Positioning Jamaica as cutting-edge offshore financial centre a win for jobs, growth
Published:Friday | March 11, 2011 | 12:00 AM
Don Wehby, Guest Writer
Jamaica has seen recent successes in 2010 with the successful implementation of the Jamaican Debt Exchange and the subsequent lowering of interest rates.
Additionally, this resulted in the country being able to access an International Monetary Fund (IMF) standby agreement amounting to US$1.3 billion, with US$640 million received in February.
The achievement of the IMF's targets for the March quarter has resulted in the country being able to access an additional US$94 million in funding from the IMF in June.
The country has also had success in the divestment of Air Jamaica to Trinidad and sugar facilities to the Chinese, who were the successful bidders.
While the country has had much success in 2010, concerns remain about the future growth path for the economy.
The IMF indicated in its review of the first-quarter targets that growth and employment are expected to remain weak.
In fact, the 2010-11 medium-term macroeconomic target for real gross domestic product growth was estimated at 0.6 per cent. For Jamaica to achieve higher and sustained rates of growth, new industries will have to be created.
The only avenue to achieve this vision is to invest in the areas that will promote growth and make Jamaica a business-friendly environment. One such area is the establishment of Jamaica as an international financial services centre (IFSC).
The proposed benefits are clear: job creation, increased government revenue, real-estate development, diversification of Jamaica's economic base, and an increased presence of Jamaica on the international financial market.
Over the years, we have witnessed our Caribbean neighbours take advantage of these lucrative business opportunities. The most well-known offshore centres are Bermuda, The Bahamas, the Cayman Islands and the British Virgin Islands. Barbados and Antigua & Barbuda have also successfully tapped the international finance market and have enjoyed a great deal of economic development from it.
With Trinidad & Tobago also ushering in plans to obtain IFSC status; it is no surprise that some would anticipate a crowding of the Caribbean international finance market. For this reason, it is absolutely essential that our endeavours be focused and specialised, exploiting specific market niches and harnessing our competitive advantage.
Trinidad and Tobago, for instance, is seeking synergies with its energy sector and Bermuda has established itself as a major player in the insurance market. Jamaica is seeking to offer a range of products and services.
We have also taken special interest in the areas of sports and entertainment/copyright financing. Jamaica has a highly marketable brand in the sports and entertainment industries, particularly after our success at the Beijing Olympics and the World Championships. Therefore, we propose to attract sports figures and entertainers from all over the world to have their financial planning done in Jamaica. Additionally, we could develop an international ship registry within the concept of an international shipping centre, a 'one-stop shop'. This is an area with great potential for job-creation. It would also build on and integrate the achievements made by Jamaica's shipping industry thus far in the areas of cruise shipping, container transshipment and production of quality seafarers.
Strong regulatory framework
What does Jamaica, a highly indebted small island, have to offer to international businesses? We have a large cadre of professionals - chartered and qualified accountants, lawyers, accountants, corporate secretaries, etc. We have a strong regulatory framework and finance is already one of our fastest-growing sectors. We have a superior telecommunication infrastructure.
When compared to our Caribbean neighbours, Jamaica boasts the best GSM technology. Also in our favour is our history as a stable democracy, proximity to the world's largest market, the United States, and our availability of training and convention facilities for professionals in the financial industry.
We are highly ranked for the quality of our transportation infrastructure, especially our airports, which are well served by major carriers from the US and from Europe. Additionally, as downtown Kingston re-emerges as a premier corporate district, with major investments such as Digicel's planned construction for its new head office downtown, the King-ston waterfront can realise its full potential with increased business from local investors and international financial entities.
At the G20 summit, several of the world's leading economies, including the United States and the United Kingdom, committed themselves to block 'abuse' by tax havens to the extent that it facilitates tax evasion. Primarily, these countries want other jurisdictions to implement measures to make information available to tax authorities in other jurisdictions.
It is important to note that Jamaica is not purporting to be a 'tax haven'. On the contrary, Jamaica has double-tax treaties, which include Exchange of Information Agreements within them. Among our treaty partners are the US, United Kingdom, CARICOM and China.
As we move towards positioning Jamaica as an IFSC, we may have to review these agreements to see how they can assist our competitive advantage. It is also a matter of priority for Jamaica to expand its tax-treaty network.
Our advantage will be bolstered by the fact that our regulatory framework is already strong, and continues to be strengthened by virtue of our membership on certain regional and international regulatory bodies, including our recent entry to the Global Forum.
The evolution of the IFSC industry gives Jamaica an opportunity to position itself on the cutting edge of the market. While it is likely that traditional IFSC businesses will change, perhaps dramatically, there will undoubtedly be a continued demand for services offered by offshore centres, particularly those that are compliant with global standards.
As a potential entrant into the market, we must frame our products and services around the needs of those who use international financial services while maintaining the accepted standards of transparency. Our focus should be on the provision of high-value financial services, international ship registration and aircraft registration, thereby leveraging several substantial assets that Jamaica has to offer.
For the IFSC to be successful, we will have to offer products and services that are tax-efficient. However, our attractiveness and subsequent performance as a market player will require much more than our tax regime. A realisation of this dream will depend on timely implementation of new legislation and the support from the Government, regulators, the Oppo-sition and the private sector.
Certainly, the international financial landscape has been forever changed by the global financial crisis. Jamaica can use this time of downturn to craft a legislative and regulatory framework that encompasses the new standards being developed in this contracting economic climate.
We have the opportunity to get things right the first time by recognising the importance of banking regulations and the need for proper supervision of financial entities.
As the global economy begins its recovery, investors are planning their return. Proceeding with development of this initiative now, therefore, will ensure that Jamaica is in a position to take full advantage of the inevitable upswing in the global economy.
With an aggressive marketing campaign, we will be most appealing when international businesses begin to expand again. We cannot afford to miss this opportunity to create jobs, diversify the Jamaican economy and further develop Jamaica as a business destination.
Don Wehby is group chief operating officer of GraceKennedy Limited. He was responsible for developing Jamaica's IFSC policy during a two-year secondment with the Ministry of Finance, 2007-2009.
Jamaica, the place of choice to live, work, raise families, and do business
- Vision 2030