction.

Jamaica Public Services Company has a monopoly on electricity distribution. It was privatized
in 2001 and is now owned 80 percent by Marubeni Corporation of Japan and 20 percent by the
government. It operates four major power plants and 8 hydro facilities. The electrification rate is
88 percent. The electric supply is generally reliable.

External Accounts

Jamaica traditionally runs a very large trade deficit as it has to import its entire oil requirement
and much of its capital goods needs while its export base is relatively narrow, consisting mostly
of alumina, and agricultural products such as sugar, rum and coffee. The rise in oil prices
during the first half of 2008 greatly widened the trade deficit. It surged by 28.3 percent during
that period from the same level of 2007 to $2.799 billion as a 32.3 percent rise in imports
outpaced a 16.1 percent advance in imports. On an annualized basis, the deficit was equivalent
to 41.6 percent of the IMF’s estimate for 2008 GDP.

Bauxite and alumina are the dominant exports, accounting for 54.9 percent of the total in the
first half of 2008 followed by sugar at 5.8 percent. With respect to imports, mineral fuels (mainly
oil and refined petroleum products) were 36.8 percent of the total, machinery and transportation
equipment had a 14.9 percent share and food, beverages tobacco and animal and vegetable
oils were 12 percent. The US was the largest export market in 2006, accounting for 30.4 percent
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of the total followed by Canada at 15.6 percent and China with a 15.1 percent share. With
respect to imports, the US was in first place with 36.8 percent of the total. In second place was
Trinidad and Tobago at 11.5 percent and Venezuela had a 10.7 percent share.

Remittances and tourist inflows help to partially offset the large trade deficit. According to the
World Bank, remittances in 2006 totaled $1.946 billion and were equal to 18.5 percent of GDP,
thus making Jamaica one of the most remittance dependent nations in the world. The
government has estimated that for the first four months of 2008, remittances totaled $623
million. Tourism meanwhile is a mainstay of the economy. In 2007, the number of tourist
arrivals was 2.880 million, which was slightly higher than the total population of the country. In
the first eight months of last year, tourist revenues were estimated by the central bank at
US$1.340 billion, which was virtually unchanged from the same period in 2007.

Despite hefty remittance and tourist inflows, the current account deficit widened sharply in the
first half of 2008 year in response to the sharp rise in oil prices. It grew by 132.6 percent to
US$1.301 billion. On an annualized basis, it was 19.3 percent of IMF estimated 2008 GDP.

External Debt

As of August 2008, the medium and long-term public and publicly guaranteed external debt was
$6.363 billion of which 10.6 percent was owed to bilateral creditors, 17.9 percent to multilateral
institutions, 4.2 percent to commercial banks and 66.6 percent were bonds. According to
Central Bank data, external debt servicing costs in 2007 were $911.35 million. The external
debt servicing ratio was 12.4 percent of the exports of goods and services, the external debt
was 83.5 percent of the exports of goods and services (which is below the 150 percent level the
IMF considers to be sustainable) and the external debt was equal to 57.1 percent of GDP.

Agriculture Sector

Sugar, bananas, coffee, cocoa and citrus fruits are the major crops grown with sugar the largest
agricultural export earner. Sugar is also used extensively to make molasses and rum. The
banana sector has experienced a sharp decline in recent years with many small and medium
producers going out of business. Most bananas are now grown on large plantations. The
banana industry was seriously damaged by Hurricane Gustav during the summer of 2008 with
about 80 percent of the crop lost.

The agriculture sector has been in decline in recent years. Its share of the economy (including
forestry and fishing) fell from 7.4 percent of GDP in 1997 to 5.2 percent in 2006. Agriculture
production in 2007 was only 73.7 percent of the 1997 level. The drop in sugar output has been
especially pronounced. In 1986, output was 206,000 tons but in the five year period ending in
2007, production averaged only about 150,000 tons. Banana exports meanwhile peaked in
1996 and have been declining precipitously ever since. As a result of the decline in agricultural
production, Jamaica has become increasingly dependent on food imports. On April 17, 2008,
Agriculture Minister Dr. Christopher Tufton, indicated that 61 percent of basic foodstuffs were
now being imported and that the food import bill rose from US$479 million in 2002 to US$662
million in the first eleven months of 2007.

