Policy for the Establishment of Special Economic Zones under the Jamaica Logistics Hub Initiative
The government of Jamaica is demonstrating its commitment through the Global Logistics Hub Initiative (GLHI), to building a competitive business environment and supporting growth-inducing economic activities that will stimulate sustainable economic growth and development. This initiative has gained much momentum and investor interest in recent time. This is due to the enormous value proposition the country offers the global economy in light of the prospects arising from changes in international production, growing world trade and the expansion of the Panama Canal.
The implementation of the GLHI brings into sharp focus the importance of the Special Economic Zones (SEZs). SEZs represent a wide variety of geographically-demarcated areas that offer simple and efficient business regulations and procedures to investors. Under the new SEZ regime, these zones will be promoted and facilitated as a strategy to attract and retain targeted investments and will catalyse and sustain economic activity across various sectors of the Jamaican economy.
It is the government’s intention to upgrade the free zone regime to a modern SEZ regime and this is strongly influenced by three main factors. Firstly, the move toward a modern SEZ regime is being driven by changes in global production and market conditions that are opening up new opportunities for small developing economies like Jamaica to actively participate in global value and supply chains. The Ministry of Industry, Investment & Commerce through its efforts to develop the new SEZ regime is seeking to place the country at the centre of international trade lanes in order to attract large corporations that are eager to benefit from the near shore value proposition.
The second rationale is centred on the enormous potential of the SEZ regime to stimulate wide-scale economic activities, especially in new and emerging sectors. Through the development of the SEZ regime and other initiatives, measures such as business climate reforms, creation & stimulation of sustainable business-to-business linkages, harmonization of fiscal incentives and other reforms, will be intensified so that over time, the Jamaican economy will be transformed to one with greater emphasis on efficiency, transparency and predictability. As a result of these reforms, both businesses in SEZs and businesses in the rest of the economy will be better prepared and equipped to access a larger share of the global market, expand and diversify their economic activities and hire more workers. These are all critical factors and conditions that must be satisfied in order to drive sustained growth and development in Jamaica.
Finally, the intention to develop a new SEZ regime ensures conformance under the World Trade Organization’s (WTO) rules for middle-income countries such as Jamaica. The existing free zone regime stipulates rigid eligibility requirements in terms of qualifying activities and the amount of manufactured goods that have to be exported (qualifying manufacturing entities are allowed to supply up to 15% of production to the domestic market which attract applicable duties and charges). The new SEZ regime seeks to bring the country into compliance with the WTO Agreement on [Export] Subsidies and Countervailing Measures by 2015 and thereby minimise the potential for challenges from other World Trade Organisation (WTO) Members.
Expected Outcomes of the Policy
Main Policy Considerations
This White Paper explores the major policy considerations that will directly affect SEZs. These policy issues have been prioritized through extensive policy consultations involving industry experts, senior government officials, international development partners and private sector interest groups. Through this consultative process, the policy team has been able to evaluate the strengths, weaknesses, threats and opportunities of several factors that are likely to impact SEZ development, specifically along the lines of international trade, market access, business regulation & facilitation, linkages, sustainable development, employment, incentives, taxation, among other areas. The policy issues and recommendations are discussed below.
Efficient and Cost-effective Trade and Business Facilitation Services
For successful access to global markets, Jamaica has to be positioned to offer SEZ investors an attractive Free Trade Agreement (FTA) network that includes key markets in the major existing and future trade lanes. It is accepted that any effort to expand Jamaica’s bilateral FTA network will require coordination with our regional trading partners in CARICOM as the Revised Treaty of Chaguaramas requires that bilateral agreements with third party states be subject to review and approval at the regional level.
