World Bank praises business environment in Jamaica

Wednesday, January 14, 2004

KINGSTON, Jamaica: The World Bank has praised the Jamaican Government for its "positive enabling environment for business establishment and operation", stating that Jamaica ranks high in international comparisons for its regulatory framework and the time it takes to start a new company.

"Major steps have been taken by the Government to improve the framework for competition, such as the passage of the Fair Competition Act, the establishment of the Fair Trading Commission and the Securities Commission," the bank also noted.

In its recently released 220-page country review on Jamaica titled 'Jamaica: The Road to Sustained Growth', the powerful Washington institution also lauded Jamaica's resolution of its financial sector crisis as "one of the world's fastest".

Continuing, the Bank says: "Without question, the speed of the eventual clean-up by FINSAC was excellent", adding that the crisis and its resolution had a smaller effect on Gross Domestic Product (GDP), than it did in East Asia. "Crisis resolution also led to a much stronger financial system, with much better regulation and supervision…", the Bank says.

The Bank points out that Jamaica is considered to have a sound legal and institutional framework for fiscal management. It cites two recent studies as ranking Jamaica as the best or second best in the region in terms of its fiscal institutions.

It also argues that Bank of Jamaica supervision of the financial sector has improved and it has "strengthened its prompt corrective action procedures. Consolidated supervision has also improved, but further improvement is needed". The report, which points out a number of weaknesses in the Jamaican economy and social sector, including education and security, also points to some of the strengths. 

The Bank gives the country high marks for its legislative framework, especially as it relates to the financial sector, property and copyright and business operations. It says that while "contingent liabilities need to be better managed", Jamaica's ability to "manage the fiscal situation technically is strong". In a section on 'Governance in Jamaica - the International Context', the World Bank report says the quality of the bureaucracy is rated high in comparison with other countries and is comparable to Chile, Hong Kong and France.

"Importantly, Jamaica comes out well in cross-country comparisons of democratic traditions and institutions, voice, Government stability and regulatory framework," the Bank notes. It holds the view that Jamaica is likely to achieve many of the Millennium Development Goals set by the United Nations in 2000, including those relating to the reduction of poverty and malnutrition of children under five, universal primary education and access to safe drinking water.

The report also highlights the fact that Jamaica's rate of gross fixed capital formation is high. "Gross fixed capital formation averaged nearly 28 per cent of (nominal) GDP over the last decade and rose to nearly 30 per cent in 2001. Jamaica's average investment rate was in the top quartile of countries in the 1990s and well above the average investment rate of 21 per cent across countries…The average investment rate from 1996-2000 was higher than in the 1980s," the Bank points out.

The Bank adds that new foreign investment, equal to about 12 per cent of investment (excluding privatizations and retained earnings), "has remained strong, which is usually a good indicator of favourable market conditions". 

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