Nov 2006 Financial News

Jamaica sees rise in Foreign Direct Investment

Nov 03, 2006

Out of 120 world economies, Jamaica was ranked 21 in world foreign direct investment (FDI) inflows, according to the 2006 United Nations World Investment Report issued yesterday by Jampro at their Trafalgar Road headquarters.


Lisa Bell, Jampro executive director of Services
This ranking translated into US$601 million worth of FDI compared to an average of US$246 million invested in Jamaica over the 1990 to 2000 decade. Worldwide, FDI inflows were US$916 billion for 2005.

In terms of the capital formation of the economy, FDI represented 20.8 per cent for Jamaica, up from 15.2 for the preceding decade. And while that appears to be an improvement, the inputs by overseas companies into Jamaica pales in comparison to the US$1.1 billion invested in neighbouring Trinidad & Tobago (T&T) in 2005.

Trinidad leads the way in FDI
For T&T, FDI makes up 42.5 per cent of the country's capital base. Not surprisingly, it is oil and natural gas that makes T&T so attractive. According to the 2006 World Investment Report, "High oil prices ... and the regulatory regime that was further liberalised with an emphasis on privatisation," led to the continued strong FDI inflows to T&T.

Nonetheless, Jamaica is holding its own by capitalising on the sun, sea and sand that has attracted the attention of Spanish investors.

"Our strategy has been to go after these large integrated European chains, which have the ability to bring their own clientele with them. There are people in Europe, who unfortunately have never heard about a Sandals or a SuperClubs and who won't make that leap to come to Jamaica until we have a brand that's familiar to them," said Michael McMorris, former executive director of Market at Jampro, speaking last year to the media.

At the time, the country was just seeing the fruits of the so-called 'Spanish Invasion.' Noting the benefits, McMorris said at the time, "The construction of the Spanish chain Riu is one of the fastest growing demographics that we have. With the kind of success that we have had where we are going to see the building of at least four hotels this year, we think the future is very, very bright," he comments, noting that the projects will also augur well for the construction industry."

That said, the growth in FDI has forced Jamaican bureaucratic institutions to have to re-engineer how business is done. Lisa Bell, Jampro executive director of Services, noted at yesterday's function, "What we hear from the Spanish investors is that Jamaica lacks efficiency, respect for time and lacks transparency."

Which Bell states, "means that it is no longer good enough to say it used to be worse and things used to take longer to get through. We have to improve the way things are done to attract more investors and keep the existing ones here."

Indeed, according to the 2006 Investment Report, "World FDI inflows are expected to increase further in 2006. This prospect is based on continued economic growth, increased corporate profits and policy liberalisation."

Still, the overall investment in Jamaica over the last 25 years has been significant. Coming from US$564 million in 1980, the stock of investments held by overseas entities in Jamaica has grown to US$6.3 billion as at 2005. This translates to 65 per cent of the gross domestic product generated from foreign investments.

Dennise Williams
Business
The Jamaica Observer
Friday, November 3, 2006.
http://www.jamaicaobserver.com/magazines/Business/html/20061102T210000-0500_114824_OBS_JAMAICA_SEES_RISE_IN_FOREIGN_DIRECT_INVESTMENT_.asp