Identifier
Created
Classification
Origin
08KINGSTON1039
2008-12-10 13:02:00
UNCLASSIFIED
Embassy Kingston
Cable title:  

JAMAICA: INVESTMENT CLIMATE STATEMENT 2009

Tags:  ECON EFIN ETRD EINV EAGR ELAB KTDB PGOV USTR OPIC 
pdf how-to read a cable
VZCZCXRO2729
RR RUEHGR
DE RUEHKG #1039/01 3451302
ZNR UUUUU ZZH
R 101302Z DEC 08
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC 7043
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 14 KINGSTON 001039 

SIPDIS

STATE FOR WHA/CAR (ACADIEUX) (VDEPIRRO) (WSMITH)
STATE FOR EB/IFD/OIA
WHA/EPSC (MROONEY)(FCORNEILLE)
EEB/ESC/IEC/EPC (MMcMANUS)
INR/RES (RWARNER)
SANTO DOMINGO FOR FCS AND FAS
TREASURY FOR ERIN NEPHEW

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV EAGR ELAB KTDB PGOV USTR OPIC
JM, XL

SUBJECT: JAMAICA: INVESTMENT CLIMATE STATEMENT 2009

REF: STATE 123907

UNCLAS SECTION 01 OF 14 KINGSTON 001039

SIPDIS

STATE FOR WHA/CAR (ACADIEUX) (VDEPIRRO) (WSMITH)
STATE FOR EB/IFD/OIA
WHA/EPSC (MROONEY)(FCORNEILLE)
EEB/ESC/IEC/EPC (MMcMANUS)
INR/RES (RWARNER)
SANTO DOMINGO FOR FCS AND FAS
TREASURY FOR ERIN NEPHEW

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV EAGR ELAB KTDB PGOV USTR OPIC
JM, XL

SUBJECT: JAMAICA: INVESTMENT CLIMATE STATEMENT 2009

REF: STATE 123907


1. Response to reftel request for the investment climate statement.

Openness to Foreign Investment
--------------


2. The Government of Jamaica (GOJ) seeks to attract foreign direct
investment and markets itself to companies in Europe, North America
and the Caribbean region. The GOJ encourages foreign investment as
a source of development and has no policies or regulations that
reserve certain sectors exclusively for Jamaicans. Prime Minister
Bruce Golding (Jamaica Labor Party),elected in September 2007,
after 18 years of rule by the People's National Party, publicly
warns of the negative consequences of red tape as a hindrance to
potential foreign investment.


3. Numerous measures which once inhibited foreign investment, such
as the Foreign Exchange Control Act and the list of areas reserved
for local investment only, have been eliminated. Thus, Jamaica does
not have any legal impediment to direct foreign investment and
applies the principle of national treatment to foreign investors.


4. With the investment landscape reformed, attention has turned to
the reduction of processing and approval times for
investment-related applications. In particular, USAID has been
providing assistance to the GOJ and the Private Sector Organization
of Jamaica for a Regulation, Legislation and Process Improvement
Project (LEGS and REGS) to remove some of the obstacles to doing
business in Jamaica. The project staff is currently revising an
existing Developer's Manual to provide updated information on the
administration, legislation, regulation and requirements involved in

the development approval process in Jamaica. The manual has been
revised, but there is still much streamlining required in achieving
the Prime Minister's 90- day turnaround deadline for approvals.


5. The LEGS and REGS Project has been paying dividends, as a 2009
World Bank Doing Business Report listed Jamaica in the top ten
countries for the Latin America and Caribbean Region in which it was
easiest to do business. Jamaica ranked above its regional peers and
compared favorably with OECD countries in areas such as starting a
business and hiring and firing workers. It should be mentioned
that, while Jamaica's Redundancy Act makes it expensive to cut staff
due to the relatively high severance payments tied to length of
service (see Labor section below),the Jamaican system still ranks
higher than its regional peers in the 2009 World Bank Ease of Doing
Business Report for the category of Hiring Workers. It only scores
lower than its peers in the subcategory of Firing Costs.


6. The Companies Act and the Securities Act govern acquisitions,
mergers and takeovers for publicly traded companies. In 1996, the
Securities Act was revised to bring it in line with international
regulations. The takeover code was redesigned to ensure the
integrity of the securities market while protecting minority
shareholders. Jamaica's legal system is based on English common law
principles and rules covering the enforceability of contracts are
based thereupon. The Jamaican judicial system therefore recognizes
and upholds the sanctity of contracts. However, in the 2009 World
Bank Doing Business Report, Jamaica slipped 25 rank positions for
Enforcing Contracts, falling from 102 in 2008 to 127 in 2009. There
are no limits on foreign ownership or control, and the Embassy is
not aware of any economic or industrial policy that has
discriminatory effects on foreign investors.


7. Foreign investors are generally granted national or Most Favored
Nation treatment, subject to the rules of their Bilateral Investment
Treaties (BITS). There are no screening mechanisms for foreign
investments, but if investors apply for government incentives, they
could be required to meet some basic pre-requisites and due
diligence may be done by the approving agency. This process is not
discriminatory and is not intended to impede investment. Jamaica
has also undertaken a comprehensive program of trade and financial
liberalization, and no sector remains closed to foreign investment.
However, projects that affect national security, have a negative
impact on the environment, or involve sectors such as life
insurance, media or mining are subjected to regulation and certain
restrictions.


8. Jamaica's privatization program is open to participation by
foreign investors, except for those that are on the restricted list
due to national security concerns. The National Investment Bank,

KINGSTON 00001039 002 OF 014


which administers privatization, is mandated to ensure that the
process is fair and transparent. However, in some privatization
transactions, the participation of local investors may lead to added
points in the scoring of proposals. When large entities are being
privatized, advertisements are placed in international newspapers
such as the Financial Times, New York Times and Wall Street Journal
to attract foreign investors. An information memorandum accompanies
privatization proposals and includes the specific requirements under
which bidders are allowed to participate and the criteria by which
proposals will be evaluated. Foreign investors have won most of the
privatization bids in the last five years. The government is
currently reviewing some of the remaining parastatals with an eye to
divestiture.


