A Blueprint for E-business - Jamaica

Transcription

April 2003
Prepared for
The Commonwealth
Secretariat and the
Government of Jamaica
A Blueprint for Ebusiness in Jamaica
Supporting Documentation
The Allen Consulting Group Pty Ltd
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Preface and Acknowledgements
The ‘Blueprint for EBusiness in Jamaica’ was prepared for the Government of
Jamaica - under the overall direction of Angela Strachan, Chief Programme
Officer in the Special Advisory Services Division of the Commonwealth
Secretariat –– by The Allen Consulting Group, an Australian economic and
policy advisory consulting company with experience in ecommerce and
regulatory analysis.
The project was funded by the Commonwealth Fund for Technical Cooperation
(CFTC), and was managed in Jamaica by the Ministry of Commerce, Science
and Technology with support from the Jamaica Promotion Corporation
(JAMPRO). It was prepared after consultations with Jamaican stakeholders in
the Government of Jamaica, the business sector and the community.
Comments were received during various stages of preparation from Dr. Jean
Dixon, Mrs. Camella Rhone, Mrs. Beverly Rose Forbes, Mr. Reginald Bhudan,
Mrs. Patricia Francis, Mrs. Veneice Pottinger, Mr. Julian Robinson, Mrs. Eileen
Heaven, Mrs. Leone Hines-Smith, Mrs. Dell Crooks, Mr. Lincoln Price, Mr. R.
Phillips, Mr. Roy Miller, Mr. Paul Sloley, Mr. Paul Smith, Mrs. Yvonne
Crooks, Mrs. Dawn Campbell, Mr. Tony Laing, Mr. Winston Hay, Mr. J.Paul
Morgan, Mrs. Barbara Lee, Ms. Wendy Duncan, Mr. Cordel Green, Mr. Roy
Humes, Ms. Loreen Walker, Mrs.Dianne Edwards-Davis, Mr. Lorenzo Grant,
Mrs. Barbara Scott, Mr. Hugh Taylor, Mrs. Kaye Morrish-Cooke, Mr. Denzle
Plummer, Mrs. Shirley Ann Eaton, Mr. Adrian Taitoo, Mr. Andrew Cocking,
Mr. Byron Lewis, Mr. Wilburn Pottinger, Dr. John Wright, Mr. Michael Julian,
Ms. Karlene Francis, Dr. David McBean, Mr. Seamus Lynch, Mr. Barry Raglan,
Mr. Michael DuQuesnay, Mrs Debbie Fraser, Professor Gordon Shirley and
Mrs. Sandra Glasgow. A complete list of stakeholders that were approached and
engaged in the study is attached in Appendix B to this report.
The project team would like to express its appreciation to the persons
mentioned above, as well as the numerous persons and research organisations in
Jamaica and overseas who contributed to making this report possible.
i
Table of Contents
Preface and Acknowledgements
Executive Summary
i
iv
Part A — Context
Chapter One
New Ways of Doing Business
2
2.1
Ecommerce
2
2.2
Ecommerce and Ebusiness
3
2.3
Driving Change
4
2.4
Ebusiness Dividends
4
Chapter Two
Opportunities and Challenges
7
2.1
Jamaica’s E–Readiness
7
2.2
Progress In Practice
8
2.3
Further Challenges
10
2.4
SWOT Analysis
11
Part B — Jamaica's Ebusiness Foundations
Chapter Three
Access to The Ebusiness Environment
14
3.1
ICT Equipment
14
3.2
Telecommunications and the Internet
15
Chapter Four
Sharpening The Regulatory Framework
30
4.1
Supportive Legal Frameworks
30
4.2
Addressing Cyber Crime
34
4.3
Tax and Ebusiness
35
4.4
Regulatory Institutions and ebusiness
37
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Chapter Five
Enhancing Ebusiness Capability
42
5.2
Human Capital
42
5.3
Developing a More Entrepreneurial Culture
44
Chapter Six
Leadership and Coordination
52
6.1
Top Down Leadership
52
6.2
Egovernment
53
Part C —Ebuisness In Key Sectors
Chapter Seven
Information Technology
58
7.1
Situation Analysis
58
7.2
Challenges
68
7.3
Suggested Approaches
69
Chapter Eight
Banking and Finance
73
8.1
The Sector and it’s Role
73
8.2
Upstream Banking
73
8.3
Downstream Banking
76
8.4
Ebusiness and Capital Markets
83
Chapter Nine
Tourism
88
9.1
Situation Analysis
88
9.2
Challenges and Threats
95
9.3
Response
96
Chapter Ten
Music and Entertainment
98
10.1
Music
98
10.2
Film
104
Chapter Eleven
Cross–sectoral Linkages
107
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Part D — The Ebuisness Strategy For Jamaica
Chapter Twelve
The Strategic Framework
109
12.1
The Blueprint’s Goal
109
12.2
Principles
109
12.3
Strategic Priorities
110
12.4
Actions By Strategic Priority
111
12.5
Timeframe For Action
112
12.6
Concluding Points
114
Part E — Appedices
Appendix A
Abbreviations
118
Appendix B
Key Stakeholders Consulted
120
Appendix C
Sources
122
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A N ECOMME RCE BL UE PRINT
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Executive Summary
“The time has come to take a clearer view of the Internet. We need to move away
from the rhetoric about “Internet industries”, “e-business strategies,” and a “new
economy” and see the Internet for what it is: an enabling technology — a powerful
set of tools that can be used,
wisely or unwisely, in almost any industry and as
1
part of almost any strategy.”
Jamaica cannot afford to take any other than a ‘clearer view’ of the Internet
when framing strategy to develop ecommerce on the island. The scepticism
evident in Porter’s seminal Harvard Business Review article is well founded. The
bursting of the ‘dot com’ bubble and other recent developments have resulted in
investors, businesses and governments wasting resources where the Internet and
ecommerce have not lived up to expectations.
While ecommerce and the Internet have not taken directions that are easy t o
predict, it is clear that they are still important new technologies. Rather than
set up an entirely new business paradigm, these technologies have found a place
in the day–to–day world of commerce, in the business of government and are
being used by ordinary people in the community. Business is taking a rather
pragmatic approach, using these technologies to improve what they do,
reengineering rather than indulging in revolutions.
Ecommerce is not just an information technology issue. It has spread beyond
the IT department and is now a strategic issue for organisations. It is reshaping
relationships with customers as well as competitors and has thrown the spotlight
upon things once considered pedestrian such as the supply chain. Its use is now
changing the structure of organisations, industries and government. There is
substantial evidence that ecommerce has helped shape macro economic
outcomes in large economies, not only in its heartland, the United States.
Successful and wise development of ecommerce is likely to shape outcomes for
small open economies dependent upon trade such as Jamaica. Successful
engagement in ecommerce is becoming vital to raise or even maintain
competitiveness. Buyers are shifting to the convenience and economy of
ecommerce. Supply chains in sectors ranging over sectors as diverse as
agriculture, mining,
manufacturing,
transport,
communications
and
entertainment are now bypassing suppliers that cannot be integrated within new
arrangements. Some businesses are obtaining access to global markets. Others
enjoy productivity gains. Ordinary businesses are using this to enhance their
business. Those that do not will be left behind.
1
Porter 2001, 'Strategy and the Internet', Harvard Business Review, vol. 79, no. 3, pp. 62-78 at 66.
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The Government of Jamaica requested expert assistance
Commonwealth Secretariat’s Fund for Technical Cooperation to:
from
•
develop an ecommerce strategy, which targets four key sectors in the
Jamaican economy (ie, information technology, banking and finance,
tourism, and music and entertainment); and
•
provide assistance to strengthen the institutional capability of the
regulatory agencies which support ecommerce activities.
the
The thrust of this report is to suggest ways of using the enabling powers of
ecommerce to provide sustainable long term benefits for the Jamaican
community. It proposes a pragmatic approach that reflects Jamaica’s underlying
strengths and weaknesses.
The report is not about how to create ebusiness applications, or specifically
about their day-to-day use in business. Very few of the key issues are about the
technology and so little space is allocated to these issues in this report. In
identifying the things that impede further involvement in ebusiness in Jamaica,
and the things that would encourage more rapid adoption of it, the focus tends
to be upon the things that Government can and does address in partnership with
business and the community. Inevitably, this has involved a lot of analysis of
the regulatory issues.
When conducting consultations with key stakeholders many essentially said ‘we
don’t need another glossy report about the massive and exciting potential of
ecommerce or ebusiness.” Others said, “what Jamaica needs is a practical
framework based on concrete actions.” The project team has sought to deliver
such a framework.
Roadmap for The Report
This report is divided into five parts:
•
Part A — Context. Defines what is meant by ecommerce and ebusiness,
identifies the drivers of change and the opportunities and challenges that
establish the need for a strategic response (Chapters One and Two);
•
Part B — Jamaica’s Ebusiness Foundations. Examines the overarching
issues that impact upon the general environment for ebusiness in Jamaica
and proposes means for dealing with them (Chapters Three to Six);
•
Part C — Ebusiness in Key Sectors. This part address the use of ebusiness in
the four key sectors identified by the Government of Jamaica (Chapters
Seven to Eleven):
– information technology;
– banking and finance;
– tourism; and
– music and entertainment.
•
Part D — The Ebusiness Strategy For Jamaica. This part brings together
the actions identified earlier in the report and outlines priorities for their
implementation (Chapter Twelve); and
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Part E — Appendixes. This provides material that supports the body of the
report.
The Context
Global Drivers of Change
Electronic commerce, or ‘ecommerce’, is not a well–defined term. At its
narrowest ecommerce can be viewed as the undertaking of transactions and
payment online using the Internet.
While many early ecommerce ventures have been proven to be non-viable, it is
clear that ecommerce is here to stay and is expanding. Forrester Research
indicates that the United States (US) online sales in 2002 grew by 52 percent
over the year to reach US$78 billion. Official statistics reported by the OECD
indicate that while the US remains the largest and fastest growing ecommerce
market, ecommerce has made significant inroads in most other markets.
Analysts are observing that business is making more use of the Internet than
merely as a platform on which to conduct transactions. General business related
activities are more common on the Internet than sales. Activities include online
promotion, online service; provision of information; online delivery; online
purchases.
Based on these points analysis of the opportunities and impacts of ecommerce
should extend to the broader concept of ‘ebusiness’. Ebusiness is short for
‘electronic business’. Ebusiness describes any business transaction or activity
that uses the Internet. This includes not only the sale of goods and services over
the Internet, but also the use of the Internet to provide an online brochure.
Ebusiness can also mean selling products over the Internet.
Ecommerce and ebusiness is increasingly pervasive. Studies in developed
countries show that the majority of businesses have an Internet connection. In
fact, in some countries, the proportion is over 90 percent. While the
proportion of businesses engaging in ecommerce is much smaller, it is growing
quickly.
Ebusiness should not be viewed as being separate or apart from normal business
— it is instead better viewed as being part of the evolution of business practices
required to maintain competitiveness.
Ebusiness is bringing changes. Key opportunities include:
•
New markets. Firms can more easily communicate with and sell to anyone,
anywhere, anytime. They can reach the globe, or reach next door.
•
Lower costs. Businesses can reach new markets without having to invest in
many of the traditional physical inputs. Many traditional businesses (such as
banks) are being reengineered to scale down on aspects that deliver little
value (eg, expensive bank branches) and placing emphasis upon aspects that
customers want (eg, service 24 hours a day 7 days a week).
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•
A level playing field. Barriers to entry have fallen. Business can contest
market share against entrenched players. Size is less important.
•
Better service. Products and services can be tailored to meet specific requests
while still meeting the advantages of scale. New technologies provide for
‘mass customisation’ where the buyer shapes the final product (products
such as computers and cars are sold this way now).
•
Innovation. More than ever, the emphasis is upon having good ideas and
acting upon them. An increasing part of the value of goods and services is in
good design — their knowledge content.
Ebusiness is not limited to business. Government is able to improve the
activities of government with ebusiness approaches. Community groups are also
finding that they are able to enhance what they do with ebusiness.
State of Play In Jamaica
The overall economy and the community at large in Jamaica is still at a
rudimentary stage of ebusiness capability. The available research suggests that
Jamaica is still at an incipient state of e–readiness. Only 9 percent of businesses
in Jamaica have access to the Internet. It is estimated that only 2 percent have
a web presence (ie, a website). Only a very small number are currently active in
ecommerce.
The outlook should not be viewed with excessive pessimism. There is evidence
that Jamaica is making progress in engaging in ebusiness:
•
there is significant interest in technology amongst the Jamaican community,
including with respect to the Internet and ebusiness. This is strongest in
areas that already have an international outlook including sectors such as
tourism as well as music and entertainment activities;
•
Jamaica has a fledgling IT sector and there is evidence that business is
turning to ebusiness techniques;
•
in general, Jamaica has a well respected regulatory regime which has made
significant reform progress over recent years;
•
a number of recent actual and mooted legislative changes have acknowledged
the need to amend legislation to make Acts compatible with an Internet
enabled world (eg, copyright); and
•
the expatriate Jamaican community has most rapidly embraced ebusiness, as
evidenced by the number of Jamaica-related web site originated and hosted
overseas, and hence Jamaica already has a substantial presence on the world
wide web.
The last point entails potential vulnerabilities. While there is evidence of a
vibrant ebusiness presence about Jamaica, much of this activity is not conducted
in Jamaica by Jamaicans.
There is less ebusiness activity in Jamaica than there could be. Meanwhile,
because of enhanced accessibility through the Internet global players are tapping
into the Jamaican market.
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Unless this pattern is addressed there is a danger that ebusiness will hollow out
Jamaican industry, shifting higher value knowledge based activities offshore,
leaving only a shell of lower value activities in Jamaica. Jamaica would still
probably benefit from the development of ebusiness in this scenario, but it would
be by less than it full potential given adoption of an effective strategy t o
develop domestic capabilities.
Jamaica’s Ebusiness Foundations
Access To ICT Technology
Widespread involvement in ebusiness, and therefore widespread enjoyment of
the gains relies upon two key inputs:
•
Access to computers and ICT technology; and
•
Access to fast reliable telecommunications facilities.
Jamaica is a developing country and even though computer prices are falling,
they remain expensive and out of reach for many. The ‘digital divide’ poses a
significant challenge for equitable development. It is notable that this is not
only an issue about fairness. Ebusiness in Jamaica and the economy in general
will operate more efficiently if Internet capabilities are ubiquitous.
The Government of Jamaica is striving to enhance access to computers. Often
this is in partnership with the international donor community, business interests
and the community at large.
A key thrust of policy in Jamaica has been to introduce competition in
telecommunications. There is compelling evidence that this is paying dividends
in terms of providers investing in delivering new and improved
telecommunications services, increased consumer contestability, greater choice
for consumers and lower prices.
While the removal of regulatory fetters to competition in telecommunications
in Jamaica has lead to significant gains, there remains a need for regulatory
intervention in some areas, possibly increasing regulation in some.
Universal access to fixed line telephony will remain a key means of access t o
the Internet for some time to come. Reflecting inherent market failures,
intervention and regulation may be needed to continue to roll out the networks
to continue to raise the teledensity ratio. Compulsory pooled industry funding
appears to be a realistic option.
While Jamaica is strong in broadband telecommunications facilities, laying the
foundations for broadband Internet access and serious business use, the evidence
suggests that there is still a need for an active policy stance in this area. Despite
the promise of alternative technologies terrestrial cable remains the most
reliable technology. In Jamaica, as elsewhere, the owner/operators of terrestrial
broadband technologies benefit from a structural position giving them market
power and the capacity to apply punitive prices for access. Prices must fall if
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Jamaican ebusinesses, located in Jamaica, are to thrive. This may require
regulatory intervention, or the threat of it.
The Regulatory Framework
There is a need to sharpen the regulatory framework to provide a better
foundation for the growth of ebusiness in Jamaica. Key measures include:
•
Development of a supportive legal framework — the UNCITRAL Model
Law appears to be a practical way to proceed and could be implemented, as it
has in other Caribbean jurisdictions with little modification.
•
Adoption of a practical approach to cybercrime — this could involve
legislation clarifying crimes in relation to authorised access to data,
unauthorised modification of data and impairment of electronic
communications as a key first step.
•
Joining in with the international community to shape outcomes in regard to
taxation of ebusiness
•
Restructuring of regulatory institutions — concentrating scarce expertise
and removing the possibility of overlap and duplication induced by
convergence.
Human Capital and Entrepreneurial Drive: Enhancing Capability
Ebusiness is more about people than machines. A key area of human capital
development that requires attention in Jamaica (and elsewhere) is in IT skills.
Being relevant and in a position to enjoy much of what the digital age has t o
offer is linked to having a well skilled and educated population with aptitude and
skills in the application of information and communication technologies in
everyday life.
Successful ebusiness, as with traditional business, relies upon entrepreneurial
verve. Entrepreneurship is in short supply everywhere and stimulating it is a
central challenge. The small and medium sized businesses that make up the
majority of businesses in Jamaica face many of the same problems as their
counterparts in other countries. They view that it is difficult enough having t o
keep one’s head above water without also reengineering the whole business with
unfamiliar techniques.
Business incubation can be a powerful means of addressing these challenges.