The government has outlined a J$500 million program to lift agricultural output. Among the
spending priorities are an improved rural road network to help farmers bring their goods to
market, establishing a center for agricultural research, boosting technical support for farmers in
the areas of soil preparation and pest and disease control and increasing fertilizer imports.




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Infrastructure

There are 21,552 kilometers (13,384 miles) of roads of which 73.9 percent are paved and 0.2
percent are expressways. The State Department’s November 25, 2008 travel advisory said,
“Most roads are paved, but suffer from ill repair, inadequate signage, large pot holes, and poor
traffic control markings.”

There are 34 airports of which 11 are paved. The busiest international airport is Sir Donald
Sangster International Airport at Montego Bay. It along with Norman Manley International
Airport in Kingston are the main hub for Air Jamaica, the national carrier. The airport serviced
about 3.7 million passengers in 2007. In December 2005, work was finished that enabled the
airport to accommodate very large passenger jet liners including the Airbus A380. There are
also plans to extend the runway to 10,000 feet and construct a new customs hall, duty free mall,
arrivals lobby and transportation center. Among the airlines that operate out of the airport are
Air Canada, American Airlines, Avianca, Continental Airlines, Cubana de Aviacion, Delta Air
Lines, Northwest Airlines, United, US Airways and Virgin Atlantic. There flights to Dusseldorf,
Montreal, Toronto, Atlanta, Baltimore, Barbados, Chicago (O'Hare), Curacao, Fort Lauderdale,
Havana, Kingston, Los Angeles, Miami, Nassau, New York (JFK), Orlando, Philadelphia,
Madrid, Calgary, Dallas/Fort Worth, Amsterdam, Bogota, Quebec City, Santo Domingo,
Frankfurt, Houston, Newark, Zurich, Barcelona. Madrid, Brussels, Milan (Malpensa), Bermuda,
Manchester, Detroit, Memphis, Winnipeg, Vancouver Minneapolis/ St. Paul, Lisbon, Milwaukee,
St. Louis, Belfast and London (Gatwick).

The international airport in Kingston is Norman Manley International Airport. There are over 130
international flights a week. The airport is undergoing a 20 year US$130 million renovation that
is expected to conclude in 2022. The work includes a new departure lounge, new elevators,
increased retail space and new air conditioning, public address, fire detection and fire fighting
systems. Among the international airlines that service the airport are Air Canada, American
Airlines, Bahamas Air, British Airways, Caribbean Airlines, Cubana de Avuacion, Delta and
Virgin Atlantic. There are flights to Atlanta, Baltimore, Barbados, Fort Lauderdale, Grenada,
Georgetown, Los Angeles, Havana, Miami, Nassau, New York- (JFK), Orlando, Philadelphia,
Toronto, London (Gatwick), Antigua, Barbados, Port of Spain, St. Maarten and Panama City. In
2007, 1,735,659 people used the airport. This was up 1.2 percent from 2006.

The nation's state-owned Jamaica Railway Corporation ceased operations in 1992. The
government has periodically tried to resurrect the railway system through a public-private
partnership or privatization. These attempts though have not been successful. A 57 kilometer
(35 miles) portion of the railway network is leased to the Jamaican subsidiary of Alcan and is
used to transport bauxite and alumina.

The ports are operated by the Port Authority of Jamaica (PAJ), which is a statutory corporation
established by the Port Authority Act of 1972. According to its website, it is the “the principal
maritime agency responsible for the regulation and development of Jamaica’s port and shipping
industry. The Port Authority is responsible for the safety of all vessels navigating the ports of
entry and regulation of the tariffs charged on goods passing through the public wharves.” The
largest port is at Kingston. It is owned by the PAJ but operated under a management contract
by A. P. Moller Terminals (Jamaica) Ltd, which is owned by the Danish Company of the same
name. An expansion program was recently completed that added additional berths and depth
and increased the container yard. Montego Bay is the second largest international port. It was
acquired by the PAJ in 1986. Ocho Rios, the third main port, is the largest port of call for cruise
ships. In the first ten months of 2008, there were 190 cruise ships that visited the port. This
was down from 14.4 percent from the same period of a year ago.