The policy highlights a few strategies that would help to achieve the market access desired. Firstly, it is critical to ensure that an economic impact assessment on the feasibility of joining existing PSAs negotiated by CARICOM countries is conducted. Secondly, the White Paper highlights the need to negotiate a position in CARICOM on the treatment of Free Zone/Special Economic Zone exports. Thirdly, it is critical to explore whether a negotiation for an amendment of the FTAs with the Dominican Republic, Cuba and Costa Rica to facilitate a list of goods produced in SEZs is in Jamaica’s interests. Fourthly, it will be necessary to implement a standardised economic impact assessment tool to evaluate the strengthening of duty relief in the major trade lanes through engagement of the ASEAN Group, China, MERCOSUR, SADC.
Sustainable Linkages between the SEZ and the rest of the economy
There is recognition that several policy measures can be applied to support greater linkages between and among businesses in the SEZs and the rest of the economy. The application of certain tax
for example, is highlighted as an important tool that can be used to create linkages. One measure being contemplated is the zero-rating of goods and services provided to the SEZs.
Other key policy measures to promote linkages include the removal of the export requirement in keeping with WTO rules, capacity improvements and knowledge & technology transfer especially among MSMEs in order to increase the opportunities for business-to-business linkage.
Competitive Tax and Incentives Regime for the SEZs
The tax and incentives provisions are hinged on four (4) important guiding principles. The first is that Jamaica’s SEZ regime will focus less on fiscal incentives and more on
providing a platform to deliver the business and trade efficiencies, reliable physical & social infrastructure, human resource capacity etc., that are demanded by the global marketplace. Secondly, where possible, fiscal incentives will not erode the domestic tax base and will not compete with the general tax regime. Thirdly, taxes and incentives will be ‘fit for purpose’ and will not cause the country to ‘give-up’ more than it needs to in terms of lost revenue to the government. The fourth principle is that, in support of the government’s overall thrust toward fiscal consolidation, there will be a deliberate shift from the government-led zone development to a model that is private-sector led or involves minimal government involvement through public-private-partnerships.
Some of the tax and incentives provisions include:
i. Low Headline CIT Rate of 12.5% on profits derived from the conduct of a trade, profession or vocation within a SEZ by an approved SEZ Operator, with accompanying tax credits, allowances and deductions that would result in a lower effective CIT rate.
ii. All domestic supplies into the SEZ will be zero-rated for GCT, including utility services. SEZ supplies into the customs territory will however be rateable at the prevailing standard rate or the applicable rate for particular supply
iii. Full relief from customs duty (CET), stamp duty, additional stamp duty and GCT on transhipped supplies into the SEZ.
Zone Development and Administration
The matters related to zone development and administration is diverse. In light of the significant role that government plays in business and trade facilitation, a SEZ Authority is being proposed to ensure that the businesses in SEZs are facilitated in an expeditious manner. The role of the SEZ Authority will entail overseeing regulatory compliance through the relevant planning and trade facilitation authorities which will be housed in a One-Stop-Shop facility.
The use of public-private-partnerships (PPP) and private zone development is a strategy that will help to lessen the burden that SEZs can place on the government. The White Paper proposes further improvements in the PPP framework to adequately meet the requirements for formal development agreements between private developers and the government.
The matter of eligibility requirements is another area in zone development about which there has been much debate. The set of eligibility requirements for the SEZ framework in Jamaica necessitates three important considerations. The first is that these requirements must be linked to the scope of the SEZ framework of the country; hence there must be consistency with the strategic objectives of national development and SEZ development. The second consideration is that there is a need to minimize revenue leakage due to migration of firms from the domestic economy to the SEZ. Thirdly, the requirements for eligibility should not be difficult to administer. This policy will follow best practice of identifying a short list of prohibited activities in a ‘negative list’. Hence, it is proposed that the following list of sectors be disqualified for SEZ eligibility: Extractive Industries – Mining & Quarrying, Hydrocarbon (Oil & Gas), Tourism, Telecommunications Services, Public Utilities, Financial Services, Construction Services, Real Estate & Property Management Services, Health Services (excluding research & development) and Retail Trade.