Expansion of leading institutions such as the Jamaican Business Development
Centre and the Technology Innovation Centre offers practical means of
building competitive businesses.
The shortage of capital for high–risk/high–return ventures is a further key
constraint. This is an area that is difficult for all governments. Government
knows little about business and the evidence is that governments do badly when
trying to pick winners. Grant funding is also expensive to the budget. What is
needed is an approach that generates a pool of equity available for investment
in new businesses and in spares the budget by limiting assistance to reward only
those that are a success.
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Leadership
Ebusiness is changing the way that business is done in business, government and
the community. It impacts upon, or has the potential to impact upon, every
sector of activity. Ebusiness presents opportunities and challenges in every area
of public administration. While private sector drive is to be encouraged, this is
not something that can be left to the private sector alone.
Key public sector objectives, including equitable growth and prosperity cannot
be assured with public sector leadership.
Key objectives cannot be met with coordination between government agencies.
Leadership also has to be shared between business, government and the
community in key areas.
Top down leadership involves commitment at the highest levels, from the
Prime Minister down.
Government agencies and their clients can benefit from using ebusiness
approaches. Demonstration that it can be done has significant value. Reflecting
learning by doing delivery of more online services in Jamaica would continue t o
build Jamaican capabilities.
Ebusiness in Key Sectors
Different Jamaican industries have embraced ebusiness at different rates. Sectors
that were focused upon in the study and approaches to accelerate involvement
in ebusiness :
•
tourism — this is probably Jamaica’s most well developed sector from an
ebusiness perspective. There is a wealth of Jamaican accommodation,
transport and tourism activities marketed on the Internet. The large
majority are medium to small scale operators. However, inspection of many
sites indicates that many are operated overseas;
•
music and entertainment — this is another very vibrant sector of Jamaican
ebusiness activity. Artists, publishers, and content aggregators and interest
groups abound about reggae music and culture. Opportunities for online
commercial transactions are limited in this medium at present because of
challenges that impact globally (including the oligopolistic nature of the
global industry and difficulties in protecting intellectual property for
digitised and easily copyable material), but there is evidence of considerable
commercial activity including promotion, advertising, and sponsorship. As
with tourism, many websites appear to be hosted outside of Jamaica;
•
information technology — stakeholders spoke often about the innate
strengths of Jamaicans in this sector and provided anecdotal evidence of this
impacting on commercial and economic opportunities. It was also apparent
that while many Jamaicans have considerable talent and technical skills, it
has proven difficult to build up a number of Jamaican businesses.
Government purchasers of IT services complained that the companies that
were in Jamaica lacked depth and capacity to undertake large assignments
and so they had little alternative than to import skills. It seems that many
Jamaicans with skills in this area leave the island (some ironically work on
websites about Jamaica from overseas); and
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financial services — Jamaican banks, finance companies and insurance
appear to be ecommerce laggards. Not all of these institutions have websites,
and those that do have a very low level of functionality. This stands in stark
contrast to the experience in other countries where banks have been at the
forefront of ebusiness and obtained significant benefits.
It is notable that there are significant cross sectoral spillovers. Raising global
awareness about Jamaican music, for example, is likely to raise additional
interest in Jamaica as a holiday destination. Resolving issues about online
banking (particularly in regard to support for online transactions for merchants)
is important for ebusiness in every sector.
The Ebusiness Strategy For Jamaica
The Aim of the Strategy
Ecommerce and ebusiness are means to an end. That is, they provide new tools
to facilitate the transformation of service delivery and the provision of greater
opportunities for Jamaican businesses and consumers. To this end:
The goal of Jamaica’s ebusiness blueprint is to maximise
opportunities to raise Jamaican competitiveness and wellbeing
from the widespread use of ebusiness.
Guiding Principles
There are a series of principles (some of which, at times, suggest different
directions) that should guide the development and application of Jamaican
ebusiness policy. These are that:
•
all Jamaicans should be provided the opportunity to access the information
economy, ecommerce and conduct ebusiness with sufficient bandwidth and at
an affordable cost;
•
all Jamaicans need to be equipped with the skills and knowledge to harness
the information economy’s benefits for employment and living standards;
•
the private sector must lead ebusiness uptake — choices about new
technology and the exploitation of opportunities must be led by the private
sector. The development of ebusiness will be market-driven, and led by
individuals and business innovators;
•
government should be a model user, supplier and purchaser of electronic
business services — this will provide direction, education and encouragement
to business and consumers;
•
legal and regulatory frameworks should be implemented to ensure that
ebusiness is safe, secure, certain and open. This involves a number of
elements:
– technological neutrality;
– transparency; and
– international consistency.
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Action
Ten priority areas have been identified for action. Jamaica should direct its
efforts to:
1. progress wider availability, use and familiarity of computers and the Internet
and raise awareness of the capacity to use ebusiness to improve business;
2. invest in appropriate human capital;
3. combat impediments to entrepreneurial development;
4. advance affordable access to world class telecommunications infrastructure
necessary to support use of the Internet and ebusiness in Jamaica;
5. build business and consumer confidence in ecommerce and ebusiness through
legislation that confirms the legitimacy of electronic communication and
transactions;
6. ensure that the regulatory framework is consistent with further development
of ebusiness in Jamaica;
7. reengineering of government service delivery using ebusiness approaches;
8. complement existing plans to encourage development of the IT sector with
measures stimulating its use of ebusiness to raise productivity and
competitiveness;
9. implement some sector specific policies in Jamaica’s strongest ebusiness
sectors including Tourism and music and entertainment complemented; and
10. develop the Jamaican banking sector’s use and support for ebusiness and
capacity to conduct payments online to remove this as a potential
bottleneck in the development of ebusiness in Jamaica.
Actions that have been identified as necessary to support the strategic priorities
are summarised below.
Table 12.1
ACTIONS AND PRIORITIES
Strategic Priority
Broad Approach
1.
Availability, use and familiarity
with computers and the Internet
Sustain government programs to provide PCs and Internet access in schools and
communities. Work closely with private sector bodies in joint projects.
2.
Investing in human capital
Continue to place emphasis upon acquisition of IT skills as a staple skill for most walks of life.
Evaluate the balance of supply and demand for IT skills. Make greater use of
3.
Combating impediments to
entrepreneurial development
Expand and enhance existing ebusiness incubators. Incubation should be an option for existing
businesses or new businesses wishing to apply ebusiness tools in any field everywhere where
business is done in Jamaica.
Develop approaches to support business in the post incubation phase.
Foster access to finance for emerging businesses through Pooled Ebusiness Funds (PEFs).
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Strategic Priority
Broad Approach
4.
Maintain commitment to universal service and access to fixed line telephony which is a key
access point to the Internet.
Affordable access to
telecommunications
Identify practical means of financing the Universal service/access arrangements that will apply
following fully contestable market arrangements as a matter of urgency.
Conduct an evaluation of broadband internet access to assess if it is an emerging bottleneck.
Place broadband prices on the regulator’s price watch list and indicate that the government will
develop policy options to drive prices down if competition is not effective in reducing prices in
the short to medium term.
The Government should withdraw ISP licenses from those companies that do not enter an
operational phase within 6mths, as a means of boosting substantive competition in the sector.
5.
Ecommerce and ebusiness
legislation
Introduce legislation supporting ecommerce as a matter of urgency.
6.
The regulatory framework
Consolidate the number of institutions involved in regulation as a means of addressing
convergence, reducing potential fragmentation, dealing with bottlenecks and focusing expertise.
7.
Reengineering Government as
model user
Accelerate progress made under the egovernment and government
programmes.
modernisation
Continue to be selective in services and activities that are reengineered focusing on higher
value activities rather than apply across the board targets that are unrealistic and result in
diffusion of limited resources.
8.
Development of the IT sector
Continue to implement the Five-Year strategic Information Technology plan.
Government to raise knowledge about ebusiness developments within the IT sector in
Jamaica.
Expand incubation of start-up companies.
Engage in post–incubation support for emerging IT companies.
Raise opportunities for partnership building within Jamaica and abroad.
Make it easier to find Jamaican IT companies and learn about their capacities. Encourage
development and maintenance of a private sector ICT/ebusiness portal site. This may include
working together to improve an existing site.
Promote awareness about Jamaican ICT/ebusiness success stories.
Obtain greater Jamaican development and involvement when making government purchasing
decisions.
Establish KPIs (some suggested) and review progress over next three years.
9.
Sector specific policies in
Jamaica’s strongest ebusiness
sectors
Focus industries include Tourism as well as music and entertainment.
Conduct a brief audit about the nature and extent of ebusiness involvement in these sectors.
Continue with plans to market Jamaican tourism businesses through an exclusive site. It is
essential that SMEs be involved in that process.
Identify global and regional sites that function as portals and ensure that Jamaican businesses
and Jamaica are well represented on those sites. Develop ‘how to guides’ to assist local
operators to be listed on these sites.
Include basic ebusiness practices within industry training schemes.
Enhance involvement of businesses in key sectors in ebusiness incubator programs. Ensure
that there is appropriate after incubator support.
Support demonstration programs for non-English web site development to broaden markets.
Encourage greater use of Internet purchasing and Internet price differentials (particularly for
tourism/travel services).
10. Banking sector’s use and support
for ebusiness
Government should encourage cooperative competition with and between banking institutions
leading to development and use of more efficient electronic payments instruments and
facilities.
Government of Jamaica to use the purchasing power of its agencies to encourage the banking
sector to provide electronic banking services and obtain modern, efficient banking services.
The Government of Jamaica should indicate that it would be willing to consider applications for
a banking authority from an Internet bank, subject of course, to meeting prudential and other
requirements on the same basis as other banks.
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A timeline for action has been established that sorts actions into three
categories:
•
immediate action — putting ebusiness legislation in place and making the
regulatory framework more ebusiness friendly.
•
medium term action — establishing the government as a model user of
ebusiness, implementing sector specific approaches in Jamaica’s strongest
sectors; and
•
longer term action — raising availability use and familiarity with computers
and the Internet, building human capital development, combating
impediments to entrepreneurial development and development of
arrangements to enhance widespread access to Internet friendly
telecommunications with a view to firmer regulation if competition does not
fully deliver.
Key Points
The global shift to a digital economy poses major threats and significant
opportunities for Jamaica. As a small open economy Jamaica is dependent upon
trade and international capital. The country’s small size and traditional reliance
on a few primary products and services has constrained industrialisation and
economic development.
The opportunities are now well rehearsed. Digital technologies and ebusiness
approaches are creating new markets, reinvigorating old markets and making
every market more accessible. Success in becoming a global player could bring
economic growth, employment generation, greater social equity, administrative
efficiency and more participatory governance.
The threats are sometimes under appreciated. Economies have to re-equip and
re-skill to meet the evolving competition. Government and every sector of the
economy have to adapt quickly. Areas of the economy that once enjoyed
natural protection from imports (including many services) now face fierce
competition. Failure to address the challenges may condemn many Jamaicans t o
persistent poverty and underdevelopment.
At issue is Jamaica’s capacity to enhance its position as a global player and t o
maintain or improve competitiveness. The ebusiness challenge is not only about
websites and electronic transactions. The digital revolution is involving
profound changes. Jamaica must implement policies and provide the framework
and environment which will facilitate investment, modernise industries, enhance
productivity and broaden the worldwide presence of Jamaicans.
It is clear that the Government of Jamaica already sees the big picture:
“As we come to terms with the Digital Age, Jamaica has the opportunity to
embrace the new concept of a “knowledge based society” for social and economic
development. We must seize the initiative and build on the foundation that we
have already laid, to establish new partnerships, develop new industries, to become
more competitive in this new age. We have already begun the process through
human resource development, the establishment of infrastructure and the
enhancement of new legislation and policies to create balance, stability and
growth…”
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A
Part A
Context
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Chapter One
New Ways of Doing Business
What is ecommerce? Why is it important for business? What good is it and why
is it important to Jamaica?
2.1
Ecommerce
Electronic commerce, or ‘ecommerce’, is not a well–defined term. At its
narrowest ecommerce can be viewed as the undertaking of transactions and
payment online using the Internet.
Ecommerce is a comparatively recent phenomenon. The Internet has been in
development in various forms since 1969, but it has only been in the last decade
that it has been used for business, and that that usage has become widespread. I t
was not until 1992, for example, that the US Congress authorised the use of the
Internet, which was originally designed for military and then academic purposes,
for commercial use.
There was considerable excitement about the potential for ecommerce when it
burst its way into the press, daily discourse and the boardrooms of nearly every
business around the world. This excitement was driven by expectations about
new access to global markets, indications of rapid growth and the lower costs.
The turn of events at the end of the last century showed that these expectations
were unrealistic. Fortunes rapidly made were lost as quickly in the collapse of
the ‘dot com’ bubble.
While many ecommerce ventures have been proven to be non-viable, it is clear
that ecommerce is here to stay. Forrester Research indicates that the United
States (US) online sales in 2002 grew by 52 percent over the year to reach
2
US$78 billion . More sober official statistics reported by the OECD indicate
that while the US remains the largest and fastest growing ecommerce market,
3
ecommerce has made significant inroads in most other markets.
Despite rapid growth, the proportion of activity that is transacted online
remains relatively small. The US Department of Commerce reports that
4
ecommerce hovers at around one percent of total retail sales. Similar
proportions are observed in other developed countries. While disappointing the
expectations of many analysts, this is still a significant achievement given that
this medium for business activity was not open for business a decade ago.
2
Johnson, C.A., Delhagen, K., Chaskey, K., 2002, 2002 US ecommerce: The Year in Review, Forester
Research, available from http://www.forrester.com.
3
A good review is provided in Organisation for Economic Cooperation and Development 2002, OECD
Information Technology Outlook: ICTs And The Information Economy, OECD, Paris.
4
US Department of Commerce, 2002, Digital Economy 2002, p.vi.
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2.2
Ecommerce and Ebusiness
Analysts are observing that business is making more use of the Internet than
merely as a platform on which to conduct transactions. General business related
activities are more common on the Internet than sales. Activities that are
frequently observed include:
•
Promotion. International statistics and day-to-day observation of the world
wide web shows that most business web sites contain more general marketing
information and supporting material than anything else;
•
Service. Many companies provide after sales service or the opportunity to
deliver digitised products and services (eg, software and pictures);
•
Information Source. The Internet has made it is easier for government,
businesses and consumers to find information to support purchasing
decisions. A little over a decade since it became a commercial product, in
most advanced countries email is nearly as ubiquitous as the telephone in
business, government and society at large. The ability to browse and search
the web has added significantly to the information able to be read and
analysed by anyone with a computer and Internet connection; and
•
Inputs and cost savings. Business and government agencies tend to use the
Internet more to find a cheaper price when purchasing than to make a sale.
Choosing from the lowest cost supplier, better management of inventories,
receiving goods and services online, are important opportunities that stem
from access to the Internet and being engaged in ecommerce.
Based on these points analysis of the opportunities and impacts of ecommerce
should extend to the broader concept of ‘ebusiness’. Ebusiness is short for
‘electronic business’. Ebusiness describes any business transaction or activity
that uses the Internet. This includes not only the sale of goods and services over
the Internet, but also the use of the Internet to provide an online brochure.
Ebusiness can also mean selling products over the Internet.
Ecommerce and ebusiness is increasingly pervasive. Studies in developed
countries show that the majority of businesses have an Internet connection. In
fact in some countries the proportion is over 90 percent. While the proportion
of businesses engaging in ecommerce is much smaller, it is growing quickly.
Ebusiness should not be viewed as being separate or apart from normal business
— it is instead better viewed as being part of the evolution of business practices
required to maintain competitiveness.
There are many other ebusiness models and many more that are likely t o
emerge. A summary of ebusiness models is provided in Box 2.1 below.
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Box 2.1: Emerging Ebusiness models
Ebusiness is characterised by new terminology and concepts about business. Looking at what ebusinesses do,
however, it is helpful to think of seven main types of ebusiness models.
•
The content model. Generates income from selling advertising space or by subscription.
•
The market maker model. Brings buyers and sellers together and facilitates transactions (includes
auction sites and industry specific trading sites)
•
The infomediary model. Consolidates and sells consumer data on needs and behaviour (eg sending
emails to users interested in particular goods and services).
•
The online retailing model. Sales are made directly over the Internet (the example now known
across the world is amazon.com)
•
The affiliate model. Generates income by providing traffic to other sites.
•
The hybrid model. A mixture of two or more other models.
•
The clicks and mortar model. This is a pun on the idea that traditional businesses were built on
bricks and mortar and that ebusinesses are built on mouse clicks. The fact is businesses today are
becoming a mixture of traditional business structures with an overlay of electronic business features.
Source:
The Australian Ebusiness Guide, 2002 and The Allen Consulting Group.
2.3
Driving Change
Ebusiness is bringing changes. Key opportunities include:
•
New markets. Firms can more easily communicate with and sell to anyone,
anywhere, anytime. They can reach the globe, or reach next door.
•
Lower costs. Businesses can reach new markets without having to invest in
many of the traditional physical inputs. Many traditional businesses (such as
banks) are being reengineered to scale down on aspects that deliver little
value (eg, expensive bank branches) and placing emphasis upon aspects that
customers want (eg, service 24 hours a day 7 days a week).