The only refinery is the Kingston refinery. It was wholly owned by the Petroleum Corporation of
Jamaica, a government entity, until the spring of 2007 when PDVSA, the Venezuelan state oil
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company, bought a 49 percent stake for US$63.7 million. In February 2008, the government
announced plans to expand the capacity from its present level of 36,000 barrels per day and
upgrade the antiquated technology. The cost of the upgrade is estimated at US$500 million.
The project is expected to be completed in 2013.

Informal Economy

Jamaica has a very sizable informal economy. The World Bank estimates it is equal to 36.4
percent of GDP. This placed it 44th of the 104 nations that the World Bank provides estimates
for. A 2006 IMF report on Jamaica estimated that the informal sector was growing faster than
the formal economy.

A report published by the International Labor Organization entitled, “Informal Sector Training in
Jamaica: An Assessment”, noted that “the ability of the traditional formal economy to absorb
workers has become limited. Under such conditions, it is difficult or impossible for low skilled
workers to secure good employment. One response to this has been the growth of the informal
economy where many workers engage.” The report estimated that as of 1997, 27 percent of the
employed labor force could be classified as working in the informal sector. It listed the major
occupations in the informal economy as subsistence farmers, street vendors, household help,
hair dressers, gardeners, taxi operators and construction workers. A 2006 report published by
the IADB on the informal economy of Jamaica estimated that 60 percent of the workers in the
informal economy were employed in wholesale and retail trade and agriculture and just 9
percent were in manufacturing. It also estimated that 57 percent of all the workers in the
informal economy were women.

On March 30, 2008, Finance Minister Audley Shaw, suggested the government tax the informal
economy in order to raise revenue to lower the budget deficit. He estimated the informal
economy was equal to 40 percent of the overall economy and encompasses about 45 per cent
of the agriculture sector and about 25 percent of wholesale and retail trade and restaurants.

On December 6, 2008, the Commissioner of Customs Danville Walker said the Government
was losing millions of dollars in revenue because of the smuggling of cigarettes and other items
such as rum, counterfeit batteries and bleaching cream.

Drug trafficking and smuggling is a major illicit activity. Jamaica has become a major transit
center for cocaine shipped from Colombia to the U.S. Much of the high crime rate is the result of
warfare between drug gangs. Jamaica is also the largest producer of marijuana and marijuana
derivative products in the Caribbean. There is a flourishing barter trade of cocaine for weapons,
which has exacerbated the high crime rate.

Political Environment


 Index                                                Rank             Score
                                                                       Political Rights: 2.0/7.0
 Freedom House Index 2008                             Status: Free
                                                                       Civil Rights: 3.0/7.0

Government

The chief of state is Queen Elizabeth II who has been represented since February 15, 2006 by
Governor General Kenneth O. Hall. The head of government is Prime Minister Bruce Golding.
He has been in office since September 11, 2007. The cabinet is appointed by the Governor
General on the advice of the prime minister. The Governor General is appointed by Queen
Elizabeth II on the recommendation of the prime minister. The head of the majority party or the
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leader of the majority coalition in the House of Representatives is appointed prime minister by
the governor general. The deputy prime minister is chosen by the prime minister.

There is a bicameral Parliament that consists of the Senate and the House of Representatives.
The Senate has 21 members who are appointed by the Governor General on the
recommendations of the prime minister and the leader of the opposition. The ruling party
selects 13 members and the opposition 8. The House of Representatives has 60 seats that are
selected by popular vote (suffrage is 18 years old) to a five year term. The last election was
conducted on September 3, 2007 and the next one has to be held no later than October 2012.
The Jamaica Labor Party has 33 seats and the People’s National Party has 27 seats.

Civil Liberties

Freedom House has designated Jamaica as being “free” and has assigned it a rating of 2 out of
7 for Political Rights and 3 out of 7 for Civil Rights. The lower the rating, the higher the level of
political and civil freedom.

