Jamaica's FDI flows tank in 2010
Published:Wednesday | July 27, 2011 | 12:00 AM
Foreign Direct Investment (FDI) into Jamaica declined by a striking 62 per cent in one year to US$201 million in 2010, according to the World Investment Report 2011 released yesterday by the United Nations Conference on Trade and Development (UNCTAD).
"We have been adversely affected by the financial crisis and the fact that a lot of investments are not going into small island developing states, or SIDS," said Jampro president, Sancia Bennett-Templer, at the local launch of the report in Kingston.
Jamaica's FDI decline worsens to 86 per cent when compared to record inflow of US$1.4 billion in 2008, just prior to the global recession.
Consequently, FDI inflows into Jamaica are now trending below the mid-1990s average of US$320 million.
In 2009, inflows amounted to US$541 million, or US$340 million more than the 2010 performance.
"But looking at the outlook, we feel that the future performance should be positive. We at Jampro have seen a resurgence in respect to interest in the tourism sector. We have a major push in respect to investments in ICT sector," said Bennett-Templer.
Focus sectors
The island will focus on "three priority sectors" to grow FDIs in 2011 - manufacturing, tourism and Information technology. Jampro explained that it would seek out such investment from emerging economies in addition to the US and Europe.
"One of the things we are looking for at Jampro is how we diversify the investments from countries. In the past, there has been a strong emphasis of investment to Jamaica from US, and in recent times from Spanish investments in the hotel sector. We now have to look at much broader a field," she said, listing Asia and Latin America.
Other speakers at the launch, including Industry minister Christopher Tufton, economist Dr Damien King, and vice-president at Jampro, Dr Dana Morris Dixon, welcomed the report's theme of Non-Equity Modalities of Investment: Franchising Contract Manufacturing and Licensing.
King said that the report was historic.
"Now in 2010, first time in history, global investment flows into the group of developing nations exceed developed nations, and that is an indicator of why this morning's event is of great importance," he said. Developing nations received some 52 per cent of world FDI inflows last year.
Jamaica underperformed the Caribbean, which dipped 26 per cent year on year to US$48 billion. The Virgin Island, Cayman Islands and Dominica Republic were the largest recipients of FDI in the Caribbean. This was largely due to investments in the financial services sector, said Bennett-Templer.
The only Caribbean countries to record increases in FDI included Haiti, up 321 per cent to US$150 million; Cuba, up 260 per cent to US$86 million; Aruba, up 120 per cent to US$161 million; Bahamas, up 48 per cent to US$977 million; St Kitts and Nevis, up 40 per cent to US$141 million; and Netherland Antilles, up 17.9 per cent to US$138 million.
Globally, FDI rose by about five per cent rise to US$1.24 trillion in 2010.
UNCTAD predicts FDI flows will continue their recovery to reach US$1.4-1.6 trillion, or the pre-crisis level in 2011.
They are expected to rise further to US$1.7 trillion in 2012 and reach US$1.9 trillion in 2013, to match the peak achieved in 2007, the report said.
"The record cash holdings of transnational corporations, ongoing corporate and industrial restructuring, rising stock market valuations and gradual exits by states from financial and non-financial firms' shareholdings, built up as supporting measures during the crisis, are creating new investment opportunities for companies across the globe," the report stated.
"However, the post-crisis business environment is still beset by uncertainties. Risk factors such as the unpredictability of global economic governance, a possible widespread sovereign debt crisis and fiscal and financial sector imbalances in some developed countries, as well as rising inflation and signs of overheating in major emerging market economies, may yet derail the FDI recovery."