Dec 2005 Financial News

Mega Projects Well On Track

Dec 06, 2005

Jamaicans are set to have more jobs, a better port and a stronger economy, based on the massive expansion taking place in the bauxite, tourism and port sectors.

The investments were expected to create 10,000-12,000 jobs over the next five years and substantially boost the island's foreign earnings.

The biggest investment is taking place in the bauxite/alumina sector. In May, JAMALCO broke ground for the $1.2 billion second phase expansion of its $49 billion expansion project, the largest single investment in the economy to date, while ALPART also carried out one phase of its US$150 million expansion. These developments are expected to create some 3500 construction jobs initially and increase crude bauxite output to nearly 9 million tonnes. JAMALCO's expansion alone is expected to increase wages by 150 million dollars and income and company taxes by up to $40 million and $32 million respectively. The industry is expected to earn a total of US$1.016 billion once the expansion ends.

Alumina and crude bauxite production have already begun to climb, with an increased output of 19.6 percent and 15.2 per cent respectively, while exports increased 14.3 and 26.2 percent at the end of the September quarter.

Fifty-six people have been employed under the first phase of the expansion programme which began in October and employment is expected to peak at 300 by year-end. Work to be done on a major refinery has also begun that should increase production before the completion of the project. Over US$77 million has already been spent on the expansion.

Encarna Pinero (standing), head of the Pinero Group delegation in Jamaica, outlines her family's decision to purchase Tank-Weld's 200-acre property in St. Ann to build a new resort. She was speaking at a Jampro function in 2003. Mrs. Patricia Francis, managing director of Jampro, is in the foreground. CONTRIBUTED

But while production climbs, jobs are expected to decline once expansion is completed, Finance Minister, Dr. Omar Davies predicted in September. In the long run, the bauxite sector is expected to create about 600 long-term jobs.

The jobs growth in the tourism sector is far more substantial however, with more than 15,000 direct jobs being created for Jamaicans. The total investment is valued at over US$600 million with the construction of a total of 5000 hotel rooms over five years.

Construction began on four new hotel properties in Rose Hall in St. James, Oyster Bay in Trelawny, Peartree Bay in St. Ann and Mammee Bay also in St Ann late last year.

The Spanish, RIU Group recently constructed a 600-room hotel in Mammee Bay. The construction cost $200 million. RIU has also constructed two other hotels in Negril, creating a total of over 1400 rooms.

But RIU is only one of several Spanish companies investing in tourism.

Some other Spanish companies are busy hunting real estate on the north coast to build more properties. Three companies Grupo Pinero, Barcelo Hotels and Grupo Iberostar have already started building.

Grupo Pinero has begun constructing a complex that will include three hotels with 600 rooms each, while Grupo Iberostar has started phase one of its 950-room apartment complex in Rose Hall. The construction of this complex is to cost some $100 million and is to be completed by December next year.

Investments by Spanish companies could grow beyond $1.3 billion next year. The investments are expected to create employment for as many as 15, 000 people, with an additional 50,000 indirect jobs.

As many as 100, 000 Spanish tourists and 300, 000 European other visitors are also expected to arrive on our shores yearly when the hotels open.

President of Jamaica Promotions Limited (JAMPRO) Pat Francis says close to 2000 direct jobs have been created from the investments already. During the construction phase of the RIU properties, over 3000 people were employed. The hotels now employ 1800 local workers.

Francis says almost all consultants and engineers contracted for the construction of these hotels were local people.

While there is growth, the tourism sector has had some challenges that have impacted on expansion. Earlier this year, scandals of multi-billion dollar (US$ 45 million) cost overruns in the construction of Sandals Whitehouse in Westmoreland, halted that project for some time. This hotel alone was projected to provide 400 rooms and hundreds of jobs for the South Coast. The scandal erupted in calls for a forensic audit into the construction of the hotel and multibillion-dollar law suits from partners, Sandals Group, which own a third of the property. Some investors fear the island may not have the skilled workers they need to meet the demands of construction. To fill the gap, Francis says the sector will embark on a partnership with the HEART Trust to create an apprenticeship programme to train people for the sector.

"We should have instituted this a long time ago. Now we are ensuring that a pool of skilled craftsmen are provided especially for the high-end hotels. This is something that we are going to have to do [now]," she says.

The lack of skilled workers has led to the importation of labourers from elsewhere in both bauxite and tourism sectors. At least five per cent of the current labour force used in the tourism expansion project is imported from abroad. During its 2003 expansion phase, JAMALCO also imported 300 of the 700 skilled people it needed for the job.

But while unskilled labour may be the major issue affecting expansion in bauxite and tourism, time seems to be a more significant factor on the Port Authority's hands. Recently, president of the Port Authority of Jamaica (PAJ), Noel Hylton, said the port needed more time to prepare the Kingston Container Terminal for transhipment services from Maersk Shipping Line. Maersk recently signed a $13 billion agreement with government to provide services to the island. But the port first needs the necessary berthing, equipment and container storage facilities by April 2006. Some of the equipment, particularly 6 ship-to-shore cranes will not arrive till 2007.

The expansion activities are to be carried out as part of a fifth phase of the port expansion project, which is to start in two weeks. Equipment has already been ordered and the design work is being done to increase the container capacity from 1 and * million to 3.2 million.

This phase is to cost $13 billion. While the expansion of the port faces some difficulties, the port expansion is expected to impact on other developments too.

The port jumped 11 places to 56th in world port rankings earlier this year, stemming from initiatives to strengthen capacity, efficiency and safety. The port added a number of new x- ray machines last year to scan containers for contraband, while increasing its capacity by 25 per cent.

That upgrading was done under an earlier, US$ 46. 3 million improvement programme.

Gareth Manning, Gleaner Writer
The Financial Gleaner
Tuesday, 6th November, 2005.
http://www.jamaica-gleaner.com/gleaner/efg/02-Dec-05/localnews/local2.htm