Freedom of expression and the press are respected. The broadcast media is largely state
owned but are open to diverse points of view. Newspapers are independent and are not
subjected to state influence. There are no restrictions on access to the internet. Freedom
House ranks Jamaica 14 of 195 in its Freedom of the Press survey for 2008 and characterized
the press as "free.”

Freedom of religion, academic freedom and freedom of assembly and association are
respected. Workers are free to form and join labor unions and to strike. The judiciary is
independent. A shortage of resources including court staff results in a backlog of cases.

Country Credit Ratings
 Credit Rating                  Standard & Poor’s       Moody’s           Fitch Ratings
 (as of date of publication)    B/Negative/B            B1/RUR-           B/Negative

Jamaica is rated by all three of the major ratings agencies. Standard and Poor’s has assigned it
a rating of B/Negative/B, which is the same rating as Ukraine. Moody’s has given Jamaica a
rating of B1/RUR- (RUR is ratings under review). Fitch has assigned Jamaica a rating of
B/Negative.

For both S&P and Fitch, an investment grade rating is BBB- or above.               For Moody’s an
investment grade rating is Baa or above.

Business Environment

 Index                                                 Rank                Score
 Bertelsmann Transformation Index 2008                 21/125              7.65/10.00
 Economic Freedom of the World Index 2008              36/141              7.3/10.00
 Fund for Peace - Failed State Index 2008              N/A                 N/A
 Heritage Foundation Economic Freedom Index            52/179              65.2/100.0
 2009
 Milken Institute Capital Access Index 2007            60/122              4.52/10.00
 Transparency     International          Corruption 96/180                 3.1/10.00
 Perception Index 2008

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 UNCTAD – Inward Potential Performance Index 92/141                       0.150/1.00
 2004-2006
 World Bank Ease of Doing Business 2009               63/181              N/A
 World Bank Gov Indicators 2007, Control of 39.1 Percentile               -0.49
 Corruption
 World Bank Gov Indicator 2007, Political Stability   43.3 Percentile     0.00
 World Bank Gov Indicator 2007, Regulatory 61.7 Percentile                0.31
 Quality
 World Bank Gov Indicators 2007, Rule of Law          31.9 Percentile     -0.03
 World Economic Forum – Global Competitive 86/134                         3.89/7.00
 Index 2008-2009

Openness to Foreign Investment

The government encourages foreign investment to spur economic activity and employment.
There are no legal distinctions made between domestic and foreign companies. All sectors of
the economy are open to foreign investors. There are no limits on foreign ownership of domestic
companies. The judicial system upholds the sanctity of contracts. Foreign companies can
participate in the privatization process. There is no screening process for foreign investments.
Foreign companies can own land. There are no restrictions, limitations or delays on the
repatriation of capital, dividends, interest and profits. Foreign companies are allowed to open
foreign exchange accounts. According to the law, the process of expropriation property must be
“transparent” and compensation must be “adequate.” Foreign investors can petition the courts
in cases of commercial disputes. The judiciary is independent and judgments are respected.
Judgments of foreign courts are accepted and enforced in all cases where there is a reciprocal
enforcement of judgment treaty with the relevant foreign country. International arbitration is
accepted as a means for settling investment disputes between private parties. There is no
performance requirements imposed as a condition for investing. A number of incentives are
offered to investors including exemptions from income and dividend taxes for up to ten years for
manufactured exports, income, import and dividend tax relief for hotels, duty relief and income
tax exemptions for motion picture producers, income tax relief for up to ten years for investors in
agriculture and duty and income tax concessions for shipping companies. The maximum
income tax rate is 25 percent and the maximum corporate tax rate is 33.3 percent.

Foreign Investment

Data from the UNCTAD indicate that FDI in 2007 were $779 million. This was below the $882
million level in 2006 and represented 22.9 percent of gross fixed capital formation. The total
stock of FDI (book value) at the end of 2007 was $8.580 billion, which was equal to 76.6 percent
of GDP

Foreign investment is very active in Jamaica, especially in the bauxite sector. Of the $4.450
billion of FDI between 2000 and 2006, 21.2 percent was in bauxite. Among the foreign
companies with operations in the mining sector are Alcoa (a partner with Jamaica's Clarendon
Alumina in Jamalco), Norsk Hydro of Norway, which owns 35 percent of Aluminum Partners of
Jamaica, UC Rusal of Russia, which owns 65 percent of Aluminum Partners of Jamaica and 93
percent of WINDALCO (West Indian Aluminum Company) and Century Aluminum.

