The Government of Jamaica (GOJ) considers foreign direct investment (FDI) a key driver for economic growth and in recent years has undertaken macroeconomic reforms that have improved its investment climate. However, the reform program was stymied by measures implemented to contain the impact of the COVID-19 pandemic. An early lockdown in the Spring of 2020 helped contain the number of Covid-19 cases but the impact on the economy was severe, with real GDP shrinking by 10 percent. To mitigate the impact of the pandemic on public health and the economy, the authorities suspended the fiscal rule for a year and swiftly implemented public health measures and a fiscal package to support jobs and protect the most vulnerable segments of the population. The downturn and the fiscal package resulted in a fiscal deficit of 3.1 percent of GDP in FY2020/21.
The Jamaican economy contracted during fiscal year (FY) 2020/21, underpinned by a near collapse in tourism and travel and weaker disposable incomes. But unlike previous shocks, the country did not experience the usual bouts of macroeconomic instability, suggesting the past decade of economic and legislative reforms are beginning to bear fruit. The Jamaican economy is also recovering from the effects of the pandemic well ahead of regional peers, with economic growth of 7-9 percent projected for FY 2021/22. Robust construction activities, a strong rebound in tourist arrivals, and record remittances, both mostly from the United States, provided the impetus for growth. The expansion in economic activity spurred a rebound in employment, with the unemployment rate falling to a historic low of 7.1 percent. The economic recovery combined with strong fiscal management allowed the government to generate the primary surplus required to reverse the debt to GDP ratio, which is expected to return to the pre-pandemic levels. The economic turnaround also contributed to a general improvement in business and consumer confidence. Notwithstanding, inflation and inflationary expectations are beginning to threaten stability, forcing the central bank to tighten monetary policy.
On March 09, 2022, Fitch Ratings Agency affirmed Jamaica’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘B+’ and assigned a stable outlook. Fitch reported that Jamaica’s ‘B+’ rating was supported by a favorable business climate and government efforts to lower the debt to GDP ratio. The agency explained that the country remained susceptible to external shocks, low growth levels, high public debt and a debt composition that exposes the country to exchange rate fluctuations and interest rate hikes. “The Stable Outlook is supported by Fitch’s expectation that having been interrupted by the pandemic, a downward trend in public debt-to-GDP will be underpinned by political consensus to maintain a high primary surplus,” the agency continued.
Jamaica received $366 million in FDI in 2020 (latest available data), a $299 million drop over the previous year. Despite the decline, data from the 2021 UNCTAD World Investment Report showed that Jamaica was the highest FDI destination in the English-Speaking Caribbean. China and Spain were the major drivers of FDI in 2020. Up to the onset of COVID-19, tourism, mining, and energy led investment inflows into the island. Though hard hit by the global pandemic, tourism and mining continued to drive foreign investment. Mineral and Chemicals investments also picked up in 2020. There is a significant host government commitment to mining, tourism, and airport development, which could resume when economic conditions improve. Business process outsourcing (BPO), including customer service and back-office support, continued to attract local and overseas investment. Investments in improved air, sea, and land transportation have reduced time and costs for transporting goods and have created opportunities in logistics.
Jamaica’s high crime rate, corruption, and comparatively high taxes have stymied its investment prospects. The country’s Transparency International corruption perception ranking improved marginally from 74 (2019) to 69 (2020) out of 180 countries. Despite laws that prescribe criminal penalties for corrupt acts by officials, there were still reports of corruption at some ministries and agencies. Measures implemented to address crime continued into 2021, including the continuation of Zones of Special Operations in several high crime areas of the island. While these efforts resulted in lower rates of serious crime in the attendant zones, the measures did not significantly impact the overall murder rate, and Jamaica continues to have one of the highest homicide rates in the world.
With energy prices a major component of the cost of doing business, the government has instituted a number of policies to address the structural impediment. In early 2020, the government published its Integrated Resource Plan (IRP), outlining the country’s electricity roadmap for the next two decades. The plan, which has been delayed by the COVID-19 pandemic, projected 1,164 MW of new generation capacity at a cost of $7.3 billion, including fuel cost and the replacement of retired plants. Renewable sources are projected to generate 50 percent of electricity by 2037, with Liquified Natural Gas (LNG), introduced in 2016, providing the lion’s share of the other 50 percent. The increased investment in new generation is expected to increase efficiency and reduce the price of electricity to consumers.
|TI Corruption Perceptions Index||2021||70 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||29.6 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD 145||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||USD 4,670||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
3. Legal Regime
4. Industrial Policies
5. Protection of Property Rights
Private entities, whether foreign or domestic, generally have the right to freely establish, own, acquire, and dispose of business enterprises and may engage in all forms of remunerative activity.