•
A level playing field. Barriers to entry have fallen. Business can contest
market share against entrenched players. Size is less important.
•
Better service. Products and services can be tailored to meet specific requests
while still meeting the advantages of scale. New technologies provide for
‘mass customisation’ where the buyer shapes the final product (products
such as computers and cars are sold this way now).
•
Innovation. More than ever, the emphasis is upon having good ideas and
acting upon them. An increasing part of the value of goods and services is in
good design — their knowledge content.
2.4
Ebusiness Dividends
Use of ecommerce and ebusiness brings benefits for business, customers and the
economy at large.
Many ebusiness or Internet based approaches are inherently cheaper than the
previous means of procuring the same services. Examples of cost savings in a
number of different day to day goods are noted in Table 2.1 on the following
page.
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Table 2.1
E–COMMERCE IMPACT ON VARIOUS DISTRIBUTION COSTS, $US PER TRANSACTION
Airline tickets
Traditional
system
$8.00
Banking
$1.08
Telephone–based
Bill payment
$2.22 to $3.32
Term life
insurance policy
$400 to $700
$0.54
Software
distribution
$15.00
$5.00
Internet–based
$1.00
$0.13
$0.65 to $1.10
$200 to $350
$0.20 to $0.50
Savings (%)
87%
89%
71% to 67%
50%
97% to 99%
Source:
OECD 1999, The Economic and Social Impacts of E–commerce: Preliminary Findings and Research Agenda, p.63.
Underlying structural changes appear to be likely. Ebusiness changes the mix of
inputs in an economy. Consumers and businesses use ebusiness to bypass or
disintermediate ‘middlemen’. In some cases the bypass is of information
providers (eg, marketers, agents, and so on), and in other cases the bypass is of
supply channels (eg, retail shopfronts, transport, handling, etc). Some industries
will contract. Those industries that fit new tastes or can take advantage of new
technologies (and therefore obtain price reductions) can expect to expand.
Ebusiness is playing a similar role to other significant inventions that have
affected business over the last two centuries. What most have in common is the
breaking down of barriers to communication, particularly what is sometimes
called the “tyranny of distance”. Many have involved getting goods to market
more quickly (railways and airtravel) or making information more accessible and
independent of location (the telegraph and telephone). Improved
communications continues to advance economic activity towards a single
worldwide market. Globalisation is a direct and increasingly difficult to avoid
consequence of these technological changes.
The overarching impact, however, is an increase in economic efficiency. Studies
in the US have identified that ICT investments in that economy have
contributed to multifactor productivity (MFP) growth. They consistently
indicate that about a quarter of the US growth rates over the later part of the
5
1990s, or more, may be attributable to ICT investment. More recent cross
comparison studies indicate that this is not unique to the US, ICT investment
6
has a similar impact in most economies studied to date.
The startling aspect of these findings is that the contribution to growth is vastly
out of proportion to the share of ICTs in the capital stock. Investments in ICT
assets in terms of millions of dollars are associated with gains in output measured
in billions of dollars each year. This is not merely an attribute of being a
technologically advanced country benefiting from the technology it makes.
Similar studies conducted about smaller, less advanced economies have shown
5
6
See Oliner, S and Sichel, D. 2000, ‘The Resurgence of Growth in the late 1990: Is Information Technology
the Story?’, Journal of Economic Perspectives, vol. 14, no. 4, Fall and Jorgenson, D., and Stiroh, K. 2000,
‘Raising the Speed Limit: US Economic Growth in the Information Age’, Brookings Papers on Economic
Activity, no. 1.
OECD, 2002, OECD Information Technology Outlook: ICTs And The Information Economy, OECD, Paris,
p21.
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that it is possible to obtain large productivity gains, and a large growth impetus,
7
by merely using the new technologies.
7
Productivity Commission, 2001 Information Technology and Australia’s Productivity Surge, Staff Research
Paper, Canberra.
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Chapter Two
Opportunities and Challenges
What prevents greater use of ecommerce? This chapter offers views that may be
useful when thinking about answers to these questions.
2.1
Jamaica’s E–Readiness
A key approach of this study is to examine actual market conditions.
The overall economy and the community at large in Jamaica is still at a
rudimentary stage of ebusiness capability. Key indicators about e-readiness are
reported in Table 2.2. In particular:
•
only nine percent of Jamaican businesses are estimated to have invested in
obtaining access to the Internet; and
•
only two percent of Jamaican businesses have a website.
Table 2.2
INDICATORS OF JAMAICAN BUSINESS INTERNET READINESS
Activity
Output
Total number of registered businesses in Jamaica
48,978
Number of Internet connected businesses
4,458
Estimated Internet business penetration rate
9%
Estimated number of business with a web presence
1,000
Estimated website penetration rate
2%
Total number of ICT sector companies
96
Source:
Allied Research Associates 2002, p. 80
The available research suggests that Jamaica is still at an incipient state of
e–readiness. A recent detailed assessment of Jamaica’s e-readiness painted a
challenging picture:
“In brief, the country has good telephone infrastructure; low Internet connectivity,
computer ownership and level of commerce; reasonably diffused electricity
distribution but not cost effective or reliable services. Innovations are rare; venture
capital scarce; institutional forces, social and political relationships often distort
market forces; there are scarce administrative, technical and managerial talents in
the area of information and communication technology;8 and the investment climate
is sullied by the high crime rate security related costs.”
8
Allied Research Associates 2002, Jamaica's E-Readiness Assessment, Central Information Technology
Office (Ministry of Industry, Commerce & Technology), Kingston, p. 85.
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Translated by the Government of Jamaica, these findings have been taken t o
9
indicate that, “e-commerce in Jamaica is in its fledgling stage”.
2.2
Progress In Practice
E-readiness is in many ways a one sided perspective. Concentration upon
e–readiness alone is to take a supply driven approach. That is, to take a ‘build it
and they will come’ approach.
Realisation that Jamaica is not yet fully prepared for ebusiness should not be
read that little is happening. In much the same way that the Internet has quickly
gathered size and momentum from modest beginnings, businesses in Jamaica are
making use of ecommerce.
Jamaica is progressing down the path established by other ecommerce and
Internet economy adopters. There is evidence of a close relationship between
the proportion of the economy actively online and the number of web hosts
(sites used for business and other services). Basically countries struggle to raise
host numbers and be involved in ecommerce while the Internet population
remains under eight percent of the total. Once they exceed this they have
reached the take-off point and gather momentum before really accelerating host
numbers and the level of ecommerce. See Figure 2.1.
Figure 2.1
THE EBUSINESS TAKE-OFF POINT
3000
Internet Hosts Per 10,000 Inhabitants
2500
2000
1500
1000
Take-off point 8-10%
500
Jamaica
0
0
10
20
30
40
50
60
Internet Users Per 100 Inhabitants
Source: Centre for International Development, Global Information Technology Report
2001-2002: Readiness for the Networked World, viewed 25 July 2002,
www.cid.harvard.edu/cr/profiles.html
9
Government of Jamaica 2002, A Five-Year Strategic Information Technology Plan for Jamaica, Kingston, p.
54.
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There is emerging evidence to suggest a higher rate of computer use and
Internet awareness by Jamaican business than was previously believed. For
example, a recent survey of small business in the Kingston area indicates that:
•
over 40 percent now use computers in their businesses;
•
31 percent indicated their intent to purchase computers; and
•
around nine percent had Internet access while five percent had websites.
10
Of course, businesses in the capital and largest city are likely to be closer to the
lead than many other businesses in other parts of Jamaica.
Despite the limited IT and Internet penetration, Jamaican business websites are
integrated into the supply chains of the new economy and are listed and
11
prominent on global portals such as Yahoo. People looking for goods and
services that Jamaica sells can find Jamaican business online. Jamaica is on the
ebusiness map.
Different Jamaican industries have embraced ebusiness at different rates. This
can be seen by looking at the four key sectors identified for this study:
•
tourism — this is probably Jamaica’s most well developed sector from an
ebusiness perspective. There is a wealth of Jamaican accommodation,
transport and tourism activities marketed on the Internet. The large
majority are medium to small scale operators. However, inspection of many
sites indicates that many are operated overseas;
•
music and entertainment — this is another very vibrant sector of Jamaican
ebusiness activity. Artists, publishers, and content aggregators and interest
groups abound about reggae music and culture. Opportunities for online
commercial transactions are limited in this medium at present because of
challenges that impact globally (including the oligopolistic nature of the
global industry and difficulties in protecting intellectual property for
digitised and easily copyable material), but there is evidence of considerable
commercial activity including promotion, advertising, and sponsorship. As
with tourism, many websites appear to be hosted outside of Jamaica;
•
information technology — stakeholders spoke often about the innate
strengths of Jamaicans in this sector and provided anecdotal evidence of this
impacting on commercial and economic opportunities. It was also apparent
that while many Jamaicans have considerable talent and technical skills, it
has proven difficult to build up a number of Jamaican businesses.
Government purchasers of IT services complained that the companies that
were in Jamaica lacked depth and capacity to undertake large assignments
and so they had little alternative than to import skills. It seems that many
Jamaicans with skills in this area leave the island (some ironically work on
websites about Jamaica from overseas); and
•
financial services — Jamaican banks, finance companies and insurance
appear to be ecommerce laggards. Not all of these institutions have websites,
and those that do have a very low level of functionality. This stands in stark
10
Allied Research Associates 2002, Jamaica's E-Readiness Assessment, Central Information Technology
Office (Ministry of Industry, Commerce & Technology), Kingston, p. 85.
11
Jamaica also has its own portal sites. For example:investjamaica.com; www.jamaicatradepoint.com,
www.go-jamaica.com; www.jamaicanetlink.com; and discoverjamaica.com/shop.
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contrast to the experience in other countries where banks have been at the
forefront of ebusiness and obtained significant benefits.
(Details of the analysis supporting these summary comments are provided in
Part C of this report.)
The overall picture is that there is evidence of a small but vibrant ebusiness
presence about Jamaica.
2.3
Further Challenges
As in many other countries, anecdotal evidence suggests that the majority of
Jamaican businesses that have a website are larger, or more established
businesses. With some exceptions, the majority of smaller businesses in Jamaica
do not appear to have an ebusiness capacity or presence on the world wide web
(www).
Only a small portion of businesses appear to conduct transactions online, with
most engaged in promotional activities, and using the Internet for
communications and research, including when looking to improve purchased
inputs.
The marketing thrust of many websites appears to be to reach into existing
markets. Many tourism sites, for example, are targeted at the US audience.
Others offer improvements in existing services (eg, mail order) for Jamaicans
overseas. This is works with and enhances existing strengths. The sense of the
research team in reviewing Jamaica’s existing websites was that there was less
emphasis on developing new markets and new sources of growth.
Comparative data suggests that there are fewer websites in Jamaica than one
12
would expect, even after taking into account its size and general e–readiness. I t
also appears there are fewer Jamaican websites than other countries in the
Caribbean and other comparable countries elsewhere. Meanwhile investigations
by the project team shows that there are in fact a vast number of websites about
Jamaica. These sites are very sophisticated providing considerable services t o
users, very often including the possibility of making online transactions.
However, closer inspection of these sites reveals that the majority of them are
owned and operated overseas, mostly in the US, Canada, with some hosted in
other Caribbean countries.
This reveals a key challenge: much existing ebusiness activity about Jamaica is
not conducted in Jamaica by Jamaicans.
12
See Kirkman, Cornelius, Sachs and Schwab 2002, The Global Information Technology Report 2001–2002:
Readiness for the Networked World, Oxford University Press, New York.
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2.4
SWOT Analysis
Given these forces of change, Table 2.3 reflects the strengths, weaknesses,
opportunities and threats that ebusiness poses to Jamaica’s business
environment.
Table 2.3
JAMAICA’S EBUSINESS STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
Strengths
•
There is an existing (but limited) ebuisness presence
Weaknesses
•
Outdated legal and regulatory structures – no specific
legislation to support e-commerce or address concerns
about it
•
Shortage of entrepreneurs
•
People are interested in Jamaica its people and culture
•
Shortage of capital, especially venture capital
•
Advanced telecommunications infrastructure
•
Low level of domestic demand for ecommerce/Internet
services
•
Increasing competition in telecommunications
•
Low level of participation in information economy/large
digital divide
•
Increasing training opportunities
•
Poor community access to affordable internet and
computers
•
Increasing creativity in software development and web
services with increasing prospect for value added exports
•
High cost of broadband Internet access
ecommerce exports
•
Jamaicans speak English, the language of IT and
ebusiness
•
Restrictive access to electronic payments and banking
system
•
Proximity to the largest and most advanced ICT and
ecommerce/ebusiness market
•
IT/ebusiness skills shortage
•
Jamaicans have close links abroad which may be inclined
to preferentially purchase from Jamaica
•
Small domestic market
•
Government’s commitment to ICT including a national IT
strategic plan and coordinating organisation.
•
Large numbers of small firms may face hurdles to use of
ecommerce
•
Other Government initiatives supporting uptake of
ecommerce including in the areas of tax administration,
trade initiatives such as customs modernisation,
JAMPRO’s Exporter Registration and Trade Agency online integration.
•
Government institutions and service delivery not IT ready
•
Poor order fulfilment (eg, customs barriers, etc)
Increasing cooperation in Caribbean IT initiatives
•
Lack of manufacturing base and production of value added
goods and services
•
Opportunities
restricts
Threats
•
New markets may be opened up through ecommerce
•
Problems from increased globalisation
•
New access to old markets
•
Ebusiness leads to unsustainable import surge
•
Efficiencies for Jamaican industry
•
Ebusiness hollows out Jamaican industry
•
Raised productivity for the economy in general
•
Brain drain depletes entrepreneurs and IT skills
•
Increased competitiveness and improved trade
•
Ebusiness raises competition and reduces profits
•
Increased contestability and lower prices for consumers
•
Digital divide deepens inequality
•
Better links across the whole community
•
Structural change causes social dislocation
•
Potential to spread jobs into rural regions
•
New services and improved convenience for rural
communities better able to communicate
•
Loss of competitiveness if the majority of Jamaican
businesses do not adopt new technologies while the rest
of the world does
Source:
The Allen Consulting Group and Allied Research Associates 2002
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The observations summarised in Table 2.3 suggest that ebusiness is both an
‘offensive’ and a ‘defensive’ issue. That is, whether or not Jamaica embraces
ebusiness, ebusiness will increasingly be relied upon by overseas customers and
businesses, to the exclusion of countries and businesses that do not have
ebusiness capabilities. While embracing ecommerce may be seen as detrimental
to Jamaica’s export position (ie, consumers and businesses may bypass physical
barriers and imports may increase) if ecommerce is not embraced then there will
likely be a reduction in exports because consumers and businesses will deal with
countries other than Jamaica.
Unless the threats and opportunities are addressed there is a danger that
ecommerce will hollow out Jamaican industry, shifting higher value knowledge
based activities offshore, leaving only a shell of lower value activities in
Jamaica. Jamaica would still probably benefit from the development of
ecommerce in this scenario, but it would be by less than its full potential given
adoption of an effective strategy to develop domestic capabilities.
12
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B
Part B
Jamaica’s
Ebusiness
Foundations
13
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Chapter Three
Access to The Ebusiness Environment
In addition to understanding business, widespread involvement in ebusiness has
two further requirements:
•
access to computers (including the knowledge to use them); and
•
access to a fast and reliable telecommunications system.
This chapter looks at these issues in some depth.
3.1
ICT Equipment
Despite falling prices in real terms for many decades access to ICT technology
is not cheap. The availability and affordability of computers and related
equipment pose a significant challenge in developing countries such as Jamaica.
The fact that access to computers is not widespread raises the threat of a digital
divide — the separation of the information ‘haves’ and ‘have nots’. The key
concern is that in the information age, being an information ‘have not’ is a life
sentence to poverty and underdevelopment.
The digital divide is not only about fairness. Many of the efficiencies brought
from ICT technologies and ebusiness hinges upon network economies. A sense
of the gains from network economies can be gained by looking at experience
with the telephone. One telephone set is merely a curiosity upon a desk. A few
phones in town may be helpful. What really makes a telephone useful for its
users is the possibility of talking to almost anyone at modest cost. The gains for
networked business, community and government grow dramatically as ICT
technologies become as ubiquitous as the telephone.
Evidence presented earlier shows that most other countries did not generate a
presence on the Internet (ie, have websites about business opportunities or
government services, etc) until after some eight to ten percent of their
population has access to the Internet. Jamaica is some way short of that point
at this time (measured with ITU definitions).
The Government of Jamaica, in partnership with business, is striving to raise
access to PCs and the Internet. Current approaches include:
•
introduction of PCs into Jamaica’s schools — over two thirds of all schools
are now equipped with computers, although access by all students is still
limited. The Government of Jamaica is examining the feasibility of utilizing
existing computer labs as access points for the public;
•
the Government of Jamaica is also committed to programs to raise public
awareness about the importance of ICT and the benefits from using it in
business and other walks of life;
14
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•
Grace Kennedy in Partnership with Western Union has installed computer
kiosks with Internet access in all the parish libraries;
•
C&WJ have agreed to establish a number of Internet Access Points across
the island. Some post offices are being equipped with Internet Kiosks with
equipment provided by C&WJ;
•
the Government of Jamaica has announced that it will install computers in
public places to provide access to email and the Internet. Community Access
Points (CAP) are being provided by the Social Development Commission;
and
•
the Government of Jamaica has also removed all duties and sales taxes on
computers and peripherals, making their acquisition by ordinary people (and
business) more affordable.