9. The country is party to both multilateral and bilateral treaties,
which provide for non-discrimination. Local laws do not distinguish
between local and foreign investors. The Embassy is not aware of
any discrimination against foreign investors at the time of initial
investment or after the investment is made. However, under the
Jamaican Companies Act, investors are required either to establish a
local company or to register a branch office of a foreign-owned
enterprise. Branches of companies incorporated abroad must also
register with the Registrar of Companies if they intend to operate
in Jamaica. The Companies Act, which came into effect in February
2005, allows foreign companies to hold lands without registering in
Jamaica. There are no laws or regulations requiring firms to adopt
articles of incorporation or association, which limit or prohibit
foreign investment, participation or control. The Embassy is not
aware of any other ways private firms could restrict foreign
investment.


10. Foreign direct investment (FDI) flow was USD 779 million in
2007, down from 850 million in 2006 according to the United Nations'
World Investment Report. The dynamism in FDI was most evident in
the construction, telecommunications, tourism, and mining sectors.
Despite significant foreign investment over the years, Jamaica's
annual GDP growth has been an anemic 1 percent on average,
indicating that foreign investment does not directly translate into
GDP growth. Jamaica appears to lack the absorptive capacity to
benefit from investments requiring high skilled employment, and a
significant portion of inputs are not sourced locally.


11. The introduction of competition in the telecommunications sector
has attracted three mobile providers and multiple internet service
provides including three licenses that are being issued to wireless
service providers. The GOJ has issued two additional fiber-optic
licenses to reduce the cost of Internet rates. Highway 2000,
Jamaica's first toll road, is being constructed by French company
Bouygues under a build, operate, and transfer (BOT) model. Two
segments of the project, costing over USD 500 million, are
completed. A third leg connecting Kingston and the resort area of
Ocho Rios should be completed by end of 2010.


12. With the onset of the global economic crisis, there has been
significant slowdown in some of Jamaica's critical foreign exchange
earners. Growth in the bauxite and tourism sectors has slowed. The
construction boom of the last three years, which brought in over USD
1 billion in FDI in the accommodation sector, has weaned. Future
projects in the sector have been postponed until the global economic
climate improves. This includes investments from Spanish hotel
chains and the high-end Harmony Cove Tourism Development. A
Brazilian company, Infinity BioEnergy, is in negotiations to acquire
the assets of Jamaica's sugar industry.

Conversion and Transfer Policies
--------------


13. Jamaica has no restrictions on holding funds or on transferring
funds associated with an investment, as the country liberalized its
foreign exchange market in 1991. However, foreign exchange
transactions must be conducted through authorized foreign exchange
dealers, cambios and bureaux de change at market-determined rates.
Foreign exchange is generally available, but companies tend to
source large amounts of foreign exchange over a three to four day
period. There are currently no plans to change the policies
affecting investment remittances and there is no delay period
currently in effect for remitting investment returns. There is no
legal parallel market (tiered system) for foreign exchange following
liberalization and there are no limitations on the inflow or outflow
of funds for any transaction. Recently surveyed U.S. companies
indicated no problems or delays in accessing foreign exchange or

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remitting investment returns.

Expropriation and Compensation
--------------


14. Property rights are protected under Section 18 of the Jamaican
Constitution. Expropriation of land may take place under the Land
Acquisition Act, which provides for compensation on the basis of
market value. Expropriation can take place before compensation is
paid, but interest for the period between the expropriation and the
compensation settlement must be paid. According to the law, the
purpose of any expropriation must be transparent, and compensation
for expropriated property must be adequate. If informal negotiation
on compensation fails, the investor has recourse in the courts.
Jamaica has signed bilateral agreements for the reciprocal promotion
and protection of investments with a number of countries, including
the United States. The Embassy is not aware of any litigation
between the Jamaican government and any private individual or
company based on expropriation or on compensation for expropriation.
There are currently no laws that force local ownership.

Dispute Settlement
--------------


15. Disputes between enterprises are handled in the local courts,
but foreign investors can refer cases to the International Center
for Settlement of Investment Disputes (ICSID). There have been
cases of trademark infringements in which U.S. firms took action and
were granted restitution in the local courts. The Jamaican
Constitution provides for an independent judiciary with a three-tier
court structure. Claims may be brought before the Magistrate or
Supreme Court. Appeals on decisions made in these courts can be
taken before the Court of Appeal and then to the Judicial Committee
of the Privy Council in the United Kingdom. Plans were afoot for
the Privy Council to be replaced by the Caribbean Court of Justice
(CCJ),which will consider and determine appeals in civil and
criminal matters from common law courts within CARICOM member
states. However, the then-opposition Jamaica Labor Party (JLP)
opposed the process and took the case to the Privy Council which
supported their position. If Jamaica were to replace the Privy
Council with the CCJ it will likely require a national referendum,
although it is not likely in the near-term. Jamaica has effective
means for enforcing property and contractual rights through: (1) The
Judgment and Awards (Reciprocal Enforcement) Act; (2) The Judgment
(Foreign) (Reciprocal Enforcement) Act; (3) The Arbitration
(Recognition and Enforcement of Foreign Awards) Act; and, (4) The
Maintenance Orders (Facilities for Enforcement) Act. Under these
acts, judgments of foreign courts are accepted and enforced in all
cases where there is a reciprocal enforcement of judgment treaty
with the relevant foreign state.