Urban support designation and development is another area that has been explored in the SEZ White Paper. The purpose of the Urban Support Area is to provide the proper commercial areas, housing, utilities, transportation, social (e.g. schools, hospitals) and recreational infrastructure in close proximity to the workers in the SEZs. This is part of creating the backward linkages into the domestic economy and will help to avoid past mistakes of not adequately providing for the needs of the workers. A specific strategy that is being considered is for the government to grant special developmental status to entitle developers to the streamlined construction regulatory process.
Labour Market and Productivity
The Vision 2030 National Development Plan for Jamaica sets out an elaborate plan for the Jamaican labour market which should result in a transformation of the labour market in a more efficient and harmonious market with a trained and educated productive workforce which sustains the entire economy and attracts quality employment-generating investments. This vision for the labour market has to be fulfilled against the backdrop of a diverse mix of local and international challenges affecting the labour market which must be addressed. This White Paper discusses a range of the specific issues that will affect the success of the SEZ regime. These include getting adequate labour supply and skills development, expected outcomes on the wage bill, the implications for productivity and competitiveness, gender dimensions and industrial relations & social protection. Some of the policy recommendations include:
i) Adopt labour practices that are in full compliance with stipulations of the International Labour Organization;
ii) All policies related to the human resource development will be aligned to existing national policy framework for training and employment and for access to employment opportunities for women and persons with disabilities;
iii) Greater collaboration between training institutions and industry to ensure constant supply of skilled personnel for firms in the SEZ; Promote a culture of voluntary compliance through awareness-raising/information-sharing programmes and initiatives geared towards investors, managers of enterprises, workers and their organizations.
iv) Promote a culture of voluntary compliance through awareness-raising/information-sharing programmes and initiatives geared towards investors, managers of enterprises, workers and their organizations.
Environmental Sustainability and Climate Change Mitigation
SEZs will be developed in full compliance with government’s policies on sustainable development which incorporate economic, environmental and social considerations. The policy framework is being formulated with strategies to create backward linkages with individuals through employment and training and among businesses through efforts to stimulate business-to-business linkages. The build-out of Urban Support Areas also ensures economic development with social inclusion.
Regulations to promote environmental sustainability are critical to doing business through the Global Value Chains model. Hence, one of the policy measures is to require the developer and operators of the SEZs to pursue and adopt low- carbon, green strategy with a clear goal and commitment to Greenhouse Gas Mitigation. Every effort will be pursued to ensure a strategy of greening the economy and related industries and safeguarding human and environmental health.
The government is focused on introducing policy measures that will hasten the development of the SEZs in the short to medium-term. The development of the policy framework for SEZs will result in a phasing out of the existing Free Zone regime with a modern regime that will enhance the country’s economic offerings to the local and foreign investor community. This necessitates the upgrading of existing legislative and regulatory frameworks in line with global best practices for SEZs that adequately fit Jamaica’s circumstances.
The full implementation of the SEZ framework will involve several private companies, associations, interest groups, MDAs, international development partners and local and foreign investors. Some of these entities have already been engaged in order to ensure that considerations are given to the effective roll-out of the policy strategies.
Following a submission by the Ministry of Industry, Investment and Commerce (hereafter referred to as the “MIIC”) in 2012, Cabinet approved the pursuance of the global logistics hub initiative (GLHI), vide Decision No.33/12 dated September 18, 2012. Cabinet recognizes the GLHI as a national development priority as substantiated by the Vision 2030: National Development Plan and a critical growth-enhancing strategy. This is why all efforts to transform Jamaica into a global logistics hub are nestled in the Growth Agenda which is the general framework guiding economic and social development over the medium-term.