These measures, and others like them, are vital in accelerating Jamaican
societies progress up the social learning curve about PCs and the Internet. They
are of central importance in ameliorating the threat of the digital divide.
Action
The Government of Jamaica in partnership with business should continue with
the application of a range of measures designed to promote widespread access
to computers and the Internet to all sections of Jamaican society.
3.2
Telecommunications and the Internet
The World Bank has identified that access to telecommunications is a key
developmental issue for Jamaica:
“More in some parts of the world than in others, poor people talk about the
importance of telephones to increase their connectivity to information, such as the
market prices for their goods and other knowledge about the outside world. In
Millbank, Jamaica the need for telephones was mentioned by several discussion
groups. The researchers write:
The community feels very strongly that the market exists for their enterprise
and the road and telephone would lead to the creation of an economically
viable industry. However, they ranked telephones as more important as they
believe these will provide income earning opportunities and a faster response
time to health or other emergencies that may arise in the community…. The
lack of telephones was a recurring theme, possibly derived from a sensed of
alienation through the remote location. Aside from the telephone, the young
men and women have a craving for information technology, and are well
aware of the Internet, seeing enterprise opportunities for marketing their
products in the area.
In other discussion groups in Millbank, women equate the telephone to the local
bridge across the river. In one group, a woman declares “this is the year 2000, the
age of technology; it is full time that we get a telephone.” In Little Bay, Jamaica’s
lack of 13
telephones and post offices is a problem identified by all discussion
groups.”
13
Narayan, Chambers, Shah and Peteschp 2000, Crying Out for Change: Voices of the Poor, Oxford University
Press, New York, p. 239.
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Indeed, the anecdotal importance of telecommunications is supported by
statistical evidence; increased telephone access is correlated with per capita
14
income.
While access to telecommunications services is necessary for communication
using simple voice telephony, it is obviously also important for the uptake of
ebusiness.
Apart from basic fixed telephony, other telecom infrastructures that are
essential for electronic commerce include:
•
wireless services;
•
broadband services (including ADSL, IDSN, cable TV and satellite) — these
allow for fast access to Internet operations; and
•
international interconnections — these are constitutive for Jamaica’s
overall capacity to access the Internet.
It is not enough to say that such technologies exist in Jamaica. They need to be
widely available and at affordable prices. Jamaica’s telecommunications services
are both constrained in their relative availability, expensive and relatively
15
unreliable.
Competition is a key to overcoming these problems. While Jamaica’s
telecommunications regime is seen as relatively competitive in comparison t o
its peers (Figure 3.1), there is scope for improvement in order to advance the
uptake of ebusiness.
3.2.1
Progressive competition in Telecommunications
Telecommunications in Jamaica have been subject to regulatory reform.
Prior to March 2000, Cable and Wireless Jamaica Limited (C&WJ) had a
monopoly on telecommunications services in Jamaica. C&WJ had an exclusive
license to provide services for 25 years with an option for renewal. The
Government of Jamaica negotiated an agreement with C&WJ to terminate
C&WJ’s monopoly and liberalise the telecommunications industry on a phased
basis:
•
Phase 1 — 1 March 2000 to 31 August 2001. Liberalisation of market for
mobile phones and resale of international voice calls.
•
Phase 2 — from 1 September 2001. Scope for competitive entry of:
domestic carriers, Internet Service Providers (ISPs) and subscriber TV (STV).
•
Phase 3 — from March 2003. All services, including international voice
telephony services, are subject to competition.
These
arrangements
(among
others)
were
established
in
Telecommunications Act 2000 that came into effect on 1 March 2000.
the
14
See World Bank, as quoted in Grace, Kenny, Qiang, Liu & Reynolds 2001, Information and Communication
Technologies and Broad-Based Development: A Partial Review of the Evidence, Draft, p 16.
15
See Kirkman, Cornelius, Sachs and Schwab 2002, The Global Information Technology Report 2001–2002:
Readiness for the Networked World, Oxford University Press, New York.
16
FOR
JAMAICA
Figure 3.1
PERCEPTION OF EFFECT OF TELECOMMUNICATIONS COMPETITION ON QUALITY
AND PRICE
Is there sufficient competition in the telecommunications sector in your country to ensure high quality,
infrequent interruptions, and low prices? (1=no, 7=yes, equal to the best in the world)
Country
Finland
Sweden
Chile
Germany
Hong Kong SAR
United States
Austria
Canada
United Kingdom
Norway
Dominican Republic
Singapore
France
Italy
Switzerland
Iceland
Korea
Netherlands
Portugal
Taiwan
Australia
Belgium
Denmark
El Salvador
Brazil
New Zealand
Venezuela
Argentina
Spain
Estonia
Israel
Colombia
Japan
Slovak Republic
Jordan
Hungary
Philippines
Czech Republic
Ireland
Malaysia
India
Sri Lanka
Egypt
Thailand
Greece
Peru
Guatemala
Indonesia
Jamaica
Panama
Uruguay
Turkey
Bolivia
Russian Federation
Mexico
Slovenia
China
Poland
Latvia
Romania
Ukraine
Paraguay
Zimbabwe
Lithuania
Costa Rica
South Africa
Bangladesh
Bulgaria
Nicaragua
Vietnam
Ecuador
rinidad and Tobago
Nigeria
Honduras
Mauritius
4.6
MEAN
0
1
2
3
4
5
6
7
Value
Source:
Kirkman et al. 2002, p. 350
17
FOR
JAMAICA
Competition in telecommunications has brought about many tangible and
material changes in Jamaica. Key aspects include:
•
The entry of vigorous competitors. In particular, the establishment of
Digicel and Centenial Digital Jamaica rolling out their cellular
communications infrastructure and business support systems, in addition to
the expanded activities of C&WJ, has involved some of the biggest direct
foreign investment projects seen in Jamaica in many years.
•
Choice. Consumers can now purchase a wide range of products and services.
Some of these are innovative products designed to meet the needs of
Jamaicans.
•
Price reductions for customers. Prices for wireless telephone services and
Internet access have fallen. The deepest price reductions have been in seen
in international call (voice) charges.
3.2.2
Fixed Telephony Issues
Fixed telephony (ie, involving terrestrial telecommunications facilities generally
through physical networks) provides the most widespread, reliable means of
obtaining access to the Internet for many people, businesses, government
agencies and community bodies. Even in countries with high incomes and
greater potential to purchase alternative technologies, telephone access remains
the most common means of obtaining Internet access. It will remain important
in Jamaica for some time to come.
The Government of Jamaica has sought to ensure that every household,
including rural and the urban poor, has access to basic telecommunication
services. As part of its agreement with the GoJ, C&WJ undertook to provide a
significant number of landline connections around the island.
Over the past decade there has been a steady increase in the number of fixed
telephone lines in Jamaica, although number of fixed lines now appears to have
reached a plateau. Despite this, there is evidence that Jamaicans do not have the
level of access that would be expected even taking into account ability to pay
and geographic factors. Analysis recently conducted by the OUR identified that
taking into account Jamaica’s circumstances it should have a teledensity ratio of
16
22.9 percent. Meanwhile actual or measured teledensity stands at 19.9 percent.
The OUR findings suggest that Jamaica has under invested in the domestic
telecommunications network (fixed line and payphone).
Universal access is one issue that competition will not solve immediately. It is
extremely unlikely that another business would seek to enter as a carrier and
rollout a universal network (and it would probably be economically wasteful if
they did given the capital tied up in duplication). Competition may in fact
confound progress in obtaining universal access.
As with most other countries, telecom companies invest in activities that
generate the highest returns. The highest return activity in Jamaica is in
16
Office of Utilities Regulation 2001, Quality of Service Standards for Cable & Wireless Jamaica — A
Consultative Document: Final Draft, Office of Utilities Regulation, Kingston.
18
FOR
JAMAICA
servicing international calls. Once the domestic terrestrial network has included
the urban and medium density areas, there is little incentive to extend expensive
infrastructure to remaining areas with lower customer density and higher costs.
Thus other less affluent segments of the population are increasingly left behind
in the race to connectivity.
The dilemma is whether it is in the public interest for government to intervene
and continue to push for the installation of services to all (ie, a universal access
obligation) or to seek to bypass reliance on fixed lines and instead turn t o
greater reliance on mobile services (which would be less useful for widespread
Internet access).
The project team notes that the Jamaica Telecommunications Advisory Council
(JTAC) recommended that the Telecommunications Act be altered to address
access more directly. In its terms:
“The relevant provision in the Telecommunications Act should speak to universal
access, as opposed to universal service. The main elements of universal access
include:
(a) Physical build-out of the network to cover unserved/underserved areas in both
rural (remote) and urban (inner city) areas.
(b) Ability to utilize the network (knowledge/expertise to use the network
effectively).
(c) Affordability of the network.
(d) Access to the emergency services, eg. Fire Brigade, Police, Air Sea Rescue etc.
(toll-free calls).
(e) Access to the network by persons with disabilities.
(f) Access to public telephones and call boxes (including
service delivery via
17
(including pre-paid card, credit card and coin phones).”
The OUR’s recent consultation document provided evidence to suggest that the
identified ‘access gap’ in Jamaica may only be closed by additional regulatory
18
intervention and/or public financial subsidies.
Action
The Government’s commitment to making continued progress towards universal
service and access to basic telecommunications services should be reaffirmed as
part of the Government’s ebusiness strategy.
Money complicates the outlook. Fixed lines are expensive to provide. If
customers in difficult to reach locations cannot or do not pay the full cost,
someone else has to. Currently fixed line costs are artificially low reflecting the
impact of regulation and community preferences. There is a cross subsidy
between domestic fixed line services and international services. This subsidy was
sustainable when C&WJ was the monopoly provider, but there are grounds t o
suggest that it will be increasingly untenable to obtain a surplus from
17
See Jamaica Telecommunications Advisory Council 2002, Telecommunications Policy reform in Jamaica:
Recommendations to the Minister for Industry, Commerce and Technology, Kingston, July, p 8.
18
Office of Utilities Regulation 2001, Quality of Service Standards for Cable & Wireless Jamaica — A
Consultative Document: Final Draft, Office of Utilities Regulation, Kingston.
19
FOR
JAMAICA
international services in a competitive environment. ‘Rate rebalancing’ or a
shift to more realistic cost reflective pricing is already underway.
The range of mechanisms available to fund universal access could include:
general taxation; higher interconnect charges; continued cross subsidies; or a
fund raised through contributions from the industry. All of the approaches suffer
from drawbacks and entail imposing costs on somebody.
The JTAC had earlier suggested that provisions in the Telecommunications Act
for a Universal Service Fund be adjusted to address ‘Access’. The Council
recommended that the fund be financed through an adjustment in the price cap
and on the basis of collection from all service providers at a rate not exceeding
5percent of revenue.
Action
It is recommended that the GoJ identify practical means to finance the
proposed Universal service/access arrangements that will apply in the future as
soon as feasible. In this regard it is recommended that the Government closely
examine the approach suggested by the Jamaica Telecommunications Advisory
Council.
3.2.3
Mobile Telephony issues
Jamaicans have embraced the use of mobile phones. The number of mobile
phone subscribers has increased by 440 percent in the two years to December
19
2001.
Deregulation of wireless services in Jamaica has seen an explosion in their use
(see Table 3.1). Mobile connections now exceed fixed connections.
Table 3.1
ESTIMATED JAMAICAN MOBILE PHONE SUBSCRIBERS (1999-2001)
Year
Source:
Subscribers
1999
160,000
2000
224,000
2001 (September)
825,500
BuddeComm 2002, p. 9
There is an issue about involvement of mobile phone carriers and retailers in
any universal access fund arrangements that may be established. Mobile
operators may point to special provisions of their license requirements that
indicate that the licensee shall provide 90 percent geographic coverage of
Jamaica within 5 years of the grant of the license. This implies that they have
already been subject to a fairly onerous universal access burden to be achieved
within a relatively short timeframe. On the other hand, it is likely that mobile
19
OUR 2002, Toward Universal Service/Access Obligation For Telecommunication Services in Jamaica: A
Consultative Document, Office of Utilities Regulation, p12.
20
FOR
JAMAICA
service operators and their customers would also gain through wider access t o
fixed line services and they should contribute also.
On balance, mobile operators should contribute to industry fund arrangements, if
established, although there may be scope to adjust financial contributions
reflecting the broad picture about responsibilities and capability to pay.
Action
The Government of Jamaica should include mobile service provider in the
universal access fund arrangements, if one is established. Their contribution
could be adjusted to reflect other requirements that they are meeting.
3.2.4
Broadband and Ebusiness
With ebusiness transactions involving increasingly multimedia applications, high
speed ‘always on’ access to the Internet becomes vital. Alternative broadband
Internet access infrastructure to the basic dial-up system include technologies
that use basic phone lines (ISDN or DSL), cable TV or satellite.
The Broadband Productivity Dividend
The use of Broadband Internet access is associated with better business
outcomes. Table 3.2 reports the findings of a study of business conducted for
Cisco Systems. It illustrates that a higher portion of businesses with a broadband
Internet connection gave a ‘yes’ to each question indicating that they obtain
the expected benefit. This is so for every one of the expected benefit
categories. In short, if using the Internet is beneficial (and there is evidence that
it is), using broadband to access the Internet is associated with obtaining more of
the benefits.
21
FOR
JAMAICA
Table 3.2
BENEFITS FROM INTERNET USE (PROPORTION OF SAMPLE THAT AGREED TO PROPOSITION
Use of the Internet in
business has…
your
Broadband
Non-broadband
Total Internet
Connected
Business
(%)
(%)
(%)
Increased ease of doing market
research
67
61
64
Increased knowledge of market
67
61
64
Increased quality of customer
service
68
59
63
Customers increasingly aware of
channels to do business
63
55
59
Reduced business costs
62
55
58
Provides access to new markets or
customers
60
56
58
Provides value-added applications
63
50
56
Increased efficiencies in sales &
distribution
57
46
51
Development of closer one to one
relationships with customers &
markets
51
45
48
Increased sales, customers or
business revenue
49
40
44
Increased ability to customise
product for customers’ needs
43
34
39
Source:
Cisco Systems, 2002, Built For Business II, p.21.
If there were general benefits from using broadband these would be expected t o
be reflected in the bottom line for businesses. There are little or no official
statistics that allow examination of this possibility. The recent Cisco study
provides some support for the notion that the gains are related to material
outcomes for business. It reported that businesses with non-broadband access t o
the Internet report costs savings on average of 1.5 percent. However, businesses
with broadband access to the Internet report an additional 4.8 percent worth of
cost savings. Survey results that support this finding are reflected in the Figure
on the following page.
22
FOR
JAMAICA
Figure 3.2
COST SAVINGS FROM USE OF THE INTERNET (% OF CURRENT COSTS)
14%
12%
Broadband Cost
10%
% of Businesses
Average Non-
Average
Savings
Savings
8%
Broadband Cost
6%
4%
2%
0%
1 to 5
6 to 10
11 to 25
Broadband
Source:
> 25%
Non-Broadband
The Allen Consulting Group Business Database
The dark bars in Figure 3.2 reflect cost savings from use of the Internet
reported by businesses with a broadband Internet connection. The lighter bars
reflect cost savings reported by businesses with a narrowband connection. The
dotted lines across the bars reflect the weighted average cost saving reported for
20
each category of Internet connection.
Issues To Address About Affordable Access To Broadband
Actual and potential users of broadband Internet in Jamaica complain of the
21
high absolute and relative costs. As an indicator some business users advised the
study team that quoted prices for a T1 leased line connection in Jamaica were
some 3 to 5 times more expensive than a similar facility the US or Canada. In
the meantime, some commentators have noted that broadband access prices in
22
Jamaica have fallen over the past year. The project team was unable to obtain
reliable data about the price of broadband Internet access for business or
household use.
Further discussion of this issue is provided in the final Booz Allen Hamilton
23
egovernment report.
From the beginning of March 2003 provision of broadband services, like other
telecommunications services, will be contestable. It is not clear that the removal
of many regulatory barriers to entry will in fact result in the entry of major
competitors, increased competition and price reductions. It is not clear if there
20
The weighting takes into account those businesses that report no cost savings.
See Grant, France and Hsu 2002, Towards an Internet-Based Education Model for Caribbean Countries, p. 2.
22
Booz Allen & Hamilton 2002b, Jamaica Information and Communications Technology Project: EGovernment Component — Consolidated Final Report, Booz Allen & Hamilton, McLean (VA), p. 76.
23
Booz Allen & Hamilton 2002b, Jamaica Information and Communications Technology Project: EGovernment Component — Consolidated Final Report, Booz Allen & Hamilton, McLean (VA), pp. 79-85.
21
23
FOR
JAMAICA
are not other, structural barriers to entry. The experience in other economies is
that despite the potential of new technologies, broadband Internet access is
dominated by terrestrial telecommunications capacity, particularly fibre optic
cable and, for small business and household use, xDSL technologies. This means
that despite the removal of regulatory barriers to entry, broadband delivery and
pricing is typically in the hands of larger, incumbent carriers.