16. A number of disputes, involving foreign investors and GOJ, on
the one hand, and foreign investors and a local association, on the
other, arose during 2005. The first dispute, which is yet to be
resolved as of early 2008, involves the implementation of a levy by
the GOJ on in-coming telephone calls for a Universal Access Fund to
finance computers and other information-related activities in
Jamaican schools. However, U.S. long-distance telephone companies
have been resisting the move and have requested that the Federal
Communications Commission put pressure on Jamaica to desist from
collecting the fees.


17. There is a Bankruptcy Act dealing with personal insolvency, a
Companies Act dealing with corporate insolvency, and other statutes
such as the Bills of Exchange and the Sale of Goods Acts dealing
with commercial matters. There are also extensive common law
principles, which are written and consistently applied. Under the
bankruptcy laws, creditors can petition for an order against an
individual or a winding up order against the company and will be
entitled to share in the assets of the bankrupt on a pro-rata basis,
after certain specified preferential creditors such as redundant
employees. The claimant has the option of settling a claim in the
currency in which the debt or obligation was incurred or in local
currency.


18. Jamaica, a signatory to the International Center for Settlement
of Disputes (ICSID) since 1965, accepts international arbitration of
investment disputes between Jamaicans and foreign investors. Local
courts also recognize and enforce foreign arbitral awards.
International arbitration is also accepted as a means for settling
investment disputes between private parties. However, acting in its

KINGSTON 00001039 004 OF 014


role as an international tribunal, the CCJ will interpret and apply
the Revised Treaty of Chaguaramas, including the CARICOM Single
Market and Economy. There is no formal domestic arbitration body in
Jamaica, but disputing parties can use arbitration proceedings to
settle their disputes. These proceedings would be guided by the
Arbitration Act which sets out the procedures disputing parties
would follow once they agree on arbitration and is read in
conjunction with the Arbitration Clauses Protocol Act, which in turn
makes reference to how foreign arbitral awards will be addressed.
If a foreign investor's country has a BIT with Jamaica, then the
rules of this treaty would apply. Other foreign investors are given
national treatment and civil procedures would apply.


Performance Requirements and Incentives
--------------


19. Jamaica is a signatory to the World Trade Organization Agreement
and is in compliance with most Uruguay Round obligations, including
the TRIMS Obligations. There are no performance requirements
imposed as a condition for investing in Jamaica. The GOJ offers a
number of incentives to attract investments, particularly those that
generate foreign exchange and expand employment. Some current
incentives are non-compliant with the WTO Agreement on Subsidies and
Countervailing Measures and should have been phased out by 2003, but
have not been. However, Jamaica was granted an extension by the WTO
to revise its incentives and is awaiting reports from the World
Bank-affiliated Foreign Investment Advisory Service and a local Tax
Review Committee to complete the process. Chief among the current
incentives are:

(a) The Export Industry Encouragement Act (EIEA) - entitles
companies manufacturing products for export to non-CARICOM member
countries benefits such as exemption from income and dividend taxes
for up to ten years, and exemption from import duties on raw
material and machinery during the incentive period. Service
industries were included in 1990 and in 1996 the EIEA was amended to
include companies that do not export 100 percent of their output.


(b) The Hotel Incentives Act - entitles hoteliers to income and
dividend tax relief for up to ten years. Hoteliers may also receive
an exemption from import duties for constructing or expanding
hotels, but must have at least ten rooms and facilities for other
activities. Income tax relief is granted for 15 years to hotels
that meet certain qualifications including: having 10 to 350 rooms,
facilities for holding conferences and operation by a qualified
general manager. The Resort Cottages Incentives Act allows for
income and dividend tax relief and duty-free importation of articles
required to construct and equip resort cottages for up to seven
years.

(c) The Motion Picture Industry Encouragement Law - motion picture
producers can receive duty relief on imported goods for use in
motion picture production as well as income tax exemption from the
date of release or exhibition of each motion picture produced in
Jamaica for a period of nine years. Producers are also granted a
tax deduction of 70 percent of the capital expenditure incurred in
acquiring facilities either in the year in which the cost is
incurred or in any subsequent year at the option of the producer.

(d) Approved farmer status under the Income Tax Act - certified
persons or companies engaged in growing food or seed crops,
horticulture, aquaculture, tobacco and animal husbandry are eligible
for income tax relief for up to ten years, renewable as well as
concessionary duty rates on farm vehicles.

(e) The International Finance Company Act - available to finance
companies conducting business solely with foreigners. With regard
to Jamaican operations, non-residents must hold at least 95 percent
of the loan capital. Profits of an approved corporate body are
taxed at a rate of only 2.5 percent.

(f) The Shipping Incentives Act - approved shipping corporations are
granted import duty and income tax concessions for a period of ten
years.

(g) The Foreign Sales Corporation Act - provides exemption from
income tax for five years for qualified income arising from foreign
trade. U.S. law through the Tax Information Exchange Agreement
(TIEA) reinforces this incentive.

KINGSTON 00001039 005 OF 014



(h) The Industry Modernization Program (IMP) and Moratorium on
Duties - under the IMP, companies are exempt from general
consumption tax on capital goods acquired for modernization. The
Minister of Finance may award a moratorium on import duties on
capital items for up to three years to companies, which do not
qualify under existing incentive legislation and have the potential
to contribute significantly to foreign exchange earnings.

(i) Accelerated Depreciation - certified companies are allowed to
deduct 50 percent of the full cost of new machinery in the year of
purchase and a further 50 percent in the following year.

(j) Other Incentives - a number of development banks provide
concessionary financing for projects. The Jamaican National EXIM
Bank provides concessionary interest rate loans for trade financing,
while the Development Bank of Jamaica offers reduced lending rates
to the productive sectors. The National Investment Bank of Jamaica
also provides equity and quasi-equity financing for key economic
sectors listed under the National Industrial Policy.