On March 11, 2008, Total signed an agreement to buy Exxon’s entire fuel operations and
marketing assets which includes its motor fuels and aviation operations and a network of 37
service stations. Cemcorp Cement of Canada is constructing a US$200 million facility.

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Bouygues of France is building and will operate Highway 2000, the country’s first toll road. Two
segments of the project, costing over US$500 million have already been completed and a third
leg that will connect Kingston and Ocho Rios is in its initial stages of development. It is
expected to cost over US$200 million.

Among the US companies that have operations in Jamaica are Archer Daniels Midland,
Centennial Wireless, American Express, Blue Cross, Colgate Palmolive, Coca Cola, DHL,
Goodyear, Procter and Gamble, Hilton, Holiday Inn, IBM, Hertz, Johnson and Johnson, Bristol
Meyers Squibb, Kraft, Microsoft, Pepsi Cola, Pizza Hut, Renaissance Hotels, Sealy Mattress,
Sherwood Williams, Ritz Carlton, Wendy’s, Wyndham, 3M, UPS, Fedex, Starwood Hotels and
Price Waterhouse Coopers. European companies with operations in Jamaica include Glaxo,
BASF, Nestles, Cable and Wireless, British American Tobacco and Lafarge.

Privatization

Recent governments have embarked upon an aggressive privatization program that has either
fully or partially divested many state holdings including those in the electricity, cement, financial
and mining sectors.

On December 18th, the government laid off 8,000 workers in the sugar industry as part of its
program to sell five state-owned sugar factories to Infinity Bio Energy of Brazil. Under a deal
agreed in 2008, Infinity Bio-Energy will own 75 percent of a new company, called NewCo, while
the government will retain a 25 percent ownership.

The government has announced its intention to divest its holdings in Air Jamaica by the end of
the first quarter of 2009.

Airports Authority of Jamaica (AAJ) has overall authority over the airports. It was set up in 1974
as an independent statutory body, with responsibility of ownership and management of Norman
Manley International Airport and Sangster International Airport. In 1990, AAJ took on the
additional responsibility of operating and managing the four major domestic airports. In April
2003, it divested the operational responsibility for the Sangster International Airport to MBJ
Airports Limited, a private sector company. AAJ though still retains ownership of the airport. In
October 2003, NMIA Airports Limited, a wholly-owned subsidiary of AAJ, took over the
operational responsibility but not the ownership of the Norman Manley International Airport
(NMIA). The government has announced its intention to fully privatize the airport.

Financial Sector

There are seven commercial banks: The Bank of Nova Scotia, First Caribbean International
Bank, Citibank, and National Commercial Bank of Jamaica, First Global Bank Ltd., RBTT Bank
Jamaica and Pan Caribbean Bank. National Commercial Bank of Jamaica is the largest bank,
accounting for 38 percent off all banks assets as of the end of June 2008. In 2002, the
government sold a majority stake in the bank to Advantage Investment Corporation (AIC), one
of Canada's largest privately held mutual fund management companies. The total deposits of
the commercial banks as of August 2008 were J$332 billion. Of the total loans and advances of
the commercial banks in August 2008, 36.1 percent were personal loans, 15.9 percent were to
the tourist sector, 12.2 percent were to government entities and 11.1 percent were to retail
distribution. Just 1.5 percent of loans and advances were extended to the agriculture sector
and only 4 percent to manufacturing companies. Non performing loans were only 2.5 percent of
total loans in June of 2008. The government established a deposit insurance scheme in 1998.