The presence of probable structural factors that provide market power t o
incumbents suggests that there may still be a role for regulation, even after
introduction of full contestability. In its egovernment study Booz Allen
Hamilton noted that:
“the current price regulation structure designates T1 lines for value pricing rather
than cost based pricing despite a lack of competition. … The new tariffs should be
cost-based, with the regulator having received the appropriate documentation
justifying the cost. The Office of Utilities Regulation, OUR, will have to evaluate
whether there is the required level of competition to allow leased lines to be
accessed from the value pricing perspective. … we would argue that C&WJ
publish all cost associated with the use of their leased lines and enhance data
services. To achieve this, the government will have to ensure that there are clearly
outlined and enforceable regulations, which allow OUR to regulate all
telecommunications operators. The regulation of leased lines and other enhanced
services are
critical because of the impact to the overall economic development in
24
Jamaica.”
While acknowledging that price regulation of broadband and associated services
is a particularly difficult regulatory area, with many critics of excessive price
25
control in other jurisdictions, the importance of broadband to Jamaican
ebusiness suggests that it is too risky to take a passive approach. Regulation does
not imply an immediate heavy-handed response There are a range of
approaches that should be applied progressively that would reduce risks and
maintain pressure for progress. This would include:
•
obtain information about broadband prices in Jamaica — if the carriers do
not provide this voluntarily this may require some regulatory force.
•
A price watch system should be put in place in order to observe changes
over time. This could be performed by OUR, FTC or any other appropriate
regulatory body.
•
This price watch system should be applied to a number of key Internet
access technologies and apply to all companies that offer those services.
•
If feasible, prices should be obtained for comparable Internet facilities in the
US, other developed countries and the region. The OECD has already made
good progress in setting out a framework for inter-country comparisons in
relation to broadband services and prices.
•
Carriers should be advised that if evidence emerges that prices appear to be
unsustainably high in Jamaica, the Government will pursue a firmer
regulatory response (reflecting a view that in the presence of structural
market factors there is insufficient competition to provide an optimal
outcome without intervention).
24
Ibid., pp. 76-7.
See Brown Regulating Internet Access: An Idea Whose Time Never Came, viewed 17 July 2002,
<http://www.adti.net/html_files/telecom/reginternetaccessppr_kbrown030600.html>.
25
24
FOR
•
JAMAICA
In any case, there is a need to conduct a more thorough investigation into
broadband access and pricing as a potential bottleneck. That investigation
should examine the need for and options available to conduct firmer
regulation upon this increasingly crucial aspect of telecommunications
activity. The findings of this investigation should be made public. The
investigation could be undertaken by a number of bodies including FTC,
OUR, the new proposed regulatory body, or a body such as CITO. Given the
importance of resolving the issue, a contribution towards the costs could be
provided by international donors.
Action
Until and unless it becomes clear that there is meaningful broadband
competition, appropriate regulatory agencies should establish a price watch
system tracking broadband prices and access over the island and over time.
Action
Data about broadband prices should also be obtained from other countries
(particularly the USA, Canada and countries in the region). Given that other
countries are very interested in this issue also Telecommunications regulators in
different countries may establish cooperative approaches to this task.
Action
An investigation into broadband access and pricing as a potential bottleneck
should be conducted. That investigation should examine the need for and
options available to conduct firmer regulation. The findings of this investigation
should be made public. The investigation could be undertaken by a number of
bodies including FTC, OUR, the new proposed regulatory body, or a body such
as CITO.
Action
If it is clear that prices are higher and remain higher for broadband Internet
access than would appear to be warranted, taking into account Jamaica’s size
and geography and other factors, the Government should indicate that it will
intervene.
3.2.5
Voice Over IP
The Internet can support voice communications as well as data. Voice over
Internet Protocol (VoIP) is a generic term for the conveyance of voice, fax and
related services, partially or wholly over packet-switched IP-protocols across
26
the Internet.
Internet telephony may also include applications that
integrate/embed the transmission of voice and fax with other media such as text
and images. VoIP offers lower prices for domestic or international
communications, although, using narrow band capacities widely available today,
the quality of communication is not as good as that provided by the
conventional telephone system.
Internet telephony has been a complex legal and political issue in Jamaica:
•
the Ministry for Commerce and Technology (MCT) allowed the
introduction of competition by issuing five licenses to VSAT operators
(under the Radio and Telegraph Control Act 1973);
26
The term Internet telephony can be used interchangeably with VoIP (Voice over Internet Protocol).
25
FOR
JAMAICA
•
litigation was undertaken (and also threatened)
regarding access to the local
27
network and the validity of VSAT licences); and
•
in February 2002 the OUR issued a Cease and Desist Enforcement Notice to
Web Communications Limited for providing Internet telephony services to
the public without a licence issued under the Telecommunications Act.
The costs and benefits associated with Internet telephony are relatively stark:
“In presenting his report, the Secretary-General underlined the following points,
which had emerged from the contributions of the membership:
a) IP-based networks represent a significant new opportunity for the membership
of the Union and are already an important part of the emerging new market
environment, in terms of volume of traffic carried and level of investment
committed.
b) From a technical perspective, IP-based networks hold the promise of providing
multimedia telecommunications services and new applications, merging voice
and data. IP may well become the unifying platform for emerging converged
networks.
c) From an economic perspective, the use of IP-based networks promises to reduce
prices to consumers, and the costs of market entry for operators, especially for
long-distance and international calls.
d) From a regulatory perspective, the development of IP Telephony is forcing a
reassessment of existing telecommunications regulation, which may need to be
reviewed in the light of the opportunities opened up, and the challenges posed,
by this new technology.
e) IP Telephony poses a dilemma for developing countries: on the one hand it
offers cheaper prices and lower costs, but it may also undermine the pricing
structure of the incumbent public telecommunication operator. The transition to
IP-based networks
also poses significant human resource development
28
challenges.”
These are all pertinent observations with respect to VoIP in Jamaica.
Naturally, incumbent carriers (such as C&WJ) are anxious about VoIP and its
capacity to result in bypass of their valuable international telephone services.
Bypass presents problems for rate rebalancing processes underway and the
ability of carriers to meet any universal service obligations placed upon them.
The current situation is that:
•
ISPs are basically blocked from offering VoIP services;
•
equipment that plugs into computers to permit voice telephony is at risk of
being deemed to be contrary to the ‘Prescribed Equipment’ provisions of the
Telecommunications Act (which is really intended to maintain the safety of
the telecommunications network, but in this case is forming a barrier to
entry for services which are not unsafe).
•
It is unclear what the legal status is for firms who may wish to explore use of
emerging Internet facilities to hold conferences and telephone calls online
27
See Infochannel Ltd. v Cable & Wireless Jamaica Ltd. Suit E014/99.
International Telecommunications Union 2001a, 'Report by the Chairman', paper presented to World
Telecommunication Policy Forum, 2001: IP Telephony, Geneva, 9 March, p. 2.
28
26
FOR
JAMAICA
(most new computers these days have microphones and video cameras are
not uncommon).
There are doubts about the current approach, which entails adverse implications
for the Internet sector, and about its practicality in the medium to longer term:
“While most developing country governments have been supportive of IP-based
networks in general, and the Internet in particular, they have often taken a different
view of IP Telephony. Consequently, ISPs in these countries may have been
deprived of a potentially valuable revenue source, and this may slow Internet
development. In some cases, ISPs have been requested to block access to specific
websites, based in foreign countries, which offer free-of-charge IP Telephony calls.
As more websites integrate voice applications, such bans will become more
difficult to enforce and the result may be that application service providers and
website developers in developing countries are
less able to compete with those in
29
countries where IP Telephony is liberalised.”
It is likely that support of Internet telephony would likely lead to quicker
adoption of computers in homes and workplaces, and generally stimulate
ebusiness in Jamaica. It would also serve the general aim of recent
communications in terms of increasing competition and reducing prices for
consumers.
The presumption should be that voice over IP is a legitimate form of
communication. In the deregulated telecommunications market that is to apply
after the introduction of Phase 3, ISPs that wish to offer Internet telephony
could become a licensed carrier if they wish. They would then be able to on-sell
telecommunications services.
This would still leave the situation for sellers of IT equipment that include voice
microphones and for businesses looking at implementing their own
communications capacity without direct use of the telephone system in an
uncertain situation.
This is a complex area that should be examined in more detail by a regulatory
body that has responsibilities for balancing the various interests at stake.
Action
The Government of Jamaica should ask the telecommunications industry
regulator to examine the issue of VoIP and its emerging potential to contribute
to increased competition. That study should also look at the desirability and
legal situation of use of emerging technologies by Jamaican business to
conduct voice and video communication without direct use of the telephone
system.
3.2.6
Internet Service Providers
Another area of telecommunications that is crucial to Internet access is the ISP
(Internet Service Provider) sector. Bottlenecks at this point would obviously
block access to the Internet for most people and businesses.
29
International Telecommunications Union 2001b, 'Report of the Secretary-General on IP Telephony', paper
presented to World Telecommunication Policy Forum, 2001: IP Telephony, Geneva, 9 March, p. 28.
27
FOR
JAMAICA
There are some 45 ISPs licensed to operate in Jamaica. This would normally
indicate vigorous competition. A recent study looking at more than the number
of licenses has found, however, that there is insufficient competition to lead t o
improvements in quality and price in Jamaica.— see Figure 3.3 on the following
page.
How can this be so? In many countries ISPs are businesses with no particular
government rules limiting competition. However, the Jamaican regime restricts,
at least notionally, market access through licensing. There are two types of ISP
licences:
•
standard ISP licences, of which 37 have been issued; and
•
ISP licences
for subscriber television providers, of which eight have been
30
issued.
While a total of 45 ISP licences have been issued it appears that the market has
engaged in gaming the regulator, and that the vast majority of licences were
obtained because they were available at zero cost and it seemed a good idea t o
have one in case they became scare (ie, by regulatory action), even though there
were no plans to actually use the licence. The impression is of a highly
competitive market with 45 or so participants, when in fact there is only a
handful of active ISPs of a sustainable scale.
This situation may be anti-competitive. The stock of non-operating ISP
licensees may overhang the market and intimidate firms with a genuine
intention to invest. The arrangements also sends the wrong signals to possible
new entrants. Overall, it is not clear what public purpose is being served through
the license arrangements and certainly what is being achieved in having so many
that are not operating.
Action
The Government of Jamaica should consider removing the need to hold a
licence to operate as an ISP, or revoke ISP licences that are not being actively
used for more than six months.
30
See Office of Utilities Regulation 2002, Public Register of All Telecommunication Licence Holders, viewed
17 July 2002, <http://www.our.org.jm/telecomcurrent.shtml>.
28
FOR
JAMAICA
Figure 3.3
PERCEPTION OF EFFECT OF ISP COMPETITION ON QUALITY AND PRICE
Is there sufficient competition in the ISP sector in your country to ensure high quality, infrequent interruptions, and
low prices? (1=no, 7=yes, equal to the best in the world)
Country
Finland
Iceland
United States
Sweden
France
Canada
Germany
Hong Kong SAR
Netherlands
Belgium
Austria
Switzerland
United Kingdom
Australia
Israel
Korea
New Zealand
Norway
Denmark
Estonia
Italy
Singapore
Czech Republic
Argentina
Chile
Brazil
Spain
Turkey
Japan
Portugal
Jordan
South Africa
Taiwan
Hungary
Egypt
Slovak Republic
Dominican Republic
El Salvador
Greece
India
Venezuela
Ireland
Latvia
Panama
Philippines
Uruguay
Colombia
Poland
Indonesia
Thailand
Jamaica
Malaysia
Mexico
Slovenia
Ukraine
Lithuania
Bulgaria
Guatemala
Peru
Sri Lanka
Zimbabwe
Ecuador
Bangladesh
Bolivia
Russian Federation
Nicaragua
Romania
China
rinidad and Tobago
Honduras
Paraguay
Nigeria
Vietnam
Costa Rica
Mauritius
5.0
MEAN
0
1
2
3
4
5
6
7
Value
Source:
29
FOR
JAMAICA
Chapter Four
Sharpening The Regulatory Framework
This Chapter deals with matters that are of immediate importance and
amenable to immediate solutions, such as the need to provide a legislative
framework that removes uncertainties about ebusiness, as well as some matters
that take up much of the time of public policy advisors, but are actually matters
that can be addressed in the medium to longer term.
4.1
Supportive Legal Frameworks
The lack of a supportive legal framework is viewed as being the most significant
barrier to the rapid development of Jamaican ebusiness. It is also one of the
easiest issues to resolve and resolve quickly.
Ecommerce and ebusiness is a new way of doing business. Business, government
and the community at large has been cautious about these new approaches and
the potential problems that may be encountered.
Stakeholders impressed upon the project team that they recognised that there
are significant issues to be addressed in Jamaica’s legislative framework t o
support expansion of the country’s ebusiness capabilities and competitiveness:
•
electronic and digital signatures — stakeholders frequently cite
uncertainties about the legal status of electronic signatures and a lack of
confidence in verification of electronic communication and authentication
as a barrier to greater involvement in ebusiness in Jamaica.
•
Evidence Act — one school of thought is that the current act is said to
specifically require signed written evidence of transactions or contracts to be
admissible as evidence in a Jamaican
court and hence faxed or electronic
31
signatures are not admissible. Some stakeholders have argued that this view
is overly cautious and incorrect. While such a divergence of opinions exists
there is a case for legislative clarification;
•
Sale of Goods Act — this may need to be updated to address the capabilities
and potential difficulties posed by online technologies;
•
privacy — it is understood that Jamaica currently has no laws regarding the
handling of individuals’ private or sensitive information (except for
background coverage through common law remedies and high level,
constitutional assurances). Global consumers are increasingly reluctant to
deal with companies operating outside of clear and robust legislative
frameworks which give consumers rights to protect their privacy. Many
other countries are providing specific laws in this area (notably, these are
technology neutral and extend beyond online use of personal or sensitive
information); and
•
intellectual property — there was some concern that Jamaican laws may not
be keeping pace with rapid changes brought about by new technologies,
31
Ibid., p. 9.
30
FOR
JAMAICA
growth in use of the Internet and new ways of doing business. There is a
sense that the owners of copyright and other forms of intellectual property,
including artistic works such as music and computer software, may face new
threats that are not addressed in existing laws. There is concern that there is
ambiguity about the applicability of older laws to new kinds of property or
the obligations of new types of businesses such as ISPs in regard to ambiguity
about carriage of information and publishing. There may also not be
sufficiently strong controls over the use of tools and devices that have
circumvention of technological copyright protection measures as their main
purpose.
The lack of a supportive legal framework for ecommerce and ebusiness in
Jamaica is not stopping the spread of the activity. There is evidence of
significant online business activity about Jamaica and importing into Jamaica
(analysed in more depth in Chapters that follow). Foreigners are selling or
marketing into Jamaica using the Internet. Larger Jamaican businesses can, and
do, bypass the lack of a legal basis for ebusiness in Jamaica by conducting such
business offshore using foreign suppliers.
What the lack of legislation is doing is making it very difficult for Jamaican
medium sized or smaller businesses to enter into ebusiness. They face more
competition from the globe while they are handicapped in pursuing ebusiness
opportunities of their own while they stay in Jamaica. While this situation is
maintained the main impact of ecommerce and ebusiness will be to ‘hollow out’
key sections of value added in the Jamaican economy.
4.1.1
Towards Solutions
The Government of Jamaica has already identified the need to adjust the legal
framework that supports business to accommodate new technologies. The
current strategic plan for the ICT sector states that
“Government must ensure that legislation covering such areas as digital signatures,
privacy, security and protection of intellectual property is put in place to facilitate
the growth of information technology; existing laws that may hinder the
growth of
32
electronic commerce should be revised and reflect the new technology.”
Significant work has been undertaken over the past year or so with respect t o
the legislative changes that need to be made to facilitate the development of
33
ecommerce in Jamaica.
The project team was advised that JAMPRO has funded a research project in
which Normal Manley Law School students identified which laws would need
34
amendment to facilitate ecommerce.
The New Economy Project in conjunction with the Government of Jamaica
have commenced a project to draft appropriate legislation — see Box 4.1 for
details.
32
Government of Jamaica 2002, A Five–Year Strategic Information Technology Plan for Jamaica, p18.
Booz Allen & Hamilton 2002a, Jamaica Information and Communications Technology Project: EGovernment Component Feasibility Study — Final Report, Booz Allen & Hamilton, McLean (VA).
34
This report was not made available to the project team.
33
31
FOR
JAMAICA
BOX 4.1: NEP Project – Electronic Business Legislation for Jamaica
The need for electronic business legislation, as a key enabler for the promotion of Electronic
Business, has been widely supported in numerous studies commissioned by the Government of
Jamaica (GOJ) and other bodies.