20. Foreign investors and their investment are generally granted
national treatment status, subject to the rules outlined in their
BIT. In essence, Jamaica has no performance requirements, except
for companies with Free Zone status, which must export at least 85
percent of their output. Foreign firms are allowed to participate
in GOJ-financed or subsidized R&D programs on a national treatment
basis. Work permits are granted by the Ministry of Labor for a
specified period, but are subject to the individual obtaining a
working visa from the Jamaican Consulate available in or near their
home state. Since 2005, foreign nationals who are conducting
business on short-term basis will not require a business visa once
they will be in Jamaica for a period not exceeding thirty days.
However, foreign nationals will need a business visa to enter
Jamaica if they are conducting business for periods exceeding thirty
days. Foreign nationals who need visas for entry to Jamaica will
require a business visa to conduct business.


21. All importers are subject to the same procedures when trading in
goods and services. To qualify for entry certificates, importers
must obtain, inter alia, a supplier invoice, a certificate of value,
and origin, a declaration of value and a bill of lading and sight.
Products imported into Jamaica must also meet specific acts
administered by the Jamaica Bureau of Standards. In December 2001,
Jamaica imposed the International Organization for Standardization
ISO date representation (yy/mm/dd) as the official format for trade,
but date labels are still accepted in the traditional European style
(dd/mm/yy). The Jamaican economy is relatively open, but some
non-tariff barriers remain. For instance, the Veterinary Division
requires certification from a U.S. federal agency for all products
containing animal and animal by-products irrespective of quantity or
form. Highly processed products such as cookies and chips therefore
require certification from a government veterinarian. The Coffee
and Coconut Industry Boards also have to issue import certificates
for coffee beans and cooking oils, respectively, but importers can
experience lengthy delays in obtaining these permits. Under intense
pressure from farmers cooperatives, the GOJ instituted a 100 percent
Common External Tariff (CET) plus an 80 percent Additional Stamp
Duty (ASD),compounded to 260 percent, on whole chicken and
leg-quarters and a number of imported vegetables.

Right to Private Ownership and Establishment
--------------


22. All private entities are entitled to establish and own business
enterprises and engage in all forms of remunerative activity,
subject to, inter alia, labor, registration and environmental
requirements. Private entities are also free to establish, acquire
and dispose of interests in business enterprises. Public and
private enterprises have equal access to markets, credit and
business operations, such as licenses and supplies. However, if the
GOJ has to compete with the private sector, it will do so on a
competitive basis so as to not distort the market.

Protection of Property Rights
--------------


23. The Jamaican Constitution guarantees property rights. Jamaica
has a system of registered titles set out in the Registration of
Titles Act, which recognizes and provides for the enforcement of
secured interests in property by way of mortgage. It also

KINGSTON 00001039 006 OF 014


facilitates and protects the acquisition and disposition of all
property rights, though working through Jamaica's cumbersome
bureaucracy can result in significant delays. In particular, it
sometimes takes a long time for landowners to secure titles.
Squatting, especially on crown (government) lands has also become a
challenge in the last ten years. Jamaica is a member of the World
Intellectual Property Organization (WIPO) and is a signatory of the
Bern Convention. Jamaica and the U.S. have an Intellectual Property
Rights Agreement and a BIT, which provide assurances to protect
intellectual property. However, Jamaica remains a special 301
"Watch List" country, largely because the patent law is not
compliant with the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS). A Geographical Indications
Act (GI) was passed in 2004 to protect products that originate from
localities where a particular quality or reputation is attributable
to its geographical origin. General law provides protection for
trade secrets. Protection against unfair competition is also
provided by the general law and the Fair Competition Act.


24. The Copyright Act of 1993, as amended, complies with the TRIPS
Agreement and adheres to the principles of the Bern Convention, and
covers works ranging from books and music to computer programs.
Amendments in June 1999 make explicit the provision of copyright
protection on compilations of works such as databases and make it an
offense for a person to manufacture or trade in decoders of
encrypted transmissions. It also gives persons having rights in
encrypted transmissions or in broadcasting or cable program services
a right of action against persons who infringe their rights. The
act needs to be amended to give effect to the provisions of the WIPO
WCT and WPPT (Internet) Treaties to which Jamaica acceded in 2002.
The Trademark Act of 1999 is also compliant with the TRIPS Agreement
and provides the owner of registered trademarks exclusive rights for
up to ten years, renewable. It provides for the protection of
"well-known" marks under the Paris Convention. A TRIPS compliant
Layout Designs Act has also been in effect since June 1999. The act
provides protection for layout-designs for integrated circuits and
gives the rights owner the exclusive right to reproduce, import,
sell or otherwise commercially exploit the layout-design and to
authorize other persons to do so. That right is in place for ten
years and may be transferred by the rights owner.

Transparency of Regulatory System
--------------


25. A Fair Competition Act (FCA) was implemented in 1993 and is
administered by the Fair Trading Commission. The main objective of
the FCA is to prevent business interests and government policies
from hindering the efficiencies to be gained from a competitive
system. The FCA deals with misleading advertisements, price-fixing,
collusion, unfair trading practices and interlocking directorships.
To date the FTC has investigated over 5,000 cases, the majority of
which are consumer protection related.


26. There are laws and policies covering taxation, labor, health and
other issues to avoid distortions or impediments to the efficient
mobilization and allocation of investment. However, investors argue
that the Redundancy Act, which deals with severance payment, is a
disincentive to investment funds. In 2001, the mandate of the
Anti-Dumping and Subsidies Commission was expanded through the
implementation of a Safeguards Act, which protects producers from
import surges. The GOJ also established the Office of Utilities
Regulation to act as regulator of the country's utilities.