In its Article IV Consultation report that was released on June 30, 2008, the IMF issued a note of
warning about the stability of the financial system. It said, “Notwithstanding the generally

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positive bank soundness indictors, the financial system is at risk…from unregulated investment
schemes. Households have reportedly borrowed, in part, from banks to fund investments in
these schemes.” The IMF cited a report from the Caribbean Policy Research Institute that
estimated the total amount in investment schemes was equal to 12.5 percent to 25 percent of
GDP. Many of them offer returns of 10 percent a month. It warned that they “could have large
macroeconomic implications in the future” if they result in a major loses to personal wealth.

The Jamaican Central Bank holds Treasury bill auctions. The average yield for 91-day bills was
22.33 percent at the January 28, 2009 auction and for 182-day bills, it was 24.26 percent.

The Jamaican dollar operates under a managed float regime. It dropped by 11.7 percent
against the US dollar in 2008 and in the five year period ending in 2008, it depreciated by 24.8
percent. In the year to date period ending February 4, it fell by a further 7.3 percent.

Jamaica has a stock exchange. Foreigners can access the exchange. On average 18-23
issues trade a day. In 2008, the stock market was not immune to the global bear market. The
JSE market index declined 25.8 percent, which was its worst descent since a 49.1 percent drop
in 1993. US dollar based investors sustained a 34.5 percent decline. In the five year period
ending in 2008, the index rose by 18.6 percent in Jamaican dollar terms but faltered by 10.8
percent in US dollars. For the year to date period ending February 3, the index rose by 7.4
percent but was lower by 0.5 percent when measured in US dollars.

Corruption and Transparency

Jamaica is a signatory of the UN Convention Against Corruption. Corruption however is a
major problem. Transparency International ranks Jamaica 96 of 180 in its 2008 corruption
perception index. This compares to its position of 84 of 179 nations in the 2007 index. The
Corruption Prevention Act established a Corruption Prevention Commission in 2003. However,
the Commission has not been very active or effective. The Bertelsmann Transformation Index
country assessment report noted that “the combination of violent crime, drug trafficking and
party politics seriously interferes with the fight against corruption. There is no public financing of
political parties or laws that would regulate the sources and types of financing for political
parties. This would allow for more transparency and control of party finances, and make the
parties more independent of private and criminal interest groups, both local and foreign.” The
US State Department’s 2008 Narcotics Report indicated that “pervasive public corruption
continues to undermine efforts against drug-related and other crimes, and plays a major role in
the safe passage of drugs and drug proceeds through Jamaica. Corruption remains a major
barrier to improving counter-narcotics efforts.”

Jamaica is ranked 63 of 181 in the World’s Bank’s 2009 ease of doing business survey. This
compares to a ranking of 62 in the previous year’s survey. It is ranked 11th in starting a
business, 32nd for employing workers, 84th in getting credit, 127th in enforcing contracts, 109th in
registering property, 70th in protecting investors and 22nd in closing a business. With respect to
the World Bank’s governance indicators, Jamaica generally performs poorly. Only with respect
to regulatory quality, where it is ranked at the 61.7 percentile, is it rated above average. For,
control of corruption, it is at the 39.1 percentile, for political stability, it is at the 43.3 percentile
and for rule of law, it is at the 31.9 percentile.

The Heritage Foundation ranks Jamaica 52 of 179 its Economic Freedom Index. It is ranked
36 of 141 in the Fraser Institute’s World Freedom Index, 86 of 134 in the World Economic
Forum’s 2008-2009 Competitiveness Index, 60 of 122 in the Milken Institute Capital Access, 92
of 141 in the UNCTAD Inward Potential Performance Index and 21 of 125 in the Bertelsmann
Transformation Index. It is not ranked in the Failed State Index that is compiled by Foreign
Policy Magazine and the Fund for Peace.

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Jamaica is ranked 66 of 118 in the 2008 World Economic Forum’s Enabling trade Index, 71 of
104 in the Lagatum Prosperity Index and 54 of 149 in the Environmental Performance Index,
which is collaboration between Yale and Columbia Universities.

