Shaping Jamaica’s economic independence: The role of SEZs
ECONOMIC INDEPENDENCE is a stated policy objective of the Government of Jamaica, as it should be. Which well-thinking Jamaican doesn’t want the personal and national freedom and capacity to shape one’s own socio-economic fortunes?
But what exactly is economic independence?
Let’s first cover what it isn’t. It is not isolation or going it alone. We live in an interdependent world and as a small island developing state, we appreciate more than most that our very survival depends on our connectedness to the world.
Now for what it is. Economic independence, to borrow from the definition of sustainability, is designing and implementing economic policies that seek to meet the needs of the present without compromising the ability of future generations to meet their needs.
Therefore, the economic independence policy position of the Government of Jamaica, GOJ, is to manage the economic affairs of the nation in a sustainable way, meeting our current needs without compromising the needs of future generations. In fact, Jamaica’s economic independence initiative goes further by pursuing policies that enhance its future economic capabilities and opportunities.
Jamaica’s drive for economic independence, as the special economic zones, or SEZ regime,
demonstrates, improves not just the number but the nature of the options, giving us greater assets in the game of global competitiveness, a game defined by global economic governance, or GEG, rules. This is a game Jamaica neither created nor set its rules, but it is nevertheless a game we must play. One of the things that makes this game such a challenge to play is that not only did we not set the rules, attempts to improve your position may draw sanction.
As a Jamaican proverb goes: ‘Donkey say worl’ no level’.
GEG is the set of institutional arrangements and international agreements that principally emerged after World War II to
manage the global economy, such as the International Monetary Fund and World Bank. Or, as succinctly put by Professor Wesley Widmaier: “Global economic governance refers to efforts to organise, structure, and regulate economic interactions. In substantive terms, economic governance deals with a host of policy challenges, including the definition of basic property rights … fiscal cooperation, and concerns for the ‘macroprudential regulation’ of financial markets.”
These rules shape Jamaica’s economic independence by placing limits on the number and nature of policy options open to us. This is important not just for policymakers to understand, but
for business and citizen alike, as it shapes the business environment, employment opportunities and Jamaica’s overall socio-economic well-being.
Jamaica is, however, not entirely hapless, as our SEZ regime demonstrates, as we have a few options that we must play well. However, even these options attract the ire of GEG rules, as the SEZ regime also demonstrates.
One of Jamaica’s major economic independence policy initiatives is the SEZ regime. SEZs are geographically designated areas used to attract foreign and local investment. They typically have trade laws that are applied differently from the rest of the country.
By way of example, three GEG rules are explained in brief.
The WTO Agreement on Subsidies and Countervailing Measures mandated that Jamaica eliminate export subsidies, which we had under our free zone regime. Our response was to develop the new SEZ regime.
The Financial Action Task Force, which polices antimoney laundering and counterterrorism financing measures, directs investment entry controls, screening and monitoring to prevent, detect and mitigate the proceeds of crime being filtered through our SEZs.
And, the OECD’s Base Erosion and Profit Shifting Project, known as BEPS, mandates that Jamaica’s SEZ regime be modified to add greater investment entry controls and supervision in the form of greater ‘substance requirements’ for investors, which create a greater nexus between investments and Jamaica. This is aimed at mitigating tax base erosion resulting from multinationals moving their profits from higher tax jurisdiction to lower ones, such as Jamaica’s SEZs.
Even with these restrictions, maybe even because of them, Jamaica’s SEZ regime, especially during the COVID-19 pandemic, has become an island of calm in a turbulent ocean. The SEZ regime represents for Jamaica’s economic independence a policy instrument that creates a safe haven for nearshore manufacturing, distribution, outsourcing services, etc, ready to serve the market of one billion people in the Americas and beyond.
Just like we became an example for macroeconomic stability and debt reduction under an austere IMF programme, we must now, through the SEZ regime, also become the example for investor attraction, sustainable economic development, growth, and quality job creation. This is at the heart of the Sustain-a-Livity; concept.
Sustain-a-Livity embraces the United Nations Industrial Development Organization’s inclusive and sustainable industrial development principles: advancing economic competitiveness (economic); creating shared prosperity (social); safeguarding the environment (environmental); and – as added by the Jamaica Special Economic Zone Authority, or JSEZA – supporting the rule of law, transparency and accountability (governance).
Sustain-a-Livity improves the number and nature of Jamaica’s options and assets on the playing field of global competitiveness, and allows us to better use the GEG rules to exert our economic independence.