The NEP has commenced a project assisting the Ministry of Industry Commerce and
Technology in meeting the requirements for electronic business legislation. The deliverables
will comprise:
•
recommendations to be used in preparing drafting instructions for new Electronic
Business Legislation for Jamaica;
•
identification of the modifications required to current regulations and legislation in order
to facilitate e-commerce activities;
•
a communications and consultation program for private and public sector
stakeholders.;
•
increase the efficiency, accuracy and timeliness of all contractual and financial
transactions. (It is estimated that in 2002 the Global Electronic Market was valued in
excess of US$330 Billion);
•
enable implementation of e-government initiatives, which is a priority area for the GOJ;
•
achieve improved service quality, reduced cost and time efficiencies ; and
•
create and promote increased transparency and efficiency in the procurement and sale
of goods and services.
Myers Fletcher and Gordon have been commissioned to prepare the recommendations as a
prelude to the drafting instructions. Consultations with key private sector organisations and
stakeholders within the Government of Jamaica have been initiated. It is intended that the
drafting instructions will be ready for consideration by Cabinet and the Parliament early in
2003.
Source: http://www.neweconomyproject.com/mict.html
4.1.2
A Model Framework
Many of the likely approaches and solutions to the legal framework are not
overly contentious. They have already been addressed in a myriad of other
countries, and the issues have been analysed in detail in Jamaica and practicable
35
approaches proposed. Most of the practical approaches are set out in the
United Nations Commission on International Trade Law (UNCITRAL) Model
Law on Electronic Commerce. The Model Law is intended to facilitate the use
of electronic communication and storage of information, such as electronic data
interchange and electronic mail. It provides standards to assess the legal value
(ie as evidence) of electronic messages and legal rules for ecommerce and
ebusiness in specific areas, such as the carriage of goods.
It is notable that:
•
legislation based on the UNCITRAL Model Law has been adopted in
Australia, Bermuda, Colombia, Ecuador, France, Hong Kong Special
Administrative Region of China, India, Ireland, Isle of Mann (Crown
Dependency of the United Kingdom of Great Britain and Northern Ireland),
New Zealand, Pakistan, Philippines, Republic of Korea, Singapore, Slovenia,
the States of Jersey (Crown Dependency of the United Kingdom of Great
Britain and Northern Ireland), Thailand, and, within the United States of
America, Illinois;
35
See the discussion and recommendations in: Ibid; Booz Allen & Hamilton 2002b, Jamaica Information and
Communications Technology Project: E-Government Component — Consolidated Final Report, Booz Allen &
Hamilton, McLean (VA), pp. 86-99.
32
FOR
•
JAMAICA
uniform legislation influenced by the Model Law and the principles on which
it is based has been prepared in Canada and in the US (Uniform Electronic
Transactions Act, adopted in 1999 by the National Conference of
Commissioners on Uniform State Law) and enacted as law by a number of
jurisdictions in those countries;
While this is a matter already under consideration by the Government of
Jamaica, and the consultancy team for this project has already exchanged views
about issues and suggestions about how to proceed with the NEP project staff,
the terms of reference for this project require recommendations about the
appropriate legal framework.
Consideration was given as to whether there is value in having a specific
legislative authority and framework for ecommerce or not? (ie, having an Act
dedicated to ecommerce issues or modifying existing acts). This is viewed as
being a matter for the Jamaican legislative drafting team to resolve and reflect
practical experience in Jamaica.
What is vital is that legislation should be drafted and passed as a matter of
urgency.
Action
Legal uncertainty regarding ecommerce should be addressed by the passage of
ecommerce legislation as a matter of urgency.
The thrust that the proposed legislation should take is also a matter to be
resolved.
Jamaica’s key trading partners and many of its competitors in the region and
around the globe have already developed and implemented legislative
frameworks that take a position in regard to key issues. There is already a well
established model law. While it may be tempting to adopt innovative
approaches to some of the technical legal issues presented by ecommerce, it
would seem that a prudent approach would be for Jamaica to adhere to the broad
approaches accepted as practical by the remainder of the international
community unless there is a major national interest at stake. Discussion with
legal experts has not identified any major aspects or issues where Jamaica’s
interests are in fact unique that would demand a unique solution.
It should be noted that deviation from the model law is likely to place a greater
burden upon Jamaicans seeking to engage in ecommerce than upon foreigners
seeking to enter Jamaican markets with ecommerce. Providing Jamaican
consumers with the best protection from potentially unscrupulous electronic
traders (including those from abroad) is likely to be given most practical effect
through measures already engaged, such as coordinated campaigns by the Fair
Trading Commission and its counterparts overseas, than seeking an optimal
legal formulation, which may prove elusive.
Whatever provisions are included in the legislation it is suggested that a
principled approach be adopted. Key principles that regularly appear to drive
legislation in other countries are:
33
FOR
JAMAICA
•
functional equivalence. As far as possible, paper based commerce and
ebusiness should be treated equally by the law; and
•
technological neutrality. The law should not discriminate between forms of
technology.
While discussions often dwell upon difficulties in defining electronic signatures
or digital signatures, the nub of the legal problem is non-repudiation. There can
be no certainty in electronic communications and contracts if the parties may
repudiate what was said or agreed. The key issues that electronic transactions
legislation normally address include:
Action
•
consideration of whether electronic documents can be accepted in place of
paper;
•
the legal status of electronic and digital signatures;
•
the formation, validity and enforcement of contracts formed electronically;
•
definition of digital signatures;
•
production of electronic documents; and
•
the need to keep records.
Instructions for draft legislation and the draft legislation itself intending to
remove legal uncertainty about the status of electronic communication and
transactions should be assessed against the desire to apply the principles of
technological neutrality and functional equivalence, as well as address practical
matters such as defining the legal status of electronic and digital signatures,
and the production of documents and maintenance of records.
4.2
Addressing Cyber Crime
Some stakeholders flagged their concern that providing a legal framework t o
permit ecommerce and facilitate greater use of ebusiness could expose the
community to new kinds of crimes committed over the Internet. They asked if
there was a concurrent need to address cybercrime?
The project team notes that there is no consensus in the international
community about appropriate approaches to dealing with cybercrime. There is
still debate about fundamental issues about the definition of a cybercrime, how it
differs from traditional crime and what are the best ways of dealing with it. The
issues are some way from resolution.
Cybercrime legislation could include elements providing that it is an offence if a
person (or body corporate) causes:
•
authorised access to data;
•
unauthorised modification of data; and
•
impairs electronic communications (eg denial of service attacks).
Cybercrime legislation along these lines has been implemented in many
jurisdictions.
34
FOR
JAMAICA
The further development in this area is the April 2001 Council of Europe
CyberCrime Convention. The Convention is aimed at harmonising laws across
the 41 Council states and other countries, and has three major features:
•
it includes a list of crimes that each member country must include in its
statutes. It requires criminalisation of offences such as hacking, the
production, sale or distribution of hacking tools, and child pornography. It
also features what in some jurisdictions is an expansion of criminal liability
for intellectual property violations (Articles 2-11);
•
it requires each participating nation to grant new powers of search and
seizure to its law enforcement authorities, including the power to require an
ISP to preserve a citizen’s internet usage records or other data, and the
power to monitor a citizen’s online activities in real time (Articles 16-22);
and
•
it requires law enforcement in every participating country to assist police
from other participating countries by cooperating with ‘mutual assistance
requests’ from police in other participating nations ‘to the widest extent
possible’ (Articles 23-35).
Not all of the provisions of the CyberCrime Convention are accepted in every
jurisdiction in Europe. The approach contained in it is not generally supported
in The United States of America. At risk of oversimplification, authorities and
business interests in the US are concerned that it may inadvertently become a
barrier to trade. It is not clear what elements of the convention would be or
would not be acceptable in Jamaica.
Some stakeholders were not convinced that considerations about cybercrime
should delay progress in establishing ecommerce legislation. They acknowledged
that while ecommerce was vulnerable to cybercrime, it should also be
remembered that fraud and other crimes are a fact of life with traditional
approaches to commerce. There is a risk in setting a higher standard of safety
for ecommerce, and blocking Jamaican involvement in it, by applying higher
standards to ecommerce than are applied to ordinary commerce.
The issues are some way from resolution. The project team considers that these
issues should be subject to continued consideration in Jamaica, but that this
consideration should not delay the implementation of the basic components of
an ecommerce compatible legal framework as soon a possible.
4.3
Tax and Ebusiness
There has been speculation about what the appropriate response that
governments should adopt towards the taxation of ebusiness. At one extreme,
there was the view that ebusiness should be allowed to grow in a tax free
environment — either by specific legislation or by inaction on the part of
government. At the other extreme, there have been suggestions about the
introduction of new taxes specifically designed to apply to ebusiness and the
growth of the knowledge economy (eg, a ‘bit’ tax).
Neither of these views has proven to be acceptable to governments or the
community. It has been seen that the first approach would ultimately lead t o
35
FOR
JAMAICA
governments having less capacity to meet the needs of their country for public
services. It would also induce tax distortions throughout the economy and in
trade. The second approach is generally seen as risking the development of
ebusiness and the benefits that increased use of it is expected to bring.
The consultancy team did not receive comments from initial meetings with
selected stakeholders to suggest that there was strong support in Jamaica for one
view or another. It appears likely that similarly to other countries the main
emphasis in Jamaica is to take a balanced approach that seeks to apply the tax
burden fairly, but takes into account the different nature of ebusiness where
necessary.
It is notable that there are technical challenges to tax administration raised by
ebusiness including:
•
difficulties in identifying the parties behind Internet businesses;
•
the ability of these businesses to store tax records offshore, or to encrypt
them or to alter them without trace;
•
the possibility that some types of electronic money could exacerbate the
problems faced in relation to the physical cash economy;
•
the possibility that increased use of ebusiness would lead to the removal of
efficient tax collection points, such as ‘middlemen’ in the distribution chain
from producer to consumer through the effect of ‘disintermediation’;
•
the ability of technology to change the nature of products through
‘digitisation’ and hence the taxation treatment of the income from the sale
of those products (leading to the shifting sales from services to royalties
which may face different tax regimes);
•
increased potential for some businesses to engage in tax planning, especially
the use of ‘tax havens’;
•
challenges for tax jurisdictions especially in relation to current source,
residency and permanent establishment
and allocative rules that underpin
36
international taxation approaches.
Reflecting these technical matters, it was feared for some time that ebusiness
would lead to a reduction in taxation revenue, especially for smaller economies
with less resources to shape the rules and pursue global compliance.
Other economies have been framing their responses to these challenges in the
context of emerging agreement with other jurisdictions. The OECD in particular
is advanced in terms of establishing principles and applying them. Five guiding
principles that the OECD adopted in Ottawa in 1998 are:
•
neutrality — taxation should seek to be neutral and equitable between forms
of ebusiness and between conventional and ebusiness, so avoiding double
taxation or unintentional non-taxation;
36
See Tax and the Internet: Volume 1, Discussion report of the Australian Taxation Office Electronic
Commerce Project Team on the Challenges of Electronic Commerce for Tax Administration, August 1997,
AGPS, Canberra, New Zealand’s Revenue Office “Taxation and the Electronic Medium”, April 1998 (available
from www.ird.govt.nz), and the United Kingdom’s Inland Revenue “Electronic Commerce: The UK’s Taxation
Agenda” November 1999 (available from www.inlandrevenue.gov.uk).
36
FOR
JAMAICA
•
efficiency — compliance costs to business and administration costs for
governments should be minimised as far as possible;
•
certainty and simplicity — tax rules should be clear and simple to
understand, so that taxpayers know where they stand;
•
effectiveness and fairness — taxation should produce the right amount of
tax at the right time, and the potential for evasion and avoidance should be
minimised; and
•
flexibility — taxation systems should be flexible and dynamic to ensure they
keep pace with technological and commercial developments.
The OECD member countries have used these principles when developing their
Taxation Framework Conditions. This involves, among other things, agreement
to achieve a fair sharing of tax base from ebusiness, recognition of the need t o
maintain fiscal sovereignty and commitment to intensified dialogue with
37
business and non-member countries.
Jamaican business and government authorities are grappling with much the same
issues. What is increasingly evident is that resolution of taxation issues in this
area, similarly to many others are complex matters. It is also increasingly clear
that the authorities and business have more time than many would previously
have thought. Ecommerce, especially business to consumer (B2C) ecommerce is
not growing as quickly as first thought. It would seem that there is scope to take
a considered approach to tax issues, involving continued consultation with key
stakeholders, including business interests.
Action
The authorities responsible for taxation policy and collection should reduce the
potential for uncertainty regarding their future approach to taxation of
ebusiness. They should flag the general approach they intend to take in
addressing the challenges posed by ecommerce by drawing on the OECD’s
Ottawa Principles and the Taxation Framework Conditions as a basis for
Jamaica’s approach.
If there are to be any changes to taxation arrangements consideration should be
given to a phased introduction, accompanied by actions to facilitate compliance
(eg, moratoriums and the provision of compliance incentives).
4.4
Regulatory Institutions and ebusiness
Is Jamaica’s regulatory framework in shape to address the challenges being posed
by the new ways of doing business?
There are five major Jamaican bodies that currently have a role in regulating, t o
varying degrees, the ecommerce and ebusiness space:
•
the Office of Utilities Regulation (OUR) — the OUR has responsibility for
the economic regulation of the major Jamaican utilities, with most aspects
of telecommunications regulation transferred to the OUR in 2000;
37
Organisation for Economic Cooperation and Development 2001, Taxation and Electronic Commerce:
Implementing the Ottawa Taxation Framework Conditions, OECD, Paris.
37
FOR
JAMAICA
•
the Fair Trading Commission (FTC) — the FTC was established under the
Fair Competition Act 1993 as both a competition and consumer protection
regulator;
•
the Spectrum Management Authority (SMA) — the SMA has the
responsibility for regulating the Radio Frequency Spectrum (which was
previously done by the Post and Telecommunications Department);
•
the Broadcasting Commission (BC) — under the Broadcasting and Radio
Re-Diffusion Amendment Act 1986 the BC’s role is to monitor and regulate
(ie, license) the electronic media, broadcast radio and television, as well as
subscriber television; and
•
the Jamaica Intellectual Property Office (JIPO) — administers laws relating
to intellectual property rights and has an additional developmental focus,
seeking to enhance wealth creation through the acquisition and maintenance
of property rights in Jamaica.
JIPO is the newest of the regulatory bodies. It was established as a separate
Statutory Agency in February 2002. It was evident to the consultancy team that
JIPO is making rapid progress in centralising administration of intellectual
property rights and in meeting Jamaica’s international obligations regarding I P
arising under the various international agreements. JIPO should be given scope
to continue this progress.
The OUR and the FTC are the older of the five organisations and have been
praised for their roles in facilitating competitive outcomes in a reform
38
context, and in the manner in which they work together:
“In Jamaica the principal competition law is the Fair Competition Act
administered by the Fair Trading Commission. … Under the Act where after
consultation with the FTC the OUR determines that a matter or any aspect thereof
relating to the provision of telecommunications services is of a substantive
competitive significance to the provision of the telecommunications services and
falls within the functions of the FTC under the Fair Competition Act the OUR
shall refer the matter to the FTC.
Under the Telecommunications Act the OUR is required to determine which public
voice carriers are to be classified as dominant public voice carriers and in making
this determination the OUR is required to consult with the FTC and take account
of any recommendations made by the Commission.
In practice the OUR and FTC work closely together39 having regularly scheduled
meetings to discuss cases which affect both agencies.”
It is not clear that the structure of the regulatory institutions has been a barrier
to the development of ecommerce and ebusiness in Jamaica. Ecommerce and
ebusiness has proven to be vigorous in countries with poor as well as good
institutional frameworks. Jamaicans are engaging in ecommerce under the
present system.
38
See Lodge and Stirton 2002a, Embedding Regulatory Autonomy: The Reform of Jamaican
Telecommunications Regulation 1988 – 2001, Centre for Analysis of Risk and Regulation Discussion Paper no. 5;
Lodge and Stirton 2002b, Globalisation and Regulatory Autonomy in Small Developing States: The Case of
Jamaican Telecommunications Reform, Working Paper 15, Manchester; Lodge and Stirton forthcoming 2002,
'Building Regulatory Autonomy in the Caribbean Telecommunications', Annals of Public and Co-operative
Economics.
39
Foga
Introduction
to
Jamaican
Telecommunications
Law,
viewed
17
July
2002,
<http://www.hg.org/art79.html>.
38
FOR
JAMAICA
What is less clear is if the present structure is compatible with the goal of
seeking to encourage rapid expansion of the use of Internet technologies.
Concerns that were reflected by stakeholders consulted in the preparation of
this report include:
•
ability to deal with convergence – the Internet is progressively removing
distinctions between forms of communications. Telephony is delivered over
through use of the radios spectrum as well as through physical networks.
With VoIP international telephony can be delivered through traditional
means or over the Internet. It is expected that the distinction between
Internet entertainment and broadcasting will progressively shrink as wide
broadband capacities become available. Regulatory structures that do not
take these changes into account may lock-out the use of new technologies,
reduce choice and competition and raise costs for the economy at large.
•
regulatory fragmentation – businesses competing in the same market are
currently subject to different regulators and may as a result face arbitrary
differences that induce economic distortions and inefficiency. The
regulation of telecommunications/ICT/ebusiness is handled across parts of
the various regulatory institutions yet the issues are very much the same.
Even with appropriate coordination the outcome is unlikely to be efficient.
