The Top 20 Business Trends to look for in Jamaica in 2020
The best way to predict the future is to create it.
Peter Drucker
Inspired by my wife I recently published an article in the Jamaica Gleaner that featured: The Top 10 Business Trends to look for in Jamaica in 2020. Truth be told the article is actually a selection from a Top 20 list which I shortened to fit within the newspaper’s publication guidelines.
Please see the full article below. Feedback is most welcomed. Enjoy!
The Article
As we move through a New Year and new decade, what will 2020 bring for business in Jamaica? More of the same or something different?
Let me admit upfront I do not hold or pretend to hold any special powers to predict the future. I wish I did, and who wouldn’t, but sorry I don’t. All I can do, much like anyone else, is make a best guess. But not a best guess based on feeling or best wishes but on data, analysis, known and emerging patterns and connecting the dots.
So, let’s do just that for 2020.
“The best predictor of future events is probably past events.” – Andre Agassi
2019 saw Jamaica further improve its macro- economic stability with the indicators pointing in the right direction. But what of economic growth?
As Finance Minister Dr Nigel Clarke and others have acknowledged, while macro-economic stability is a critical condition for economic growth by itself it is not enough to spur greater levels of economic growth. And the results speak for themselves.
The Jamaican economy grew, according to STATIN, at a low 0.6% for the June to September quarter of 2019, the last reported period of 2019. This makes for 19 consecutive quarters of economic growth, which is the longest unbroken stretch of economic growth since Jamaica started measuring growth quarterly in 1997.
This growth while low did occur under challenging circumstances locally and internationally. For example, locally we saw the closure of the JISCO/Alpart plant represented a 17.6% decline in Jamaica’s output bauxite/alumina and internationally the trade war between the USA and China saw a drag on global growth.
So, what will change this picture for Jamaica?
What guided the list?
I chose the list based on several factors, including but not limited to, the convergence of various government policies, investments, enhanced and emerging business opportunities and infrastructural decisions made by the government, private sector and civil society in 2019 and preceding years. Certain patterns have emerged that should make 2020 – best guess – a very special one for business in Jamaica.
Top 20 business trends
Here are my top twenty trends, placed in no order of priority:
#1. Jamaica Stock Exchange (JSE)
The number one ranked stock exchange according to Bloomberg in 2018 will continue its stellar performance with even more Initial Public Offering (IPOs) and Additional Public Offerings (APOs). The money raised will further fuel the expansion of businesses locally and offer Jamaicans an opportunity to invest.
The Government through the listing of TransJamaica Highway and JPS will continue its policy, as it did with Wigton IPO where over 30,000 Jamaicans participated.
The TransJamaica Highway IPO, expected to be the largest in the history of the JSE, gives ordinary Jamaicans an opportunity to build long term wealth through owning a piece of Jamaica’s logistics infrastructure. Jamaicans by investing will now personally own part of our logistics hub and individually be part of the transformation of our economy into a logistics centred one.
Expect more such opportunities from the JSE in 2020.
#2. Tourism growth
Tourism will build on its growth in 2019. The preliminary report from the Jamaica Tourist Board (JTB) is showing that in 2019, Tourism earned between US$3.7 billion and US$3.8 billion from approx. 4.4 million visitors, which is a US$500 million increase from 2018.
This success was under scored by an increase in the retention of tourist spend locally. In 2016, Jamaica was retaining 30 cents for every dollar earned in tourism, but in 2019 that increased to 40.8 cents. This trails regional leader the Dominican Republic at 50 cents but is ahead of the Caribbean range of 10 to 30 cents. The retention earnings are set to improve in 2020 with greater linkages between tourism and local attractions, entertainment, and food events.
Brand Jamaica will be on full display with the release in April of No Time to Die, Daniel Craig’s last James Bond movie; the celebration of the Bob Marley diamond jubilee under the theme Marley 75: Redemption; the Jamaica Rum Festival, etc
Additionally, recent endorsements by international media companies CNN, Bloomberg and The Travel, which have hailed Jamaica as one of the must-see destinations ought to also improve things.
#3. Pension funds
In 2019 the Government changed the pension Regulations now permitting Pension Funds to invest in private equity and venture capital for the first time. These amounts, on aggregate, should not exceed a maximum of 5% of the assets of the pension fund.
