Inclusive Economic Growth in Kingston, Jamaica Report for Kingston Restoration Company and Urban Development Corporation

Michael Beirnard Swati Chaudhary Sofia Fernandez del Castillo Shaheen Hasan Doreen Kagarama

Under the advisement of Adjunct Associate Professor Vanessa Keith

School of International and Public Affairs Columbia University May 6th, 2011 Table of Contents

Executive Summary ------3

Introduction/Background ------5

Client Organizations ------9

Entrepreneurs in Jamaica ------11

Dynamic Sectors ------22

Music ------22

Information Communication Technology ------31

Value Added Agricultural Goods ------35

Business Incubation Model ------43

Funding ------58

Conclusion ------64

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Executive Summary

The Kingston Restoration Company (KRC) and Urban Development Corporation (UDC), a public- private partnership in Kingston, Jamaica, are currently in the process of revitalizing Kingston, developing sites in the Downtown area while exploring options for developing new industries as sources of employment and economic growth. In December of 2011, the KRC/Kingston Workshop team was charged with identifying avenues for this development and assessing its potential. Working with Vanessa

Keith of StudioTeka Design in Brooklyn, New York, we worked to design a basic strategy for developing and incorporating growth-generating activities within the larger urban development activities of UDC and

KRC. Our team consulted relevant stakeholders from the KRC and UDC, regional experts, community groups and representatives from particular industries to guide our research into potential growth- generating activities. In particular, our research focused on the development potential of specific industries including the value-added agricultural product sector; the creative industry sector, specifically the music production sector; and information and communication technology-related industries. These industries were identified for their dynamism and potential for income and skills generation and development for the population of Kingston. As part of our research, team representatives traveled to

Kingston on two separate occasions—in January and March of 2011—to meet with representatives of businesses, government, non-government, and international organizations, and to collect materials related to our research. As the final product of our research and fieldwork, we now present analyses of three dynamic industries and a series of proposals for the continued development of these industries and the support of small business activities.

Our report and related recommendations are presented in three sections. First, as we have identified small and medium-sized enterprises to be the elements of the Jamaican economy most vital to development and job creation in the near term, we have outlined current challenges faced by these enterprises and have outlined several steps for improving the environment for micro and small business creation.

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Second, we have presented in-depth analyses of the three most dynamic industries in Jamaica, including their current state of development, opportunities for their further development, and threats to their continued growth. We include case studies from different locations around the world to present best case practices for each industry and then illustrate how these practices might be implemented in the context of Jamaica.

Finally, we present the business incubation model as a significant and promising strategy for small business creation and development. While there are several business incubators currently in operation in

Jamaica, we conclude that these centers have not met their full potential for the promotion and support of small enterprises. After briefly describing two incubation centers (the Technology and Innovation Centre at the University of Technology, Jamaica, and the Jamaica Business Development Corporation‘s

Incubator and Resource Center) to identify where these organizations fall short, we present the essential elements and basic structure of a fully-functional and effective business incubation center. We then present initial steps for the development of such a center and identify several possible avenues—including partner organizations and businesses, funding sources, and necessary administrative structures—for its establishment. We also outline a possible program for reaching out to potential entrepreneurs through community building efforts in Kingston.

Overall, our proposals are intended to conform to the plans of the Government of Jamaica as described in the Planning Institute of Jamaica‘s A Growth-Inducement Strategy for Jamaica in the Short and

Medium Term which outlines the current initiatives of the Government of Jamaica in their pursuit of goals outlined in Vision: 2030 Jamaica, the most recent national development plan. Released on March 4, 2011, this plan emphasizes the role of entrepreneurship in dynamic industries as a central component of economic development for Jamaica in the near term.

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Introduction/Background

Kingston is the capital of the Caribbean island nation of Jamaica. The Jamaican economy has long been dependent on the richness of the land: agricultural products and, later, bauxite mines were the main engines of economic growth. Starting in the 1950s and 1960s, tourism became an important industry.

With the downturn in the aluminum market, ineffective economic policies, and the increasing costs of servicing the nation‘s debt, Jamaica‘s economy has sputtered over the past two decades with slow overall growth, persistent high unemployment / underemployment, and few dynamic sectors. Jamaica is classified as a lower middle-income developing country.1 Almost half of the population of Jamaica is employed in the informal sector, in mostly part-time positions without formal contracts, which are often in low-productivity, labor-intensive industries like agriculture.2 Because of Jamaica‘s status as a middle- income country and already-sizeable public debt, urban renewal and poverty reduction efforts in the country are not a priority for international donors.

In the past few decades, the population of the Kingston Metropolitan Area (KMA) has grown dramatically, the result of urban-rural migration as Jamaicans pursue employment in growing industries centered in urban areas. Urban areas like Kingston have struggled to accommodate this migration due to fragmented planning infrastructure—planning is carried out by 20 different institutions and governed by over 100 individual pieces of legislation—and planning capacity that is overwhelmed by the size of the migration. A number of significant problems have resulted. First, migration is not evenly distributed among Jamaica‘s urban centers but has occurred mostly in Kingston: almost a third of the Jamaican population resides in the KMA. A population that has overwhelmed the available space and infrastructure has resulted in urban sprawl and environmental degradation in the Kingston Metropolitan Region.

Squatting and haphazard settlements are pervasive, and congestion is severe. At the same time, the city is sharply divided by wealth and class. ―New Kingston,‖ the northern region of the KMA, is an affluent neighborhood and home to many of the city‘s businesses and wealthier residents, while poorer areas, like

5 the Downtown/Waterfront neighborhoods, are characterized by physical deterioration, higher crime rates, and decreased educational and professional opportunities. 3 Poorer neighborhoods are also typically divided into political ―garrisons,‖ regions of a particular political leaning that compete (sometimes

Figure 1: A Garrison Neighborhood in Downtown Kingston violently) with one another.4

Downtown Kingston has born

the brunt of these negative

impacts of urbanization; while

businesses and wealthier

residents have moved to other

regions of the city, the

Downtown area has become a

region characterized by poverty, congestion, crime, and crumbling infrastructure. At the same time, this area is culturally vibrant with a world-renowned music tradition, an emerging artistic community, and a rich history.

The Urban Development Corporation (UDC), an arm of the Jamaican national government, was created in 1968 to guide the development of Jamaica‘s urban centers. During the 1960s, as investments into industries concentrated in urban areas increased, these areas saw a rapid increase in population which strained the resources of urban centers. Since its creation, the UDC has worked to accommodate this urbanization by expanding and strengthening public infrastructure and introducing alternative patterns of urban settlement. Downtown Kingston was one of the first areas chosen by the UDC for development and revitalization, and several plans for developing the Downtown/Waterfront area have been developed.5

The Kingston Restoration Company (KRC) was created in 1983 to address emerging problems in the area of downtown Kingston and is part of a public/private partnership with the Urban Development

Corporation (UDC) working toward the restoration of downtown Kingston as an active commercial and production center.6 In 2007, the UDC launched a redevelopment plan for Kingston that aimed to halt the decay of the area, improve physical infrastructure, and direct attention to new opportunities for economic

6 and human development in the area. This plan included proposals for the development of new service and government centers for the Kingston area including a new transportation hub, a new market district, new government buildings for the Jamaican Parliament and Ministry of Foreign Affairs, and several public spaces. As of November 2009, the Transport Centre is nearing completion and work has begun on a cultural center and public park.7 Jamaica‘s first 25-year comprehensive development plan, Vision 2030

Jamaica, was issued on May 5, 2009. The plan lays out the strategies of the UDC and the Planning

Institute of Jamaica for addressing the rapid expansion of urban areas like Kingston and the strains it has put on local resources.

Jamaica, particularly the Kingston region, is rich in resources that have not been sufficiently assessed or developed as potential engines of growth. In some areas, physical capital sits idle, abandoned after the exodus of businesses to ―New Kingston.‖ The population of Jamaica is, on-average, highly educated, though many with higher degrees leave the island for greater economic opportunities elsewhere. For these reasons, the KRC and UDC are now exploring options for revitalizing Downtown Kingston, seeking to establish new industries which will serve to generate income for the area‘s inhabitants while improving the physical environment of the Downtown/Waterfront area.

Working with the KRC and UDC, and with the guidance of Ms. Vanessa Keith of StudioTeka (New

York), the KRC Kingston Workshop Team began conducting research into the development potential of a few specific industries in December of 2010. After identifying the most promising sectors, our team examined best-case practices for each industry. Through a series of case studies on different initiatives from around the globe, we identified the conditions and practices most likely to promote the productive and profitable development of each sector. In addition to conducting research while in New York City, team representatives traveled to Jamaica in January and March to meet with relevant stakeholders, assess the progress of current development projects, and acquire additional information on the conditions of relevant institutions, locations, organizations, and resources. Cooperating with representatives of the KRC and UDC, team representatives conducted informational interviews with governmental and non- governmental organizations including:

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 The University of the West Indies (UWI)

 University of Technology, Jamaica (UTECH)

 Jamaica Promotions Corporation (JAMPRO)

 Jamaica Social Investment Fund (JSIF)

 Social Development Commission (SDC)

 United Nations Development Program (UNDP)

 Jamaica Chamber of Commerce (JCC)

 Private Sector Organization of Jamaica (PSOJ)

 Jamaica Diaspora Institute

 Jamaica Business Development Corporation (JBDC)

 Jamaica Ministry of Agriculture

Our preliminary research into potential industries and development programs began in November

2010 and continued through December. Representatives from our team traveled to Kingston in early

January 2011. The remaining team members supported these representatives from New York City while conducting further research. From mid-January to mid-March 2011, our full team worked in New York

City to combine and synthesize our research from literature reviews and the January fieldwork into a set of preliminary case studies. Team representatives made a second trip to Jamaica in March to discuss our preliminary findings with KRC and UDC representatives, conduct additional research, and conduct follow-up interviews with representatives from different governmental and non-governmental organizations. In the final stages of our project—from mid-March until mid-April—we finalized our research and began formulating proposals for presentation to Ms. Keith and representatives from KRC and UDC.

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Client Organizations

Kingston Restoration Company

The Kingston Restoration Company (KRC) was created to address the deterioration of downtown

Kingston through initiatives aimed at stimulating the local economy, creating jobs through investment in restoration projects, and the provision of development services to clients. In 1983, it was incorporated as a public/private partnership with the Urban Development Corporation (UDC) and Pan Jamaican Investment

Trust Ltd. In 1990, it became KRC Ltd. and was assigned the fundamental role of ―creating the necessary conditions for sustainable, physical cultural, social and economic development for urban areas‖.8 Under its current configuration, seventeen members from the private and public sectors and civil society comprise the KRC‘s Board of Directors which approves programs to be launched by the KRC. The

Executive Director, Mr. Morin Seymour, is charged with managing daily operations.

All the programs and projects are configured according to the KRC Distinctive Value Chain-CIS

Triple strategy and implemented according to six reinforcing themes:

 Capacity building in order for organizations to carry out their objectives.

 Improving public spaces

 Providing for safer communities

 Providing for secure environments and shelter

 Supporting education for change and

 Promoting enterprise development and job creation

The KRC works to effect significant and measurable development change within and outside Kingston with different partners and entities from both the public and private sectors. The KRC‘s past project partners include: the Ministry of National Security, the Jamaica Defense Force, Scotia bank Jamaica,

British High Commission, Canadian International Development Agency, Urban Development

Corporation, the Department of International Development (DFID) of the UK Government, the Prince‘s

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Foundation for the Built Environment, USAID and the Inter American Development Bank (IADB). The

KRC is subject to an annual audit.9

Urban Development Corporation

Urban Development Corporation (UDC) is a government-owned company created in 1968 as the

Government‘s urban development arm, a ―developer in the public interest‖ for Jamaica.10 UDC is a self- financing company earning most of its income from retained earnings and grants from the Government, commercial banks, and international institutions; it also works with investment partners. Currently, UDC has a combined asset base of J$17 billion in buildings and land.

UDC operates in areas where it has been granted the authority to plan, design, implement and manage development projects. The Corporation is answerable to the Prime Minister and Jamaica Houses of

Parliament to whom it must submit an annual report of its current and planned activities. UDC‘s Board of

Directors is tasked with approving projects to be undertaken by the Corporation; daily operations the responsibility of the General Manager who is assisted by the Executive Management Team. In accordance with their Strategic Plan for 2009-2012, UDC currently works to apply urban development programs to counter the effects of the global recession in Jamaica. It aligns its current projects with the strategies and goals of Vision 2030: Jamaica, a plan for national development produced by the Planning Institute of

Jamaica.11

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Entrepreneurial Landscape in Jamaica

Need for Taxation Reform

Creating a suitable environment for entrepreneurship means making it easier for businesses to begin, thrive and comply with government regulations. It entails lowering the cost of conducting business, as well as tackling social obstacles to an enterprise‘s success. Lowering costs requires both monetary and fiscal measures from the government – lowering interest rates as well as reforming taxation policy. An effective and popular fiscal tool for encouraging entrepreneurship is simplifying national taxation policy.