The implementation of the Global Logistics Hub Initiative (GLHI) will be transformative and will have far-reaching effects on the Jamaican economy over the medium- to long-term. Under the GLHI several geographical areas will be designated as clusters for high impact investors. The businesses in these geographical areas, called Special Economic Zones (SEZs), will experience enhanced procedures and regulations relative to businesses operating outside these areas. SEZs are central to the overall GLHI as they will link industrial development and logistics services and will facilitate MSME participation in export industries. These SEZs will also ensure a smooth transition towards a policy regime that complies with our international obligations under the World Trade Organization (WTO) by 2015.
This White Paper provides an overview of the issues and challenges that the policy framework needs to address and the approaches that are being contemplated to resolve them. It has benefited from consultative engagements with various organizations that are represented on the SEZ Policy Steering Committee (see list of organizations represented on the SEZ Policy Steering Committee in Appendix 1). Other local and international organizations were engaged through policy dialogues which were convened by the MIIC and the SEZ PSC. Research was also carried out by a team of technical officers at the MIIC to inform the recommended policy strategies.
IV. Situational Context – Jamaican Free Zones Regime
Free zone operations in Jamaica date as far back as 1976 with the establishment of the Kingston Free Zone (KFZ), on approximately 44 acres of land adjacent to the Port of Kingston. The Montego Bay Free Zone (MBFZ) which initially spanned 3.2 acres with one factory- Akom Limited (28,000 sq. ft.) - was established in 1985, in the southwest region of the city. The KFZ space has since decreased to 16 acres when the Port Authority of Jamaica used a large acreage for port expansion between 2004 and 2006. The MBFZ, on the other hand, has expanded to 44 acres with 352,966 sq. ft. office space and 249,000 sq. ft. factory space. In an effort to improve the efficiency of the public zones and enhance the quality of service to investors, in 1998 there was a merger of the management functions of the MBFZ and the KFZ.
Administration and Tax Incentives
The Jamaican free zone regime is designed to encourage foreign direct investment (FDI), promote export growth and create new employment. Initially, businesses operating in free zones were primarily involved in the textile industries but there has been a gradual shift toward manufacturing, telemarketing, warehousing, data entry, electronic assembly, telecommunication services and business process outsourcing, among other activities. The value proposition that the free zones offer to investors involves easy access to air and seaports, duty-free benefits, minimal customs procedures, large skilled and semi-skilled English speaking workforce and telecommunication, logistics & transportation services.
Free zones are operated under the Jamaica Export Free Zone Act (1982). The Free Zone Council has the authority to grant approval for free zone status and the Minister to designate areas as free zones. Approved free zone enterprises benefit from:
Duty-free importation of capital goods, consumer goods, office equipment, raw materials or articles for use in connection with the approved product;
No import licensing requirements;
Duty-free treatment of articles for the construction, alteration, and repair of equipment of premises in the Free Zones;
Total relief from income tax in respect of profits or gains earned from approved activities;
Repatriation of profits (since the liberalization of the foreign exchange market in 1991 there are no restrictions on the repatriation of profits);
Exemption from the normal fees payable with respect to work permits.
Under the Jamaica Export Free Zones Act, MIIC grants approvals for free zone status. Enterprises that are approved to operate in the free zones are required to be registered or incorporated under the Companies Act and are required to carry out prescribed business activities as stipulated by the Act. Qualifying manufacturing entities are allowed to supply up to 15% of production to the domestic market which attracts applicable duties and charges.
From Free Zones to Modern Special Economic Zones
The economic output from the zones has been in decline on account of the structural reforms, failure to encourage business higher up the value chain, preference erosion in the US market and increased foreign competition. Despite the downturn in activities, free zones continue to play a significant role in the country’s economic development. In addition, the free zone regime continues to be a critical success factor in attracting investors to the country and supports the overall domestic capacity building efforts of the country.
The existing free zone regime in Jamaica follows the traditional model for free zones in terms of its underlying policy framework. The regime stipulates rigid eligibility requirements in terms of qualifying activities and the amount of manufactured goods that have to be exported. Free zones are primarily developed and operated by the government which offers a diverse mix of incentives to attract occupants of the zones. While there are single entity free zones, free zones are generally located in industrial areas or near ports or airports. Other features that are typical of the traditional model include outdated labour practices and restricted interaction with the rest of the country.