There is about $550 billion in pension funds in Jamaica, 5%, therefore, equates to $25 billion in capital available for investing. As the Finance Minister said, this “is a game-changer for innovation, for opportunity, and for growth.” In 2019 we saw Grace Kennedy (GK) Pension Scheme getting in on the act, signing a financing contract for FosRich Limited’s expansion into a new warehousing facility.
4. Special Economic Zones
Special Economic Zones (SEZ), a geographically designated area where fiscal and other incentives are used to attract investment to a country are expanding globally. There are over 5,400 SEZs in over 147 countries including Jamaica. After the mammoth task undertaken in 2019 by the Special Economic Zone Authority (JSEZA), of transitioning Jamaica’s free zones over to SEZ we now have approx. 104 entities across 140 locations in 11 parishes with SEZ status as either Developers or Occupants.
While the SEZ are frequently associated with the business process outsourcing (BPO) sector, BPO while an important sector is but one of a variety of economic activities undertaken in the SEZs.
In 2020 expect greater growth in the BPO, logistics, manufacturing and creative industries with expanded opportunities for non-SEZ local businesses through stronger linkages and higher domestic inputs being sourced from the local economy.
Additionally, SEZs will experience growth in Jamaica by introducing new business models reflective of opportunities presented by global value chains in the ‘as a service’ model. For example, research as a service, data as a service, distribution as a service, etc.
We already see SEZ companies like Canco Limited in St Thomas, with its food manufacturing standards certifications leading the way by offering manufacturing as a service, likewise a subsidiary of West Indies Petroleum offering (oil) storage as a service in Port Esquivel.
#5. Further BPO growth
The BPO sector has unquestionably been one of the best performing in 2019. The BPO sector is considered a priority for the Government of Jamaica and has received concessional loans from the Development Bank of Jamaica (DBJ) to the tune of over USD $73.9 million. The DBJ is currently seeking a further USD $40 million from the Ministry of Finance to facilitate growth in the sector.
The sector is currently undergoing a transformation, moving into greater value-added and knowledge intensive activities.
According to the Business Process Industry Association of Jamaica (BPIAJ) now the Global Services Association of Jamaica (GSAJ) the sector employs approx. 36,000 Jamaicans and is segmented with 80% customer service; 18% knowledge process and 2% per cent information technology (IT) outsourcing. The GSAJ is seeking to grow the latter two segments.
#6. Climate Change
The Oxford Dictionary’s word of the year for 2019 was climate emergency.
The world is in a climate emergency and we need action on all fronts from mitigation, to adoption to resilience. Climate research has shown that small island developing states (SIDS) like Jamaica are the most vulnerable to economic loss caused by climate change.
SIDS are on the front lines of climate change.
With 60% of our population living within three to five kilometres of the coastline Jamaica is very vulnerable, according to a World Bank study, flooding from storm surges is projected to cost US$136.4 million in damage annually. However, countries that prepare for climate change will fare better financially, according to a recent report done by the Economist Intelligence Unit.
Climate adaptation and resilience is an opportunity for Jamaican businesses to create new goods and services.
For example, according to the World Economic Forum citing a study of the Mexican dairy supply chain
innovations that improve climate resilience such as heat-resistant building material, drought-resistant seeds, water-harvesting services, low-drip irrigation and new insurance schemes can also generate business opportunities, including new market niches, and new local technologies, products and services – often at a lower price.
Climate resilience is make or break for businesses. Here’s why – World Economic Forum
#7. Sustainable Development Goals (SDGs)/ Sustainability
Jamaican businesses that do not embrace sustainability and the SDGs face a double threat. Click To TweetSustainability is not just for green companies or for PR. It has become a business imperative for all companies.
Globally, sustainability has become important for the investor community with sustainable investment now topping $30 trillion according to McKinsey& Company. Driving this push is the attraction of both businesses and governments to the UN’s 17 Sustainable Development Goals (SDGs). The SDGs cover a range of objectives including action on climate change, decent work, responsible consumption and production, and poverty eradication.
