Review of Article EntitledForeign investment into Jamaica down 22 per cent in '02

Jamaica is characterized as a Low Growth Economy, having a growth rate of less than 1%. The country was severely affected by the cost of servicing its debt, since over 30% of its public expenditure had to be spent in servicing debt. Jamaicas balance of payments crisis began in the 1960s, although it was a period of rapid tourism and bauxite expansion. From then on, the Jamaican economy has been spiraling downward, only achieving the highest rate of growth, 4.6%, between 1989 and 1990. In the article under review, Steven Jackson of the Observer, writes that US$479 million in foreign direct investment (FDI) flowed into Jamaica last year, a 22 per cent decline on the 2001 inflow, the World Investment Report, released yesterday by the United Nations Conference on Trade and Development (UNCTAD), revealed. According to UNCTAD, the world FDI's was impaired by a general economic decline and the September 2001 terrorist attacks in the USA. But, because of a number of committed investments in tourism and telecommunications, the agency is very optimistic about the Jamaican economy over the next three years, to 2005. According to Bartholomew Nyarko-Mensha, deputy representative at UN, "The uncertain global economic arena, slower than expected economic growth in

several countries, falling stock market valuations dim prospects for recovery," he said at the unveiling of the report at Jampro's office in Kingston. "Insecurity in both economic and social political context have contributed to a second year of decline in FDI globally." Jamaica has been borrowing both externally and internally to meet aggregate demand, external debt amounting to approximately US$4 million while its internal debt is approximately JA$700 million. On of the factors contributing to Jamaicas economic crisis is the decline in investment capital inflows. Investors have been vacating the country and

seeking greener pastures. However, one of the major sources of inflows last year was the acquisition of National Commercial Bank (NCB) by Canadian-based fund management company, AIC, owned by Jamaican-born billionaire, Michael Lee-Chin. According to Lee-Chin, "What makes it attractive for investors is that there are no taxes on dividends," he said. "You cannot get this in certain parts of the world. As an investor you look for the best possible capital arrangement for your investment, we (Jamaica) have it." "Jampro anticipates J$11.2 billion in capital formation and 6,000 employment and for 2004 to 2005 expects $12 billion in capital formation and 6,500 jobs," said Jampro's president, Patricia Francis. "We expect 35,000 new top-class tourism rooms by 2010."

One of the major investments is the 1,800-room Spanish resort in St Ann. This development, by Grupo Pinero, will take three years to complete and will be done as three 600-room hotels geared to European travellers. Each property will cost between US$60 million and US$100 million. Grupo Pinero is one of Spain's major hotel owners and operators, with hotels and other tourism-related ventures in Spain, Portugal, Russia, the Dominican Republic, Cuba, Mexico and Brazil. Jamaica has been investing heavily in the tourism sector and

telecommunications, and Jamaica's FDI is expected to increase during 2004/5, based on committed investments. However, in order to attract sustainable

foreign investments, the country cannot do without an improvement in its business climate. Jamaica's medium-term prospects will depend upon

encouraging investment, maintaining a competitive exchange rate, selling off reacquired firms, and implementing proper fiscal and monetary policies. I believe economic development can best be promoted and entrepreneurs attracted to investments by establishing a stable business climate and allowing a fair rate of return on investment. In the public sector, governments can improve the business climate by adjusting tax policies and removing unnecessary restrictions on business and trade. A sound economy with a bright future is the key element in attracting investors in our country. It is my hope that one day Jamaica would rise out of the economic slump and grow to be a large high growth economy.