6. Financial Sector
7. State-Owned Enterprises
Jamaican SOEs are most prominent in the agriculture, mining, energy, and transport sectors of the economy. Of 149 public bodies, 54 are self-financing and are therefore considered SOEs as either limited liability entities established under the Companies Act of Jamaica or statutory bodies created by individual enabling legislation. SOEs generally do not receive preferential access to government contracts. SOEs must adhere to the provisions of the GOJ (Revised) Handbook of Public Sector Procurement Procedures and are expected to participate in a bidding process to provide goods and services to the government. SOEs also provide services to private sector firms. SOEs must report quarterly on all contracts above a prescribed limit to the Integrity Commission. Since 2002, SOEs have been subject to the same tax requirements as private enterprises and are required to purchase government-owned land and raw material and execute these transactions on similar terms as private entities.
Jamaica’s Public Bodies Management and Accountability Act (PBMA) requires SOEs to prepare annual corporate plans and budgets, which must be debated and approved by Parliament. As part of the GOJ’s economic reform agenda, SOE performance is monitored against agreed targets and goals, with oversight provided by stakeholders including representatives of civil society. The GOJ prioritized divestment of SOEs, particularly the most inefficient, as part of its IMF reform commitments. Private firms compete with SOEs on fair terms and SOEs generally lack the same profitability motives as private enterprises, leading to the GOJ’s absorbing the debt of loss-making public sector enterprises.
Jamaica’s public bodies report to their respective Board of Directors appointed by the responsible portfolio minister and while no general rules guide the allocation of SOE board positions, some entities allocate seats to specific stakeholders. In 2012, the GOJ approved a Corporate Governance Framework (CGF) under which persons appointed to boards should possess the skills and competencies required for the effective functioning of the entity. With some board members being selected on the basis of their political affiliation, the government is in the process of developing new board policy guidelines. The Jamaican court system, while slow, is respected for being fair and balanced and in many cases has ruled against the GOJ and its agents.
8. Responsible Business Conduct
Responsible Business Conduct (RBC) among many Jamaican companies is a developing practice, with more established companies further along the scale. In 2013, the government provided additional financial incentives for corporations to support charity work through the Charities Act, under which corporations and individuals can claim a tax deduction on contributions made to registered charitable organizations. Some large publicly listed companies and multinational corporations in Jamaica maintain their own foundations that carry out social and community projects to support education, youth employment, and entrepreneurship.
In 2018, the GOJ became party to the OECD’s Base Erosion and Profit Shifting Multilateral Convention, which updates the network of bilateral tax treaties and reduces opportunities for tax avoidance by multinational enterprises. GOJ also became signatory to the Convention on Mutual Administrative Assistance in Tax Matters, effective March 1, 2019, having deposited instruments of ratification in November 2018.
Recent years have seen increased disputes over bauxite mining rights in Jamaica’s Cockpit Country, an area inhabited by the semi-autonomous Maroon population. In January 2022, the Jamaican government granted a Jamaican-owned subsidiary of an international firm rights to mine on more than one thousand acres of previously protected land claimed by the Maroons despite protests by community representatives.
Jamaican law provides criminal penalties for corruption by public officials, however, there is at least circumstantial evidence that some officials engage in corrupt practice. There were also reports of government corruption in the last couple years and it remained a significant cause of public concern. Media and civil society organizations continued to criticize the government for being slow and at times reluctant to tackle corruption.
Under the Corruption Prevention Act, public servants can be imprisoned for up to 10 years and fined as much as USD 100,000 if found guilty of engaging in acts of bribery, including bribes to foreign public officials.
In 2017, Jamaica passed an Integrity Commission Act that consolidated three agencies with anti-corruption mandates into a single entity, the Integrity Commission, which now has limited prosecutorial powers. The three agencies are the precursor Integrity Commission, which received and monitored statutory declarations from parliamentarians; the Office of the Contractor General (OCG), which monitored government contracts; and the Commission for the Prevention of Corruption, which received the financial filings of specified public servants. A key area of concern for corruption is in government procurement. However, successful prosecutions – particularly for high-level corruption – are rare. Three Ministers of government demitted office between 2018 and March 2022, in the wake of corruption allegations.
Corruption, and its apparent linkages with organized crime, appear to be one of the root causes of Jamaica’s high crime rate and economic stagnation. In 2021, Transparency International gave Jamaica a score of 44 out of a possible 100 on the Corruption Perception Index (CPI).
10. Political and Security Environment
Crime poses a greater threat to foreign investment in Jamaica than political violence, as the country has not experienced any major political violence since the early 1980s. Violent crime, mostly attributed to gangs, is rooted in poverty, unemployment, social neglect, and transnational crime, including so-called “lottery-scamming”, and is a serious problem in Jamaica. Gang violence is highly concentrated in inner-city neighborhoods but can occur elsewhere. The Jamaica Constabulary Force recorded 1,463 murders in 2021, a per capita homicide rate of roughly 50 per 100,000, the highest homicide rate in Latin America and the Caribbean in 2021. Jamaica also faces a significant problem with extortion in certain urban commercial areas and on large construction project sites. The security challenges increase the cost of doing business as companies spend on additional security measures.