The SDGs are a means to drive business growth through equitable, green and inclusive business practices. Sustainability and the SDGs have become industry norms due to pressures from suppliers and consumers, to have greater transparency, traceability, and environmental protection as a normal part of doing business
Jamaican businesses that do not embrace sustainability and the SDGs face a double threat. They face being squeezed in the middle between potential customer backlash or boycotts for not embracing and making sustainability a part of their business ethos. And they could also potentially face suppliers refusing to sell to them because increasingly global suppliers are looking end-to-end at their supply chains to ensure that they are sustainable.
#8. Port infrastructure improvements
Jamaica is a maritime state and the blue economy is a cornerstone of our overall economy. The sea connects us to the world. It is estimated that 90% of global trade is carried by sea, and Jamaica’s port logistics infrastructural improvements have positioned it well to capture a greater share of this.
Jamaica sits in a region dominated by the Panama Canal that carries 6% of global trade, however, Jamaica has yet to fully capitalize on the expanded canal however we have started to see change.
Kingston Freeport Terminal (KFTL) has been accepting Post-Panamax vessels – the largest ships that can pass through the canal – in Kingston and set the best performance ever in the history of the port of Kingston in terms of container moves, 3,304 moves within 24 hours, on a Port-Panamax ship. With this and other improvements at the container terminal, Jamaica stands ready to play an increasingly larger role in global trade.
#9. The Ferry economic cluster build-out
A cluster is emerging in the Ferry, St. Catherine area, that most people have not fully recognized the power of, at least not yet.
The 94-acre Kingston 876 commercial complex is being built-out by the Cascade Group Jamaica and includes the $60 million headquarters for Tropical Battery, the current build-out of Outsourcing Company Limited (CEAC) 100,000 square feet BPO focused SEZ and the already built 7,000-square-metre Nestlé Jamaica distribution hub. When completed Kingston 876 is expected to host 30-35 operations.
The Ferry area also hosts Tank Weld Equipment Ltd the sole dealer for Shacman trucks for the Caribbean. Derrimon Trading is leasing space from Tank Weld to build out a $100 million distribution Hub. What makes the Ferry so special? Its location. It is close to the port of Kingston, three major population centre (Kingston, Portmore and Spanish Town) and it has great connectivity to both the East-West and North-South highways.
#10. Port centric logistics developments
The two major port centric logistics developments to watch out for in 2020 are both in Kingston. The Kingston Logistics Park (KLP), under the Port Authority of Jamaica (PAJ), is one example of public sector implementation of the Logistics Hub Initiative aimed at transforming Jamaica into a logistics and trade hub.
Adjacent to the Kingston Freeport Terminal Limited (KFTL) the KLP is being positioned by the PAJ as a special economic zone logistics and value-added industrial park. According to the PAJ the first phase of the KLP is scheduled to be completed and operational in Q1 of 2020.
The second port centric development which is a private sector Logistics Hub Initiative to look out for is Kingston Wharves Limited (KWL) and its subsidiary Western Terminals build-out of its SEZ, especially its Global Auto Logistics Centre at Tinson Pen. And more to come.
#11. Improved Road network
It goes without saying that roads are important to economic development. Nevertheless, roads by themselves do not induce sustainable growth. However, roads that facilitate the movement of goods, services and or people more efficiently not only introduce cost savings but new opportunities for earnings. And these are the conditions that many of the over 400 roads that were resurfaced and rehabilitated in 2019 offer Jamaica.
The Prime Minister said it best at the ground-breaking for the Southern Coastal Highway Improvement Project:
“Reducing the distance between people, market, services and knowledge is a great part of what economic growth is all about. The flow of goods, capital, technology and people will drive economic growth and create a broader space for development and prosperity for all.”
Andrew Holness – Prime Minster of Jamaica
#12. Airport improvements
Jamaica’s three international airports, Norman Manley in Kingston, Sangster in Montego Bay and Ian Fleming in Boscobel are all undergoing improvements that better position Jamaica and Jamaican businesses to provide improved service offerings for people and cargo movements to and from Jamaica.
Mexican company, Grupo Aeroportuario del Pacifico (GAP), the parent company of the two companies that hold the concessions to operate the Norman Manley in Kingston and Sangster airport respectively expressed confidence in Jamaica by correlating its investments in Jamaica with its belief in the country’s prospects for growth. Its Sangster subsidiary, which serves as the primary gateway to Jamaica and facilitates the transit of more than 85 per cent of tourists arriving on the island, has commenced its USD$70 million work to extend the runway.
