Multilateral Tax Convention Becomes Law In Singapore

As of May 1, 2016 the Multilateral Convention on Mutual Administrative Assistance in Tax Matters  took effect  and  became the law of the land in Singapore. The Convention, developed jointly by the  Organization of Organization for Economic Cooperation and Development (OECD) and the Council of Europe in 1988. It was amended in 2010 to respond to a call by the Group of Twenty (G-20) nations that it be aligned to the new international standard on the automatic exchange of information and that it be opened up to all countries. And according to the OECD it “is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance, a top priority for all countries.”

The May 1 effective date comes some four months after Singapore ratified the Convention January 2016 and is part of effort to increase tax transparency and combating cross-border tax evasion in Asia’s top financial and business hub. The Convention will allow Singapore’s Inland Revenue Authority the ability to request information from other tax authorities, and seek assistance in collecting outstanding tax debts.

This move by the The Little Red Dot, as  Singapore is affectionately called, in my opinion has further strengthen its position as a global financial hub.

 

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The world’s top ten most export driven economies

Which countries top the list of the ten most export driven economies?

The list might just have a few surprises for example – spoiler alert – mainland China is not on the list.  The absence of China may make some call into question the credibility of such a list given  China’s label as the ‘factory of the world,’ however, what is being measures isn’t simply the volume of export. This list is reflects exports as a percentage of Gross National Product.

Driving exports is a critical part of national development

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The air transport sector globally is a significant employer

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Special Economic Zones: a tool for economic development

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85% of World Trade is in bulk goods

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Jamaica’s Logistics Hub: reshaping ourselves to reshape global trade, Part I

Jamaica’s progress towards being a Global Logistics Hub might appear to be slow, especially when compared to what Panama appears to be doing but Jamaica’s progress is real and it is meaningful. Three point need to be emphasized here:

  1. What Jamaica is developing and what Panama is developing are different.
  2. Jamaica’s Logistics hub is not solely dependent on the expanded Canal.
  3. Jamaica and Panama are not starting from the same position.

logitics_hub globleWhat Jamaica is developing, yes developing, because we have move well past mere plans, and what Panama is developing while connected, are different. The Panama Canal serves as a very important transit point and not a Hub in the sense that we are talking about in Jamaica.

With the current Canal expansion exercise taking place in Panama there has been a strong emphasis on the Maritime component of the Logistics Hub Initiative. This is understandable since 90% of all goods are carried by ships and the Canal currently handles over 5% of global trade. However, this emphasis has unfortunately been to the detriment, well as far as public focus is concerned, to the other elements of the Initiative such as the role of creating an enabling business environment and its importance for attracting investments, economic growth, growing our exports, increasing social and economic inclusion and job creation. Jamaica’s Hub it cannot be overemphasized, is about much more than just ports; our hub also has the following components: Aviation, ICT/Data, Financial Services, Production/Manufacturing (within and outside of Special Economic Zones), and Internal logistics (road, rail, fiber optics, etc.).

Creating an enabling business environment is a must if our people – entrepreneurs, students or job seekers – are to chart and travel the road to prosperity. If we don’t get our house in order and provide an enabling business environment all the infrastructure in the world will not matter as we will not be able to function in an efficient manner which is what companies are looking for to enhance their global value chains. This why you have the Shipping Association of Jamaica (SAJ) and veteran businessmen, like Charles ‘Charlie’ Johnston calling for trade facilitation reforms to the Customs Act that is currently before a Joint Select Committee of Parliament. Two such reforms, for example, are including the definition of transshipment in the Act and expanding it to include cargo coming from one port and leaving from another rather than how its currently defined in Regulation as cargo coming in from a port and leaving from the same port.  The second reform is allowing for vanning/devanning of containers.

136_1949The first reform would allow for greater movement of cargo from port to port resulting in greater opportunities for the trucking sector for example but more importantly it is a needed reform to expand the benefits of our cruise shipping industry. This is especially true as we move into homeporting. Jamaica has a great opportunity in the cruise shipping industry, which is already being exploited but could be greatly expanded especially with homeporting. Some of these opportunities are in supplying the cruise shipping lines with such things as spare parts, food and lube oil. This activity – chandlery – is one that creates great opportunity for entrepreneurs, especially small businesses, and job seekers in both logistics itself and manufacturing.