The upgrading of the free zone regime to a modern SEZ regime therefore represents a significant step towards transforming the operations of these zones. Moreover, the upgrading of free zones to SEZs is a move towards conformance under the World Trade Organization (WTO) rules for middle-income countries such as Jamaica. The country is required to bring its free zone regimes into compliance with the WTO Agreement on [Export] Subsidies and Countervailing Measures by 2015.
The concept of a special economic zone is a generic term that has evolved over time and applies to a large variety of zones including recent variants of the traditional commercial zones (see note on SEZ in Appendix II).4 The new SEZ regime for Jamaica will adopt international standards and growing trends for zone development. These include the following:
Countrywide zone development that have no export volume preconditions
Private sector zone development and management
Complete two-way trade between zones and the rest of the economy (i.e. a removal of the current 15% cap on domestic sales)
Labour practices that are consistent with International Labour Organization standards
Incorporation of development policy priorities other than employment, FDI and value chain development to include innovation, human resource development, rural development and green growth5
Economic, social and environmental sustainability
V. SEZs and the Global Logistics Hub Initiative
International trade patterns are undergoing significant realignments as a result of the geographically dispersed networks that make up an integrated global production system. This is being driven by the changes that are occurring in the configuration of global value-chains including the central role of contract manufacturing, outsourcing, etc., in optimizing the business process. Other significant trends that are triggered by these developments include the rise of services, innovations in logistics and changes in trade policies.6 As a result of these changes countries are increasingly becoming more open to and dependent on global trade which is impacting the location of transnational and multinational corporations that are eager to seek out locations that offer competitive transaction and transportation costs and quick turnaround.
An equally significant development is the enormous prospects from the increased trade and data flows throughout the region, as a result of increased South-South commerce, the expansion of the Panama Canal and changing air cargo patterns, scheduled to take place as early as 2015-2016. Trade among developing countries/regions, i.e. South-South trade, has grown tremendously. In 1990, South-South trade accounted for 8% of global trade. By 2012, South-South trade grew to 24% of global trade. South and Central America (including the Caribbean) has grown export sales by 11% annually between 2005 and 2012, which is 3 percentage points above the global growth rate. Notwithstanding the forecasts for increased intra-Asian trade, Jamaica will still remain relevant in future global value chains. Currently, the South America to Asia trade lane accounts for 2% of global trade. By 2020, South America’s trade with Asia will capture 5% of global trade.
VI. Exploring the SEZ Model for Jamaica
It is the mission and purpose of the government of Jamaica to set the right foundation for the successful development and long-term sustainability of the SEZs, through strategies that will help to shift Jamaica’s economic paradigm to one that creates higher value goods and services and leads to higher growth and job creation, in accordance with international best practices.
The experiences of countries with successful SEZs make a strong case for their development. SEZs have the potential to be:
- Highly effective for job generation, particularly for women entering the workforce and is a significant source of employment particularly for small countries like Jamaica.
- Stimulants for export growth and diversification in both the range of products and markets.
- Major foreign exchange earners
- Food and energy security enablers
- Attractive for foreign direct investment
- Sources for government revenue
- Enablers of technology transfer and skills upgrading
VII. Major Policy Considerations and Recommendations
This section explores some of the major policy considerations that will directly affect the timely implementation of the new SEZ regime. It does not attempt to offer the most comprehensive picture of the range of issues that will impact SEZ development however the discussions on issues identified, are ongoing and are being guided by research and the technical expertise of the members of the SEZ Policy Steering Committee as well as the wider public, including regional and international development partners. Consultations undertaken involve an evaluation of a wide spectrum of strengths, weaknesses, threats and opportunities that will impact SEZ development, specifically along the lines of market access, business regulation & facilitation, linkages, sustainable development, incentives and taxation, among other areas. These are explored below.