Standards Compliance Assessments
 IMF Dissemination Standard                            Subscription Status
 Special Data Dissemination Standard                   Not a SDDS Subscriber
 General Data Dissemination Standard                   Yes, a GDDS Subscriber


 IMF Assessment                  Standards Assessed        Dates              Compliance Level
 Reports on Standards and Banking Supervision May 1, 2006                     High
 Codes (ROSCs)            Monetary and Fiscal May 1, 2006                     Mixed
                          Policy Transparency
                          Payments Systems    May 1, 2006                     Mixed
 Financial Sector Assessment                               May 1, 2006        Mixed
 Programs (FSAPs)


Jamaica was assessed for Banking Supervision, Monetary and Fiscal Transparency and
Payments Systems under the IMF’s FSAPs. The report noted that the financial system was well
capitalized, supervised and regulations have been brought into line with best international
practices. It urged the government to reduce its high level of debt.

Human Capital

 Index                                                 Rank                 Score
 UNDP Human Development Index 2008                     87/179               0.771/1.000

Social Indicators
Jamaica ranks 87 of the 179 countries and territories in the UNDP Human Development Index
in 2008. The infant mortality rate is 17 per 1,000 live births, 9 percent of the population is
considered undernourished, the probability of dying before the age of 40 is 8.3 percent, 97
percent of births are attended to by a skilled health care professional, 93 percent of the
population has access to clean drinking water, the maternal mortality rate is 17 per 100,000 live
births, the under five mortality rate is 30 per 1,000 live births, 84 percent of one-year olds are
fully immunized against measles, 18.7 percent of the population lives below the national poverty
level, 10 percent of infants are born with low birth weight, 4 percent of children under 5 are
underweight, 93 percent of the population have access to improved sanitation facilities, 14.4
percent of the population lives on less than $2 a day, the probability of dying between the ages
of 15 and 60 is 17.7 percent and the life expectancy is 72.2 years (74.9 years for females and
69.6 years for males).

Access to Technology

There are 129 mainline telephone lines and 1,017 cellular subscribers per 1,000 people (only 12
other countries and territories surveyed by the UNDP had a higher ratio). Internet use is 404
per 1,000 people. There are 63 personal computers per 1,000 people, 168 televisions per
1,000 people, 444 radios per 1,000 people (1,944 per 1,000 people in the US) and there are 85
motor vehicles per 1,000 people. The per capita consumption of electricity is 3,508 kilowatt
hours (in the US, it is 14,240 kilowatt hours).
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Jamaica is ranked 46 of 127 in the World Economic Forum’s 2007-2008 Networked Readiness
Index. The Index “measures the propensity for countries to exploit the opportunities offered by
information and communications technology.”

Health Indicators

There are 90 physicians per 100,000 people and 170 nurses and midwives per 100,000 people.
In 2003, there were only 212 dentists in the entire country. There are 170 hospital beds per
100,000 people. By comparison, in the US, there are 320 per 100,000 people.

The prevalence of AIDS is 1.5 percent of the adult population (15-49 years old), the prevalence
of diabetes is 7.0 percent of the population between 20 and 79, the prevalence of tuberculosis is
8 per 100,000 people (in the US, it is 3 per 100,000 people), the mortality rate from road traffic
accidents is 7.2 per 100,000 people, the homicide rate is 34.4 per 100,000 people, the
prevalence of obesity is 5.1 percent for males and 41 percent for females and the prevalence of
tobacco use is 9.2 percent for females 15 years of age and over and 20.8 percent of males.

In the WHO’s ranking of the world’s health care systems, Jamaica is 53 of 190 countries
surveyed.

Education Indicators

The adult literacy is 85.5 percent for those 15 years and older. The average for Latin America
and the Caribbean is 91.3. The net enrollment rate in primary school is 90 percent for girls and
89 percent for boys. This compares to the Latin American and the Caribbean average of 94
percent for girls and 94 percent for boys. The ratio of primary school age children who are not in
primary school is 9 percent. The net enrollment rate in secondary school is 77 percent for girls
and 74 percent for boys, which compares to the Latin American and the Caribbean average of
73 percent for girls and 68 percent for boys. The gross enrolment for tertiary education is 19
percent. This is below the 31 percent regional average. The school life expectancy of 11.6
years is lower that the 13.3 year regional average.