The vanning/devanning of containers, is the process of stuffing and unsnuffing of a shipping container. It is a value added and cost savings logistics activity that takes place on or near the port that enhances transshipment. Jamaica already serves as a transshipment hub in the region; however, to move to a Logistics Hub, namely on the scale stated by Minister Hylton (Ministry of Industry, Investment and Commerce), “as a global asset and the fourth node in the global trading system along with Singapore, Dubai and Rotterdam,” vanning/devanning is a basic activity in achieving our vision. Large retailers such as Walmart and Macy’s, which source goods from all over the world, find vanning/devanning an invaluable cost savings logistics exercise. Companies like these regularly pack, unpack, rearrange and consolidate cargo from different containers to maximize container use and space. For example, clothes that come from Vietnam in two containers and shoes that come from China in one container can be sent to Jamaica where the containers can be rearranged to have a mix of clothes and shoes for the Miami and New York markets. By vanning/devanning in Jamaica, one container can be eliminated saving transportation cost to Miami and New York. Vanning/devanning, it must be emphasized, is a low hanging fruit that can utilize our port infrastructure, as is, and due to its labour intensive nature creates great job opportunities.

Let me be clear about the effects of this reform. Vanning/devanning will not suddenly become an exclusive activity only carried out in Jamaica. No! Such activities are currently being carried out in Panama and other parts of the region and this will continue to be the case. However, what the reform offers Jamaica is an opportunity to use its existing port infrastructure, as is, to offer a much needed service. What Jamaica can offer the market, among other things, is a centralized location in the Caribbean that is closer to the US Eastern seaborne markets relative to that of Panama.

These reforms, along with others, are enabling the further build out of a logistics centered economy. What the SAJ, Mr. Johnston and many others know, among other things, is that with our current port infrastructure Jamaica has great scale and scope for expanding its throughput by simply fixing our inefficiencies. Put another way, by improving the business environment, in this case on the port, we can increase economic activity, grow our exports and jobs with our ports, as is. Now just imagine when we also expanded the ports and other connected infrastructure, like the Special Economic Zones, what would be possible?

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Globalization has seen a greater convergence of goods and services trade

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Opportunities for Micro, Small and Medium Enterprises (MSMEs) in a logistics centered economy

This is an article published in the Jamaica Business Development Corporation‘s (JDBC)Business Dialog Aug – Oct 2015 issue, please click here to see the full publication.

 

Opportunities for Micro, Small and Medium Enterprises (MSMEs) in a logistics centered economy

The logistics centered economy is a complex concept. However, it is essentially about creating sustainable economic growth by removing the obstacles to economic development. This is being achieved through policies directed at creating a business friendly environment, increasing our connectivity through the use of technology and increased transportation links. In fact it is through this process of reform, which includes businesses finding new and innovative ways to create value that the opportunities lay for Micro, Small and Medium Enterprises (MSME). The MSME sector has been the primary target of many of these reforms not just because they form the majority of businesses in Jamaica, but mainly because as the Minister of Industry, Investment and Commerce, Anthony Hylton has consistently said:

when you solve the fundamental problems facing the MSME sector you invariably improve the overall economy.

Minister Hylton engaging small business owner at the launch of the Mobile Business Clinic in Montego Bay

Minister Hylton engaging small business owner at the launch of the Mobile Business Clinic in Montego Bay

The Logistics centered economy is not simply an internal response to Jamaica’s economic challenges; it is also an opportunity to respond to those challenges by taking advantage of trends in the global economy. These trends   have seen manufacturing becoming more global, specialized, fragmented and services dependent. This in turn has resulted in certain sectors critical to trade, including logistics, shipping, aviation, finance, and information communication technology being concentrated in strategic locations – logistics hubs.

So what are the opportunities for the MSMEs?

Opportunities abound for the MSMEs in a logistics centered economy, moreover, many of these opportunities do not lie in the distant future but are here and now.   The issue however is, how best to illustrate these opportunities. The telling of stories is a good medium.

The Mobile Business Clinic has criss-crossed the island providing a platform for many fruitful and insightful exchanges at a grassroots level about the logistics centered economy. One of our all-time favorite came in Savannah-la-mar, where we met a restaurant owner who had come to the Clinic to take advantage of the business advisory services being offered by the Jamaica Business Development Corporation (JBDC).

