Barack stopover a welcome mat for investment
President Barack Obama's visit to Jamaica will send a powerful message to the investor community that Jamaica is open for business. It will say to the investor community that Jamaica has certain fundamentals in place that make it suitable to do business.
The visit will suggest that Jamaica has a functioning democracy, the rule of law works, it has a functioning market economy, and, importantly, it embraces diversity and differences among nations in the complex global economy.
As a small economy, Jamaica cannot afford to isolate itself from the wider global world economy. Its markets are too small to ensure long-term growth and survival of its firms and industry sectors. As such, integration in the global economy is critical. This integration will come through both inward and outward foreign direct investments.
Jamaican firms will have to be engaged in international business through modalities such as licensing, franchising, exports, mergers and acquisition, and outward foreign direct investment (FDI). Similarly, Jamaica has to be open to foreign investors coming to its shores to set up businesses through greenfield and brownfield foreign direct investments.
CRITICAL ROLE OF INWARD FDI
The development literature is replete with examples of countries that have used inward foreign direct investments to advance their quest for economic growth and development.
Singapore is a classic case of a poor and depressed economy just 50 years ago, and has attracted significant amounts of FDI to transform its growth prospects to become one of the wealthiest countries in the world today.
Having started off with a per-capita income almost equal to that of Jamaica at the time of their independence in 1965, today, they boast a per-capita income that is 11 times that of Jamaica, thanks to the massive amount of FDI they have attracted over those years. The FDI has provided significant revenues for the Government to take on critical infrastructural projects, capacity building, human-resources development, among other things.
Singapore's average FDI since the 1970s is around US$12.43 billion, with a high of US$63.77 billion in 2013. This had definitely made a difference to that economy's strong growth performance.
OPPORTUNITIES FOR FDI
There is no doubt that Jamaica has done a relatively good job of attracting FDI. Since the 2008 global financial crisis, the country had been able to rebound in its attraction of FDI, which stood at US$700 million in 2014. While this is a far cry from the huge amounts of FDI inflows to Singapore, the importance is the signal effect that this increase has for further FDI to flow.
Jamaica's recent performance in FDI inflows show that there are indeed great opportunities for more investments to flow into the economy. We need to now target the US$1-billion mark, given the increased investor confidence flowing from the stabilisation of the macroeconomy.
Also, with the high levels of confidence shown by the US political directorate in Jamaica's economic performance as signalled by President Obama's visit, it is an opportune time for Jamaica to step up its marketing campaign in that geographic region to attract more of its direct investments in the strategic projects which form the growth agenda. There should be efforts to attract investments in areas such as agro parks, energy, logistics hub, business process outsourcing, ICT, among others.
Jamaica should use the president's visit as an opportunity to showcase to the investor community worldwide that we are open and ready for business. We should have a proactive marketing plan to show that there is an enabling environment ready for investments.
Barack Obama's historic visit should be used as an opportunity to capitalise on investment promotions in order to generate long-term prospects for growth through foreign direct investments.