According to the June 21, 2007 report on Jamaica on the Education International Barometer of
Human and Trade Union Rights in Education, “Primary education is tuition-free, universal and
compulsory for students aged 6 to 11…School fees for books, materials and supplies as well as
school uniforms make education too expensive for many families whose children are therefore
withdrawn from school…Only 70 percent of children aged 12 to 16 have access to secondary
school…In secondary school, parents are required to pay half the school fee while the state
pays the other half. High schools across the island claim they are owed millions of dollars in
fees from parents who cannot afford to pay…Polls show that one-fifth of Jamaican parents
cannot afford to send their children to secondary school for the 2006–07 academic year.”

Economic Data and Outlook

 IMF Country Data Overview 2008 (Est.)

 GDP          GDP:          GDP per CPI:               Current    Budget     FDI
 Growth                     capita:                    Account as deficit as (UNCTAD
                                                       % of GDP   % of GDP   2007)

 0.7%         $13.467       $4,990        20.1%        -16.0%         -5.8% (FY $779
              billion                                                 ending in million
                                                                      March)

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 IMF Article IV Consultation
 The IMF press release that was issued on December 10, 2008 following the conclusion of the
 visit of IMF Managing Director Dominique Strauss Kahn welcomed the government’s
 commitment to reduce the budget deficit and rationalize public entities. It also praised the
 central bank’s steps to tighten monetary policy to slow inflation, which had been exacerbated
 by the sharp rise in food and energy prices in the first half of the year.”


Economic Outlook

After growing 1.2 percent in 2007, the IMF estimated the economy expanded by 0.7 percent in
2008 and for 2009, a 0.9 percent advance is forecasted. The IMF however may be too optimistic
about the near-term economic outlook as Jamaica will be severely battered by the worldwide
economic slowdown prompted by the global credit crunch. The recession in the US will have a
particularly negative impact as the US is the largest export market, the largest source of tourists
(in 2007, 39.4 percent of all tourists came from the US) and a major source of remittances.

The steep drop in bauxite prices prompted by the collapse of the commodity bubble will also
have a negative impact on the economy by curtailing export receipts and prompting lay-offs at
bauxite mines. Both Windalco and the Aluminum Partners of Jamaica announced lay-offs in
December and on February 4, WINDALCO indicated it will suspend operations at its two bauxite
refineries at the end of March.

The economy will also be inhibited by a tight fiscal policy designed to reduce the large national
debt. As of the end of 2007, the combined domestic and external debt was 130.7 percent of
GDP. The IMF has warned the government that the high debt level is a threat to sustained
economic growth and has urged the government to take action to reduce it. In its latest Article
IV Consultation report that was released on June 30, it said, “Past efforts at reducing the debt
have not succeeded because the necessary fiscal structural reforms have been lacking. The
central government budget process is weak, as evidenced by the spending commitments
outside the budget. There has also been inadequate control over scores of inefficient off budget
entities…fundamental reform of public employment has been lacking resulting in periodic
upward spikes of the wage bill.”

In the medium term, the government must enact policies to spur the country’s meager growth
rate, which averaged just 1.3 percent per annum between 1999 and 2008. The sluggish growth
rate is a major reason for a brain drain as Jamaicans seek employment in other countries
because of a lack of job opportunities. The economy is much too dependent on just a few
sources of income such as bauxite and tourism that employ only a limited number of people.
The manufacturing base is relatively narrow and there is a need to diversify energy sources
away from oil. In addition, the agriculture sector needs to be bolstered to reduce the country’s
great dependence on imported food, which is a major factor for the widening trade deficit.
Finally, the government needs to take measures to reduce the ballooning current account
deficit, which soared from 4.1 percent of GDP in 1999 to 16 percent of GDP in 2008.

Membership in international organizations
 Financial Action Task Force (FATF)                   Not a member

 International  Center    for     Settlements     of Signatory on June 23, 1965
 Investment Disputes (ICSID)

 International Federation of Accountants (IFAC)       Yes, a member


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Multinational Investment Guarantee Agency Yes, a member
(MIGA)
United Nations Convention Against Corruption Signatory on September 16, 2005

World Intellectual Property Organization (WIPO)   Yes, a member

World Trade Organization (WTO)                    Yes, a member since March 9, 1995




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