When Jamaica’s prime minister Bruce Golding led the country’s Labour Party to election victory in 2007, he pledged to liberalise trade and re-energise the economy. Despite high levels of crime and corruption, Jamaica has made great strides to reform its business culture, achieving 63rd position in the World Bank’s 2009 ‘ease of doing business’ rankings.
The Caribbean island has attracted growing levels of FDI during the past few years, reaching $22.65bn in 2007. But the first sign that the global economic downturn had reached Jamaica was seen in November and December last year when foreign remittances – which represent 17% of the country’s GDP – fell by an average of 14% on the previous year. Deputy prime minister Dr Kenneth Baugh says the decline was the first tangible sign that the average $2bn annual remittances from the US, Canada and UK could no longer be depended upon.
Jamaica’s metals and mining sector has suffered from a drop in the price of bauxite, one of the island’s biggest export commodities, which has dropped in price by more than half since its peak in summer 2007. “There is a stockpiling of aluminium, a drop in demand; smelters are slowing down production and laying people off,” says Mr Baugh. The government’s response is to turn to the sector which seems to be faring the best under the economic conditions: tourism. “Our minister for tourism has been active in anticipating the problems with intensive marketing campaigns which is why our tourism is holding up while some of our Caribbean neighbours have seen more fall-off than us,” he says.
The government has approved casino gaming as a formal part of the tourism industry, which Mr Baugh says has prompted interest as well as firm construction commitments from foreign investors, particularly from Spain. And where tourism grows, so too does the demand for associated services. Mr Baugh is hoping one such spin-off will be a boost to Jamaica’s agro-processing industry. “To a large extent, our tourism depends on importing food from the US, so that is an area with opportunities for expanding our agro-processing sector,” he says.
Jamaica’s imports come largely from the US, which is also its biggest export market. “There is no question that we have to preserve that relationship,” says Mr Baugh, who aims to establish US trade agreements to replace the Caribbean Basin Initiative, trade preferences agreed with the US in the 1980s by then president Ronald Reagan.
While a trade agreement with the US is still in its planning stages, Jamaica signed a reciprocal arrangement with the EU in October 2008 along with 13 other Caribbean countries. The Economic Partnership Agreement (EPA) trade deal will open 86.9% of the region’s market to duty free imports from the EU during the next 25 years, with 82.7% of the market being liberalised in the first 15 years. There will be a moratorium of three years on all tariffs except those on motor vehicles, spare parts and petrol coming into the region. Other duties and charges are to remain for the first seven years and will be phased out in the following three.
“We would like to negotiate something similar with the US but we are trying it out with Canada to start with,” says Mr Baugh, who is examining the potential effects of tariff removal and ways in which lost tariff revenue can be replaced. “It is not impossible if we get more investment and, as with the EPA, we want to make sure there is a strong investment component with other free-trade agreements,” he says.
Dr Kenneth Baugh
2007Government of Jamaica
Deputy prime minister and minister for foreign affairs and trade
1989Parliament of Jamaica
Senator, Upper House Parliament
1980Government of Jamaica/Parliament of Jamaica
Minister of health and member of parliament, North West St James