Simplification can entail lowering taxes as an incentive for businesses as well as reducing the number of taxes and introducing methods to file.

During 1980‘s and 1990‘s, Jamaican tax code was revised to consist of a flat rate income tax and a single rate value added tax (VAT). This structure proposed lower administrative burden on the

Figure 2: Caption on a Mini-bus at Coronation Market government and collection rates

from the public. However, flat rate

of 33.3% proved to be extremely

high for middle to low income

segments of the population,

leaving them with low disposal

income and therefore lower

savings for investment purposes.

VAT of 17.5% further lowered the quantity demanded and hurt sales amongst low and middle income entrepreneurs. Additionally, businesses need to pay about 18 types of taxes in Jamaica. Figure 2 captures the general sentiment of middle and low income class Jamaicans whose disposable incomes are most affected. Conversations

11 reveal their frustration with high tax rates – both income tax and VAT. Many confess to evading income taxes, knowingly and unknowingly. Often the number of taxes to be filed is unclear. The process is difficult and bureaucratic; as a result a business is often unsure of whether it is tax compliant. . Jamaica ranks extremely poorly (170 out of 178 countries) in the World Bank report on economies where it is most difficult to pay taxes due to the number of different tax types, payment dates and tax rates. The

IFC‘s‖ Doing Business Index‖ ranks Jamaica as 173 (out of 174) in Ease of Taxation. Additionally,

Figure 3shows that Jamaica is not on the list of countries that have made it easier to do business in the past five years. Therefore, it is no surprise that tax evasion is discussed and admitted openly.

Figure 3: IFC’s Five Years of Cumulative Change

There are two related consequences to a difficult taxation environment: 1) government revenue is compromised due to shortage of tax revenue, and 2) entrepreneurs are companies prefer to stay in the informal sector where they do not have to pay taxes. The Inter-American Development Bank estimates that 44% of Jamaican economy is in the informal sector. 12

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Considering that downtown Kingston houses a large proportion of the city‘s middle to low income communities and businesses, tax reform is needed for inclusive growth. Enabling enterprises and individuals to become tax compliant would expand the government‘s tax base and translate into enhanced services for the public. Countries that make it easier to pay taxes tend to have higher rates of workforce participation, lower rates of unemployment and higher level of Foreign Direct Investment.13

A number of countries have implemented reforms that could be applied to the Jamaican context. Hong

Kong, which shares an English colonial history with Jamaica, pursued a policy to ease taxes after becoming a part of China. Currently in Hong Kong, there are only four business taxes, all at low rates.

For instance, corporate income tax is only 17.5% of taxable profits. 14 IFC considers the ease and low level of taxes in Hong Kong to be one of the main factors behind Hong Kong‘s thriving business environment. Egypt saw the number of complying taxpayers increase by a million after reducing both corporate and personal income tax rates in 2005.15

However, corporate tax is only part of the needed reforms: the Jamaican government needs to look across all taxes that companies pay when considering a reform agenda. The World Bank study this year shows that corporate income taxes only account for 37% of the Total Tax Rate (TTR), 26% of the number of hours spent on tax compliance and 12% of the number of tax payments made.16 Many alternative tax structures exist which are more efficient and less burdensome. Sales tax, labor tax and contributions add significantly to the cost in some countries and also to the compliance obligations. These show that a win- win for the government is achievable by simplifying the tax system and easing the compliance burden on business. In Brazil, for example, the Simples program, which aimed to ease tax requirements for small businesses, resulted in a 13% increase in retail business registrations following the program‘s initiation.17

It further reduced administrative cost by 1/5 and therefore boosted the net income of the government. 18

To consider the full impact of the various business taxes, both their tax cost and their compliance burden need to be considered. Indirect taxes and consumption taxes can add substantially to compliance costs.

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Government revenues can be expanded by simplifying tax systems and compliance obligations. This may involve reducing the number of taxes. Companies benefit at the same time with reduced tax compliance obligations to fulfill.19 In Sierra Leone, a major post-conflict effort has been to improve the operating environment for businesses; its government has adopted a low corporate income tax rate and adopting a straight forward approach to its tax codes.20 Other countries such as Colombia, Israel, the Kyrgyz

Republic, South Africa, Uruguay and Uzbekistan reduced the number of taxes paid by businesses by consolidating or eliminating taxes. According to the IFC, all these mentioned countries have benefitted from a larger formal sector and enhanced tax base for the government. 21

Moreover, governments can foster inclusion in the formal sector via electronic filing of taxes. A third of the world‘s countries now use electronic payment such as bank transfer – and half use payment by check.

22 Countries with large informal economies such as Jamaica are positioned to benefit the most from this strategy. In Mozambique the tax authority favors check payments by clearing them faster than bank transfers. Lesotho, Malaysia, the Netherlands, Turkey and Uzbekistan simplified the process of paying taxes by introducing or expanding electronic filing and reducing the frequency of payments. In the

Democratic Republic of Congo, with taxes twice as high as the commercial profit for a company with a profit margin of 20%, businesses have a Figure 4: Low to mid income entrepreneurs in Kingston are positioned to benefit the most from tax reforms strong incentive to evade taxes. 23 On the other hand, more businesses can be persuaded to enter the formal economy with an easier filing process.

Jamaica‘s high tax rates and complicated filing system are in need of reform. High

VAT and income tax hurt both

14 individuals and enterprises by raising the cost of goods. They stifle entrepreneurship and prevent businesses from entering the formal sector. Additionally, a high number of taxes encourages evasion to keep government revenue lower. Keeping in mind the prevalence of low to middle income individuals and businesses in Kingston, there is immense potential for it to benefit from such reform. Reform on tax rates and complexity is a win-win situation where more revenue is collected by the government and more businesses are legitimized in Kingston.

Social and Political Divides

The social and political divides in Kingston pose barriers to inclusive economic growth. There is a deep seated history of partisan politics in the city that divides neighborhoods, stifles businesses and creates an unsuitable environment for businesses. Though differences amongst ethnicities and classes can largely be traced to the legacy of slavery, colonialism and pattern of migration into Jamaica, the economic crisis of

1970‘s was detrimental to Kingston‘s stability. More specifically, the balance of payment adjustment programs in caused severe changes in the distribution of output, employment, incomes, prices, and resource use by the city‘s residents. Today the rigid divides of Kingston‘s neighborhoods along political lines, crime and violence, and mistrust amongst social classes prove to be major impediments in

Kingston‘s economic growth. In order to make recommendations about inclusive growth, it is important to understand Kingston‘s contemporary history as it relates to partisan politics and class struggle.

Between 1962 and 1972, Jamaica was governed by the Jamaica Labor Party (JLP). The JLP‘s economic strategy was based on ―foreign investment by invitation‖ – the attraction of foreign investment via generous tax incentives. However, in lieu of domestic capital and entrepreneurship, this strategy reinforced external dependence and fostered the dominance of foreign capital in Jamaica. Resources and capital from foreign sources did not ―trickle down‖ to the majority of the people.24 Unemployment increased from 13 percent in 1960 to 23 percent in 1972.25 Income distribution became less equitable; it is estimated that the total share of the GDP earned by the poorest 40% shrank from 7.2% to 5.4%. The

15 income of the poorest 30% fell from J$32 to J$25.26 The period witnessed social unrest and outbursts of violence from the unemployed; the general election of 1967 was colored by clashes between rival political factions and the level of crime became alarming.

In February 1972 the People‘s National Party (PNP) came into power and implemented a policy of redistribution consisting of social programs aimed at alleviating poverty. The programs included a literacy campaign, employment programs, food subsidies, rent controls, free education, minimum wage, cooperatives in agriculture, and loans to small businesses.27 Because redistributive policies such as high income taxes can counter growth strategies such as lowering income taxes, the PNP implemented an expansionary program to borrow from external sources. However, these policies did not improve the economy‘s growth, nor did they diffuse class antagonism amongst the poor. And the end of PNP‘s term,

Jamaica owed a large debt to the IMF, and violent clashes amongst the poor in Kingston continued.

The already slowing Jamaican economy was further aggravated by the OPEC oil crisis of 1972. High energy prices distressed export volume, depressed revenues from tourism, and caused a large outflow of capital. Jamaica‘s supply foreign reserves shrank: a surplus of J$36.4 Million in 1971 became a deficit of

J$43.6 Million in 1973 and a balance of payments crisis ensued.28

IMF Intervention: In December 1976, the Jamaican government opened discussions with International

Monetary Fund (IMF). 29 In 1978, after much resistance, the PNP signed an agreement on a set of policies aimed at reducing the deficit and enhancing long-term economic growth in Jamaica. They focused on devaluation to make exports more competitive. They further demanded that central government deregulate of the economy by removing subsidies, reducing government expenditure and shrinking state enterprises. It is important to note that the policies of the IMF were fundamentally in contradiction to those of the Jamaican government. While the PNP sought to increase government participation in the economy, the IMF demanded the minimization of the state‘s role.

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Complying with IMF‘s demands, the government reduced expenditure, subsidies and low interest lending to businesses. This was most detrimental to low and mid income enterprises that relied on government assistance. The unintended result of the IMF‘s actions was the exacerbation of class tensions in Jamaica both through the inherent nature of the economic policies it imposed, and through interventions in political processes outside of the organization‘s prerogative. It leveraged its status as the lender of last resort to accomplish both.

The IMF‘s economic policies further depressed living conditions of the poorest Jamaicans while reducing the government‘s credibility with the marginalized. Devaluation of the Jamaican Dollar caused a sharp rise in cost of living while simultaneously decreasing wages per capita by 16.3% from 1977 and

1980. 30 While the IMF was not solely responsible, the immediate devaluations were conducted at its insistence. Furthermore, reducing the state‘s role in the economy entailed reducing support for state enterprises, cooperatives, community economic organizations and small businesses. The minimum wage was lowered, subsidies were reduced and social services were cut back. These measures decreased the standard of living of the poorest citizens and constrained the state‘s outreach to most social classes. The conditions proved ripe only for large capitalist enterprises and foreign investors. They were detrimental to domestic enterprises, especially those of small and medium sizes which did not have ready access to capital or management support. The developments were contrary to the PNP‘s distributive goals; they challenged the credibility of the government and its commitment to the marginalized.

The IMF‘s rejection of the government‘s policies also reinforced the notion that the current Jamaican government was guilty of economic mismanagement. If sent the message that if an administration was not in agreement with IMF, then it was irresponsible. The IMF‘s rejection of PNP‘s redistributive policies conveyed to the public that PNP was not informed, experienced or far sighted in shaping the Jamaican economy. It is unclear whether Jamaica Labor Party‘s (PNP) policies at the time were redistributive or in

17 congruence with the reforms. Regardless, any opposition party did not have room to disagree with the

IMF if it wished to be elected.

Lastly, the IMF intervened directly in political affairs by making a number of recommendations that were not part of the written agreements. In 1979, the IMF publicly expressed that it had ―serious doubts about the seriousness and purpose of the Manley administration.‖31 It accused the government of implementing counter-productive policies and of not being committed to the program. Ample arguments can be made to support or negate the capabilities of the PNP administration; however, IMF‘s intervention in a sovereign state‘s politics was beyond the mandate of a lender. It undermined the authority of the government and set the stage for a chaotic election.

The opposition, JLP, whether by original intent or by inevitability, launched a campaign against PNP‘s policies. It portrayed the economic hardships being faced by the poor as the direct result of administration‘s economic mismanagement. The image of the administration was already as irresponsible. As partisan politics unraveled, the voter base divided and intensified rivalries within communities. In the next election, JLP emerged as the leader.

However, the shift in governing parties did not reduce poverty or class struggle. In Kingston especially, political rifts have manifested in literal divisions of neighborhoods: specific streets are pro-JLP and therefore anti-PNP. Conversations with residents of marginalized communities such as Mountain View reveal that ―you better not wear green in a PNP neighborhood because it‘s a JLP color. You‘ll have to pay, hopefully only with money.‖ 32 Furthermore, it‘s not advisable for rival neighborhoods to conduct businesses in each other‘s territories because politically motivated dons are responsible for protection of enterprises. Political allegiance has also become a determinant of government priorities: many citizens do not receive tangible economic rewards through government programs for the poor. Government resources

18 are skewed towards communities, neighborhoods and literal blocks of houses that identify with the incumbent political party.