27. Although there has been improvement in the approval process for
investment projects, it can still take anywhere from three months
for Free Zone projects to over a year for green-field projects.
Having recognized the problem, the GOJ has intensified its efforts
to reduce bureaucracy as well as improve transparency and customer
service levels within the public sector. A Ministry of Development
was established to deal with investment bottlenecks. As stated
above, the private sector, GOJ and USAID have also joined forces to
implement a project (LEGS and REGS) to identify and deal with key
legislation, regulations and processes that constrain business. The
project is currently addressing the reform process with regard to
the approval for development and building permits. It should be
noted that as a result of this work, Jamaica was the top reformer
globally this year on Dealing with Construction Permits, in the
World Bank Doing Business 2009 Report, improving its rank on that
indicator by 25 spots to 49th place.


28. The Embassy is not aware of any informal regulatory processes

KINGSTON 00001039 007 OF 014


managed by NGOs or private sector associations or of any private
sector and/or GOJ effort to restrict foreign participation in
industry standards-setting consortia or organizations. However, in
December 2004, the Free Trade Commission (FTC) implemented a
non-legislative code of conduct governing the petroleum industry.
The mandates of this code place restrictions on property sales and
contracts between marketing companies and retailers, and are
enforceable through fines levied by the FTC. Proposed legislation is
available for public comment and submissions are generally invited
from members of the public for items considered to be controversial.
The legal, regulatory and accounting systems are transparent and
consistent with international norms, and Jamaica has adopted the new
International Financial Reporting System.

Efficient Capital Markets and Portfolio Investment
--------------


29. Since the 1980s, Jamaica has initiated reforms aimed at
fostering private sector activity and increasing the role of market
forces in resource allocation. These reforms intensified in the
1990s, resulting in trade, financial and capital account
liberalization. This has led to the availability of credit on
market terms and foreigners are allowed to borrow freely on the
local market at market-determined rates of interest. While some
major financial products are still lacking, the private sector still
has access to a variety of credit instruments.


30. Jamaica has an effective regulatory system established to
encourage and facilitate portfolio investment. The Financial
Services Commission and the Bank of Jamaica jointly regulate
portfolio investment. At the end of September 2008, the country's
four largest commercial banks had total assets amounting to over USD
6 billion or 90 percent of the entire assets of commercial banks.
Five of the country's seven commercial banks, including the four
largest, are foreign-owned. During the mid-1990s there was a
meltdown in the financial sector often referred as "FINSAC", but
since 1998 there has been consolidation and increased output
performance in the sector. Significant strides have also been made
in terms of the regulatory framework, which are now in line with
international standards. The non-performing loans portfolio as a
percentage of the total asset base has moved from seven percent in
2000 to 2.4 percent at the end of September 2008.


31. Based on the Rule 404 of the Jamaica Stock Exchange (JSE),fully
paid shares shall be free from any restriction on the right of
transfer and from all liens. Two listed companies have clauses
within their memoranda and articles of association that restrict
foreign investors, but these predate the JSE. JSE listing
arrangements allow for 20 percent of issued share capital to be
listed, but there is no requirement that stipulates that this
threshold must be maintained after listing. The rules of the JSE
and the Security Acts also have specific provisions relating to the
process of takeover and mergers, but these are general and, given
that there are no specific provisions (except in the cases mentioned
above) regarding restrictions to foreign participation, it follows
that there are no specific measures designed to protect against
hostile foreign takeovers.

Political Violence
--------------


32. Jamaica has had no incidents involving politically motivated
damage to projects and/or installations. Crime poses a greater
threat to foreign investments than do politically motivated
activities. The resort city of Montego Bay experienced a day of
social unrest in 2003, in response to alleged police excesses. The
street demonstration, which included the blocking of roads, affected
the flow of tourists between hotels and the airport. Violent crime,
rooted in poverty, unemployment, and drug trafficking, is a serious
problem in Jamaica, particularly in Kingston. Sporadic gang
violence and shootings are concentrated in certain inner city
neighborhoods, but can occur in other areas. Extortion is a serious
problem in certain areas of the commercial district and on large
construction projects - such as the Highway 2000 project.

Corruption
--------------


33. Jamaica has a Corruption Prevention Act (CPA),which established
a Corruption Prevention Commission in 2003 to, among other things:
(1) receive, examine and document the statutory declarations of

KINGSTON 00001039 008 OF 014


public sector workers; (2) receive and investigate any complaint
regarding an act of corruption; and, (3) conduct investigation into
acts of corruption, if satisfied there are reasonable grounds to do
so. To date there has been no enforcement, as the commission lacks
the capacity to enforce the filing of declarations. Recent reports
suggest that non-compliance is running at over 30 percent. However,
the commission will be working with the Director of Public
Prosecution to have enforcement measures implemented. The Embassy
is not aware of any disproportionate application of corruption
measures against foreign investors, but some members of the private
sector perceive that the law is not applied impartially among
locals. During a recent panel discussion on governance, a GOJ
Senator also stated that Jamaica had not done well in eliminating
corruption from the public sector.


34. Jamaica is a signatory of the OECD Anti-Bribery Convention and
has ratified the Inter-American Convention Against Corruption.
Anti-corruption initiatives have been taken within the Jamaica
Constabulary Force as well as some private sector organizations.
Prosecutors also continue to take part in regional anti-corruption
conferences, with one such conference developed by the United States
Department of Justice (USDOJ). However, Jamaica is not a signatory
to the UN Anticorruption Convention. The Embassy is not aware of
any U.S. firm identifying corruption as an obstacle to foreign
investment. Transparency International (TI) performed a formal
study of corruption in 2003. The TI report identifies widespread
political, petty, and narcotics-related corruption as being
prevalent in Jamaica. According to Transparency International's
Perception Index, the perception of corruption in Jamaica has
worsened in the past three years. The island has slid from a score
of 3.7 out of 10 in 2006, to 3.3 in 2007, down to 3.1 in 2008. This
score places Jamaica in the same category as Benin, Gabon,
Guatemala, and Mali.


