EARLIER in May, I had the opportunity to participate in a visit to Honduras to tour and get a first-hand experience of their value proposition as an emerging outsourcing destination.

Nestled in Latin America between prime outsourcing destinations such as Nicaragua, Guatemala, Costa Rica and El Salvador; Honduras is a nation in a hurry to catch up with the rest of the world. It is embarking on several strategic initiatives and making significant strides in becoming a BPO service destination of choice.

Honduras is poised as a big gainer in the future because of its robust and growing infrastructure; large pool of human capital allied with its telecom infrastructure and the population’s bilingual skills in Spanish and English. It is home of one of the most modern business and technology parks — Altia Business Park.

Honduras provides complete infrastructure and world-class services to companies wishing to work in a global environment. Located in San Pedro Sula, (with development underway in Tegucigalpa, the country’s capital) the Altia Business Park is designed to give businesses more than just an office space — equipped with a university campus, medical centre, hotel, and exercise and sports facilities.

The turnkey solution for businesses and their employees enables companies to focus on their core business while being assured that the requisite amenities they need are right outside their door.

Game changer

A game changer in the outsourcing business is the development of trade/economic zones. Most countries that have sizeable outsourcing businesses today have successfully established such tax-sheltered enclaves.

In Honduras, international service companies like BPO and contact centre operators benefit from tax exoneration under the trade zone regime. The Call Centre and BPO Promotion Law in Honduras, provides a tax holiday on the importation of tools, parts, accessories, furniture and office equipment, and all goods involved with the company’s active business. The law also includes an income tax holiday on revenue from all the business activities carried out within the trade zones as well as a 50 per cent training grant on employee salaries for the first 90 days of employment.

Is Jamaica poised for growth?

As services-led growth continues to prove itself as a valid and sustainable economic model, countries with a tradition of outsourcing as well as newbie nations are vying to increase their share of the larger pie. By strategically structuring these tax-sheltered enclaves and leveraging their strengths, countries are claiming a share of the global outsourcing services business.

As Jamaica seeks to embark on this trajectory to develop special economic zones islandwide; business enclaves are seeking to attract foreign investment, expand employment and exports, and foster broader economic growth.

But Jamaica must take into consideration that the proposed special economic zones (SEZs) will not be successful with the introduction of new taxes and an increase in existing taxes. The reality is many SEZs have failed because they were poorly run, too bureaucratic and companies were not able to compete and expand thus producing substantial employment.

The distinguishing feature of economic zones is their tax-exempt status, and this enables economic zones to be employment generators. The premise for its existence is that investors will receive tax, tariff and regulatory incentives to expand business and generate jobs, thus increasing employment and the tax base. The notion is that the tax foregone on companies will be greater with increased employment.

Developers such as Barnett Tech Park are actively developing the infrastructure providing comprehensive technology/business enclave for contact centre operations equipped with the requisite amenities. However, it will not be successful or competitive if the requisite frameworks do not provide the benefits that such business models are known for. The outsourcing industry thrives on attractive privileges to businesses, notably duty-free import of capital goods and income-tax holidays.

Jamaica is currently on a growth path to double the industry by 2020; the regulatory transition in effect will decide our trajectory and determine whether or not Jamaica will be listed as a state with failed or successful SEZs.

12.5 per cent tax

As Jamaica strives to move from its infancy to a mature stage in the outsourcing industry, it is not wise for the Government to introduce the proposed 12.5 per cent corporate income tax; this will be a deterrent for investors wishing to set up or existing investors seeking to expand operations in Jamaica.

In 2007, the Dominican Republic and Jamaica were once on a similar level in the outsourcing industry. By 2014, the Dominican Republic had quadrupled its employment size due to the tax advantages offered in the trade zones and government support in developing the workforce and the industry.

Honduras, the new destination to watch, is now actively seeking investors to take advantage of the country’s convenient location, tax-free benefits and talented bilingual workforce to make it an outsourcing hotspot in the region.

Let us not be blindfolded and not pay attention to emerging destinations and what they are doing to develop their competitive advantage.

To be successful, Jamaica must create effective economic zones leveraging both internal strengths and taking into consideration global business trends. We are operating in a global marketplace; our success will materialise only if we are competitive globally.

Yoni Epstein is President of the Business Process Industry Association of Jamaica (BPIAJ) — the national representative advocacy body for Information, Communications Technology/Business Process Outsourcing entities. The association currently has 33 members and is currently expanding its membership to include service providers to the industry from the various sectors.