Jamaica marginally worse at courting investors - Taxes and shipping costs heavy burdens

Published: Friday September 12, 2008

Jamaica has slipped one place in overall rankings for the ease of doing business, and has made no progress in reforming or rolling back heavy corporate taxes in the past year to remain one of the most heavily taxed countries on the globe, according to the latest World Bank-IFC report released on Wednesday.

Jamaica is No 63 of 181 economies ranked by the World Bank in the 'Doing Business 2009' review, down from No 62.

But, to put a more positive spin on the ranking, there are 118 worse places in the world for doing business. Still only eight of them are outclassed by Jamaica in the sub-ranking that assesses tax-friendliness.

And, when matched against countries in the region only, of the 32 Latin American and Caribbean or LAC economies, Jamaica is at No 9; St Lucia is No 1 and Venezuela is at the very bottom. Trinidad is ranked 15 regionally, but 80 on the world scale.

The World Bank-IFC survey of business environment worldwide, is meant, the bank said, to provide countries with a guide to where reforms are needed. It also highlights the fastest reformers.

Singapore remains at No 1 in the rankings, while Azerbaijan (see related story on Page 28) got kudos for top reforms.

Heavy shipping costs

Dragging Jamaica down in the current survey is the 51.3 per cent of taxes businesses pay on average - that's more than 51 cents of every dollar earned - to the treasury and designated state agencies with which they interface 72 times per year; heavy shipping costs of US$1,750 per export container and the US$1,420 charge per container of imports; the two months required to register property and transaction fees that double those of other groupings; and enforcement of contracts (see insert for rankings).

Export costs have remained steady in the past three years, but imports are more costly, up by US$70 per container in a year.

Additionally, shipping cargo from Jamaica is significantly more expensive than elsewhere - by more than US$500 relative to regional countries, and close to US$700 more than rich nations bundled under the Organisation of Economic Cooperation and Development (OECD) in relation to exports; while import costs are higher by US$160 and US$280, respectively.

This at a time when the Port Authority of Jamaica is attempting to position Kingston as a top transhipment hub in the region, against ports like Dominican Republic.

In fact, Jamaica has fallen four places in the sub-ranking for commercial trade across borders to slot 100, even though its procedures and turnaround time on imports and exports basically track with other countries in the region.

Not all bad for the country

The gap opens up most starkly when the cost of doing business through the ports is factored.

But it's not all bad for the country. Jamaica holds court with ten other nations as one of the most friendly jurisdictions to start a business, retaining its slot at position 11, well ahead of neighbouring trade partner Trinidad, both of which are locked in a race to roll out their capitals as low tax havens or offshore financial centres.

Jamaica is also basically on par with OECD countries on the number of procedures required to start a business, six, whereas regionally it's just under 10.

And for businesses that fail, investors in Jamaica recover just under 65 cents of every dollar pumped into the business, comparable to the near 69 cents for rich countries, and more than double the 27 cents in the region.

The island of 2.7 million with income per capita of US$3,710, outpaces all others in laws designed to buffer access to credit - scoring eight out of a possible 10, compared to the LAC at 5.6 points and the OECD, 6.8 points.

But as for the availability of credit information through bureaus or registries, Jamaica's score is zero. Plans for a credit bureau are in train but have not materialised.

Transparency

Its stocks fall even further in the critical area of transparency, which falls under the heading of 'protecting investors' which cover, said the Doing Business analysts, three dimensions: transparency of transactions or disclosures; liability for self-dealing; and ability of shareholders to sue or hold directors and officers for misconduct.

On the disclosure index, Jamaica scores four out of a possible 10, but the world is no better, with OECD countries averaging 5.9 points and LAC 4.1.

The three are all bundled at or around five points for investor protection, but Jamaica pulls ahead in the director liability index at eight points compared to five for the two regions.


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20080912/business/business7.html