Local investors should tap into ICT sector

Dennis Morrison, Contributor

When Jamaica embarked on the mobilisation of investment to establish state-of-the-art telecoms infrastructure in the late 1990s, hopes ran high that we would have been able to use this as a foundation for generating new economic activity and jobs. At one point, a target of 40,000 jobs was announced for the information and communication technology (ICT) sector. But there were several missteps, and only 10,000 were created by the mid-2000s.

Nonetheless, we were the leading country in the Caribbean in the sector, but over time, the Dominican Republic has overtaken us, and now has twice the number of ICT jobs. From the outset, Jamaican investors have been gun-shy, declining from investing in telecoms infrastructure, and with a few exceptions, in entering the ICT business. Remarkably, there was no local participation, even in joint ventures, in bidding for the cellular licences.

Our investors have either been risk averse, preferring to park their money in government paper, or, ironically, gambling on Ponzi schemes. A factor limiting the growth of the ICT sector is the lack of office space to meet the parameters of cost and physical standards set by firms in the business. Foreign firms have, therefore, been the drivers of the sector, and several of them have taken the step of investing in their own office space after initially operating in leased, government-owned facilities.

Powerful new addition

News coming from the recent Jamaica Investment Forum in Montego Bay is that another major foreign company, Convergys, a Fortune 500 company, is to set up operations locally. This is a powerful new addition, one of the largest ICT organisations worldwide, that could eventually employ 3,000 persons locally. It, too, will establish its own office centre. But could we not have attracted other firms and boosted the number of new jobs, had there been an aggressive approach to removing the constraint of office space?

An encouraging case of a local new entrepreneur in the field is that of Global Gateway Solutions, which now operates at the Montego Bay Free Zone. The company employs 500 people, providing a range of services in telemarketing, finance and accounting, and collection services. Global Gateway is filling the growing US demand for near-shore ICT service providers to compete with India and the Philippines, among others.

The truth is that even with these two new operators, Jamaica is still just scratching the surface in terms of developing its potential in the ICT sector. The sector has remained a growth area throughout the recession, which means that there are opportunities for a country with advantages such as location, language, trainable workforce, and modern infrastructure. It is left to be seen whether private-sector interests with available capital resources are prepared to be more dynamic and expand their business portfolios into this arena. What could the catalyst be?

Investment prospects still not clear

While the general feedback from the Montego Bay Investment Forum appears positive, it is still not clear what is the overall assessment of the country's investment prospects. What, for example, are the main projects in the pipeline, and what is the state of readiness for implementation of each of them? Is Jamaica on the recovery path from the sharp downturn in 2010 when foreign-direct investment flows fell to US$200 million - a quarter of the level achieved at peak in the late 2000s? What specific actions are required to boost the recovery process?

Investment activity worldwide is rebounding after the collapse in 2009 and 2010. Even in Europe, where the financial and debt crisis has been forcing many businesses to scale back, there is evidence of increased investments - foreign and local. In Ireland, foreign investors are increasing spending, as that country has moved to make it more cost competitive. Cash-flush investment funds from China, India, Brazil, and other emerging economies are on the lookout for new investment opportunities in ICT, manufacturing, tourism, etc. Did Jamaica use the period of the downturn to make itself more attractive for investment?

To move the Jamaican economy forward, it is going to be necessary to make unavoidably painful adjustments in order to curtail government spending and control the public debt. But while these adjustments are necessary, they will not be sufficient. Our debt problems also require that the country generate substantial economic growth, and investment is a key driver of growth. We must do both things at the same time if the country is to extricate itself from the economic and social crisis.

Dennis Morrison is an economist. Email feedback to columns@gleanerjm.com.