•
competition vrs consumer protection – the current arrangements may
misleadingly give the impression that price regulation is a separate issue
from competition (ie, antitrust) regulation and consumer protection
legislation. Regulation is only necessary to the degree that there is a
deviation from that which would occur in a competitive environment. Thus,
it is best to see price, competition and consumer regulation as an integrated
package, and that a full understanding of each component provides greater
protection of the public interest. For example, a consumer complaint may
provide some indication of anti-competitive conduct which may in turn
affect the approach to price regulation. The current regime strains these
synergies;
•
regulatory capture – regulatory organisations that are locked in debates with
particular industries tend over time to become heavily influenced by the
success or failure of that industry. Such regulators can loose sight of the
bigger picture in protecting consumers and the public interest and become
vulnerable to arguments merging the public interest and the interest of the
industry being regulated.
•
high cost structures – a multitude of small agencies adds to costs. There are
economies of scale in regulation as there are in most government activities.
A regulatory structure that costs more than it could do will impose costs
upon industry and the community.
•
organisational sustainability – regulation is a difficult sphere requiring
knowledge of specific industries, economics and law among many other
disciplines. Regulators require access to skilled officials that are scarce in
many economies, including Jamaica. Staffing a number of regulators and
finding appropriate leaders, and ensuring that they have the technical skills
is difficult. The current arrangements divide the pool of available regulatory
expertise into different organisations, which is likely to reduce overall
ability to handle technical complexity, and diminish overall regulatory
capability. This may in turn reduce:
– the ability for staff to develop stronger analytical experience in the
complete regulation of sectors which have common economic and
39
FOR
JAMAICA
technical characteristics (particularly network
telecommunications, electricity, gas and water);
industries
such as
– the attractiveness of these organisations as working environments; and
– may result 40in jurisdictional overlap, and hence increased regulatory
uncertainty.
In response to many of these concerns and reflecting expectations about
‘demonoplisation’ of the telecommunications industry from March 2003
(discussed in subsequent Chapters), the Jamaica Telecommunications Advisory
Council (JTAC) has recommended that the government establish a single
regulatory body for the IT/Telecommunications/Broadcasting activity. This
would bring together the Telecommunications Division of the OUR, the BC and
the SMA. The remainder of the OUR, dealing with activities without much
competition such as water and electricity, would remain as an independent
41
body.
JTAC also sought to improve clarity about the treatment of competition policy
issues, especially in relation to overlap and duplication between FTC and the
new regulatory body. It recommended that:
•
all competition policy rules governing the
IT/Telecommunications/broadcasting area be encoded within the FTC
legislation;
•
matters which appear on the face of it to be competition issues should be
referred in the first instance to the FTC;
•
the new regulatory body, in conjunction with the FTC, should monitor the
sector to ensure prohibition of business mergers and acquisaitions that could
lessen the effect of competition in the domestic market;
•
unlike referrals to the OUR which have recourse to the Telecommunications
Appeals Tribunal, appeals to the FTCs decisions would be directed only to
the courts; and
•
the FTC should be required to upgrade its technical capacity in this area.
The project team was advised by Government officials that this broad approach
was being examined very closely by the Government of Jamaica.
To be effective, institutional checks and balances provided by a regulatory
framework must be able to cope with two potential pitfalls:
•
capture — with regulation serving the interests of those whose conduct was
supposed to be regulated; and
•
administrative expropriation — where the regulator42sets tariffs or market
rules so that the provider cannot recoup sunk costs.
40
See Booz Allen & Hamilton 2002b, Jamaica Information and Communications Technology Project: EGovernment Component — Consolidated Final Report, Booz Allen & Hamilton, McLean (VA), p. 85.
41
Jamaica Telecommunications Advisory Council 2002, Telecommunications Policy reform in Jamaica:
Recommendations to the Minister for Industry, Commerce and Technology, Kingston, p. 4.
42
Levy 1998, 'Comparative Regulation', in Newman (ed.), A New Palgrave Dictionary of Economics and the
Law, Macmillan, Basingstoke.
40
FOR
JAMAICA
Generally, measures that have proven useful to avoid adverse outcomes include
systems characterised by substantial checks and balances, including the courts
and Tribunals, as well as certain political safeguards which operate to reduce the
possibility of capture or other regulatory ‘loose cannon’ behaviour. For
example, the Telecommunications Act requires that OUR regulations be subject
to positive affirmation of Parliament. Similarly, the OUR’s Act authorises the
Minister to issue directions ‘of a general nature’, and makes the OUR directly
accountable to the Minister.
Action
The proposal to consolidate regulatory institutions, particularly the possibility of
establishing an IT/telecommunications/Broadcasting body should be examined
closely. Efficiencies and industry benefits should be identified in the process.
Appropriate safeguards to ensure that the special regulator is nether captured
by the industry or unduly hash upon it should also be considered.
A further concern underlying many of the regulatory organisations relates t o
their funding base. In particular, there is a concern that across the board funding
drawn from levies and licence fees may send less than optimal signals to the
industries, the regulatory bodies and the community as a whole:
•
reliance on industry levies increases scope for industry capture. This may
occur because the regulator may be reluctant to impose regulatory decisions
which may affect its own regulatory base. Even if this is not a problem in
practice, there may be a perception by some in the community that the
funding of the regulator may compromise the regulator’s independence;
•
over-reliance on licence fees may act as an entry barrier which may create
barriers to entry and in turn harm competition.
The project team considers that examination of the regulatory framework
should include evaluation of the scope to:
Action
•
limit the application of fees fund to amounts necessary to pay for
administrative overheads only on a cost-recovery basis. Such fees may cover
the costs associated with lodging applications, processing renewals, and so
on;
•
fund investigations, litigation, policy analysis and development from general
government revenue; and
•
return the monies raised from penalties, and fines and other measures to the
Jamaican Budget as general revenue.
Limit the scope for regulatory capture and administrative expropriation by
placing funding arrangements for regulatory agencies upon a basis combining
cost recovery for purely administrative tasks and from general revenue for other
activities. Penalties, fees and fines should be returned to the budget.
41
FOR
JAMAICA
Chapter Five
Enhancing Ebusiness Capability
Ebusiness is more about people than machines. This section focuses upon the
fundamental driver of competitiveness in a global knowledge economy —
human capital.
5.2
Human Capital
A key area of human capital development that requires attention in Jamaica
(and elsewhere) is in relation to IT skills. The Government of Jamaica has
already set about putting resources in place to raise volume of IT skills training
programs — see Box 5.1.
Box 5.1: Human Capital Development Elements of the INTEC Project
The Information Technology (INTEC) Project was initiated in April 2000, in support of the National Strategic Plan for Information Technology. The
plan puts information and communication technology (ICT) at the centre of Jamaica's economic development, as a dynamic industry and in
supporting the development of other sectors of the economy.
The INTEC Project is a three-year Project, which is intended to establish the framework for the knowledge-based society within the plan for longterm economic development.
Three basic objectives are the drivers for the project:
•
the creation of 40,000 jobs in the short term;
•
the development of a knowledge based society through life long learning, the training and retraining of our human resource, and access to
technology; and
•
the development of a vibrant local information technology industry.
Human Resource Development to provide a pool of workers able to support the establishment of a range of ICT technologies is one of five key
subprograms . The development of the human resources in respect of job creation is being managed as follows:
•
training of students in existing institutions;
•
retraining of existing work force;
•
scholarship support for talented students;
•
development of an appropriate IT curriculum to inculcate the IT culture from the Primary to the Post secondary levels in support of the new
objectives;
•
training of trainers to deliver the high end programming curriculum; and
•
informal training at the level of the community, including the Physically Challenged and inmates of the Correctional Institutions
Several private and public sector agencies support the objective to provide training at all levels in the ICT sector. HEART NTA coordinates the
creation of the human resource needed to facilitate the employment opportunities. They are supported by other private sector agencies such as
Dynamic Dimensions Inc., (DDI), Work Force Development Consortium and others.
Over 10,000 persons will receive training in various disciplines such as Word Processing, Spread-sheet analysis, computer programming (using the
CIT curriculum), medical transcription, data processing (MOUS certification), CXC Information Technology and computer aided design (CAD). The
Caribbean Institute of Technology (CIT) curriculum, is to be replicated in Community Colleges, Teacher Training Colleges and Private Institutions
across Jamaica.
In addition to training at the high end HEART NTA has provided training in Industry Based IT (Data Entry), Computer Maintenance, Programming and
Web Based Design, Customer Service Applications, Advance Word and Excel. Some two thousand four hundred people have received such training
to date. Some three thousand six hundred trainees are presently being trained at this level.
Source:
Ministry of Industry, Commerce and Technology 2002a.
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There is little that is new or innovative in advocating investment in human
capital, but it is unavoidable. As a prominent US expert said recently at a
conference in Jamaica about preparation for the knowledge economy, key roles
43
for government are TRANING, TRAINING and TRAINING.
Action
The Government of Jamaica and business should continue to place emphasis
upon facilitating the acquisition of IT skills by a larger number of Jamaicans.
Lessons from overseas show that it is not necessarily sufficient, or efficient, t o
expand every existing educational program. In some countries courses are being
expanded while graduates are sitting idle and linger in unemployment queues. In
some cases, jobs for specific areas remain unfilled while more graduates with
inappropriate skills enter the market. These quandaries have become
particularly pronounced as the ICT industry has shown itself to be vulnerable t o
cyclical downturns.
The OECD proposes a framework for thinking about appropriate government
actions based on experience of member countries. The OECD framework is
summarised in Table 5.1.
Table 5.1
ICT SKILLS: ISSUES AND ACTIONS
Skills Formation
(Which Skills?)
Skills Acquisition
and Renewal
(When and Where)
Professional ICT Skills
Skills required to
develop, use or service
ICT professionally
Post-secondary
education, IT vendor
certification
Applied ICT skills
Ability to use ICT in
non-ICT jobs
Post-compulsory
education, workplace
training
Basic ICT skills
Strong life learning
skills: fluency to use
ICT for learning,
working, recreation
Learning context,
schools (children),
training (adults), [at
work, formal courses,
informal exposure]
Main Issues
Areas for
Government
Action
• Balance
specialists ICT
skills with other
more generic
skills
• High mobility
• Recognise nonformal
qualifications
• Improve
attractiveness of
ICT careers
• Assist in
providing labour
market
information
• Examine options
for using foreign
labour
• Importance of
integrating ICT
into a
sector/profession
• Help identify
emerging ICT
skill
requirements for
non-ICT jobs
• Provide
incentives for
firms to train
workers
• Develop common
standards
• Build core ICT
competencies in
curricula
• Enhance teacher
skills
• Promote ICT
skills as
important
“generic” skills
for life long
learning
• facilitate roll out of
ICT in schools
• promote ICT
skills among
teachers
Source: Organisation for Economic Cooperation and Development 2002, p. 174
43
Garrison 2000, 'The Knowledge Economy: A New Context for Development', paper presented to Jamaica in
the 21st Century, Kingston, November 14-15.
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Achieving a better match of ICT skills supply and demand requires information.
Without this resources will be wasted. The consulting team were unable t o
identify an existing information source in Jamaica about this matter. Original
data may have to be collected relating to:
•
a survey of industry demand for ICT skills — it is important that this
collect information from industry in general not just the ICT sector; and
•
an analysis or survey of the current enrolment and completion rates of
public and private education and training suppliers.
Often the key to progress is in bringing together the various parties in the skills
development market (ie, buyers and sellers of skills). Other countries have found
that an inexpensive way to do this is to establish an online forum — an online
44
skills exchange.
Action
The Government of Jamaica should evaluate the balance of supply and
demand in ICT skills. This may involve original data collection. This may be an
appropriate Task for CITO with the support of the Education Ministry and
business.
5.3
Developing a More Entrepreneurial Culture
Entrepreneurship is in short supply everywhere. This is in part why success is
well rewarded. Some stakeholders reflected that Jamaica faced significant
challenges in this regard:
•
it is claimed that the education system places greater emphasis on preparing
bright people for the professions, a career in large corporations, or in
government, rather than in starting and growing innovative new businesses;
•
capital for ebusiness ventures is limited. Banks are the major source of
finance for working capital for domestic firms in Jamaica but, reflecting
current macro-economic policy settings and the lingering balance sheet
repair difficulties facing the Jamaican banking sector, access to capital is
tight and funds are expensive. While, of the Caribbean countries, “Only in
Jamaica is there a small market
for short-term commercial paper issued by
45
large corporate entities”, venture capital is said to be almost non-existent
at present. There are apparently limited opportunities for incubation of new
businesses where people with new ideas can learn by doing in association with
others; and
•
there are problems with partnering. Many stakeholders reflect that
partnering is a powerful means of accelerating business development,
especially in ebusiness. This has not been lost on Jamaican business interests
overseas, with many of the more vigorous online commercial activities
about Jamaica that are already available apparently involving partnership
arrangements in key aspects of the business. It was reported that Jamaican
businesses at home, especially small and medium sized businesses, have been
44
See for example the skills exchange which operates in Australia available at www.ITskillshub.com.au.
Worrell, Cherebin and Polius-Mounsey 2001, Financial System Soundness in the Caribbean: An Initial
Assessment, International Monetary Fund Working Paper WP/01/123, p. 6.
45
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reluctant to use partnering or strategic alliances in to accelerate
development of competitive capacity in ebusiness.
This situation is not conducive to development of entrepreneurial ebusiness
ventures. This is not to say that Jamaicans are not entrepreneurial. Some
evidence provided to the project team suggests that the contrary is the case.
There are already many Jamaican entrepreneurs operating dynamic businesses
online. A challenge is that many have left Jamaica to do it.
5.3.1
Venture Capital And Ebusiness
Access to capital is a key constraint to growth in the Jamaican economy at
present. Obtaining capital for start up businesses built around an ebusiness
strategy is particularly difficult, especially after the failure of many ‘dot coms’
around the globe.
Macroeconomic issues also raise significant challenges to investment. Price
stability, exchange rate stability, rebuilding the banking sector after crisis and
management of Jamaica’s significant debt are major concerns.
The Government of Jamaica has also tried various means of creating enhanced
access to capital for the ICT sector and ebusiness ventures. Most recently the
Government of Jamaica established an Information Technology Loan Fund and
proposes the creation of a Venture Capital Fund.
The Loan Fund has apparently encountered some of the usual difficulties to be
46
expected in extending public sector money to risky business enterprises.
The Venture Capital Fund is to build on the resources of the existing
Technology Development Fund, but will be managed with the flexibility for
managing development funds as obtains in other countries. The aim will be t o
build on the intellectual property of Jamaicans in developing a viable industry.
This was intended to:
•
seed the development of an ICT industry in order to ensure sustainability,
and
•
encourage the establishment of a venture capital industry in Jamaica, in
order to meet the broader economic objective of improving the climate for
entrepreneurship.
The viability of the fund was predicated on the financial participation of the
private sector, and the mobilising of private sector capital for the purpose of
equity and other risk-taking investments in new and early stage companies.
To date recommendations have been received from consultants, and discussions
47
are being held with potential financial partners of the private sector.
46
See Ministry of Industry, Commerce and Technology 2002a, Report on the INTEC Project and the
Circumstances Under Which the National Investment Bank of Jamaica Placed Netserve in Receivership,
Kingston.
47
Ministry of Industry, Commerce and Technology 2002b, ‘Performance of the Information Technology
Research and Development (INTEC) Project for 2000/2001 and Focus for Fiscal Year 2001/2002’ Kingston.
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5.3.2
Stronger Private Sector Involvement
A variation to loan and venture capital schemes is proposed. This variation
starts with the premise that financing ebusiness development is a risky business
best left to business. Nevertheless, there is a national interest in seeing
accelerated development of the activity and reasons to expect that the market
if left to itself will under invest in it. The challenge is to find a way of providing
public sector encouragement without providing all of the money and absorbing
all of the risk, or even a large part of it. A further challenge is to build the
capacity of the private sector to fill the venture capital role, rather than
displacing it with cumbersome government bodies.
It is suggested that the Government of Jamaica provide for the establishment of
Pooled Ebusiness Funds (PEFs). PEFs would be private companies, established
under legislation, that raise capital from investors (no investor would be able t o
hold greater than say 30 percent of the PEF’s shares) and use it to invest in
ebusiness ventures. In return PEFs and their shareholders are taxed at a lower
rate on income generated through PEF activities. The legislation would place
constraints on what is and is not a legitimate ebusiness PEF and establish a
regulatory body to ensure that the rules were followed. Examples of such
restraints could include:
•
PEFs would be required to invest:
– in Jamaican firms that will establish or significantly expand an ebusiness
related business;
– in newly issued ordinary shares or other kinds of newly issued shares;
– in at least ten percent of the investee business’ paid up capital;
– a minimum percentage of its capital within five years;
•
PEFs would be prohibited from investing:
– in other PEFs;
– in retail sale or property developments;
– in companies whose total assets exceed a certain value;
– more than, say, 30 percent of its capital in any one business.