The economic hardships faced by the poor in Kingston have cultivated clientelism between society and political parties. Clientelism is a ―more or less personalized relationship between actors or a set of actors, commanding unequal wealth, status or influence, based on conditional loyalties, and involving mutually beneficial transactions.‖33 The need for Kingston residents to accumulate scarce economic resources has led to favoritism, where resources are tendered to those who display loyalty. For the residents, there are more economic gains in forming political identities rather than seeking formal sector employment or starting a business. A resident of Mountain View describes, ―Kids, especially boys think that they get more money and respect if they follow the don. Why start a business? That‘s a lot of work, and too much risk.‖34

Residents are encouraged to form political identities. As these political identities strengthen with generations of violence, economic growth via the private sector becomes difficult to implement for three

reasons: resources are distributed Figure 5: Coronation Market, where entrepreneurship came to a halt in June 2010 due to gang violence only to supporters of the party in

power; long term planning of

enterprises is compromised with

elections as uncertain milestones;

and violence and social stigma act

as barriers to entry in certain

geographies.

An example is Coronation Market, the largest produce market in Jamaica – it burned during summer 2010 as a result of gang violence. Figure 5 depicts Coronation Market in January 2011. According to vendors, the market was closed until August 2010, and business didn‘t pick up until September. Even after

19 opening, the market was in shambles, operating with make-shift tarps and nervous vendors. It was not until Digicel, a leading mobile provider undertook a project to re-vamp Coronation Market that it began reconstructing.

Coronation market is a great example of how the government can adopt a ―corridor approach‖ to navigate the divisive social landscape of downtown Kingston. The market has been revitalized by Digicel, a

Figure 6: New Coronation Market via Digicel

privately owned company, as part of its Corporate Social Responsibility initiative. The government was not directly involved in the project; hence the project lacks any traces of partisan politics. By providing

Digicel with tax incentives to open offices downtown, the government has created a more inclusive mechanism for economic growth. Figure 6 depicts the new Coronation Market during migration from the old version (see Figure 5). Despite the recent fire and violence, the general sentiment in the Market is optimistic. Vendors seem reluctant to discuss June 2010; however, they express confidence in a peaceful environment going forward. They are enthusiastic about the new space, the supermarket feel, new facilities like the bathroom, and the colorful portrayal of Coronation. The government has done an excellent job of staying in the ‗corridor‘ while allowing the private sector to encourage this project.

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Similarly, the government can apply the corridor approach to navigate social divides and encourage entrepreneurship in other parts of Kingston. It can take steps to address security concerns regarding crime and violence. It can further support private sector by lowering barriers to entry, providing economic incentive such as discounted rent, establish special economic zones (SEZ) via tax incentives and create incubators for small to medium sized businesses.

It is not realistic to expect the elimination of social and political divides in Kingston in the next few years.

Despite efforts from private and public sectors, the deep seated history of social struggle will persist in the near future. The challenge ahead is to navigate this environment and enable the private sector to create mechanisms for inclusive growth. This type of growth would provide opportunities to the supporter of

PNP as well as JLP. It must employ and educate members of low and middle class income communities.

Growth needs to reach migrants during the Balance of Payment period, as well as old natives of Kingston, all ethnicities and people living in conflicting neighborhoods.

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Analyses of Dynamic Sectors

I. Music

Background

Undoubtedly, a dynamic segment of Jamaica‘s economy is its world famous music. In 2000, it was estimated that gross revenues from music and music-related activities were equivalent in size to 10% of the GDP.35 Since the 1990s, the government has realized that in addition to promoting national culture,

Jamaican music has the potential to become a powerful engine for economic and social growth.

Consequently, the Jamaican government has undertaken several initiatives with regional and international bodies such as the United Nations Conference on Trade and Development (UNCTAD), the World

Intellectual Property Organization (WIPO) and the Caribbean Community and Common Market

(CARICOM). These initiatives have examined numerous issues that are impeding the music industry's growth, such as the lack of technical equipment and adequately trained human resources, and weak

36 copyright protections and enforcement mechanisms.

To date, limited progress has been made in addressing shortcomings of Jamaica‘s music industry.

Government agencies like Jamaican Promotions Corporation (JAMPRO), which is responsible for investment and export promotion, have provided technical and financial assistance such as the publication of a Music Industry Directory to the music industry since the 1980s. The Music Industry Directory looks at the process to connect suppliers in the sector for the promotion of professional services of the Jamaican entertainment sector to the world.

Another example includes the waiving of customs duties on musicians‘ tools of trade by the Ministry of Finance.37 There has also been some progress made within the industry to better structure and organize itself. The establishment of collecting societies, such as Jamaica Musical Rights Administration Society

(JAMRAS), Jamaica Copyright Licensing Agency (JAMCOPY), Jamaica Performers Administration

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Society (JPAS) and the Intellectual Property Service Centre (IPC) has begun to cover the rights management services necessary to realize significant returns within the music industry.

Unfortunately, these efforts have not led to the long-term involvement and trust of musicians, performers, producers and record labels. Government policy is viewed as highly fragmented with regards to music and culture, with several under-resourced agencies (JAMPRO, Jamaica Intellectual Property

Office (JIPO), Entertainment Unit, Jamaica Cultural Development Commission (JCDC), and the Ministry of Education, Youth and Culture) and no clear lead agency. The lack of a well-coordinated effort and absence of dialogue between the various actors in the sector to date has severely frustrated significant development of the industry and the eroded the private sector‘s trust of public intervention.

Strengths and Opportunities

It is estimated that in 2000, performances in Jamaica generated gross revenues in excess of US $10 million.38 In 2002, economist Michael Witter estimated the size of the international market for reggae at

US$60-75 million. The Economic and Social Survey of Jamaica (2003) reported a 15.7% increase in exports of recorded music in the first six months of 2003, over the same period in 2002.39 The United

Kingdom and the United States accounted for 73.9% and 13.2% respectively of the total value of the recorded music exported in 2003, making these two nations the main markets for Jamaica‘s music.40

While the United States and the United Kingston are the largest markets for Jamaican music, there are marketing opportunities present in non-traditional markets in Africa and South America, where there is significant demand for Jamaican music (cite UNESCO study). Lastly, the music industry provides employment and income for between 6,000 and 12,000 people in Jamaica, including a cadre of performers and vital service providers in artist management, promotion, marketing, stage management, and audio engineering. These facts underscore the untapped potential of the music industry in generating economic growth and job creation.

Most importantly, Jamaica‘s music is inextricably linked to the Jamaican ―brand,‖ contributing to the uniqueness of the product. However, Jamaica has not been able to leverage the power of its most

23 recognized brand to realize greater economic gains. Indeed, the reggae beat, and the rapping of Jamaican reggae dancehall music are sampled in dance music across the globe, as well as being transformed for a

Spanish language audience into reggaeton in the Spanish speaking Caribbean. If Jamaica were to become the hub where authentic reggae could be tapped, it could have strong implications for the tourism industry in Kingston as well.

Weaknesses and Threats

In reality, only a very small portion of music revenue generated globally is earned by Jamaicans or channeled into the domestic economy. Most income from the music industry in Jamaica is currently generated by exports, particularly through the involvement of performers in the overseas markets.41

At present, the music industry is highly fragmented, populated by small, medium and micro enterprises composed of many differentiated performing artists.42 Most local musicians and recording artists do not receive adequate compensation for their work through royalties or shares of income from the sale of recorded music. Many industry professionals have little or no formal education, as most of them hail from mainly poor and stratified communities. Moreover, most are not adequately trained and receive little business support for improvement.

The majority of Jamaican musicians earn their living primarily from live performances at festivals both locally and abroad. Most of the popular Jamaican ―musicians‖ are performing artists, not composers or songwriters, which means that they lack copyright protections for their music. 43 Jamaican performing artists who lack exclusive rights in their performances primarily put on shows to obtain one-time payments for their performance instead of gaining long-term earnings through copyright royalties. 44

Performers have thus been limited by the prohibitive cost of travel and touring around the world and by the number of concerts secured by his or her performance promoter. The music industry to date has been developed in an unstructured and somewhat haphazard way, without proper protection of intellectual property, resulting in Jamaica's loss of millions of dollars in potential revenue.

24

Since Jamaica‘s music industry is fragmented and essentially a multi-sector enterprise, there is an overwhelming need for specialization. Specialization entails focusing on specific areas like song writing, arrangement and production, marketing and promotion, artist management, studio engineering, band management, and performance. Emphasis is needed on training and acquisition of relevant skills for

Jamaicans in this sector. Currently, the field is dominated by micro-enterprises and self- employed workers and there exists a general lack of technical knowledge and management; therefore, professionalization of the industry by way of training and other methods can yield economical dividends with respect to employment rates.

Case Studies of Successful Music Development Initiatives

African Festivals and Sunsplash

A cursory examination of countries that have explored the potential of cultural tourism suggests that there is much potential for growth through the showcasing of musical festivals in Jamaica. This is particularly the case for downtown Kingston, a site steeped in the importance of music as a unique cultural marker. This is relevant given the recent shift away from mass tourism, influenced by the changing preferences and demographics of travelers who seek a more authentic travel experience.45 In some major cities and tourist destinations, cultural tourism is estimated to be as high as 40 percent of annual visitor arrivals.46 In addition, cultural tourists tend to spend more on local goods and services than the average visitor.

Festival tourism has proven to be an important innovation and source of competitive advantage in the global tourism industry. Countries such as Malawi have harnessed the potential of their cultural capital by drawing on the creativity of local artists and entrepreneurs to promote themselves as major destination sites. Malawi‘s Lake of Stars festival, a musical, social and cultural exchange organized every year on the shores of Africa‘s third largest lake, has attracted great attention from Western media as well as

UNESCO. According to the Lake of Stars website, the festival has exposed over 200 million people to

Malawi through its media coverage, notably on global news networks (BBC, CNN) and online47. Another

25 example is Zimbabwe‘s Harare International Festival of Arts, which has now turned into an international event. Since its establishment in 1999, it has successfully formed strategic partnerships with the corporate sector, and the festival now assures 70% of its revenues through corporate sponsorship.

Such festivals have unleashed creative local cultural capital, such as music; in addition, they have a significant impact on attracting visitors, benefiting airlines and hotels with spillover effects on the local economy including the food, beverage and restaurant sectors, as well as on job creation associated with the production and execution of the event. Currently there is an informal 'immersion tourism' already taking place in downtown Kingston that can capitalize on the synergies between music and tourism. There are young people from countries as far away as Japan who visit Kingston to follow its unique brand of sound systems around the country, as well as to experience the dancehall circuit and immerse themselves in the birthplace of reggae. Moreover, dancehall street dances, such as Passa Passa, have drawn crowds, ranging from middle class ‗uptown‘ residents to their ‗downtown‘ inner-city counterparts, along with foreign visitors. There are similar dancehall events that are held during the workweek that also attract visitors, including Early Mondays, Hot Mondays, Blase Blasé, Jiggy Fridays, Weddy Weddy, Blazing

Wednesdays, and so on.48

Music festivals present a platform for combining training and performance activities, while also providing opportunities for local talented artists to network and market themselves. In fact, one of the most successful projects in the Caribbean has been Jamaica's Reggae Sunsplash, a concert that was first staged in 1978 in Montego Bay. Its success was marked by the fact that it ran for nearly 20 years and that

―its worldwide touring activities provided exposure for more Jamaican reggae artists than any other concert in the nation‘s history,‖ promoting the fame of musicians like Bob Marley.49 The festival was a success due to its novel concept of combining a multi-day festival which showcased Jamaica‘s distinctive reggae music together with other Jamaican cultural fixtures such as food, arts, and crafts. Further, Reggae

Sunsplash primarily attracted tourists to Jamaica for what was traditionally a slow summer season.

Therefore, in addition to increasing tourism, Reggae Sunsplash built awareness of Jamaican music culture

26 in the rest of the world. Reggae Sunsplash exported its unique cultural brand directly to international markets through its summer tours of the United States, Canada, Europe and Japan.50

However, despite the success of being staged for some 18 consecutive years in Jamaica and almost 10 years of touring abroad, the show folded in 1998, with an unsuccessful attempt of revival in 2006. It is instructive to consider the reasons for its failure, including; over-saturation of both local and international reggae concert markets; the rising cost of creative talent caused by a lack of talent innovation

(development and inclusion of new and fresh marketable talent); intellectual property theft; inadequate professional management; and lack of corporate sponsorship.51

Despite its eventual decline, lessons about financial management and the professionalization of local artists can be drawn from Reggae Sunsplash that can inform the development of future musical festivals and other related endeavors in current and future urban revitalization plans for Kingston.

