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Article Excerpt
The U.S. Dept. of Commerce has produced a 56-page Country Commercial Guide which offers helpful information on doing business in or with Jamaica. Excerpts follow. If you wish to read the complete report, Email me (kalwagenheim@cs.com). I'll Email it to you as a file attachment.
Market Overview
The Jamaican economy was expected to grow by almost 2% in 2005, despite the negative impact of hurricanes Dennis, Emily and Wilma. Growth was expected to emanate from construction, mining, electricity and to a lesser extent tourism. Barring shocks, output in 2005 could be further buoyed by increased tourist arrivals, higher bauxite and alumina production, increased construction activity and the recovery in agriculture.
During FY 2004/05 GOJ operations generated a fiscal deficit of about US$440 million or 4.8% of GDP, which compared favorably with the US$486 million recorded in the previous fiscal year. Fiscal operations were largely in line with projections until hurricane Ivan derailed the fiscal program. Expenditures were increased to help rehab efforts, but revenues suffered from a sluggish economic performance after the September hurricane. In framing the 2005/06 Budget the GOJ commited to achieving a balanced budget by the end of April 2006. But, by late Oct. 2005, the GOJ had generated a fiscal deficit of US$350 million due largely to the US$180 million shortfall in revenues. The deficit was expected to moderate during the last three months of the fiscal year, but the GOJ will be hard pressed to meet its original target and might very well be forced to revise its fiscal target.
Prices as measured by the CPI rose by 12.5% for the first eight months of 2005. This marks the third consecutive year of double-digit inflation, mostly driven by supply shocks and to a lesser extent policy-induced shocks such as tax hikes and utility rate increases. Rising oil prices and to a lesser extent increased domestic food prices after the onslaught of hurricanes Dennis and Emily in July 2005 have fed most of the inflation in 2005. Higher oil prices had a direct effect on utility rates, which were also driven by a 5.8% annual inflation adjustment to electricity prices. The oil price hike also provided the impetus for the significant jump in transportation cost, with bus fares increasing by almost 50%.
Rising inflation and declining supplies of foreign exchange fueled frequent bouts of instability in the foreign exchange market during 3Q calendar 2005. By the end of that quarter the local currency depreciated by 1.7%, vs. an appreciation of 0.02% in the previous three quarters. Inflationary expectations prompted some investors to realign their portfolios, prompting strong demand for US$ denominated instruments. To ease the demand pressures, the Bank of Jamaica (BOJ) sold large amounts of foreign currency. Despite the frequent interventions, Net International Reserves were only depleted by US$37.8 million to US$2.1 billion. The foreign exchange market continues to face increased demand pressures, prompting the BOJ to intensify its intervention program.
The US remains Jamaica's main trading partner, accounting for almost 40% of total trade. Jamaica imports and exports respectively 45% and 30% of its goods from and to the US. Jamaica's other major trading partners in order of volume are Trinidad & Tobago, the UK, Canada, Japan and China.
Jamaica-US relations are good. Although the two countries occasionally disagree over specific issues, most notably relations with Cuba, Jamaica has supported many US objectives in the Caribbean region. There are no major political issues affecting the business climate. Both major political parties favor attracting foreign investment.
Market Challenges
Since the 1990's Jamaica has embarked on a program of gradual duty reduction. Permits and import licenses are only required for a few items, including meat, ground provisions, fruits, vegetables, drugs, firearms, used tires and two-way radios. It has become easier to import items into Jamaica, but technicalities exist, (such as the growing importance of standards issues).
Jamaica operates a Common External Tariff (CET) along with other trading partners of the Caribbean Community (CARICOM). Goods imported from third countries are subject to the duties listed in the CET but goods imported from CARICOM countries and are certified to be of CARICOM origin do not generally attract these import duties. These CARICOM origin goods enjoy duty-free status (they are not subject to Customs import duty, but local taxes, General Consumption Tax and Special Consumption Tax are payable). Details: www.caricom.org.
Market Opportunities
The United States is Jamaica's primary trading partner. Proximity, quality and service have encouraged Jamaican businessmen to purchase from the US.
After a period of lackluster economic activity, projections are that Jamaica could have improved growth prospects in the years to come. Sectors, which should have good prospects are Building Products, Safety/Security Equipment, Telecom Equipment, Drugs and Pharmaceuticals.
The sectors that have attracted the most attention by foreign investors: Agribusiness, Chemicals and Minerals, Energy, Entertainment--Music and Film, Information and Communications Technology, Infrastructure, Mining and Tourism.
Major projects include: The GOJ-led high-end Harmony Cove tourist development, several hotel developments, airport and seaport improvement, highway development, activities related to Cricket World Cup 2007, mining (bauxite/alumina and limestone), and energy.
Establishing an Office
The establishment of a local office is best approached with the assistance of JAMPRO. Potential investors can present project proposals to JAMPRO for assessment and guidance. Registration or incorporation of the business should be made with the Registrar of Companies. JAMPRO will assist with: (1) obtaining applications from the income tax department; (2) obtaining import licenses from the trade board; (3) identification of business location (factory space or land);
Franchising
No specific laws regulate the operation of franchises and there is normal business relationship with the locally registered entity and the headquarters of the franchise. Current U.S. franchises here include Kentucky Fried Chicken (KFC), Burger King, Pizza Hut, Subway, and Wendy's. The latest addition in the food category was TGIFridays, which opened its doors in Kingston in late 2004. McDonald's ceased operating in mid 2005 after operating for about 10 years in Jamaica. There are also other types of franchises in areas such as dry cleaning, automobile care, and training.
Direct Marketing
Mail order sales and catalogs have not been very popular (perhaps due to postal and other inefficiencies etc); moves towards deregulation and liberalization have compelled retailers to think of more creative ways of getting their message to customers and...
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