'If we don't hang together, we shall hang separately'
IN ONE OF THE BEST PResentations of the sectoral debate following the budget, Minister Anthony Hylton, referring to the need for joined-up government, referred to the well known saying "If we don't all hang together, we shall hang separately".
He correctly focused on Jamaica's "ease of doing business", announcing that he had re-activated the National Competitiveness Council (NCC) to drive improvement in Jamaica ranking in the World Bank's Doing Business Report. In 2012, Jamaica ranked 88 out of 183 countries.
He followed this with a call to action, correctly noting that Jamaica's most important challenge today is our lack of international competitiveness, and that if it is not addressed, we will not be able to survive in the globalised environment, as "Time is not on our side".
Critically, the centrepiece of Minister Hylton's strategy was the unique opportunity of Jamaica becoming a global shipping and logistics hub for the Americas. This opportunity, which in the Minister's vision includes the dredging of Kingston Harbour, the Port Facility expansion at Fort Augusta and Gordon Cay, the Caymanas Economic Zone, a transhipment commodity port facility near Yallahs in St Thomas, Dr Cole's Dry Dock Facility at Jackson Bay in Clarendon and the Vernamfield Air Cargo and Passenger Facility is for the most part, as he admitted, in no way new. However, as World Bank representative Gorgio Valentini had noted in a recent speech to the Private Sector Organisation of Jamaica (PSOJ), "Vision without implementation is hallucination". Minister Hylton has the opportunity, indeed the necessity for the sake of the country, to finally execute on this vision.
The Minister's second area of focus was the Information and Communications Technology/Business Process Outsourcing Sector, or ICT/BPO sector for short, which he advised was expected to reach a market size of US $1 trillion by 2014, according to projections by the International Data Corporation. He advised that in Latin America and the Caribbean, the BPO sector is currently worth US $2.5 billion, of which Jamaica's share is just six per cent, or US$145 million. He stated that his goal was to double the number of jobs in the sector over the next four years to 30,000. Currently, 94 per cent of those employed in the Montego Bay Free Zone, some 4,777 persons as of March 2012, are in the ICT sector, whilst 784 people are employed in the Kingston Free Zone and the Portmore Informatics Park.
Thirdly, the Minister emphasized the opportunities for health and wellness tourism, noting "Jamaica, as a world renowned tourist destination, has a well - developed medical infrastructure, numerous private medical facilities, and a first class reputation for its doctors and nurses." Advising that a road map for health and wellness tourism has been developed, he stated his Ministry is "aggressively pushing for strategies within the context of the tax reform process and the proposed Omnibus Incentives Act."
The last point is critical. The health tourism opportunity has existed for Jamaica for at least twenty years, if not much longer. It however lies at the absolute epicentre of the intersection of tax policy and economic development. The average import tariff in a country like the United States, with which Jamaica is essentially competing for both normal and "health and wellness" tourists is a couple of per cent. Much of the best in class advanced medical equipment used in their major hospitals is in any case made in the US. The lack of incentives for medical tourism in Jamaica (which just means giving them a more level playing field with the US) is probably responsible for the non -development of this industry in Jamaica, despite all our natural advantages. The very expensive medical equipment (and investment in training and high salaries of the specialists required) for an international hospital facility makes it unsurprising that an Indian international medical chain might prefer Cayman to Jamaica to build a 1000 room hospital rather than pay millions of US dollars in import duties on the equipment in Jamaica, or tax rates of 30 per cent plus for its staff or as corporate income tax, rather than the zero available in Cayman. However, Jamaica's advantages over Cayman, in terms of people, food and space would be decisive for new hospital development if import duties were a few percentage points, approaching zero, and corporate and personal income tax were about 15 per cent, as is now the case in Mauritius. At those rates, and with the promised lowered electricity costs, there would be no need for any incentives, either for health tourism or for tourism generally, depending on the rate of value added tax chosen.
Finally, the Minister noted the opportunity in the international financial services industry, noting that "experts have expressed with confidence that no other initiative that could be pursued by the Government could provide a higher return on investment in the short run". He cited the KPMG report of July 2008 "Assessment of the Implementation Strategy for the Establishment of an IFSC", that long term this could provide direct employment prospects for 15,000 professionals, with potential revenues for the government approaching US$300 million.
All of these opportunities are in global industries with massive market sizes of a trillion US dollars or more. Crucially, this makes them attractive enough to be financed by international investors. In each case, Jamaica would only need a one per cent share of the world market to create a new US$ 1 billion dollar industry, and there is no reason why some of the entrepreneurs should not be Jamaican, and even become billionaires themselves.
The key to all these business opportunities is to create the right business environment for Jamaica to be the preferred destination for Asian investment in the America's, similar to the role Singapore played for decades in western investment into Asia. It is therefore extraordinarily timely that the Jamaica Chamber of Commerce's post budget forum this coming Wednesday "Building tax policies to encourage Foreign Investment and Growth" will have as one of its presenters KPMG's new star tax partner Don Yu, who has enormous business experience throughout Asia. The successful implementation of such an Asia focused tax strategy (into which Mr. Yu will provide up to the minute insight), an excellent complement to the extremely successful recent "Doing business in China seminar", will be nothing less than the difference between decades of continued stagnation, and the melting away of Jamaica's debt trap as the creation of new US billion dollar industries drive six to 10 per cent per year annual GDP growth. As the Minister says, Jamaicans still have the opportunity to hang together rather than hang separately. In regard to the latter issue, a discussion of our current macro-economic state by leading Bank of Nova Scotia economist Dr Adrian Stokes will also be part of the seminar.