AfroReggae (Brazil)

Music can also play an important role in mobilizing marginalized communities within Kingston. A successful story to draw upon is AfroReggae, a Brazilian NGO that offers workshops in music and dance as an alternative to crime and drugs for youths from the favelas (slums). These workshops are conducted by a band of forty regular performers whose shows employ a combination of percussion, dance, rap, and circus acts. It contains 460 members and a number of affiliated performance groups. For example, its flagship group, Banda AfroReggae, has toured the United States and Europe, and, in 2002, released a debut album with Universal.

This group is unique in that it has coupled popular culture/music with youth mobilization to transform the lives of favela dwellers. The group recruits youths involved in the drug trade and helps them attain professional skills. AfroReggae plays on some of the methods that drug dealers use to attract young people by promoting a sense of belonging to a group, providing for elevated status and enhanced self- esteem, and giving financial incentives. The group works closely with families as a key to the

27 fundamental success of the youth programs. Moreover, it always operates with the approval of the residents‘ association.

By innovatively using music, dance, and other performing arts to draw youth away from the drug trade, AfroReggae‘s model has been successful in equipping young people with marketable professional skills that have enabled them to enter the performance and entertainment industries. For example, some

AfroReggae members have gone on to form independent bands, one graduate is now a part of Canada‘s

Cirque du Soleil, and another alumnus is with Ringling Brothers Barnum and Bailey Circus. In addition,

Afro Reggae has leveraged its credibility to attract corporate partnerships like the global mining company, Vale.

Given the rich cultural heritage of Jamaican music and dance, a similar program employing music can be launched as a means to attract downtown Kingston residents. This model is particularly relevant given the large population of young, disaffected, unemployed young people prone to violence that live in

Kingston. KRC can leverage its community-based programs to build these groups and link the community-based model to music and performance venues in downtown Kingston. The incorporation of these types of activities in the proposed community-development program in downtown Kingston would strengthen the relations of coexistence and solidarity among the community through music and cultural activities.

Recently, the private sector has played an important role in the development of downtown Kingston.

Digicel has recognized the importance of integrating within the community, as evidenced by its recent refurbishments to the Coronation Market. Using a model similar to that of AfroReggae, which has drawn support from corporate sponsors, may also provide opportunities for KRC and URD to link with socially responsible companies like Digicel in their community-building efforts.

K-Pop (Korea)

Advances in digital technologies have enabled the Internet to become a major medium for distributing and accessing music. These new developments in media and entertainment can open new opportunities

28 for unleashing the synergies between music and information communication technologies (ICT) in

Jamaica. The Internet has great potential to be a tool for marketing and to provide exposure to global markets for local artists, since marketing costs are generally prohibitively high for most small producers and record companies.52

An instructive example of a country in which the music industry has drastically reorganized the distribution of music is Korea, where a rapid diffusion of delivery of ‗K-pop‘ (Korean pop music) over the Internet has been seen through peer-to-peer music sharing networks and mobile music delivery.

Moreover, social media like YouTube and Twitter have become an important means for Korean artists to reach audiences in formerly hard-to-access markets like the U.S. and Europe. As a result, upcoming

Korean artists are now bypassing traditional outlets like radio and television, aggressively promoting their efforts to go international via the Internet. For example, a young Korean artist Taeyang, who is better known in South Korea as a representative of the Korean boy band Big Bang, released his first solo album online in August 2010, where it hit No. 2 on iTunes' R&B sales charts in the U.S. and No. 1 in Canada — a first for an Asian artist.53 The artist noted that he did not do any promotion in North America for the album, which was recorded in Korean and targeted fans in South Korea and Japan. Similarly, other social- media-savvy K-pop stars are using twitter, YouTube and Facebook to promote their music across and beyond Asia.

Similarly, digital creation and distribution of music can potentially offer Jamaican artists a significant opportunity to reach markets beyond Jamaica. The Internet offers lesser-known as well as popular

Jamaican performing artists the opportunity to interact and perform online through such tools as web- casting and live streaming performance to reach a much wider audience.54 A recent success story from

Kingston is Terry Lynn, whose unique blend of electronica and dancehall music has made it to the top of music charts in Europe and the U.S. Terry Lynn's debut album, Kingston Logic 2.0, was distributed online, where individual tracks have been made gradually available as free downloads from her website,

KingstonLogic.com. She also freely distributed 1,000 CD copies of the album in local communities to introduce her music to Jamaicans, independent of the media. This unique distribution strategy provided

29 the artist with wider exposure and eventually secured her a spot on the international pop charts. Drawing on this story, other Jamaican start-up musicians and related professionals in the music industry that lack management and entrepreneurial skills, can benefit from an incubation center‘s basic business training and capacity-building opportunities.

However, the challenge of copyright piracy via the Internet remains a major threat. As it is, widespread piracy of Jamaican music has been a major problem for the Jamaican music industry. The issue needs to be addressed if the full potential of the music industry is to be maximized. If the Internet is to become a viable medium of music delivery, a supportive legal and regulatory framework needs to be created to protect owners against copyright infringement in the new digital environment.

Potential Funding

The World Bank would be a suitable potential partner to approach in any endeavor related to developing Jamaica‘s music industry. In recent years, the World Bank has worked with a number of governments to help them confront challenges facing their respective music industries. For example,

World Bank‘s Africa Music Project has worked with several African governments to develop the local music industry by effecting relevant policy and legal reform, and devising plans to distribute African music via an Internet-based system. The World Bank has proposed ideas including music archives and soft micro-credit loans for musicians, bands and clubs and for setting up digital studio-cum-websites in

Africa for distributing locally-produced music through music sharing services.55 Similar efforts, such as the proposed business incubator, can be launched in Jamaica to provide support to promising professionals in the music industry who could benefit both from the provision of business skills and up- front financial assistance to take a viable creative industry business-plan into implementation.

Conclusion

In spite of the many limitations faced by the music industry, Jamaica continues to produce per capita, the most recorded music in the world. The challenge facing Jamaica at this time is to ensure that it can

30 leverage the power of its brand, create an enabling regulatory environment and build on Jamaica‘s comparative advantage in music. There are many opportunities to create forward linkages with other sectors in the economy, namely tourism and information technology. There is a critical need to create mechanisms to identify and develop new talent and provide on-going training and capacity-building opportunities for people and small businesses in the music industry. A business incubator that supports the development of aspiring and struggling musicians could do just that.

II. Information and Communication Technology

Background

As defined by the Organization for Economic Co-operation and Development (OECD), Information and Communication Technology (ICT) is a combination of manufacturing and services industry that capture, transmit and display data and information electronically. The term is often used to encompass a variety of communication tools such as cellular phones, computers, and satellite systems as well as relative services and applications associated with them. The strength of the ICT industry lies in the fact that it is cross-cutting and therefore has potential to advance a variety of industries within an economy.

These range from private sector development to the development of the music industry and to social sectors such as education and health.

With regard to private sector growth, ICT is especially important for enterprises, business facilitation and development. According to a study on the assessment of the landscape of micro, small, and medium sized enterprises (MSMEs) in Jamaica, it is estimated that 48 percent of MSMEs believe that technology, as it promotes creativity and innovation, is a major boost for private sector development.56 ICT is increasingly revolutionizing production processes, access to markets, and information sources together with social interactions. ICT also promotes government efficiency, fostering transparency and better communications with and service provision to citizens. Among these new technologies, mobile telephony takes a special place in view of its exceptional diffusion in the last decade or so and its strong social and

31 economic impact.57

Like most developing countries, Jamaica shows great promise for the promotion of ICT as a means to foster growth. The country has identified ICT as a strategic priority sector for development. According to

Vision: 2030 Jamaica, the Government of Jamaica aims at creating ―a globally competitive ICT sector that is widely accessible and makes the greatest possible contribution to the social and economic development of Jamaica.‖ Specific government priorities within the ICT sector include:

o Integration of ICT at all levels of the education system in efforts to produce a knowledge-based and educated society.

o Creation of affordable universal broadband access for all Jamaicans in order to eliminate the digital divide.

o Establishment of internationally renowned technology parks and research centers to foster innovation in society.

o Attraction of international companies to establish software development companies or manufacturing plants.

Additionally the government of Jamaica has determined to leverage ICT as a means to foster niche markets where Jamaica already has competitive advantage. Specific target areas include; the service industry (financial sector, hospitality and creative industries), manufacturing, agriculture and tourism.

Opportunities and Strengths

The World Bank has shown that ICT is one of the best performing sectors, both in terms of returns and development impact.58 Within the Jamaican context, the ICT industry has already experienced significant relative growth, particularly with regards to attracting investment in various sectors of the economy. One indicator of performance within the sector in recent years comes from earnings and investment data.

Foreign direct investment (FDI) inflows to the ICT sector averaged US$69 million per annum over the period 2001-2005, representing 11% of total FDI inflows in this period. Annual inflows of earnings from communication services and computer and information services have averaged US$199.2 million over the

32 period 2001-2005.59

Additionally, the government of Jamaica has made efforts to promote ICT education through various training institutions. Providers range from institutions of higher learning to vocational training institutes and secondary schools. Major universities providing computer science degrees include the University of the West Indies (UWI), Northern Caribbean University and the University of Technology (UTECH).

Moreover the national technical and vocational training agency HEART Trust/National Training Agency

(NTA) has a wide range of partnerships with both public and private agencies and owns academies and training institutes that offer technical training.

Weaknesses and needs

Despite the existing opportunities for growth in the sector, a number of constraints remain. Human resource development in ICT is presently one of the biggest challenges. This situation is exacerbated by the fact that donor and academic interventions within the industry largely focus on ICT development more than innovation measure and entrepreneurship promotion. Some specific sector challenges include:

o Relatively low levels of computer usage and affordable internet access among households and schools with limited access to affordable hardware

o Inadequate public awareness toward the importance and relevance of technology

o A lack of sufficient legal frameworks and regulation, particularly regarding intellectual property legislation and protection

o A heavy focus of local ICT companies on low value-added services for export

o Limited access to capital for new ventures in the ICT sector

Potential funding

There are various financing sources that both the private sector and Government of Jamaica can leverage for funding the development of the ICT sector. The World Bank is the largest multi-lateral financier and provider of policy advice in the field of ICT in developing countries. Over the past five

33 years, the World Bank Group has provided more than US$3 billion of funding in over 80 countries through its three financing arms; the International Bank for Reconstruction and Development (IBRD or

World Bank), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee

Agency (MIGA).60 Other funding sources include the United Nations Development Programme (UNDP), an institution that has provided significant funding for ICT development initiatives in multiple countries around the world.

Case Studies of Successful ICT Development Initiatives

Mauritius

The Mauritian economy – which has shown steady 5-6% growth since its independence in 1968, developing from a low-income, agriculture-based economy to a middle-income, diversified economy – suffered from declining revenues in the country‘s traditional anchor sectors. This decline prompted the government‘s commitment in 2000 to invest in turning ICT into the ―fifth pillar‖ of the economy, and to increase the country‘s focus on service and value-added industries.

The Mauritian economy had long been dependent on sugar revenues (traditionally 25%-30% of GDP) and other anchor sectors such as textiles, tourism and financial services for its historically strong economic growth. Due to reduced sugar prices – including a drop of nearly 40% in 2005 -- and a suffering textiles industry, among other factors, the Mauritian government has spent the last decade shifting its economic strategy towards services and technology, with particular emphasis on ICT. In response to this shift, the ICT sector in Mauritius has undergone rapid and sustained development, accelerated by the government‘s commitment to transform Mauritius into a ―Cyber Island.‖ Mauritius has also progressively recorded steady growth with regards to ICT usage and penetration.

The Mauritian government channeled considerable resources into this transition, introducing a number of initiatives to support the emergence of a local ICT sector, attract ICT-focused FDI and build local ICT capabilities.