35. Corruption may well be the single greatest concern among
Jamaicans, most of whom believe it one of the root causes of the
high crime rate. In the past year, 16 police officers have been
arrested for alleged acts of corruption, but only one has been at
senior level. Despite numerous allegations of public corruption,
the last conviction of a politician on corruption charges was in

1981. In recent times only one politician has been arrested on
charges of corruption; he is currently awaiting trial.


36. Under the Corruption Prevention Act (CPA),it is an offense to
solicit or accept a bribe. Public servants can be imprisoned for up
to ten years and fined as much as JMD ten million if found guilty of
engaging in acts of bribery. Individuals and companies are also
criminally liable if they bribe foreign public officials and can be
prosecuted and face the same penalties. The legislation covers
public officials who meet the JMD two million salary threshold and
those working in sensitive positions such as police and military
officers. However, it is well known that a number of public
officials have been delinquent in complying with mandatory filing.
The creation of the CPA could be viewed as evidence that GOJ
officials are taking anti-corruption efforts seriously. However,
financial constraints have crippled the commission's ability to
fully execute its mandate of enforcing asset declarations. In 2007,
The GOJ passed into law the Proceeds of Crime Act (POCA),a powerful
legal tool that allows for both criminal and civil forfeiture and
criminalizes money laundering related to narcotics offenses, fraud,
firearms trafficking, human trafficking, terrorist financing and
corruption, and applies to all property or assets associated with an
individual convicted or suspected of involvement with a crime.
More active enforcement of the POCA by the GOJ would certainly
strengthen anti-corruption efforts.


37. U.S. investors should be aware of the U.S. provisions of the
Foreign Corrupt Practices Act (FCPA) which, in general, prohibits
corrupt payments to foreign officials for the purpose of obtaining
or keeping business. See the U.S. Department of Justice website for
more information. http://www.usdoj.gov/criminal/fraud/fcpa/


38. The CPA also contains provisions for the extradition of Jamaican
citizens for crimes of corruption. In April 2002, Prime Minister
Patterson tabled a code of conduct in Parliament for government
ministers. The 49-point code covers such issues as conflict of
interest and integrity in the conduct of public and private
business. The agency responsible for combating corruption is the
Commission for the Prevention of Corruption. Other "watchdog"
organizations operating in Jamaica include Transparency
International, Jamaicans for Justice, Families Against State

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Terrorism and the Farquharson Institute of Public Affairs.

Bilateral Investment Agreements
--------------


39. Jamaica has investment treaties with the United States (Feb.
1994, which came into force in March 1997),Argentina (Feb. 1994),
France (Jan. 1993),Italy (Sept. 1993),Germany (Sept. 1992),
Netherlands (Apr. 1991),Switzerland (Dec. 1990),the United Kingdom
(Jan. 1987),China (1998),Cuba (May 1997),Egypt (Feb. 1999),
Indonesia (Feb. 1999) and Zimbabwe (Feb. 1999) and is presently
negotiating bilateral investment agreements with South Korea, Costa
Rica, Belgium, Russia and Canada. Jamaica has also signed and
ratified double taxation agreements with the U.S., Canada, CARICOM,
China, Switzerland, Germany, Norway, Sweden, Denmark and the United
Kingdom.

OPIC and Other Investment Insurance Programs
--------------


40. The Overseas Private Investment Corporation has identified
infrastructure, telecommunications, construction, tourism and
renewable energy as areas where its programs can have an impact in
Jamaica. OPIC political risk insurance can insure up to USD 40
million per project. OPIC also provides medium to long-term
financing to ventures with significant U.S. participation. OPIC can
normally guarantee or lend from USD 0.1 to 250 million per project.
OPIC has historically committed more than USD 750 million in
insurance and financing to support over 80 projects in Jamaica in
industries such as construction, energy, telecommunications, and
tourism. The country became a signatory to the Multilateral
Investment Guarantee Agency in 1986 and ratified the agreement in

1987.


41. The foreign exchange market remained relatively stable for the
first nine months of 2008, depreciating by 1.6 percent. However, by
October the effects of the global financial crisis became evident,
with the local currency slipping by over eight percent to the first
week of December. The sharp depreciation has been underpinned by a
confluence of demand and supply factors led by increased margin
calls from overseas creditors. Demand pressures were also
compounded by increasing Jamaican dollar liquidity as local
financial institutions converted maturing debt instruments into hard
currency. The increased demand for hard currency could not have
come at a worse time, as it coincided with the slow period for
inflows and the traditional demand spike for foreign currency to
purchase Christmas supplies. But one of the single greatest shocks
to the foreign exchange market came from the negative ratings
released by the three main ratings agencies. But a currency
adjustment was not unexpected given the 16.8 percent spike in
inflation to September, 2008, which represented an almost 15 percent
real appreciation in the currency. And with confidence waning and
rising inflation rendering returns on local instruments negative,
investors were always going to switch to foreign assets to hedge
against any further erosion in real returns. High commodities
prices led by oil imports had also influenced a USD 793 million
deterioration in the current account balance to June 2008. With
foreign investment inflows drying up and the capital market shut,
there would have been a shortfall in the supply of foreign inflows
required to finance the current account, thus forcing the exchange
rate to adjust.


42. To address the instability, the Central Bank drew on its arsenal
of monetary tools to temper demand pressures. On October 15, the
Bank introduced a temporary USD loan facility for institutions
affected by margin calls. Two days later the Bank complemented this
response by hiking interest rates by up to 1.2 percent. The Bank
followed up by facilitating the flow of credit among financial
institutions to moderate the pressures in the foreign exchange
market, while assisting the continued functioning of the inter-bank
credit market. At the same time, the bank sold over USD 400 million
or 20 percent of its stock of Net International Reserves (NIR) to
the currency market to shore up supplies, thus, bringing NIR down
from USD 2.1B in 2007 to USD 1.7B in December 2008. However, these
policy responses were not sufficient to alleviate the demand
pressures in the currency market, due to a build up in Jamaica
dollar liquidity stemming from maturing debt instruments. To remove
this liquidity, the Bank embarked on an even more aggressive
monetary program, offering an attractive short term instrument with
interest payable at 20.5 percent as well increasing the cash reserve
requirement by two percentage points to 11 percent. Interest rates

KINGSTON 00001039 010 OF 014


were further hiked to as high as 24 percent for one year
instruments. These measures were accompanied by an 18-month GOJ USD
indexed bond with a coupon of 11.5 percent.