This lady was excited to learn that her restaurant, even though not an export oriented business, was very much a part of the logistics centered economy.  Her business had in fact benefited from the ease of doing business resulting from the Companies Office of Jamaica’s (COJ) ‘Super Form’ which consolidated the many forms needed to register her business into one and reduced the time, and money  needed to interact with various government agencies to just one, the COJ. More importantly, she was excited to learn of a possible new way of expanding her business by revisiting the idea of deliveries which she had earlier tried but later discontinued.  She embraced the idea that she could further expand her growing and lucrative made to order – in logistics speak, fulfilment – part of her business by using the existing transport infrastructure she had running right outside her restaurant. Rather than invest a lot of time and money in setting up and operating a delivery system she could use her cell phone and the connections she had with the taxi drivers to work out a delivery system.

The second story is about a farmer who lives in Linstead and decided to tap into the lucrative, US $400 million ornamental fish export market. This farmer in his operation may benefit from the North/South highway increasing the speed and durability of his fish to get to the airport for export. He would have also benefited from the removal of export licenses by the Trade Board on ornamental fish and the expanded market access from the air service agreements with countries like Singapore and Turkey.

The final story is about Kington Wharves (KWL) and their US$100 million investment to upgrade and expand their port facilities and to build its Total Logistics Center (TLC).  KWL provides the clearest example to date of how MSMEs will benefit from the establishment of Special Economic Zones (SEZ). While KWL has targeted large global companies for its TLC it has incorporated Jamaican MSMEs in its plans by creating backward linkages to the local economy.  One example of this is the creation of a specialized area for the food vendors who operated just outside of the gates of the various properties it bought and consolidated for its investment and who would otherwise have lost their livelihoods. What KWL has done in its transition from Free Zone to SEZ is to create the first SEZ ‘goods and services providers’ as outlined in the draft SEZ policy. Moreover, these and other goods and services providers will further benefit from the removal of the GCT disincentive that was charged on their goods and services making them even more competitive to imports.

These examples illustrate, among other things, that the logistics centered economy while based on logistics, isn’t only about logistics. In fact it would be more accurate to say that what we are truly talking about is a logistics, value added, production, warehousing, and distribution economy. But I am sure you would all agree that doesn’t roll of the tongue as well as logistics centered economy. What they also show is that opportunities are here and now; and ready to be seized.

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Air transport logistics is indispensable for tourism

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Jamaica Logistics Hub: a timeline on creating an enabling business environment

A enabling business environment is a strategic priority area for the Government of Jamaica and particularly the Ministry of Industry, Investment and Commerce, in the implementation of the Global Logistics Hub Initiative.

Creating an enabling business environment can be defined as the explicit attempts by the Government of Jamaica (GOJ) and its partners  to reduce the regulatory and non-regulatory barriers, costs, risks and uncertainties in all forms of commercial activity to stimulate and support business growth, local business retention, and the attraction of new business (local and foreign).

Please click here to see some of the work that has been done and results achieved.

Much like the whole Global Logistics Hub Initiative creating an enabling business environment is a whole of government effort. However, the Minister of Industry, Investment and Commerce (MIIC), Anthony Hylton, has directed that the MIIC as the business Ministry, the chief coordinator of the Initiative and Chair of the National Competitiveness Council hold a keen interest and special responsibilities in this area. For example as the business Ministry it as made it easier for businesses to register and even granted an amnesty in 2015 for businesses to get their annual fillings in order.

Further, as the chief coordinator of the Initiative the MIIC, through the Free Zone Council, is currently managing the smooth transition from Free Zones to Special Economic Zones (SEZ) and has successfully lobbied the Ministry of Finance to remove the General Consumption Tax (GCT) on goods and services being supplied to the Free Zones from the local economy. This removed a major impediment for local business, especially small businesses to do business with Free Zone companies and thereby creating backward linkages and greater benefits to the local economy.

Finally, Chairing the National Competitiveness Council (NCC), keeps the MIIC and the Minister firmly focused on the implementation of the Global Logistics Hub Initiative and creating a Logistics Centered Economy. The NCC has the responsibility of monitoring and coordinating the implementation of Jamaica’s business reform agenda and functions as the focal point for the resolution of investment, trade and business bottlenecks.

Creating the enabling business environment,a business friendly environment, a logistics centered environment, whatever you want to call it, it is a critical success factor for Jamaica to expand its logistics hub capabilities. A business friendly environment because it facilitates trade and investment is a large part of the foundational work being carried out by the Government of Jamaica. While the business environment has improved since 2012, resulting in new or expanded private sector investments, there is still a lot of work to do going forward.

 

 

 

 

 

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