Additionally, as part of the concession to operate Norman Manley USD$60 million in investment has been committed to the development of the airport during the first three years of operation, under an overall modernisation plan that is expected to cost over USD$100 million.
#13. Drones
Drone flying as a service represents a low hanging fruit in tourism that locals can build the market and dominate. Click To TweetThe global commercial drone market is estimated at a value of USD $5.80 billion and is projected to grow tenfold in five years by Barclays. This is a fourth industrial revolution technology that has tremendous job creation prospects in Jamaica. The more immediate opportunities will be seen in various services industries.
In 2020 expect drone usage to expand into constructions, private security, precision agriculture to deliver fertilizer, herbicides and pesticides. The most existing opportunity will be in tourism with drone flying as a service where tourist can fly around the beautiful landscape of Jamaica and take pictures and videos.
This is a winning formula to enhance Jamaica’s tourism in the 21st century. The great thing about drone flying as a service is that it represents a low hanging fruit that locals can get involved in, build the market and dominate.
#14. The Bank of Jamaica monetary transmission mechanism
One of the perennial complaints of Jamaican businesses, especially the MSME sector, is access to credit at reasonable and affordable rates. While there has been much improvement in this area for many MSMEs, the interest rates being offered by financial institutions are still far too high.
In response, the Bank of Jamaica (BOJ) under-took a set of policy rate – the rate that financial institutions borrow from the BOJ – reductions reaching 0.5% by the end of 2019. The reductions were done to drive credit expansion by making money less expensive to borrow. It has not fully worked as acknowledged by the BOJ Governor Richard Byles when he said that
“while this faster growth of private sector credit is a positive signal, we are of the view that this expansion in credit is still not fast enough, particularly in the context of where domestic activity remains below the economy’s potential or capacity. This suggests that an even faster pace of credit growth is possible without causing inflation to rise above the inflation target.”
Richard Byles – BOJ Governor
Importantly, the Governor clearly signal that the way forward would not be business as usual when he exclaimed that
“whatever blockage is in the system that is causing the rates to not go down as fast. I want them to talk why we are not seeing a better transmission of the policy rate reductions to borrowers.”
Richard Byles – BOJ Governor
#15. BOJ Foreign Exchange Platform
This is a platform that has been long-awaited by Jamaican importers and exporters. It will bring greater transparency in the foreign exchange trading market in Jamaica.
The platform will allow for foreign exchange trading where those involved can post their prices so that others can see what they are willing to sell and buy at. As such, “the transparency with prices will be a lot clearer, and that is where efficiency in the market comes from,” says, Deputy Governor at the BOJ John Robinson.
The platform will have the benefit of allowing Jamaican entrepreneurs, large and small, to better formulate and deploy foreign exchange risk mitigation strategies such as hedging options, including a forward-contracts. This will further empower the Jamaican entrepreneur class to take on greater risks and opportunities for the benefit of us all.
#16. MSME GOJ procurement
It is estimated that the Government of Jamaica spends 30% of GDP on procuring goods and services annually. According to STATIN Jamaica’s GDP in 2018 stood at J$1,817,994,000,000 – about J$ 1.8 trillion – making public procurement at 30% a sizable J$545,398,200,000.
The government in 2019 undertook two reforms aimed at giving greater access to Jamaican businesses to this pot of money. The two measures, the first a 20% Set Aside for MSMEs and the second a Domestic Margin of Preference are set to add much-needed opportunities to Jamaican businesses.
The 20% MSME Set Aside is just that, a set side of 20% of Government procurement for MSMEs. For MSMEs that is just over a billion-dollar (J$1,090,784,000) market just for them.
The Domestic Margin of Preference allows for national bidder participating in an international bidding an opportunity to earn a government contract even if its bid price exceeds the bid price of a foreign bidder by up to 20%. The national bidder, however, must demonstrate that it will include at least 35% domestic content.
#17. Renewable energy
Jamaica has an ambitious but achievable renewable energy in electricity target of 50% by 2030. The country already generates over 17% of its electricity from renewable sources.
