USAID CBJ FY 2002: Jamaica

Summary: Through 1999, Jamaica's economy continued to deteriorate, though at a slower rate, with 2000 being the first time in five years that the country experienced slight economic growth (GDP). The structural problems underlying the country's inability to generate economic growth include weak institutions (financial and non-financial) which support the private sector, the high cost of credit, an inadequately trained workforce, and government procedures that do not encourage business development. High levels of crime and violence further undermine efforts to promote investment, employment, and growth. Micro, small, and medium sized enterprises (SMMEs) have been severely affected by the recession, and the environment in which businesses operate must be greatly improved. In 1999, there were 41 government agencies working with the private sector. As a result, there were many overlapping bureaucratic requirements and procedures that inhibited trade and investment in Jamaica. In addition, key sectors of the economy, such as the telecommunications sector, had monopoly status that impacted on business performance. Mediocre product quality and poor services are also key impediments to the competitiveness and growth of enterprises.

While in the past, this objective was almost exclusively focused on the micro-enterprise sector, it is now focused on reducing constraints to doing business in Jamaica. This will have a stronger and more positive impact on the country's economic growth. Accordingly, activities will assist in developing the business environment in which the private sector operates, to support the small, medium and micro-enterprise (SMME) sectors. Although SMMEs are recognized by public and private sector organizations as key to development and growth, they remain under served. The small and micro-enterprise sectors are primarily hindered by lack of financial and technical assistance products. The medium sized enterprises are more affected by an inability to find the right type of assistance to address specific needs. In this age of globalization, small and medium sized businesses must be prepared and have the tools to compete in the world economy.

To address some of these concerns, USAID: 1) is working with the public and private sectors to identify and reduce key constraints to doing business; 2) is strengthening the business skills of companies to help them to compete more effectively in the global market; 3) is developing financial instruments to increase the availability of private funds to the micro and small business sectors; and 4) is seeking to facilitate increased retail lending to the micro and small business sectors. Three results are expected from these interventions, namely: reduction of business constraints while fostering competition; improvement of business skills in companies; and an increase in private financing for the micro and small enterprise sectors. By the completion of the strategy period, a large number of companies are expected to have reallocated human and financial resources to compete head on with other companies and reduced the resources required to deal with red tape and financing concerns.

The activities that currently support the achievement of the Strategic Objective are: micro-enterprise development - Jamaica National Building Society (JNBS), New Economy Program (NEP), Business Roadmap development, and the Jamaica Conference Board.

Key Results: In order to measure overall performance under this objective, a proxy indicator was developed which is the number of new businesses registered in Jamaica. As the program assists in reducing business constraints, it is assumed that over time, more people will want to formally establish companies rather than do business in an informal manner. For 2000, while a figure of 4,500 was planned, in actuality 4,668 new businesses were established. This number is expected to increase by 10% per year.

To improve the business skill of companies, a program got underway in late 2000 to provide companies with the necessary tools to increase the number of businesses making productivity and/or technological improvements. This is a new indicator for which a baseline will be established this year, and reported on as of 2001. In support of this, several private sector groups including the Jamaica Exporters Association (JEA) and the Jamaica Chamber of Commerce will be initiating competitiveness programs.

With respect to loans to micro and small enterprises, of the 5,910 target, a total of 4,258 loans were disbursed. This lower figure reflects the fact that for much of the year the program was under government control and an overall cap of $1.0 million was set on the loan portfolio. Until the program was privatized, it could not grow. Earlier in 2000, a baseline of 1,680 small and micro enterprises accessing financial instruments from assisted companies was established. The actual was 1,910. Program activities continue to assist with increasing private financing for the micro and small enterprise sectors.

Performance and Prospects: Activities under this objective are fulfilling expectations, and are moving from start-up to the implementation phase in 2001 with mechanisms in place to identify and carry out additional activities.

In the area of reducing key business constraints, the plan was to reduce one constraint in 2000 and it was met. At the request of the Government of Jamaica (GOJ), highly specialized experts were provided to: 1) comment on proposed ministerial regulations for the telecommunications sector; 2) develop practical guidelines for the GOJ to promote competition among the carriers and service providers; 3) develop a transparent licensing process and 4) recommend how the Office of Utilities Regulation (OUR) might be better structured. The U.S. Federal Communications Commission provided highly specialized technical assistance to the GOJ in areas such as spectrum management, regulatory oversight and best practices from other countries. In this regard, the New Economy Program (NEP) provided extensive support to the OUR to oversee the telecommunications sector. The result is that three companies have been given licenses to provide cellular phone service in Jamaica. With the introduction of additional service providers, quality of service and types of cellular phone options are expected to increase to all sectors including SMMEs.