Labor
--------------


43. Jamaica had an estimated labor force of 1.3 million at the end
of January 2008, of which 10.2 percent was unemployed. Since 1999
there has been a steady increase in the numbers of people trained in
information technology, particularly for call centers, and most of
these workers have been absorbed by the growing call center
industry. There has also been a jump in the number of university
graduates, but the numbers have been depleted by migration to North
America and the UK. This has apparently led to a shortage of highly
educated and experienced labor as evidenced by the number of
advertisements for these workers in the newspapers weekly. On the
other hand, there has been a marked increase in the number of work
permits issued to expatriates, particularly in the services sectors.
In 2007, a total of 5,927 permits were issued, down 6.3 percent,
suggesting a falloff in the demand for permits as some tourism
projects are completed.


44. Jamaica has an active and strong trade union movement with
membership equal to an estimated 20 percent of the labor force,
although the movement is considerably weaker now than historically
has been the case. Labor relations have traditionally been
adversarial due to the level of distrust between workers and
management. However, both parties have attempted to enhance the
relationship between them by enacting a program for the management
of labor cooperation (PROMALCO).


45. Jamaica has a number of labor friendly laws including the
Employment (Termination and Redundancy Payments) Act, 1974 (as
amended) (ETRPA). Under the Act, subject to some exclusions,
employees with not less than two years continuous employment, who
are dismissed on the grounds of "redundancy" are entitled to
redundancy payment. As a general rule, workers with up to ten years
continuous employment are entitled to two weeks payment for every
year as well the requisite notice pay, while workers with over ten
years continuous employment are entitled to three weeks payment plus
notice pay (notice pay is the period in which the employee must give
notice to their employer before leaving their position except in
certain cases such as firing for cause).


46. Jamaica has ratified the following ILO Conventions: Right of
Association (Agriculture) Convention 1921 - ratified July 8, 1963;
Freedom of Association and Protection of the Right to Organize
Convention, 1948 - ratified December 26, 1962; and, Right to
Organize and Collective Bargaining Convention, 1949 - ratified
December 26, 1962. The GOJ is adopting the ILO policy on HIV/AIDS
in the workplace. The GOJ, working in conjunction with the ILO and
local stakeholders, has also developed a national plan of action on
flexibility in working time to guide flexible working arrangements
in Jamaica. 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. 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.

Foreign-Trade Zones/Free Ports
--------------


47. Jamaica's Free Zones Act allows investors to operate solely with
foreign exchange in activities such as warehousing, refining,
manufacturing, redistribution, processing, assembling, packaging,
and services such as insurance and banking. Incentives offered
include a 100-percent tax holiday in perpetuity, no import licensing
requirements, and exemption from customs duties on construction and
raw materials, capital goods, and office equipment. Manufacturing
companies operating in the Free Zones are allowed to sell 15 percent
of their production on the local market with the approval of the
responsible minister. Duty-free zones are primarily found in
airports, hotels, and tourist centers and, as with free zone
activities, do not discriminate on the basis of nationality. The
Kingston and Montego Bay Free Zones provide factory space for the
above listed activities. Amendments have also been made to the
Jamaica Export Free Zone Act to allow for the establishment of
Single Entity Free Zones, with individual companies now designated
as free zones. The Kingston Free Zone has recently developed an

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Informatics Park.

For foreign trade zone information investors can contact:

Ms. Beverly Williamson, Senior Vice-President, Business Management
and Special Projects, Kingston and Montego Bay Free Zones, 27
Shannon Drive, Kingston 15, Tel: (876) 922-0290-8; 923-5274-5/6021;
Fax: (876) 923-6023. 1 Mangrove Way, Montego Bay Free Port, P.O. Box
1377, Montego Bay, Tel:(876) 979-8696; Fax (876) 979-8088;
Email:bwillaimson@portjam.com

Ambassador Stewart Stephenson, General Manager, Factories
Corporation, 1 King St. Kingston, Tel: (876) 924-9600 -1; Fax: (876)
924-9630; Email: factories@cwjamaica.com

Foreign Direct Investment Statistics
f. Foreign Direct Investment Statistics

Table 1: FDI Stock in Jamaica (USD Million)

2001 2002 2004 2005 2006 2007
Inward 4,040 4,409 5,783 6.335 7,264 8,580
Outward 798 872 1,079 1,174 1,257 817
Source: World Investment Report, 2005

Table 2: FDI Stock as a Percent of GDP

2001 2002 2004 2005 2006 2007
Inward 50.5 56.7 66.4 65.1 68.8 76.6
Outward 10.3 11.2 12.4 12.1 11.9 7.3
Source: World Investment Report, 2005

Table 3: Inward FDI (USD Million)

2002 2003 2004 2005 2006 2007


Direct Investment 479 721 602 683 882 867
Bauxite Sector 108 150 57 112 336 217
JAMPRO 79 201 n/a 173 315 277
Ret. Earnings 162 158 178 202 132 177
Divestment 84 0 0 0 0 0
Other 46 212 367 197 99 196
Source: Bank of Jamaica

Table 4: Inward FDI as a percentage of GDP

2001 2002 2003 2004 2005


Direct Investment 8.7 6.6 9.5 6.7 7.9
Bauxite Sector 1.2 1.5 2.0 0.7 1.3
JAMPRO 1.6 1.1 2.6 0.9 2.0
Ret. Earnings 1.6 2.2 2.1 2.0 2.3
Divestment 3.3 1.1 0.0 0.0 0.0
Other 1.0 0.6 2.8 3.2 2.3
Source: Bank of Jamaica