The U.S. Department of State Travel Advisory (of March 2022) assesses Jamaica at Level 3, indicating travelers should exercise increased caution. U.S. companies with personnel assigned to Jamaica are strongly advised to conduct security and cultural awareness training.
Please refer to the Jamaica 2019 Crime and Safety Report from the Department of State’s Overseas Security Advisory Council (OSAC) for additional information (https://www.osac.gov/Country/Jamaica/Detail).
11. Labor Policies and Practices
Jamaica had an estimated labor force of 1.3 million as of October 2021 with an unemployment rate of 7.1 percent. Women make up 46.2 percent of the labor force and have an unemployment rate of 9 percent. Unemployment is highest within the 14-19 age cohort. Most Jamaicans are employed in services including the retail and tourism sectors, followed by construction, transportation, and communications. Since 1999, more Jamaicans have become trained in information technology and the business process outsourcing (BPO) industry currently employs more than 40,000 people.
Data from the Statistical Institute of Jamaica (STATIN) show that the number of women securing employment is gradually increasing. According to STATIN’s October 2021 Labor Force Survey, of the 76,600 additional persons gaining jobs to expand the employed labor force by 6.6 per cent to 1,234,800, women accounted for 43,700. This out-turn represents 57 per cent of the overall additional jobs generated and pushed the number of gainfully employed females by 8.5 per cent up to 558,600. While the margin of increase for males was smaller, at 39,900 or 5.1 per cent, the overall number of men in jobs was significantly larger, at 676,200 (https://jis.gov.jm/government/ministries/).
No law requires hiring locals, but foreign investors are expected to hire locals, especially for unskilled and lower skilled jobs. Under the Work Permit Act, a foreign national who wishes to work in Jamaica must first apply for a permit issued by the Ministry of Labor and Social Security. The law, which seeks to give first preference to Jamaicans, requires organizations planning to employ foreign nationals to prove that attempts were made to employ a Jamaican national.
The security guard industry adopted the practice of employing workers on extended contracts to avoid some of the cost, including severance, associated with direct employment. Jamaica does not have a history of waiving labor laws to retain or attract investment and these laws tend to be uniform across the economy.
There are no restrictions on employers adjusting employment to respond to market conditions, but there are severance payment requirements if a position is made redundant. Under the law, there is a distinction between a layoff and a redundancy. A layoff allows a temporary period without employment for up to four months. The Employment (Termination and Redundancy Payments) Act provides redundancy pay to employees who are let go with at least two years of continuous employment. There are no unemployment benefits in Jamaica, but low-income Jamaicans have the option of applying for social benefits under a conditional cash transfer program referred to as the Program for Advancement though Health and Education (PATH).
The law provides for the rights of workers to form or join unions, to bargain collectively, and the freedom to strike. Trade union membership accounts for about 20 percent of the labor force, although the movement has weakened in recent years. The law prohibits anti-union discrimination, although it is not uncommon for private sector employers to lay off union workers and rehire them as contractors. Labor law entitles protections to all persons categorized as workers, although it denies contract workers coverage under certain statutory provisions, such as redundancy benefits. The law denies collective bargaining if no single union represents at least 40 percent of the workers in the unit. Unionization is limited in Jamaica’s free zones.
Jamaica has an Industrial Disputes Tribunal (IDT) to which the Minister of Labor and Social Security may refer disputes unsettled at the local level.
Jamaica ratified most International Labor Organization (ILO) Conventions and international labor rights are recognized within domestic law. Jamaica has ratified all key international conventions concerning child labor and established laws and regulations related to child labor, including in its worst forms. However, gaps still exist in Jamaica’s legal framework to adequately protect children from child labor. The GOJ is under-resourced for investigations on worker abuse as well as on occupational safety and health checks.
Jamaica’s workplace policy incorporates all of the recommended practices of the ILO code of practice on HIV/AIDS but the legislation to regulate enforcement is yet to be ratified. In conjunction with the ILO and local stakeholders, the GOJ passed legislation guiding flexible working arrangements.
The informal economy (encompassing pure tax evasion, the irregular economy and illegal activities) represents a large and growing share of the overall economy. This growing sector represents a diverse group of enterprises and workers, ranging from local peddlers to relatively sophisticated small entrepreneurs. Tax evaders reduce revenue the Jamaican tax system would otherwise receive. Tax evasion therefore contributes to lower levels of government services, higher taxes on the rest of the economy and larger government deficits. Irregular economic activity is the least virulent portion of the informal economy, and even has beneficial aspects. Irregular activity generates goods, services and jobs that might otherwise be unavailable.
14. Contact for More Information
142 Old Hope Road
Kingston 6, Jamaica