The Jamaica Chamber of Commerce and USAID are jointly working to establish a Conference Board that will bring together high-level private sector executives to discuss and analyze pertinent issues that affect business development operations. This is in response to the private sector's perception of the need to develop a mechanism that provides in-depth analysis of issues that impact on their performance. A Board of Directors consisting of ten prominent businesspersons was established, and events began in early 2001.

Assistance is being provided to the Ministry of Industry, Commerce and Technology, conducting an ongoing investor roadmap exercise that identifies major impediments to doing business in Jamaica. To date, several important bottlenecks have been identified in different government agencies that adversely impact on business development and operations, and solutions are being found. The Ministry of Finance and Planning (MOFP) Tax Administration Department is addressing tax administration issues. Similarly, a workshop on simplifying the process of obtaining Tax Compliance Certificates was conducted by the MOFP. The NEP will continue to assist with these processes.

With respect to improving the business skills of companies, introduction of the issue of competitiveness to the private sector has been very well received in Jamaica. A U.S. based company sensitized business leaders on the need to develop a new competitiveness paradigm. This has resulted in the Jamaica Exporters Association spearheading an effort to introduce this competitiveness paradigm in new economic initiatives.

With respect to private financing for the micro and small enterprise sectors, the sale of Union Bank's (GOJ owned) micro-enterprise unit and portfolio to the Jamaica National Building Society (JNBS) has finally been completed. This was an activity that USAID had supported when it belonged to Worker's Bank. Unfortunately, the Bank became insolvent and the Government had to intervene. USAID convinced them to keep the micro-enterprise unit together and to sell it as a separate unit. The sale to the Jamaica National Building Society has resulted in the elimination of the loan portfolio cap thereby allowing it to grow, increase efficiency, and expand services geographically. Through a recently negotiated Cooperative Agreement, USAID is assisting JNBS with this effort.

In FY 2002, USAID plans to assist the private sector and GOJ in nine projects spanning the areas of Information Technology, automated check clearing for banks, a credit bureau, expanding the new competitiveness model in the private sector, developing new financial products to assist SMMEs, improving the productivity and customer service in GOJ departments that interface extensively with the private sector, and preparing the business sector for the consequences of the Free Trade Area of the Americas (FTAA).

FY 2001 DA funds support microenterprise development by assisting the Jamaica National Micro Credit Company expand operations ($600,000); assisting small and micro enterprises in developing new financial products and improving company efficiency; providing technical assistance to the Government of Jamaica to eliminate bureaucratic bottlenecks ($1 million); development of the Business Roadmap ($100,000); the Jamaica Conference Board for public and private sector dialogue ($300,000); and other micro, medium and small business development activities ($200,000).

FY 2002 funds will be used to reduce business constraints ($650,000); improve business skills of companies ($640,000); and increase private financing for the micro and small enterprise sectors ($800,000).

Possible Adjustments to Plans: No significant adjustments to plans are anticipated.

Other Donor Programs: USAID is working with the Inter-American Development Bank, the British Department for International Development, the World Bank, the Caribbean Development Bank, and the International Monetary Fund.

Principal Contractors, Grantees or Agencies: U.S. partners include the U.S. Federal Communications Commission. Jamaican partners include the Private Sector Organization of Jamaica; Jamaica Exporters Association; the Ministry of Industry, Commerce and Technology; the Ministry of Finance and Planning; the National Environmental Protection Agency; Jamaica Promotions Ltd.; the Jamaica Chamber of Commerce; and Jamaican organizations CARANA and FINTRAC.

Jamaica 532-006

U.S. Financing

(In thousands of dollars)

	Obligations		Expenditures		Unliquidated
Through September 30, 1999	24,329	DA	20,308	DA	4,021	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	0	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA
Fiscal Year 2000	1,975	DA	1,173	DA
	0	CSD	0	CSD
	0	ESF	0	ESF
	0	SEED	0	SEED
	0	FSA	0	FSA
	0	DFA	0	DFA
Through September 30, 2000	26,304	DA	21,481	DA	4,823	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	0	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA
Prior Year Unobligated Funds	0	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
Planned Fiscal Year 2001 NOA	2,200	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
Total Planned Fiscal Year 2001	2,200	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
			Future Obligations		Est. Total Cost
Proposed Fiscal Year 2002 NOA	2,090	DA	6,235	DA	36,829	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	0	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA

Jamaica

Activity Data Sheet

Jamaica 532-006

U.S. Financing