Policy Element: Efficient and Cost-effective Trade and Business Facilitation Services
The country’s progress in undertaking business environment reforms that will guarantee competitive transaction costs, speed and predictability in its logistics system lies at thecentre of the establishment of SEZs. The move to place greater reliance on business and trade facilitation reflects not only international best practice but also follows a growing global trend by governments that use their regulatory functions as services to investors. Countries often use zones as demonstration areas to test the impact of new regulatory policies and approaches. Examples include Aqaba SEZ (Jordan) which used automated business licensing and customs systems in the zone before applying more broadly in Jordan.
a. Trade Facilitation
Trade Facilitation is of keen interest in the global trading community. In December 2013 WTO members concluded negotiations on a Trade Facilitation Agreement (TFA). The TFA will enter into force once two-thirds of members have completed their domestic ratification process.
The TFA outlines binding commitments aimed at expediting the movement, release and clearance of goods at the border. It also seeks to improve transparency and cooperation among WTO Members on border measures. The implementation of the measures identified in the TFA can improve the cross-border trading processes in Jamaica, and will benefit the development of SEZs.
According to a report produced by the International Trade Centre (2013)7, the most frequent non-tariff measures (NTM) encountered by Jamaican firms were export inspections and these were predominately encountered through interaction with the Jamaica Customs Agency, Ministry of Health, Ministry of Agriculture, Bureau of Standards among other government bodies. Export inspections are particularly burdensome due to the large number of procedural obstacles (POs) that include lengthy delays associated with the inspection process, associated costs and the arbitrary behaviour of officials regarding inspections.
Exporters encounter these challenges in meeting international quality standards, conformity assessments and pre-shipment inspections especially for agro-based exports to main markets such as the United States, Canada and the United Kingdom. There are product-specific legally binding requirements in these markets which subject products (mainly fresh produce) to regulations that are difficult to implement and are associated with a large number of POs including delays, high fees and associated costs. The ITC report notes that the relevant legislative and institutional framework for quality, standards, and other requirements are in place however, service delivery is inefficient and is significantly hampered by: high cost of implementation of international standards; high costs and variable quality of basic services such as product testing and certification; and the burden of having to deal with multiple testing and laboratory services provided by several government agencies, among other things.
Importers are also affected by problems associated with licensing, inspections and certification imposed by local authorities. POs encountered in the implementation of domestic regulations include burdensome charges and fees and other para-tariff measures and delays. Charges and fees associated with obtaining permits and licenses, and fees from valuations are problematic for local companies that import inputs for products. This is further compounded by inefficiencies resulting from ill-equipped government officers within the regulating agencies.
It is widely accepted that poor zone performance has been linked to cumbersome procedures and controls. Therefore, streamlining business processes should be a core part of zone benefits.
1. Ensure high-level support across MDAs to advance the work of the Trade Facilitation Task Force to design an implementation work programme for the implementation of trade facilitation measures across MDAs (including but not limited to TFA measures),
2. Continuously improve the one-stop-shop (OSS)8 facility with all export documentation and inspection officers
3. Improve domestic laboratory and testing facilities for particular products
4. Implement risk management systems earlier in the clearance process and establish clearing times
5. Expedite the implementation of Food Safety/HACCP Management Systems to reduce hassle associated with testing and certification
6. Expedite integrated development of automated processing systems, including the Port Community System, Single Electronic Window and the Authorized System of Customs Data (ASYCUDA)9
7. Make the necessary amendments to the Customs Act in line with best practice, taking into account the harmonization of the Customs Acts across CARICOM.
8. Execute regular training and sensitization especially among inspections, licensing and permit dispensing officers across various agencies with emphasis on cost and time minimization. Training should also be geared towards a mind-set change toward customer service and customer satisfaction and higher levels of collaboration and coordination with MDAs and the private sector.