In response to this commitment, the National Computer Board (NCB) established an incubator as ―a

34 centre of excellence where ideas and entrepreneurship are transformed into successful and viable business ventures.‖ Its mission was to ―boost entrepreneurship in the ICT sector and to provide start-ups with the necessary business advisory services and financial support with viable business ventures.‖ In order to focus its offering, the incubator identified four key organizational objectives: promoting ICT entrepreneurship; boosting job creation in the ICT sector; developing linkages with other institutions; and marketing its start-ups. The establishment and growth of the NCB, an organization tasked with the accelerated diffusion of ICTs through knowledge building, policy creation, infrastructure and service facilitation, has been a major contributor to this momentum.

The government of Mauritius, and in particular the NCB, has succeeded in strengthening the ICT industry and building the country‘s ICT capacity. However, it has not yet achieved its most ambitious competitiveness goals—this is due, in part, to the absence of a local culture of entrepreneurialism and innovation. Realizing that ICT is a necessary but not sufficient condition for accelerated growth, the government has committed to innovation as an essential input into its future development.

III. Value-Added Natural/Agricultural Products61

Background

The agricultural sector is a major component of most economies throughout the Caribbean, supplying a large portion of local food stock and employing a significant portion of most nations‘ workforces. As of

2009, 20.2% of Jamaica‘s workforce was engaged in some form of agricultural work, making agriculture the nation‘s largest sector. 55% of the country‘s total land area is occupied by agricultural activity. Most agricultural production is done by small-scale farmers living in the island‘s interior who produce non- traditional, non-staple crops for the local market; large-scale farmers produce mainly export staple crops and use 39% of the agricultural land. Domestic agriculture, or production for local markets and consumers, is on the decline for both food and other agricultural products due to the increased availability and lower prices of imported goods and materials. At the same time, local demand for certain crops has

35 increased due to demand from the burgeoning hotel and tourist accommodation industries. Staple crops like sugar and bananas continue to constitute a large portion of most Caribbean nations‘ total exports, while the European Union and the United States continued to consume the vast majority of these outflows.62

In the past decade, several countries in the Caribbean—most notably, Cuba—have invested heavily in the development of modern agricultural methods (i.e. using modern technologies for the growth, harvest, processing, and transport of agricultural products) and have made efforts to diversify away from traditional staple export crops. Many nations in the region—Jamaica included—have invested considerable resources into the research and development of alternative crops and have shifted their focus away from the export of raw agricultural products to the production of ―value-added‖ agricultural products.

Table 1: Examples of agricultural products (raw/value-added)63

Plants (raw) Herbs (e.g. lemongrass, rosemary) Dried or powdered plant products (e.g. teas) Spices (raw, unprocessed) Simple (value-added) products Spirits, syrups Herbal wines & tonics Nutraceuticals & ―functional‖ foods Extracts Natural dyes Essential oils Natural preservatives (e.g. citric acid, vinegar) Soaps, lotions, creams Complex (value-added) products Highly-processed nutraceuticals Plant-derived pharmaceuticals

Agriculture Development in Jamaica

In addition to the sale of staple crops and raw plant materials to local and international markets,

Jamaica‘s agricultural sector already produces a wealth of value-added products ranging from slightly- processed foodstuffs (e.g. banana and plantain chips) to highly processed plant-based products like lotions and organic extracts. Table 1 provides a sample of the variety of value added products currently produced in Jamaica. These products have been developed mainly by local businesses; however, research

36 organizations like the Biotechnology Centre at the University of the West Indies at Mona (UWI-Mona) and the Scientific Research Council (SRC) have assisted in or spearheaded the development of highly refined, high quality organic products from local plants. The SRC Food Technology Institute, for example, has developed a range of value-added agricultural products such as natural preservatives and seasoning mixes from local ingredients.

In addition to traditional value-added agricultural products like packaged and processed foods, several research facilities in

Jamaica continue to make progress in developing non-traditional products using a range of local plants. For example, 368 plants—13% of which are endemic to

Jamaica—have been identified by scientists at

UWI-Mona, the SRC, the University of Technology, and Northern Caribbean University to have significant medicinal properties. For example, red sorrel, a flowering plant whose blossoms are well known in the Caribbean as a base for drinks and preserves, is now known to possess significant levels of antioxidants—compounds used in dietary supplements, preservatives, and cosmetics—and is a natural diuretic. Another plant, turmeric, is valued in local cuisine for its curry-like flavor and yellow coloring powder; however, turmeric also contains high levels of antioxidants and compounds which, when processed, have pain-relieving and anti-inflammatory properties.64 Many of these plants have been used by Jamaicans, according to local tradition, as natural remedies for a host of ailments; however, continued research and development into the cultivation of these plants and the purification of their medicinal ingredients, like that currently performed at the Medicinal Plant Research Group at UWI-Mona, represents a significant opportunity for the development of additional locally-produced value-added agricultural products. Table 2 provides a list of specific Jamaican plants with high potential for development and ―value-add‖ production.

37

Table 2: Specific Plants of Value

(Jamaican plants with high demand and established local and/or international recognition of nutritional/medicinal qualities)65 Ginger In addition to use as a flavoring agent, ginger is (sold: raw, dried, processed, extracted oils) widely regarded for its nutritional value and medicinal qualities. In raw and tea form, it is used as a remedy for nausea and indigestion; ginger oil is used for similar medicinal purposes and is a common component of cosmetics. Lemongrass Lemongrass teas are used as an effective (sold: raw, dried, extracted oils) treatment for nausea and high fever. Lemongrass oil is a highly sought-after component in cosmetics and aromatherapy products. Nutmeg In addition to its use as a flavoring agent, (sold: raw, dried, extracted oils) nutmeg oil is a common ingredient in cosmetics and pharmaceuticals. In raw form, nutmeg oil is a natural analgesic used topically for muscle and joint pain. Sorrel Sorrel, popularly used as a flavoring agent or as (sold: dried, extracts, powdered) the base for drinks, is widely recognized for its high vitamin and anti-oxidant content. It is an effective diuretic and has recently been the subject of research for possible cancer-fighting properties.

Opportunities and Strengths

Markets for high-quality natural products are expanding, both in Jamaica and internationally.

International demand for nutraceuticals and cosmeceuticals, in particular, has grown significantly in recent years, with the global market expected to reach nearly US$180 billion in the next two years. The largest consumer of nutraceutical foods and supplements is the United States, as ―alternative remedies‖ and natural medicines become more accepted as an alternative to traditional medicine and pharmaceuticals.

Researchers at UWI-Mona have worked to make the technology for producing the highest-quality strains of local medicinal plants accessible to local farmers through the development of low-cost tissue culture techniques and resistant crop strains, while the SRC provides training to local growers in a range of processing techniques (e.g. solar drying) to produce high-quality products. As a result of these efforts and collaborations between UWI-Mona and the Jamaica Ministry of Agriculture which began in 1996, the

38 use of high-tech agricultural methods has been on the rise. 66 At present, local farmers are decreasing their use of imported seeds to grow staple crops in favor of planting unique Jamaican crops from local seed sources (though the majority of the all cultivated crops are still produced using imported seeds). Recent advances in information and communication technologies have facilitated the spread of sustainable growing and harvesting practices throughout the region.67 At the same time, a recent increase in research and development of agro-biotechnology throughout the Caribbean region presents an opportunity for

Jamaica to benefit from and contribute to a growing industry in the region while tapping into nearby markets and resources. Indeed, a number of Jamaican businesses are currently engaged in the export of high-quality aromatic and medicinal plant products and have identified and engaged regional and international markets. For example, BABA Roots Ltd. in Darliston, Westmoreland Jamaica, manufactures

―root tonics,‖ drinks derived from the roots of local plants like sarsaparilla and marketed as male enhancements and dietary supplements. BABA Roots sells its products locally and to international buyers through distributors in the US and Great Britain.68

Weaknesses & Needs

While the value-added agricultural product sector has the potential to produce significant economic gains for Jamaica, there currently are several significant obstacles to this sector‘s full development and expansion. First, many of the crops are not currently widely recognized by agricultural workers for their true economic potential—this is partially caused by an inadequate amount of research available on specific properties of each plant (regarding yields, effectiveness of active ingredients, etc.). At the same time, structural problems in both the agricultural sector and the Jamaican economy as a whole could prevent the value-added product industry from gaining momentum.

Local farmers prefer known crops, especially exportable staple crops, to the largely unknown but potentially more lucrative cultivation of medicinal and other non-traditional crops. Currently, the small number of merchants in the value-added agricultural product sector does not produce enough demand to encourage a transition from traditionally-grown crops. Local demand for herbal medicines and other

39 value-added products is not yet widespread. At the same time, the export of non-traditional crop products is hampered by the generally disorganized state of their main export channels (to be contrasted with the export channels for staple crops which are, in general, well organized and efficient).69 The lack of extensive research into non-traditional plants is, in large part, responsible for the lack of demand and organization. Dr. Sylvia A. Mitchell, head of the Biotechnology Centre at UWI-Mona, describes the main goals of future research:

 correct identification of existing and other known potentially medicinal plants

 testing and development of products derived from plants with known medicinal properties

 research into ―best case practices‖ of nutraceutical producing locales around the globe to ensure

efficient & quality production

In addition to a lack of information regarding the true value of non-traditional crops, larger problems in the Jamaican labor force may preclude the establishment of a thriving value-added sector. First, the loss of many former overseas markets for agricultural products—the result of the North American Free Trade

Agreement which caused a significant loss of revenue for many Jamaican farmers—has led to a general shift of emphasis away from agriculture and towards developing what are perceived to be more skill- intensive and profitable sectors. Second, public awareness of the need for conservation and sustainable agricultural techniques is largely absent. Non-traditional plants (those which are not cultivated) used for medicinal or other purposes are typically harvested from the natural environment and are rarely replenished. Second, as most processing techniques for the production of high-value-added agricultural products requires at least part of the agricultural labor force to possess advanced technical skills and scientific training, most agricultural workers do not currently possess the necessary skill level. Relatedly, most academic programs (with the exception of recent additions to the curricula and degree programs at

UWI-Mona and the University of Technology, Jamaica) will not, in their current form, produce students with the necessary skill levels in science and technology to be employed in this industry. Finally, a lack of political interest precludes the devotion of national resources—in education, investment, legal and financial protections and incentives—necessary to develop this industry while the lack of communication

40 and interaction between policy makers and researchers maintains the obscurity of this area of research to the national political and economic dialogue.70

Short-term industry needs:

(areas for focus in the promotion and development of the agricultural/agricultural product industry)

 increased emphasis in agriculture-related fields of study / training

 increased public awareness of the importance of Jamaica‘s biodiversity as a sustainable resource

(for products, increased tourism, et. al.)

 increased emphasis—in schools, training institutions, and government agencies—on the

development and modernization of the agricultural sectors

 increased recognition of the potential for value-added agricultural products for income generation

Short term strategies

(implementable in the short term; low costs; most or all required resources currently available)

 publicize agriculture-related studies and industries to reach a wider audience and draw the interest

of students and workers

 increase cooperation and communications between policy makers and researchers/academics in

the field of agricultural development

 sensitize the public to the importance of Jamaica‘s natural resources through educational

campaigns

 inform businesses, policy makers, and the general public of the potential of value-added

agricultural products for income/job generation (including small and medium size enterprises)

41

Potential Funding Sources

 The Organization of American States provided funding for Biotechnology Centre and Scientific

Research Council to pursue research and to support the development of a nutraceutical industry in

Jamaica.

 The Inter-American Development Bank has collaborated with the Bureau of Standards Jamaica

and the UWI-Mona Biotechnology Centre to develop plans, programs, and policies for the

commercialization of locally grown medicinal plants.

 The Centre for Development and Enterprise (Brussels) funded the establishment (implemented

by Jamaica Promotions Corporation) of the Herbal Sectors Development Program.71

42

Recommendation: Business Incubation & Community Development Model

Introduction

Jamaica‘s workforce is characterized by its resourcefulness and entrepreneurial initiative. In the past few decades, a number of medium-sized and large Jamaican firms have thrived; more than a few have become productive and profitable enterprises. Indeed, Jamaica-based companies like GraceKennedy are models of efficient and innovative commercial activity for Jamaica, the Caribbean, and the world.

However, as in many other nations, significant challenges face any entrepreneur who hopes to establish a successful business in Jamaica. As described in earlier sections, the current business environment of

Jamaica poses a number of unique challenges; there are, however, other specific challenges to small businesses which are not Jamaica-specific. Starting and maintaining a successful enterprise requires resources and know-how that are, in the best cases, difficult to acquire and develop. Absent fortunate circumstances or extraordinary business savvy, all small businesses must develop their material and human resources; many start virtually from scratch. New business founders in Jamaica face the challenges of an increasingly competitive and globalized economy; however, they are also surrounded by established

Jamaican businesses that thrive in a wide range of sectors. An entrepreneur should have access to and take advantage of the experience, skills, and resources present in established national, regional, and global business networks. It is from this perspective that the business incubation model originates.

