Topaz Johnson, Legal Commentator

Jamaica hopes to switch from the ranks of developing to developed country status by 2030.

A perusal of the World Bank/IFC Doing Business 2009 study highlights how intertwined public administration, law, and economic success are, and gives an interesting picture of where Jamaica stands vis-a-vis the world.

Overall, Jamaica is ranked 63 of 181 economies in terms of the 'ease of doing business', with Singapore at No 1. Several components determine this. Significantly, Jamaica was ranked 11 and 22 for starting and closing a business, respectively. Those were our best grades.

The poorest scores were for paying taxes, enforcing contracts, registering property, trading across borders and getting credit.

Payment of taxes ranked the lowest at 173. Leaving the tax and trade policies and procedures aside, there are the implications for the legal system in the other three areas.

CONTRACT ENFORCEMENT

The study suggests entrepreneurs are more willing to engage with new customers when there is an efficient system of enforcing contracts.

Jamaica is ranked 127. This compares with being 102 in 2008.

The fall is primarily due to an increase in the time for contract enforcement through the court system. This moved from 565 to 655 days.

The 90-day increase is attributable to the introduction of automatic mediation in any proceedings in which a case management conference has not been fixed before September 18, 2006.

In fairness to what some call 'negative reform', civil procedure rules provide for the application to dispense with mediation in certain circumstances. Also in its defence is a review by the Dispute Resolution Foundation reporting a 61 per cent success rate for all matters mediated, with 97 per cent of users reporting satisfaction.

Approximately 20 per cent of all cases referred to the DRF are commercial matters which represents a significant number of the commercial cases filed in the courts.

In the region, Jamaica has relatively few procedural steps and a shorter time for enforcement. But the cost is much higher.

The study - using a claim of about US$7,400 - estimates costs at 45.6 per cent of the claim in Jamaica.

It is a fair presumption though that the cost as a percentage of the claim for enforcement of smaller claims is disproportionately higher than for larger claims.

Jamaica's costs compare with, for instance, St Kitts and Nevis' 20.5 per cent.

Entrepreneurs prefer not to take risks in economies where it is costly or difficult to enforce contracts. Without assurances of efficient enforcement they would rather do business within small groups of existing contacts.

The drivers of our relatively high cost should be analysed.

PROPERTY REGISTRATION

Second, the ease of land conveyancing is a consideration for investors and creditors. Jamaica is ranked 109 overall for registering property. It is chiefly the cost, not the procedures or duration of transfers that is of concern.

The recent reduction in transfer tax and the stamp duty from 7.5 per cent to 5.0 per cent and from 5.5 per cent to 4.5 per cent of the property value, respectively, is positive.

However, these remain high relative to some neighbouring countries and more so internationally, since some countries do not impose taxes or duties on land transfers.

New Zealand has best practices in land transfer according to the study.

It has a two-step process which is possible to complete in two days, costing as little as 0.1 per cent of the property value.

Compare this with the five-step process, which costs 10 per cent of the property value, to transfer land in Jamaica which takes an average of 54 days to complete.

In terms of investor perception, lower costs and simpler procedures to transfer land formally, lowers transaction costs and are associated with security of property rights and less corruption.

Last, we look at obtaining credit. Jamaica ranked at number 84 for 2009, falling from 79 in 2008.

There is a glaring absence in Jamaica of institutions that collect and distribute credit information on borrowers.

Expand access to credit

Credit registries can expand access to credit by assisting lenders to assess risk and allocate credit more efficiently.

Otherwise there may be heavy reliance on personal connections.

Positive steps are being made with the Credit Reporting Bill. This legislation, when enacted, will provide the framework for establishing credit bureaus.

Enhancing the credit system includes the protection of legal rights of those who offer credit.

The registration of securities given to creditors is done at the National Land Agency, the Island Record Office and the Companies Office.

Ideally, we should have a security registration system that is unified geographically and by asset type.

Some creditors do not have an unrestricted right or access to the security pledged because our laws give priority to certain taxes, employee compensation, National Insurance Scheme (NIS) and National Housing Trust contributions. Our public policy dictates this.

As individuals we may often have been advised not to compare ourselves with others. The wisdom in this is clear.

In attracting investment to our country and encouraging entrepreneurship though, comparisons are not only useful but crucial.

Reaching and surpassing standards of regulations that enhance business activities already achieved in other countries would be pivotal to reaching developed status by 2030.

Topaz Johnson is an attorney with the law firm DunnCox in Kingston.

JASAP all-island picks

Notice

Vinnette Notice, branch manager of RBTT Mandeville, emerged winner of the All Island Boss of the Year competition, and Janice Davis, a secretary at the Runaway Bay HEART Hotel and Training Institute, was sashed All Island Administrative Professional of the Year in selections held April 5.

Four parishes participated in the competition run by the Jamaica Association of Secretaries and Administrative Professionals.

The selections were held in Montego Bay.

Megan Deane, deputy managing director of National Export/Import Bank was the runner up boss, while Yolanda Dixon of JASAP's Manchester chapter was runner up secretary.

topaz.johnson@dunncox.com