9. Execute ongoing sensitization and information-sharing among all border and non-border entities that influence business and trade facilitation. As part of this effort, the MIIC should continue to engage in regular scenario planning exercises in order to increase awareness and buy- in among all key players.10
10. All MDAs and private sector organizations (including insurance companies, banks and other non-border entities) should become more sensitized about their role in business and trade facilitation, in order to enhance the level of predictability and efficiency and general business climate reforms, across the board.
11. Streamline all mechanisms, protocols and procedures that facilitate the sharing of information among MDAs. These mechanisms, protocols etc., must be re-organized in a way that helps to enhance the level of overall integration among MDAs involved in trade and business facilitation.
12. Encourage private sector to undertake capacity building exercises among staff and engage in frequent communication with business support organizations to enhance service delivery.
13. Encourage the immediate implementation of commitments under the EPA such as single administrative documents (SADs)
VIII. Implementation, Monitoring and Evaluation
The Ministry of Industry, Investment and Commerce will see to the proper development, execution, monitoring and evaluation of the SEZ policy framework. The MIIC will be guided by the Special Economic Zone Act and Regulations to be enacted before the end of 2015 that will govern SEZ operations and the establishment of a central SEZ Authority. This Authority will operate on the principles of autonomy and transparency and will be charged with the responsibility of regulating all SEZs in Jamaica. Its functions will be carried out through collaborative efforts involving the relevant MDAs that will influence the effectiveness of the regime.
It should be noted that while the SEZ Authority and the work of MIIC will play a significant role the development of SEZs, it is recognized that the full and effective implementation will involve several private companies, associations, interest groups, MDAs, international development partners and local and foreign investors. The MIIC has already begun to explore the kinds of considerations that will have to be given to the effective roll-out of the policy strategies, through ongoing engagements with entities such as the Bureau of Standards, Jamaica Customs Agency, JAMPRO, Ministry of Finance & Planning, Trade Board, Ministry of Foreign Affairs & Foreign Trade, among others. Much of the work to develop the SEZ regime will be guided by the SEZ legislation and regulations.
IX. Legal Implications
Current Legal and Regulatory Framework – Jamaica Free Zones Act (1982)
The Act as currently constituted lacks the level of detail and policy coherence needed in a Special Economic Zone regime.
The lack of policy coherence includes:
The responsibilities and functions of the Port Authority of
Jamaica under s. 6-18 vs those of other Promoters ( s. 7) is greatly disproportional and could be viewed as prejudicial and discouraging to private investment. Additionally, the presence of the Port Authority as a Promoter and regulator makes the Act very untidy and counter to international best practice where business and regulatory functions are separated.
There is a heavy restriction on retail trade under s 25. This limits the policy space for creative investment opportunities for Free Zone shopping malls or for free ports.
There is severe prohibition on the storage of petroleum products under section s32. This would have a chilling effect on a commodity port and on bunkering activities with tank farms.
All goods coming into the Free Zone have to be consigned to Promoter or approved enterprise under s23 (3). This could have a chilling effect on the 3PL business and efficiency of moving goods generally.
There are no labour standards expressly mentioned in the Act or its Regulations.
There are no environmental standards expressly mentioned in the Act or its regulations.
It is unclear if the JPS All Island Licence applies to Free Zones. The Act grants a Promoter the right under prescribed terms and conditions that should be met for this activity.
In light of the policy gaps identified in the current Free Zone Act, a Special Economic Zone Act and the attendant Regulations will be developed in line with the necessary policy framework, in order to give effect to the proposed Special Economic Zone regime. The draft SEZ legislation would need to be harmonized with modern Port Authority of Jamaica and Maritime Authority of Jamaica legislation in order to ensure coherence with all pieces of legislation that will impact the SEZ regime. By harmonizing these pieces of legislation, possible duplication of the functions among the MIIC, the Port Authority of Jamaica and the Maritime Authority of Jamaica will be avoided.