As defined by the National Business Incubation Association (NBIA) of America, business incubation is ―a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services.‖ According to

NBIA, a business incubator‘s main goal is ―to produce successful firms that will leave the program financially viable and freestanding.‖72 According to the Organization for Economic Co-operation and

Development (OECD), a business incubator is a tool to facilitate enterprise creation and development, usually (but not always) comprising physical workspace and co-located business advisory and other

43 related services. Physical facilities are often provided on the basis of leases that are flexible, and sometimes below the market rate…Business incubators have variously been referred to as enterprise centers, nurseries, shared workspaces, managed workspaces and venture units.‖

Rationale

A business incubator would provide high-potential small-business owners the training and access to essential resources needed to accelerate the development of their enterprises into sophisticated and profitable businesses. An incubation center in Kingston would draw from existing expertise and business resources. A functioning incubator would have, at the very least, the following characteristics:

 resources and staff to provide start-up businesses with a broad range of services, training, and temporary material and financial support;

 partnerships with established local businesses and cooperative agreements with business professionals in a variety of sectors including, but not limited to include accounting/audit firms, business strategy and planning advisories, marketing firms, and design firms;

 forward linkages to firms for the placement of incubator graduates, or to facilitate the entrance of incubated firms into the market;

 backward linkages to schools and training institutions to recruit potential entrepreneurs and ensure that they possess basic business skills; and

 working connections with past incubator graduates to provide limited support to these businesses while using their acquired expertise to enhance incubator programs.

Incubation would occur for a limited period after which firms would graduate and be replaced by a new group of start-up businesses. Incubators typically conduct rolling admissions (depending on the incubator‘s resources and capacity), taking in and graduating firms on a regular basis.

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Relevance of Business Incubation

 Importance of business development services to private sector development. Two of the greatest challenges faced by the majority of small- and medium-sized enterprises interviewed by our team are access to financing and access to markets. The incubator will have a vital role to play in both developing business plans to help enterprises raise capital and facilitating linkages to international buyers, providing everything from translation to marketing services.

 Accelerating business development service supply. There are a few business service providers already present in Jamaica: HEART/NTA and UTECH, for example, that offer services for both public and private sectors. The accelerated development of a vibrant and effective business services sector in

Jamaica will require providing focused and intensive support to (or ‗incubating‘) a network of high- potential firms that offer a wide range of business services.

 Encouraging specialization. Increased coordination/networking among business service providers will allow them to serve the diverse needs of private businesses while maintaining specialization at the individual firm level. There is currently a risk that business service providers will become too thinly spread, offering an excessively wide range of services (due to the nature of MSME demand) without developing sufficient expertise in any one service area. Facilitating collaboration among different business service providers allows individual firms to develop and maintain focus on core competencies, while the network as a whole remains responsive to the diverse nature of demand.

Current Jamaica business incubators

At least two business incubators currently exist in Jamaica and provide a range of services to trainees and small business owners. The Technology and Innovation Centre (TIC) at University of Technology,

Jamaica, and the Incubator and Resource Center at the Jamaica Business Development Corporation

(JBDC) both provide a number of support services to Jamaican businesses. However, as explained below, each of these incubators falls short of the ideal incubation model in a few crucial ways.

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Technology and Innovation Centre – University of Technology, Jamaica

The TIC, formerly the Entrepreneurial Centre, is an incubator at the University of Technology,

Jamaica (UTECH), for start-up technology businesses. The Centre provides training, business, consultancy, and information services to new businesses while also serving established small enterprises in Jamaica, the UTECH community, and institutional clients. However, the Centre faces a few significant drawbacks in its operations. For example, according to some experts in the Jamaica business community, the Centre does not currently provide a sufficient number of essential services to entrepreneurs-in- training, does not effectively convey its expectations—regarding business skills and training—for prospective students through backward linkages to other schools and training centers, and does not currently employ a sufficiently-experienced staff or possess enough linkages to the business community for advisory and consultative purposes. Also, entrepreneurial skills training—what was once a central component of the Centre‘s core curriculum—has become a secondary element in the Centre‘s training program.73

Incubator and Resource Centre – Jamaica Business Development Corporation

The Incubator and Resource Centre (IRC) provides entrepreneurs and new business employees with a range of services and resources through its Technical Services branch. It functions as an effective incubation center for existing businesses; however, unlike the TIC at UTECH, the IRC functions primarily as a fee-for-service provider for businesses which require specialized training or advising in one or a few specific areas of business. The Centre does not provide a holistic training curriculum for student- entrepreneurs, and its training services are geared toward serving only a few specific sectors.74

Plans for Future Incubation Efforts

It is worth noting that the PIOJ‘s most recent plan for the development of Kingston includes a proposal for an incubator-like entity, the ―West Kingston Commercial Lifestyles Centre,‖ to be established in Downtown Kingston. Described as ―a strategic structuring of the economic, cultural,

46 historical, social, and geographic assets, and business opportunities, that competitively advantage

Downtown Kingston as a commercial zone,‖ this center would provide many of the elements of traditional business incubator.75 However, as currently planned, the center would not be structured with the primary purpose of business incubation, but rather would simply put different businesses and service providers in close proximity with one another to encourage their participation. So while the proposed center is a step in the right direction, it lacks many elements needed for it to function as an effective incubator. Above all, it lacks a coherent plan for making business interaction and cooperation a required element of the center. Businesses comprising the center must interlock in their functions and be encouraged to cooperate in a mutually-beneficial way.

Incubator principles and services

Prior to articulating specific incubation services, it is important to articulate operating principles to determine which services a new KRC-initiated incubator could offer. The KRC must focus its efforts on a few key objectives to avoid inefficient use of resources.

 Partnership with existing incubation initiatives: Collaboration with partners such as JSIF, UNDP,

UTECH, UWI and HEART/NTA in the creation of the incubator is imperative. The KRC understands that donor partners have played and will continue to play a central role in the development of Jamaica‘s private sector. Given that the incubator center could be a ―first point of reference‖ for small- and medium-size enterprises and that KRC has limited resources, the incubator would need to maximize inputs from its partners in the form of financial and/or technical assistance.

 Positioning: The role of the potential incubator needs to be clearly articulated to avoid confusion with existing service providers (e.g. Government of Jamaica agencies, NGO55s, lenders).

 Focused technical assistance: It is imperative to realize that KRC‘s proposed incubator is not intended to supplant existing technical extension services. Upon identifying gaps, the center could either coordinate with partners to address these gaps, or communicate the needs to HEART/NTA, UTECH,

JBDC, and other potential partners for initiatives at a national level. In general, partners that specialize in

47 specific trades or disciplines are better configured to offer extension services. The incubator should ideally offer limited in-house technical assistance with in the selected priority sectors namely; ICT, music and creative industries as well as agricultural products.

Considering these operating principles for a KRC incubator center, it is important to outline specific services that could be provided:

a. Training: The incubator will offer training by hosting its partners‘ programs in its center and contracting with independent trainers where and when they are available. To have wide impact, initial training will focus on subjects central to MSMEs‘ development, such as training in management techniques, business concept development, technical training, regulatory compliance, and capital and finance acquisition. Training may take the form of workshops, presentations with Q&A, lectures, expert panels, or mentor-protégé arrangements. The incubator may also organize trainings for participating trainers / independent consultants. KRC could leverage UTECH and UWI expertise to meet this goal.

b. Information: Initial information services will include: a basic library of business news and information (e.g. information on up-to-date trends in the ICT, music and agricultural product sectors); custom research services for discrete requests (e.g. product prices, supplies prices, markets)

c. Access to financing: The incubator will not offer funding, but will improve access to existing funding by managing a database of financing sources in the region and the requirements of each source.

To complement the database of financing sources, the center will also refer customers to qualified consultants for business concept development. In addition, the center will work closely with the JSIF to identify strong candidates and provide focused training and consultation to enable them to access available seed funding. Other potential partners in this process would include Scotiabank and The Grace

Kennedy Foundation.

d. Networking: To build a robust business community nationally, the incubation center will create personal linkages through networking events and a mentoring program. This will be particularly important in the music industry since local artists would have an opportunity to learn from and interact with more accomplished international Jamaican artists. A bulletin board will facilitate communication on

48 common interests, partnership opportunities, requests for services, and other information relevant to

MSME stakeholders. To generate heightened business awareness, the KRC incubation center will also actively organize events such as speeches by successful businesspeople and artists.

e. Consultant Monitoring: The incubator will actively refer customers to institutional service providers and qualified independent consultants. Therefore, KRC will manage a database of qualified consultants in the downtown Kingston area and greater Jamaica. The KRC and/or partner organizations would need to assume responsibility for ―certifying‖ the quality of independent consultants, since referrals would imply a ―stamp of approval‖ by the center.

The diagram below provides an overview of the proposed incubator offerings as well as coordination mechanisms with other partners.

Figure 2:

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Sustainability

Because of the challenges facing past incubation centers and their perceived shortcomings, the initial perception of the ―value-add‖ of the KRC-led incubation center will be crucial and its performance will build its credibility. At the beginning, positive outcomes need not be exceptionally large, but should be consistent, meaningful and visible. A string of small but immediate victories will better serve the center.

As a matter of perception, small fees may actually reinforce the image of value, as free business services may be considered ―charitable‖ and therefore sub-par.

KRC cannot achieve its goal unless the organization can harness the resources required to implement required services at the incubator—this will require significant efforts in fundraising and capital acquisition. KRC needs to mobilize for funding sources: fees charged for services will partly finance the center but, given that these fees will be relatively small, this income cannot be relied upon. The KRC must leverage the resources provided by partners will including Government of Jamaica agencies, NGOs, private companies, educational institutions, and individual donors who will provide funds and in-kind contributions.

The Role of ICTs in Incubation and Business Support Services

Businesses around the globe are increasingly making use of the internet and other digital resources to increase productivity and market exposure while limiting expenses on transactions and materials. Jamaica has identified Information and Communication Technology (ICT) as a strategic priority sector for development. According to Vision: 2030 Jamaica, the Government of Jamaica aims to create ―a globally competitive ICT sector that is widely accessible and makes the greatest possible contribution to the social and economic development of Jamaica.‖ According to the country‘s ICT plan, the sector is considered an enabler industry - one that would undoubtedly lead to development in other sectors including economic, social, environmental and governance areas. Thus, training in ICT skills and the provision of ICT resources—e.g. regular access to internet and basic business software—is a necessary component of any incubation effort.

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The use of ICTs has already demonstrated its potential for facilitating the development of a number of sectors in Jamaica. For example Jamaica has been ranked the number one E-government nation in the

Caribbean for the last three years by the UN Global E-Government Rankings and has introduced electronic portals for accessing a range of government services and for the payment of some taxes. ICTs have the potential to significantly improve the operations of the law enforcement and justice systems of government. They also have a role to play in the development of the island‘s health system by linking providers at all points of care electronically and supporting the development of tele-health services for domestic and foreign customers. Finally, and perhaps most importantly, the future of the educational system will increasingly be driven by the application of ICTs through the use of personal devices,

―intelligent environments,‖ computing infrastructure, and advanced pedagogical interfaces. This enabling role of ICT embodies the concept of ICT for development (ICT4D), reflecting the contribution that ICTs can make to national development in all sectors.76

Case Studies of Successful Incubator Development Initiatives

KRC can learn from the USAID program in Russia on how to set up sustainable business development incubator centers. From 1993-1997, the objective of the USAID program was to provide potential and new businesses in Russia‘s new capitalist economy with the assistance and tools necessary to succeed in the local and global markets. The project established eight sustainable Business Support Centers (BSCs) in different parts of Russia that provided direct assistance to enterprises, and designed and implemented an integrated program of support to build business infrastructure and improve the environment for small business. The BSCs provides two forms of services: program activities to build infrastructure (e.g. programs to build business-government relations, local training infrastructure with strategic partners, developed business information/research and policy information services); and direct assistance to entrepreneurs (e.g. enterprise services such as business planning, marketing and sales strategies, business registration, etc.; business links services; financial linkages; local training to entrepreneurs; etc.). The project succeeded in addressing unmet needs of MSMEs and liaising with strategic partners. Although the

51 incubators required initial support, when the USAID project ended the centers had become self- sustainable. This was because people realized the value added by the centers and began paying for the services they provided.