Table 5: FDI Projects Facilitated by Jamaica Promotions by Sector
(USD Million)

01/02 02/03 03/04 04/05 05/06 06/07


TOTAL 289.2 462.7 105.8 153.8 233.2 265.7
Agriculture 0.0 5.6 2.9 6.4 3.0 0.0
Music, Film, Ent. 9.8 9.4 14.2 12.3 15.0 0.0
Info Tech. 186.0 277.0 45.9 11.4 64.3 55.7
Manufacturing 56.5 85.6 31.1 0.0 11.1 38.9
Mining/Chemicals 0.4 30.4 0.4 4.6 16.0 1.3

Tourism 36.5 54.6 11.1 119.2 123.9 169.8
Source: Jamaica Promotions Agency (JAMPRO)

Table 6: FDI Projects Facilitated by JAMPRO by Selected Country of
Origin, FY 99-07

Country and Sector JDOLS Millions
BELGIUM
Tourism 100.0
CANADA

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Film 126.7
Information Technology 7,068.2
Manufacturing 546.3
Mining and Chemical 213.5
CAYMAN ISLAND
Tourism 78.2
DOMINICAN REPUBLIC
Information Technology 276.0
Manufacturing 284.9
GERMANY
Film 131.3
ITALY
Tourism 58.3
JAPAN
Film 14.2
RUSSIA
Film 228.5
SOUTH AFRICA
Manufacturing 27.2
SPAIN
Tourism 26,536.0
ST. LUCIA
Manufacturing 88.6
TAIWAN
Agriculture 570.4
TRINIDAD AND TOBAGO
Mineral and Chemical 1,466.8
Manufacturing 2,327.0
U.S.A.
Agriculture 182.0
Film 1,414.9
Information Technology 13,508.7
Manufacturing 2,367.0
Mining and Chemicals 674.2
Textiles 102.5
Tourism 6,378.3
UNITED KINGDOM
Film 277.9
Information Technology 9,277.1
Manufacturing 1,842.3

Tourism 124.1
MULTIPLE OWNERS
Film 784.6
Tourism 1,629.1
Source: JAMPRO (does not capture all new investments)

Jamaica has a long history of attracting foreign direct investment
from the United States. Among the major U.S. investors operating in
Jamaica are:

--------------
Accounting
--------------
KPMG Peat Marwick
Price Waterhouse-Coopers

--------------
Advertising
--------------
Lindo Foote, Cone & Belding (FCB)
McCann Erickson (Ja.) Ltd.

--------------
Agribusiness and Beverages
--------------
ADM Milling Company
Coca Cola Jamaica
Nabisco Brands, Inc.
Pepsi-Cola Jamaica Bottling Plant
Kraft

--------------
Banking & Finance
--------------
Citibank N.A.

--------------
Chemicals/Pharmaceuticals
--------------
Alkali Group of Companies

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Antilles Chemical Co.
Cetco Water Laboratories
Diversey-Lever Jamaica Ltd.
Fabcon (Caribbean) Ltd.
Industrial Gases Ltd. (IGL)
Sherwin Williams W.I. Ltd.
Smithkline Beecham International

--------------
Computers and Data Processing
--------------
Data Key Processors Jamaica Ltd.
Fargo Electronics
IBM World Trade Corp.
Jamaica Digiport Int'l Ltd.
Media Track Inc.
Microsoft
New Horizons Learning Centre
Oceanic Digital Jamaica Ltd.
Productive Business Solutions Ltd.
Standard Data Systems

--------------
Consumer Products
--------------
Colgate Palmolive

F. W. Woolworth & Co. (Ja.) Ltd.
Gillette Caribbean
Johnson & Johnson
KIWI Brands Caribbean Ltd.
Mead Johnson
Meineke
PriceSmart
Rooms-to-Go

--------------
Courier Service
--------------
FedEx
UPS
International Bonded Couriers

--------------
Insurance
--------------
American Home Assurance Co.
Blue Cross Shield of Jamaica

--------------
Manufacturing and Assembly
--------------
Baywind Manufacturing Ltd.
3-M Interamerica Inc.
Custom Marble & Design Jamaica Ltd.
Econ Industries Inc.
Goodyear (distributor)
Hofmann and Leavy Jamaica Ltd.
Jamaica Bow Co. Ltd.
Jockey International Jamaica Ltd.
Johnson & Johnson
Sealy Mattress Company
Singer Sewing Machine Co. Ltd.
Sportswear Producers Ltd.
West Indies Nutritional Corporation Ltd.
Williamson Dickie Jamaica Ltd.

--------------
Mining & Energy
--------------
Alcoa Minerals of Jamaica, Inc.
Alumina Partners of Jamaica (ALPART)
Jamaica Energy Partners
Jamaica Private Power Company Ltd.
Kaiser Bauxite Company
Texaco Caribbean Inc.

--------------
Project Management
--------------
Boyken-Mortimer International LLC


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--------------
Tourism and Hospitality Industry
--------------
American Airlines
American Express Int'l Inc.
Baskin Robbins
Churches Fried Chicken
Continental Airlines
Hertz (Liberty) Car Rental
Hilton (Kingston) Hotel
Holiday Inn Sunspree Resort
Kenny Rogers Roasters Chicken
Pizza Hut
Popeye's Chicken and Seafood
Renaissance Jamaica Grande Hotel
Restaurants Associates Ltd. - Burger King
Restaurants of Jamaica Ltd. - Kentucky Fried Chicken
Ritz Carlton Hotel
Spirit Airlines
Subway (Ja.) Ltd.
TCBY Frozen Yogurt
Wendy's
Wyndham Rose Hall Hotel
JOHNSON