WITH its eye on duplicating Panama’s free trade zones and increasing local export capacity, the Government of Jamaica implemented the special economic zones (SEZs), a geographical zone designated for economic activity offering efficient business regulations plus incentives to investors.

Jamaica is hoping to create its own version of the Colón Free Trade Zone near the Atlantic entrance to the Panama Canal. The zone is dedicated to re-exporting merchandise to Latin America and the Caribbean and is described as the largest free zone in the Americas and the second-largest in the world. Created in 1948, the free zone houses around 1,751 merchants.

In Jamaica, SEZs are now located in 11 parishes and include training, incubation space, warehousing and distribution, logistics, manufacturing, assembly, and production facilities. Investment floors are US$1.5 million for a developer in SEZ and US$25,000 for occupants or merchants and service providers. Tax incentives include exemptions or zero-rating in respect of asset tax, transfer tax, and customs duty and GCT on items imported into the SEZ.

Developers and occupants must pay income tax (at a reduced rate of 12.5 per cent) on income earned from conduct of trade within the SEZ but they receive a tax credit for expenditure on research and training up to a maximum of 10 per cent of income tax payable, and pay no income tax on profits derived from rentals in the zone.

In February 2020, Chairman and chief executive officer (CEO) of real estate company Stanley Motta Limited, Melanie Subratie, said that the company had successfully secured its SEZ designation and that major client Alorica had started benefitting from the designation.

SEZ designation provides a corporate income tax headline rate of 12.5 per cent, which can be reduced further to 7.5 per cent with the addition of other tax credits under the designation.

Stanley Motta’s property, named 58 HWT, is named after a business at the same location. As outlined on its website, it is a business process outsourcing and technology park with five commercial office buildings totaling over 200,000 square feet of rental space.

Currently, there is 26.6 million square feet of designated SEZ area representing US$660.6 million of direct investment and the addition of 30,226 new jobs, at last update. The Government reports that as at March 2020, there were a total of 131 of 134 approved free zone entities, representing 98 per cent, which had transitioned to the new SEZ regime. There are another 52 new SEZ developers, who entered into licensing agreements with the Jamaica Special Economic Zone Authority (JSEZA), bringing the complement of SEZ entities to 183.

Meanwhile, construction is being planned on several projects during the 2021/22 financial year, aiming to provide approximately 400 acres of additional special economic zone (SEZ) space at an estimated value of more than US$1.3 billion according to Government reports. The project comprises approximately 250 acres of mixed-use facilities, including data centres and petrochemical and logistics industries.

Properties included are Grand Ridge in Montego Bay, a 65-acre zone with commercial, educational, medical/pharmaceutical and commercial industries; a 26-acre film studio and post-production facility in Trelawny; and the Seaview Eco-Industrial Park in the Seaview/Riverton area.

The Government, in its reports, indicates that with the new SEZ entities coming on stream, it has earned an increase in revenue from $22 million in 2019 to a reported $381 million in June 2020. New additions also resulted in approximately 50,391 new jobs in the information and communications technology and business process outsourcing (BPO), agribusiness, logistics and fuel sectors.

Port expansion

Also, in pursuance of its aims to improve the island’s positioning as a logistics hub with the opening of the Panama Canal, a concession agreement was signed on April 7, 2015 between the Port Authority of Jamaica (PAJ) and Kingston Freeport Terminal Limited (KFTL), a special purpose vehicle formed to accept the KCT Concession.

In an update, Professor Gordon Shirley, president and CEO of the PAJ, said that the concessionaire (KFTL) has invested more than US$320M in the terminal since taking over the operations in July 2016. The agreement mandated the concessionaire to dredge the access channel to the Kingston Harbour and the basin of the KCT to allow for the handling of the larger vessels that will transit the Panama Canal after its expansion.

He outlined, “Capital investments so far included dredging of the Turning Basin and the areas around the berth to accommodate berthing of the large post-Panamax vessels passing through the Panama Canal, acquisition of 2 Post-Panamax Cranes as well as other container handling equipment, and implementation of a new Terminal Operating System (TOS).”

The KFTL is jointly owned by the members of the Consortium, Terminal Link [TL] and CMA CGM with equity interests of 40 per cent and 60 per cent, respectively.

The agreement gave KFTL a 30-year term concession with the right to finance, expand, operate, maintain and transfer the Kingston Container Terminal (KCT) at the end of the concession period.