The Small Business Administration (SBA), a branch of the US government dedicated to the development of small businesses in the United States, offers a contrasting case study. Under its purview, a national network of ―Small Business Development Centers‖ (SBDC) offers management and technical assistance to small businesses. Each SBDC is located at a university. The SBDCs are not self-sustaining

but at the same time are mandated to offer

free services. Funding is mainly from the

U.S. government and host universities

(offering offices, resources, and staff

expertise), although small fees are collected

for training courses to cover some costs.

Core consulting services are free, which

presents a challenge for the center.

The SBDCs also offers an example of how a national network of business support centers may coordinate and cooperate with partner organizations and amongst themselves. In this system, universities act like partner providers by offering technical assistance and management assistance, depending on the universities‘ capabilities. Therefore, each SBDC has different competencies, as determined by the capacities of the partner university. For example, the Wharton SBDC‘s strength is in management and strategy, whereas Bucknell University‘s SBDC excels in product development. On a regional basis,

SBDC‘s share lessons and information through quarterly directors‘ meetings, a regional website and training calendar, and a newsletter; they also refer clients to one another‘s centers.

As a final example, the American internet company Google, Inc. has announced plans to launch a start-up incubator for web and mobile-based small businesses. The 6-month program, Umbono, will offer its five participant start-up companies a collaborative workspace in Cape Town and provide access to core

52 business skills training, seed capital, and mentorship from both Google professionals and the company‘s wide range of business partners. The program will also connect these enterprises with potential investors for their future operations and expansion. This Umbono program thus serves as an ideal model for business incubation: it aims to support high-potential enterprises by providing for their financial and material needs in the short term, solidifying their base of human capital, and facilitating their formation of strategic connections and partnerships with other established enterprises.77

Community-Based Entrepreneurship Program

At the core of the Planning Institute of Jamaica planning strategy is the recognition that an existing pool of entrepreneurial talent needs to be harnessed to advance Jamaica‘s economic and social development. There are a number of nascent businesses in Jamaica that require an enabling environment to exploit the potential of its micro and small enterprises. Since providing sustainable employment for disadvantaged communities in downtown Kingston is a priority on both national and local agendas for community development, it is important to link enterprise development to community development.

Social development and economic development are interdependent: it is critical to not only create jobs and generate income, but also to connect people and bridge entrenched social divides. A balanced bottom- up approach is therefore necessary to allow sustainable community development through economic participation, while also ensuring community building and fostering self-reliance.

Consequently, a strategy geared towards enabling micro-enterprises and small businesses would need to engage with socially-divided communities, NGOs, the private sector and Jamaican policy makers.

Partnerships that cut across the public and private spheres are needed to create viable markets and supportive environments for entrepreneurs to prosper and contribute to economic and social development in downtown Kingston. Leveraging its reputation for working with communities in Kingston and its favorable relationship with influential stakeholders, KRC and the UDC are well placed to pilot a community based entrepreneurship program in tandem with the launch of an incubation center to create and build the capacity of entrepreneurs and communities in downtown Kingston.

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Rationale

From a development perspective, the enabling of enterprises is important: new businesses build on the existing talent and potential in a community, create jobs that generate income and enhance the capabilities of residents through employment, training, and increased access to resources. However, enhancing community cohesiveness and participation, and promoting self-reliance are also critical elements in any grass-roots development project. Community development should be concurrent with economic development. Consequently, we recommend that an organized effort to increase opportunities for employment—such as the proposed incubation center—should be paired with an effort to increase harmony and cooperation within communities. We also envision that a complementary community development program can serve as a feeder to identify latent entrepreneurial talent for inclusion into the business incubator center.

Aspiring entrepreneurs and micro- and small-business owners in Jamaica come from different social backgrounds with varying degrees of education; some have little or no business experience or prior

54 training. There are a number of organizations that provide skills training for the labor force in Jamaica, including HEART Trust/NTA, the National Youth Service (NYS), and the Jamaica Business

Development Corporation (JBDC). Although these and other institutions are involved in skills and business training, there are no prominent programs that specialize in basic entrepreneurial training—i.e. teaching the basic skills and knowledge required to launch and sustain a small business—and none offer their services in the service of community improvement. Consider, as an example, the training provided to would-be entrepreneurs by JBDC: the organization offers skills training via a fee-for-service model, and the area and skills for which training is offered is limited to a few specific industries. This model is accommodating for many Jamaican workers; however, it is not ideal for many others. Workers with limited resources (the ―bottom of the pyramid‖), for example, may be automatically excluded because they are unable to pay service fees. The program proposed herein would attempt to identify and provide supporting programs for underserved populations in Kingston.

The community development program will have two main objectives.

First, it will serve as a community- building tool. By promoting resident participation within communities, and connecting residents and encouraging constructive interactions within and between communities, this program will foster a sense of security and solidarity tied to positive community attributes. The core strategies would be the encouragement of residents from different neighborhoods to interact in workshops and sessions in a neutral space to foster economic self- reliance and to cooperate in community-building activities to promote social cohesiveness.

Second, this program will serve as an outreach program for identifying promising entrepreneurs and business concepts for introduction into the incubation program. Thus, the program will not only connect

55 residents with members from other neighborhoods, but will also groom potential entrepreneurs while identifying promising talent—talent that might otherwise have gone unnoticed—for placement into the incubation center.

The community-development program would consist of workshops devoted to training in concepts and skills related to the three dynamic industries we have identified: ICTs, music and value-added agricultural products. Other industry specific training can be rolled out at a later date based on the success of a pilot program. Basic training can be in computer literacy, development of business concepts, basic financial management, marketing, bookkeeping, and other basic business skills. Above all, program activities would encourage participation and constructive collaboration among the participants. Experts who lead the workshops would include volunteers from the business community, recent educational/vocational center graduates, and current university students enrolled in relevant fields of study. As an incentive to encourage community participation and attendance, ―graduates‖ of the program can be rewarded with a training diploma or certificate upon completion of the workshop. This endeavor would ideally be conducted in partnership with educational or vocational institutions.

To capture the latent talent of community residents that lack the know-how and resources to access traditional training programs, KRC can leverage its existing relationship with communities to promote community improvement while recruiting for its entrepreneurship training program. In partnership with

Urban Development Corporation, community groups, and churches that are highly regarded in their respective neighborhoods, it can raise awareness and attract community members to its program.

Below, Figure 4 illustrates how Roderick, a fledgling entrepreneur in Kingston that sells honey, can gain capacity in basic business skills from a community-based program and then graduate to be included in the business incubation center, where he will receive advanced technical assistance, industry information and access to financing mechanisms and marketing distribution.

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Funding

The initiatives proposed herein are likely to require a substantial dedication of resources and investment, at least at the outset. Considering the KRC‘s existing commitments in Kingston and current resource base, its reputation with international organizations, and the limited fiscal space of the Government of Jamaica, we believe that a portion of funding for these initiatives should be sought from outside sources. In additions to approaching past funders of KRC initiatives like the Inter-American Development Bank, we propose a funding model that engages the Jamaican diaspora and private sector organizations to secure the needed support.

Remittances

Remittances are considered an increasingly important source of external financing, being the second largest flow to developing countries and doubling the size of net official finance.78 The Jamaican diaspora community provides significant capital to Jamaica through remittances. However, it remains an untapped development resource that could serve as a powerful development tool.79 In 2005, the World Bank found that remittances have a positive impact on the development and welfare of the migrant-sending countries.

Studies show a positive result on the impact of remittances on services such as education and health, investment, and poverty reduction among the households that receive them.80

The 3x1 Program for Migrants in Mexico is one innovative example that Jamaica can draw on how to redirect remittances to finance national and local development initiatives. In this program, Mexican migrants in the U.S. organize Hometown Associations (HTA‘s) and send money back home for proposed social and productive projects. For each peso that migrants contribute, the federal, state, and municipal governments match to contribute three additional pesos. The Program targets localities that suffer from poverty, underdevelopment, or social exclusion; also, migrants help to direct the Program‘s resources by identifying regions and towns they wish to help. The 3x1 Program for Migrants is innovative in its active

58 and direct incorporation of migrant communities in government-supported development projects in their communities of migrants‘ origin.81

Many governments have identified remittances as a potential tool for financing national and local development strategies and have created incentives and policies to attract money from citizens living abroad. Matching funds, like the 3x1 Program for Migrants in Mexico, are more common in Latin

American countries such as Mexico, El Salvador and Guatemala; however, there are other models for incentivizing remittances. For example, migrants remitting through banks in Egypt receive tax breaks for up to ten years. Egypt and Moldova also enable members of the diaspora to buy land at preferential prices. Other countries like Bangladesh, India and Tunisia offer a special category of deposit accounts at commercial banks with preferential rates and with the option to have accounts denominated in foreign currency. Citizens of India and Pakistan living abroad in India and Pakistan benefit from preferential access to capital goods and raw material imports.

Initially, the policy path to leverage remittances was primarily focused on controlling their flow into the destination country (i.e. taxing remittances, establishing foreign exchange rules and/or the requirement to invest a percentage of their earnings into a government fund). However, these policies have failed in most cases because their main effect has been to channel the remittances through non- official channels.82

Jamaican Context

It is estimated that approximately 2 million Jamaicans live abroad. The United States is the chief destination for migrants from Jamaica, followed by Canada and the United Kingdom (82%, 15% and 2%, respectively).83

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Figure 5: Remittances as a Percentage of GDP

Tajikistan, 46

Moldova, 38 Tonga, 35

Lesotho, 29

Honduras, 24 Lebanon, 24 Guyana, 24 Jordan, 23 Haiti, 20 Jamaica, 19

Source: UN Population

Proportional to the country‘s GDP, Jamaica is one of the largest recipients of remittances in the world.

As shown in figure 3, remittances represented more than 10% Jamaica‘s gross output in 2009—this despite the global economic crisis that had significantly lowered migrants‘ income. Remitted funds added

$1.8 billion dollars to the Jamaican economy and so represent an indispensable source of income for the country.84

In 2003, the Government of Jamaica created the Jamaica Diaspora Institute (JDI) to actively engage the diaspora. The JDI has a catalogue of local community-based projects that include candidates for assistance through telephone mentoring, volunteering, professional guidance, and financial contributions.

According to JDI Director Naville Ying, ―JDI has generated incentives to organize migrants and has undertaken initiatives to mobilize Jamaicans living abroad towards development related activities.

Specific sectors of focus have involved the education and health sectors where various groups have raised funds to benefit schools and hospitals. Moreover, Jamaicans living abroad have had two sessions with

Parliament where they have discussed various issues.‖ JDI has been fostering an active Jamaican diaspora. However, capturing its enthusiasm with attractive incentives is important to increase the long- term effect of remittances.

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Today, the Jamaican diaspora is contributing to development in Jamaica with remittances, funding and in-kind donations, and knowledge. Remittances are used predominantly for current spending or for informal asset building, reducing the opportunity to take more value-added out of those resources and assets. Despite the effort of the JDI to engage the diaspora in the development of Jamaica, the

Government of Jamaica still lacks a comprehensive strategy to divert remittances to more productive uses.

As shown in Figure 4, although there has recently been a decline in the cost of sending remittances, the costs of transfers to Jamaica continue to be among the highest in the region. Additionally, the number of remittance companies operating declined from 7 to 6 in the period 2001-2005.85

Figure 6: Cost to send US$200 to Latin American and Caribbean Countries (US$)

Source: Orozco, 2006

The JDI has been working to encourage the participation of Jamaicans overseas in different aspects of national development. However, aside from their root and family linkages, these groups do not have an additional incentive to send money back to the island. Current inflows of remittances are therefore likely to cease after a generation has passed. To harness the true potential of remittances for development in

Jamaica, we propose two strategies: first, the Government of Jamaica should consider a funds-matching program approach to leverage remittances as a form of investment to accelerate development; and second, the Government must make efforts to reduce remittance transactions costs. As the second strategy is beyond the mission and scope of the KRC, we now focus mainly on the first proposal; however, as high transaction costs are a significant impediment to the benefits of remittances, it is still crucial that KRC raise awareness of this structural issue at a national level.

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The Government of Jamaica needs to view the diaspora as contributing partners to maximize the benefits of remittances. There must be policies to engage the diaspora and draw remittances into the country. A program that can provide matching funds to collective remittances from institutional diaspora groups can help increase the benefits of remittances while promotion a greater volume of remittances in the future. Matching funds to selected programs, such as the incubator community project, will certainly increase and facilitate the financial sustainability of this and other KRC projects.