Achieving the 50% and beyond renewable energy target is an economic energy security and climate change imperative for Jamaica. Jamaica currently spends over 9% of its GDP (or $1.3 billion annually) on petroleum imports, which contributes substantially to our negative trade balance.
In 2020 expect to see continued expansion of renewables. Of greatest interest will be the first utility-scale floating solar plant in the Caribbean to be installed at the Mona Reservoir. The 45-megawatt floating solar PV plant is a USD $60 million investment by the international partnership greenCrowd, through its client Derillion Energy. Being a floating solar plant means that it will help lessen if even in a small way, the evaporation that occurs at the Mona Reservoir.
#18. LNG
The new 194 MW JPS LNG plant and the New Fortress LNG terminal both in Old Harbour St Catherine have changed Jamaica’s energy landscape forever. The latter ought to be watched keenly because of its wider implications for development, economic growth, and job creation.
The potential combination of LNG for power, cryogenics for cooling, solar/wind and deep water cooling puts New Fortress in a great position to put Jamaica on the map in growing datacentre market Click To TweetThe terminal is part of larger plans to position Jamaica as an LNG hub within a global logistics and trade hub.
Additionally, it has opened opportunities for further economic diversification and investment in food-processing industries, cold logistics, pharmaceuticals, manufacturing of chemicals, and plastics. However, the biggest thing to watch is in the possibility of a Datacentre by New Fortress.
Data centres are critical infrastructure in cloud computing where depending on its size and configuration tech companies like Google, Apple, Microsoft, etc. perform or receive services ranging from data storage, infrastructure as a service, data as a service, data analytics, etc. For datacentres, energy is their largest operating expense largely due to the cooling required for the computer servers.
Jamaica offers a globally unique solution for data centres by combing a variety of technologies.
The potential combination of LNG for power generation cryogenics (LNG is shipped at a very cold -160 C) for cooling, renewables such as solar/wind and deep water cooling from the sea, puts New Fortress in a great position to put Jamaica on the map in growing data centres and cloud computing market estimated by Bloomberg to be worth USD $36.7 billion.
#19. Growth in the Marijuana industry
According to a report by Hemp Business Journal, the global marijuana market is projected to reach USD $2.1 billion in 2020. It’s no wonder that CNN has claimed that 2020 could be a defining year for the cannabis industry. Expect greater growth in exports especially in cannabidiol (CBD) oil, medical tourism and medical research.
This growth will be fueled by a more commercially focused use of Brand Jamaica to sell Marijuana and its derived products like CBD oil. Jamaica is well positioned to capture its own share of this market.
Get the Facts – Cannabis Licensing
For better or worse marijuana is associated with Jamaica and brand Jamaica. However, as more countries move to create a legal industry, Jamaican companies are well positioned to create brands built on the already established reputation and strength of brand Jamaica.
#20. Logistics opening new possibilities
2020 will be a year for logistics in Jamaica. Click To TweetWith the improving road network, improved port and airport infrastructure, raising of money on the stock exchange by logistics companies and the build-out of more warehouse spaces, especially as SEZs, 2020 will be a year for logistics.
Mailpac listed on the Jamaica stock exchange in the latter part of 2019 raising money to fund its growth and expansion in response to the growing e-commerce market in Jamaica.
Another example to watch is Howard Mitchell’s aircraft cargo and handler provider AJAS Limited and its plans to list on the Junior Stock Exchange in 2020. The funds raised, according to Mr. Mitchell would finance its expansion in response to keeping pace with increased passenger and cargo volumes. Additionally, he pointed out that there is interest coming from the Middle East about using Jamaica as an aviation hub.
Finally, we cannot forget Wisynco, National Baking Company and Knutsford Express and all of which either announced or commenced logistics projects in 2019.
These sampling of private projects is the logistics hub in motion. They use the infrastructure laid down by the Government and transforming Jamaica into a logistics centred economy.
Conclusion
What will 2020 bring for Jamaica?
Much will depend on us Jamaicans. Business, civil society and the government must continue to strengthen their working relationship to achieve the common objective of economic growth and development.
With these 20 best guesses, let’s see what 2020 will really bring.
Very interesting article. Love the concepts that shows economic growth and development.