JDI has done important work to create formal diaspora institutions abroad. These institutions can function as a base to finance any project. However, these groups do not currently have the option to finance projects with the support of the government. Shifting the decision of selecting a project to these diaspora groups will engage them in local development projects. The matching sources for these projects may include diaspora groups, KRC, members of the private sector, or an international organization such as the Inter-American Development Bank (IDB). Diaspora associations would select a project to finance.

For example, a diaspora group may be interested in funding a fish-farming project. Fish can be directed to niche markets. For each Jamaican dollar invested by the diaspora group, the KRC, the private sector and an international organization will each provide an additional Jamaican dollar. All four actors are meant to be equal partners in terms of financing and representation. The local community will serve as

―mirror club.‖

Other Sources of Funding

KRC has been successful at attracting funding from international and multilateral organizations.

Learning about upcoming funding opportunities before submitting a proposal is part of the due diligence required before approaching regional or multilateral funders. Among the suggested sources that have previously worked with the GOJ are:

- The Department for International Development (DFID). DFID‘s average annual budget is 19

million in the Caribbean until 2015 and had expenditures of 3.9 million in 2008-2009.

- Inter-American Development Bank (IDB)

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- Caribbean Development Bank

- United States Agency for International Development (USAID)

- Grace Kennedy Foundation

- The Prince‘s Foundation for the Build Environment

- World Bank – through the Jamaica Social Investment Fund

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Conclusion

The Jamaican economy has been in a steady state of decline for the last 30 years. This has been particularly evident in downtown Kingston, which has become a region characterized by poverty, congestion, crime, and crumbling infrastructure. Yet, at the same time, this area is vibrant with a world- renowned music tradition, latent technologies and a supply of entrepreneurial talent ready to act to bring these assets to fruition. Halting the stagnation of the Jamaican economy will require new and innovative approaches that unlock the creativity and entrepreneurial talent of communities throughout Kingston as a foundation for its organic development.

Through a careful assessment of dynamic and promising industries in the Jamaican economy, and through a description of the challenging environment faced by enterprises, we present the business incubation model as a promising strategy for small business creation and development. Our recommendations are guided by the recognition that an existing pool of entrepreneurial talent needs to be harnessed to advance Jamaica‘s economic and social development. Since providing sustainable employment for disadvantaged communities in downtown Kingston is a priority in both national and local agendas, we also stress the importance of linking enterprise development to community development. In partnership with major stakeholders that have a vested interest in the development of Kingston, KRC and

UDC can provide a holistic and integrated program of social enrichment that broadens the base of participation in the development process and builds self-reliance within and cohesiveness between communities.

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Sources

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35 Vanus James. The Caribbean Music Industry Database (CMIDA Report Prepared for The United Nations Conference on Trade and Development (UNCTAD) and World Intellectual Property Organization (WIPO), October 2001 36 Brown, Hilary. National Strategy & Action Plan to further develop the Jamaican Music Industry. Prepared for The Ministry of Education Youth & Culture and the Global Alliance Programme, UNESCO. December 2004 37 Brown, Hilary. National Strategy & Action Plan to further develop the Jamaican Music Industry. Prepared for The Ministry of Education Youth & Culture and the Global Alliance Programme, UNESCO. December 2004 38 Vanus James. The Caribbean Music Industry Database (CMIDA Report Prepared for The United Nations Conference on Trade and Development (UNCTAD) and World Intellectual Property Organization (WIPO), October 2001 39 Brown, Hilary. National Strategy & Action Plan to further develop the Jamaican Music Industry. Prepared for The Ministry of Education Youth & Culture and the Global Alliance Programme, UNESCO. December 2004 40 Brown, Hilary. National Strategy & Action Plan to further develop the Jamaican Music Industry. Prepared for The Ministry of Education Youth & Culture and the Global Alliance Programme, UNESCO. December 2004 41 Vanus James. The Caribbean Music Industry Database (CMIDA Report Prepared for The United Nations Conference on Trade and Development (UNCTAD) and World Intellectual Property Organization (WIPO), October 2001 42 Vanus James. The Caribbean Music Industry Database (CMIDA Report Prepared for The United Nations Conference on Trade and Development (UNCTAD) and World Intellectual Property Organization (WIPO), October 2001 43 Vanus James. The Caribbean Music Industry Database (CMIDA Report Prepared for The United Nations Conference on Trade and Development (UNCTAD) and World Intellectual Property Organization (WIPO), October 2001 44 Vanus James. The Caribbean Music Industry Database (CMIDA Report Prepared for The United Nations Conference on Trade and Development (UNCTAD) and World Intellectual Property Organization (WIPO), October 2001 45 Nurse Keith. Keeping the Right Balance – Embracing Our Heritage in the Greater Caribbean. Proceedings of the Fifth Annual Caribbean Conference on Sustainable Tourism Development, Organized by the Caribbean Tourism Organization (CTO), in collaboration with the Association of Caribbean States (ACS) and the Government of St. Kitts and Nevis. St. Kitts Marriott Royal Beach Resort, St. Kitts and Nevis, September 9th to 12th, 2003 46 Nurse, Keith, http://www.globalenvision.org/library/3/1470 47 Lake of Starr\s festival website: www.lakeofstars.org 48 Hope Donna. Passa Passa: Interrogating Cultural Hybridities in Jamaican Dancehalls. Small Axe - Number 21 (Volume 10, Number 3), October 2006, pp. 125-139 49 Nurse Keith. Keeping the Right Balance – Embracing Our Heritage in the Greater Caribbean. Proceedings of the Fifth Annual Caribbean Conference on Sustainable Tourism Development, Organized by the Caribbean Tourism Organization (CTO), in collaboration with the Association of Caribbean States (ACS) and the Government of St. Kitts and Nevis. St. Kitts Marriott Royal Beach Resort, St. Kitts and Nevis, September 9th to 12th, 2003 50 Nurse Keith. Keeping the Right Balance – Embracing Our Heritage in the Greater Caribbean. Proceedings of the Fifth Annual Caribbean Conference on Sustainable Tourism Development, Organized by the Caribbean Tourism Organization (CTO), in collaboration with the Association of Caribbean States (ACS) and the Government of St. Kitts and Nevis. St. Kitts Marriott Royal Beach Resort, St. Kitts and Nevis, September 9th to 12th, 2003 51 Nurse Keith. Keeping the Right Balance – Embracing Our Heritage in the Greater Caribbean. Proceedings of the Fifth Annual Caribbean Conference on Sustainable Tourism Development, Organized by the Caribbean Tourism Organization (CTO), in collaboration with the Association of Caribbean States (ACS) and the Government of St. Kitts and Nevis. St. Kitts Marriott Royal Beach Resort, St. Kitts and Nevis, September 9th to 12th, 2003 52 United Nations Conference on Trade and Development. Electronic Commerce and Music Business Development in Jamaica: a Portal to the New Economy? Technology for Development Series. 2002 53 Yoon, Lina. Korean Pop, with Online Help, Goes Global. Times Magazine, August 10, 2010 54 United Nations Conference on Trade and Development. Electronic Commerce and Music Business Development in Jamaica: a Portal to the New Economy? Technology for Development Series. 2002 55 World Bank: WorldBank.org 56 PSDP 2008 A landscape assessment of Jamaican micro small and medium size enterprises (MSMEs) 57 The Global Information Technology Report 2008-2009 World Economic Forum

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58 The World Bank website 59 Jamaica ICT sector plan 60 The World Bank website 61 ―Value-added agricultural products‖ include any product which uses agricultural inputs (cultivated plant matter) which, with some combination of processing and additional inputs, increases the market value of the product (beyond the value of the raw material. 61 Planning Institute of Jamaica. Jamaica Survey of Living Conditions 2009. Government of Jamaica. 21.6; McGlashan, Don, et. al. ―Jamaica: Country Report on the State of Plant Genetic Resources for Food and Agriculture.‖ Prepared for Food and Agriculture Organization of the United Nations (FAO). 2008. 8-16. 62 Planning Institute of Jamaica. Jamaica Survey of Living Conditions 2009. Government of Jamaica. 21.6; McGlashan, Don, et. al. ―Jamaica: Country Report on the State of Plant Genetic Resources for Food and Agriculture.‖ Prepared for Food and Agriculture Organization of the United Nations (FAO). 2008. 8-16. 63 Mitchell, S.A. et. al. ―Medicinal Plant Biotechnology Research in Jamaica – Challenges and Opportunities.‖ Biotechnology Centre, University of West Indies—Mona Campus. 2007. 179. 64 Mitchell, S.A. et. al. ―Medicinal Plant Biotechnology Research in Jamaica – Challenges and Opportunities.‖ 174. 65 Mitchell, S.A. et. al. ―Government‘s Policies in Promoting Sustainable Utilization of MAPS.‖ 13-4. 66 Mitchell, S.A. and Ahmad, MH. ―A Review of Medicinal Plant Research at the University of the West Indies, Jamaica, 1948-2001.‖ Biotechnology Centre, University of the West Indies at Mona. 2006. 244-7; Mitchell, S.A. et. al. ―Medicinal Plant Biotechnology Research in Jamaica – Challenges and Opportunities.‖ 172; McGlashan, Don, et. al. ―Jamaica: Country Report on the State of Plant Genetic Resources for Food and Agriculture.‖ 11,15, 44-8. 67 McGlashan, Don, et. al. ―Jamaica: Country Report on the State of Plant Genetic Resources for Food and Agriculture.‖ 11-12. 68 Mitchell, S.A. et. al. ―Government‘s Policies in Promoting Sustainable Utilization of MAPS.‖ in Medicinal and Aromatic Plant Country Report: Jamaica. International Centre for Science and High Technology (ICS)-United Nations Industrial Development Organization (UNIDO). 2007. 16-8. 69 Mitchell, S.A. et. al. ―Medicinal Plant Biotechnology Research in Jamaica – Challenges and Opportunities.‖ 175; McGlashan, Don, et. al. ―Jamaica: Country Report on the State of Plant Genetic Resources for Food and Agriculture.‖ 6,10. 70 McGlashan, Don, et. al. ―Jamaica: Country Report on the State of Plant Genetic Resources for Food and Agriculture.‖ 21-56. 71 Additional Resources for information on Agricultural Products: Mitchell, S.A. et. al. ―Government‘s Policies in Promoting Sustainable Utilization of MAPS.‖ in Medicinal and Aromatic Plant Country Report: Jamaica. International Centre for Science and High Technology (ICS)-United Nations Industrial Development Organization (UNIDO). 2007. 35-6; Dr. Silvia A Mitchell, Researcher, Biotechnology Centre, University of West Indies at Mona. 72National Business Incubation Association. < http://www.nbia.org/resource_library/faq/index.php#1> 73 Dr. Michael Witter, Professor of Economics (UWI-Mona). Interview. 11 March 2011; Sandra Glasgow, CEO Private Sector Organisation of Jamaica. Interview. 10 March 2011. 74 Jamaica Business Development Corporation. ―Technical Services – Resource Centres.‖ ; Valerie Veira, CEO Jamaica Business Development Corporation. Interview. 17 March 2011. 75 Planning Institute of Jamaica. A Growth-Inducement Strategy for Jamaica in the Short and Medium Term. March 4, 2011. 43. 76 Jamaica Draft ICT Sector plan 77 ―Umbono by Google. ―The Program.‖ < http://www.google.co.za/intl/en/umbono/program.html> 78 (Sagasti, 2005). 79 USAID, Office of Development Credit, ―Leveraging the Jamaican Diaspora for Development‖ 80 Maldonado, R., Bajuk, N., Watson, G. ␣Remittances to Latin America and the Caribbean in 2009: The Effects of the Global Financial Crisis.‖ Multilateral Investment Fund, Inter-American Development Bank. Washington D.C., 2010. 81 Rocha Menocal, Alina, ―Social Cohesion Practical Experiences and Initiatives‖, Office of EUROsociAL - FIIAPP and Overseas Development Institute (ODI) 82 See Maldonado, pg 57 83 Migration Policy Institute http://www.migrationinformation.org/Profiles/display.cfm?ID=787

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84 Maldonado, R., Bajuk, N., Watson, G. ␣Remittances to Latin America and the Caribbean in 2009: The Effects of the Global Financial Crisis.‖ Multilateral Investment Fund, Inter-American Development Bank. Washington D.C., 2010. 85 Orozco, Manuel, 2006, ‖ International Flows of Remittances: Cost, competition and financial access in Latin America and the Caribbean—toward an industry scorecard‖ Inter-American Dialogue, Washington D.C.

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