This scheme provides:
•
additional capital for ebusiness ventures at low cost to the Government of
Jamaica — there is only a cost to the Government of Jamaica if the
investment actually is profitable (ie, if the investments are unsuccessful then
there is no cost); and
•
the private sector with a framework for partnering:
– PEFs become part owners of the
firms they invest in. Before
approaching a PEF it is therefore likely that firms will seriously consider
what they want from a partner with whom they will be sharing
ownership. The PEFs will need to establish a record of bringing value t o
the table in addition to their money; and
– in order to receive money from a PEF it will be necessary to convince
the investors of the potential commercial value of what they are doing
46
FOR
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(or planning to do). This is likely to improve the quality of ebusiness
business development.
Broadly similar arrangements applied elsewhere have stimulated significant
investment in risky ventures at modest cost to government — see Box 5.2.
Action
The Government of Jamaica should seek to foster greater private finance in
ebusiness ventures by introducing Pooled Ebusiness Funds.
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Box 5.2: EXPANDING PRIVATE VENTURE CAPITAL FUNDS — INSIGHT FROM AUSTRALIA
A shortage of capital for investment innovative business has been a constraint impeding growth in Australia’s technology sector for some time.
Governments had attempted to address this constraint with grant programs, tax concessions and through the establishment of public sector venture
capital funds which provided concessional and commercial debt and equity. These activities met with mixed success, but were expensive for
government. The main message was that public sector agencies were not well suited to identifying commercial opportunities.
The national level of Government in Australia, The Commonwealth Government of Australia developed a new system that sought to mobilise private
sector funds and develop the capacity of the private sector to invest in risky, innovative business opportunities. The Pooled Development Funds
Program was introduced in 1992 to develop the market for equity capital for small to medium sizes enterprises (SMEs). Under the Pooled
Development Funds Act 1992 a private company is established, known as a PDF, that raises capital from investors for investment into SMEs. To
date the Program has been administered by both Coalition and ALP Governments and appears to have bipartisan support.
Establishing a PDF
To become a PDF companies are required to register with the PDF Board and provide the Board with annual returns on the status of their
investments.
Concessional Tax Treatment
To provide incentive for investors, PDFs and their shareholders qualify for income tax concessions on income generated from the patient equity
investments in SMEs that are available under the program. Tax Concessions include:
•
PDFs are taxed at 15 percent on the SME component of their investment income;
•
Unfranked PDF dividends are tax exempt in the hands of investors (unless the investor elects to be taxed whereby they can use the
imputation credits attached to the franked dividend to offset other tax obligations); and
•
The capital gains on realisation of shares held in a PDF are tax exempt.
Investment Parameters
Investments made by PDFs must:
•
Be in SMEs with total assets of less than $50 million whose primary activities are not retail operations or property development;
•
Not be in another PDF;
•
Be for the purpose of establishing an eligible business either alone or with other parties; or to increase substantially the production capacity
or the supply capacity for an established eligible business and to substantially expand existing markets or to develop new markets for goods
and services of established eligible businesses; and
•
Normally investment by the PDF must be at least ten percent of the total capital of the investee’s business although the PDF Board is able to
approve investments of lower proportions. The investment must be in newly issued ordinary shares or other newly issued or pre-owned
shares as approved by the Board. A PDF is not permitted to invest more than thirty percent of its capital in any one–investee company
without prior approval of the Board.
The Board
The Board is made up of six members who are predominantly drawn from the private sector. The Board’s function and powers as set out in the PDF
Act include:
•
Consideration of applications for registration as PDFs;
•
Registration of PDFs;
•
Examination of requests from PDFs to vary investment plans;
•
Exercising discretion for PDFs under various sections of the Act;
•
Monitoring compliance of PDFs with the legislation;
•
Collection and examination of annual returns from PDFs;
•
Revocation of PDF registration; and
•
Provision of advice to the Minister on the operation of the PDF Program.
State of Play
Over 120 PDFs have registered up to June 2002. They have raised capital of about A$750 million capital. Of this over $350 million has been invested
in 350 SMEs.
The Treasury forecasts a ‘tax expenditure’ (ie, revenue loss) from the PDF program of less than A$1 million per annum over the next four years.
Source:
Pooled Development Funds Registration Board 2000, Annual Report 1999-2000, AusInfo, Canberra.
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5.3.3
Incubating Ebusiness Growth
Size matters when it comes to ebusiness. So does skill and experience in running
and growing a viable business. Even experienced businesses have to go through
something of a transformation as they adapt their business to the opportunities
and pressures that are associated with the online environment. Making a
mistake, even in fairly basic matters such as the office establishment can be
fatal for a new or transforming business.
It is notable that the wave of dot com companies that recently failed had ample
capital and considerable IT skills. What they fundamentally lacked was the skills
to put their strengths together within a sound business framework. As Michael
Porter points out, sound business skills are still the key factor that will sort
success from failure.
There is much anecdotal evidence to suggest that the small and medium sized
businesses that make up the majority of business in Jamaica face many of the
same problems as their counterparts in other countries. Running a business is
challenging enough without having to think about reengineering it with new
technology. In addition, while many may view that accessing the Internet would
be nice, they may not see how they can make a business around it. Most
importantly, there are significant issues such as knowing how to do it and
perceptions about the cost.
While the traditional focus of encouraging innovation in business has been upon
new businesses or start ups, it is clear that rapid diffusion of this beneficial
technology hinges on getting existing businesses to change.
Business incubation could be a powerful means of addressing these challenges.
Incubators already exist in Jamaica and have met with some success — see
Box 5.3.
In order to facilitate business redevelopment involving greater use of ebusiness
and Internet business strategies, it would be beneficial if there was a wider
network of formal technology innovation centres modelled on the existing TIC
that catered to:
•
businesses in transformation as well as start ups
•
businesses in other major centres; and
•
businesses in targeted industries (including say tourism or music).
It would also be beneficial if the Jamaican Business Development Centre’s
capacity to give advice about ebusiness and online technologies was enhanced
and that this could also be available for businesses in other major centres and in
priority industries.
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Box 5.3: Business Development and Incubation in Jamaica
The Technology Innovation Centre (TIC)
The TIC is a business Incubator serving new technology-based businesses. Essentially the TIC
provides:
•
work space through flexible office arrangements;
•
shared office facilities such as receptionist, conference rooms, telephone system, fax and
computer, copier;
•
advisory services;
•
skills development in business management, marketing and other disciplines;
•
speed in securing the needed office facilities as well as facilitating registration, the payment of
taxes, and meeting other regulations;
•
access to seed money, through the incubator’s reputation and better business plans, and often
through an internal revolving fund that provides equity or small loans on concessional terms;
and
•
the synergy of sharing and networking among tenants and with the local community.
A key aspect of the TIC is that resident businesses have immediate access to high bandwidth Internet
facilities at a cost that is a fraction of what they would have to pay in the day to day Jamaican market.
Most of not all of the companies in the TIC have been born with a significant Internet umbilical cord, even
if not all are actually based on ebusiness applications from commencement.
The TIC is part of the University of Technology, Jamaica and has established a culture of bringing
together learning and business. It has been operating for many years and expanded to its current scale
cautiously. It is located in Kingston, although it has affiliations with s few other educational institutions on
the Island (and with international bodies).
The Jamaican Business Development Centre
The Jamaican Business Development Centre promotes the creation and sustainable development of the
micro, small and medium businesses in Jamaica. It delivers its services through a service mix of:
•
technical and business management advice;
•
marketing advice;
•
production management advice;
•
technical advice;
•
finance;
•
grants and cost sharing schemes;
•
training;
•
JDDC Seminars Series;
•
tourism;
•
product development and prototyping;
•
sales promotion;
•
public relations; and
•
business registration.
No charge is made for the help and information given by the Centre’s business advisor. Should technical
or professional advice or training be required, a modest fee is charged.
Source:
www.ticjamaica.com and www.jbdc.net.
Action
The Government of Jamaica should develop a broader network of support to
incubate companies making the transition to ecommerce and online business
models. This should build upon models that are already proving to be
successful in Jamaica, drawing linkages between business, leading educational
institutions and Government support.
50
FOR
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5.3.4
Emerging Business Support
Having supported businesses through the transition to development of an online
business model and entry into potentially global markets and competition, they
still need support.
This may involve developing programs for road shows/marketing missions;
trade fairs and conferences at a lower level than previously. There may also be a
need to undertake more promotional activity in relation to securing exposure
and marketing space for Jamaican business on global ebusiness platforms.
Action
The Government of Jamaica should develop means of encouraging the
development of emerging ecommerce enabled businesses in the crucial postincubation period. JAMPRO should coordinate actions with incubators to
showcase emerging businesses to international trading partners and potential
investors, as well as in emerging Internet marketplaces.
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Chapter Six
Leadership and Coordination
Ebusiness is changing the way that business is done in business, government
and the community. It impacts upon, or has the potential to impact upon, every
sector of activity. Ebusiness presents opportunities and challenges in every area
of public administration. While private sector drive is to be encouraged, this is
not something that can be left to the private sector alone.
Key public sector objectives, including equitable growth and prosperity cannot
be assured with public sector leadership.
Key objectives cannot be met with coordination between government agencies.
Leadership also has to be shared between business, government and the
community in key areas.
6.1
Top Down Leadership
The Government of Jamaica is applying leadership from the top down. Key
institutional arrangements in government and with connections to leadership
bodies outside of government include:
•
The Prime Minister the Rt. Hon. P.J. Patterson, P.C., Q.C. The PM
provided the opening message about working in the cyber world in the
current strategic plan for ICT sector
•
Cabinet Subcommittee on Technology. This Subcommittee examines key
issues and applies a whole of government perspective.
•
Central Information Technology Office. This Office reports to the Minister
of Commerce, Science and Technology. This Office is necessary to carry
out and monitor the initiatives identified in the Information technology
strategic plan. This Office is linked with the private sector through the
Information Technology Advisory Council (IAC) and other agencies. It
seeks to identify opportunities for cross-government and private sector
initiatives, coordinate those initiatives and develop policies and new
programmes to implement this Strategic Plan and other successor plans.
•
E-Business Advisory Committee. This operates under the chairmanship of
the private sector. The committee has already established priorities for the
promotion of E-Business i.e. developing framework legislation,
infrastructure development, and community access and government
applications.
Some countries have established a new role to boost ecommerce, or ebusiness in
general. The United Kingdom, for example, has established specific Ministerial
responsibilities for ‘ecommerce and competititiveness’, appointed an ‘E48
Envoy’ supported by a specific bureaucracy. The Australian Government has
48
See http://www.e-envoy.gov.uk/ for details about role and composition of the e-Envoy and the Office.
52
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the National Office for the Information Economy (NOIE), an agency of
government that has responsibilities for development and coordination of
advice about the information economy, including ecommerce and ebusiness in
49
general.
It is not clear that countries with specific information economy or ebusiness
agencies are performing better than those without. There is also the point that
the ultimate aim is to encourage every area of government to use ebusiness
where they can and have ownership of it. There are concerns in some quarters
that agencies intending to encourage use of e-business, but without the actual
legislative responsibilities for many programs add to the cost of government and
a further layer of government.
The key issue is coordination and drive and this can be achieved many ways
without the need for building in additional bureaucracy. It is recommended that
the Government of Jamaica continue to use flexible coordination approaches
the continued clear support of the Prime Minister, his Cabinet Ministers and all
relevant agencies of government.
At some points through the report it is suggested that tasks be referred to CITO,
for further analysis. CITO has been identified merely because it seemed well
placed at present. If it is not continued, or its role is defined to focus on other
activities, it is expected that the tasks identified as being usefully carried out by
CITO should be passed to other agencies of government, or reviewed by a task
force assembled for a specific purpose.
6.2
Egovernment
There has been some criticism of the manner in which government services are
provided to the Jamaican community:
“Currently, the quality of service to the public is deemed as poor and is
characterized by: (i) cumbersome procedures; (ii) long delays; (iii) unsatisfactory
resolution of problems faced by clients; (iv) high private costs of compliance with
laws and regulations; and (v) discourteous behaviour.
The Jamaican public sector displays characteristics commonly found in most
established bureaucracies. Rigid laws and regulations govern Public Sector entities.
Compliance with these laws and regulations takes precedence over achieving
organisational objectives. In turn, this reduces responsiveness to emerging
situations and discourages innovation.
Decision-making is hierarchical and most decisions get pushed up the senior level.
Many senior level officials regard themselves as policy makers, controllers or
regulators, rather than facilitators.
In addition, both managerial and operational business in the public sector need reengineering. Most of the current business processes were established decades ago
and continue unchanged. In spite of major changes in the external environment and
the role of the public sector, business processes have not been restructured. Many
49
See http://www.noie.gov.au.
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business processes that could be completed in one-step or location are fragmented
50
between different organisations or different sections within a given organization.”
Many of these issues are being addressed through
Modernization Programme.
the
Public Sector
During consultations the project team heard many examples of activities
undertaken by the Government of Jamaica that could (and probably should) be
delivered online. Furthermore, a number of stakeholders pointed out that delay
in the adoption of ebusiness by the Government of Jamaica is foregoing
significant efficiency gains and gains from raising awareness and confidence in
electronic transactions.
Egovernment has been a important feature of Jamaica’s governmental reforms
for a number of years. For example, in 2000 UNESCO described the
egovernment push in these terms:
“Under the National IT Strategy the relevant goals state that:
‘The Government of Jamaica plans to provide its citizens with efficient government
services through the use of IT.’
Networks will be established to allow access to government services from libraries,
post offices, banks, hospitals and other public locations. The Government will
coordinate the locations access, presentation methods, and sharing of resources.
The key focus is to have citizens throughout the country, even in rural areas, be
able to find and receive information and services from different government
organizations consistently and easily.
Actions towards this end include:
•
delivery of two types of services: i) providing information to the public,
and ii) allowing transactions to be performed. Early emphasis is to be
placed on the former, i.e. provision of information to the public. The
Minister of Commerce and Technology will establish a goal to provide a
certain percentage of information services to the public within the next
three years. For example, 25% of information services will be provided by
the year 2003.
•
Identifying a set of government services suitable for electronic self-service.
Enough progress has been made in other countries in the area of electronic
government to permit identification and widespread deployment of a core
set of commonly requested government services that citizens can initiate
and complete in a single electronic session.
•
Expanding locations where public can access information and obtain
public services. To ensure that all citizens have equal access to
technology, establish a network of kiosk or computer systems that
provide Government information and services in prominent locations in
each region of Jamaica.
•
Broadening IT access to rural communities through placement of facilities
where the public an use it in convenient community locations, such as
libraries, post offices, banks, hospitals, and other government offices. For
example, rural public libraries can be networked with main libraries to
expand the services that are available to the public throughout the country.
50
United Nations Educational Scientific and Cultural Organization and Comnet-IT 2000, Jamaica, viewed 17
July 2002, <http://www.comnet.mt/Unesco/Country%20Profiles%20Project/jamaica.htm>.
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Use of partnerships to obtain support, knowledge, loans, computers, services and
training to further the development of the IT industry in Jamaica. Development
partnerships with industry, universities, and multi-lateral and multi-national
organizations. Partnerships are vital to achieving strategic IT goals. These
partnerships facilitate major culture changes throughout the government. Public
and private sector partners work together to provide more efficient and effective
51
government services.”
The project team is aware of a number of ongoing projects to implement
ebusiness solutions in the public sector and have been assured that progress is
being made. This progress, and further progress, reflects a number of studies
52
recently undertaken for the Government of Jamaica.
The box on the following page sets out significant progress in the area of
customs administration.
It is notable that egovernment faces many of the same barriers that ebusiness
does, particularly in terms of legislative issues and electronic banking. In this
respect, egovernment’s prospects will be significantly enhanced if reforms
supported in section 3.5 are implemented
Action
The Government of Jamaica should progress widespread adoption
egovernment as recommended by Booz Allen Hamilton.
of
Some governments have set goals to achieve the electronic delivery of a high
proportion of government services online with a few years. Progress towards
these goals has involved more about semantics and playing with definitions than
about service and substantial change. Government agencies in such arrangements
have felt pressured into use of the Internet rather than fully pursuing the
opportunities. In addition the actions have tended to spread IT and ebusiness
expertise thinly.
The shot gun approach seeks to raise ebusiness everywhere, when in practice
more may be achieved in circumstances where there are limited resources by
applying these approaches where the gains will be highest. It is not clear that
Jamaica can afford the shot gun approach.
Action
Continue to be selective in services and activities that are reengineered focusing
on higher value activities rather than apply across the board targets that are
unrealistic and result in diffusion of limited resources.
51
Ibid.
See Booz Allen & Hamilton 2002a, Jamaica Information and Communications Technology Project: EGovernment Component Feasibility Study — Final Report, Booz Allen & Hamilton, McLean (VA); Booz Allen &
Hamilton 2002b, Jamaica Information and Communications Technology Project: E-Government Component —
Consolidated Final Report, Booz Allen & Hamilton, McLean (VA).
52
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Box 6.1: Jamaica Customs Automated Services Online
The Government of Jamaica has developed capacity to provide customs services online. This was delivered by Fiscal Services Limited
(FSL), a government-owned information technology company.
Context
The Jamaica Customs Department's responsibilities include facilitating the importation of goods into the island and the collection of
government revenue at the points of entry. The processing of imports had been primarily manual, with a paper-based system at its core. The
system involved shuffling large amounts of paper through many sections, most of the time using the Customs Brokers as the carrier. There
was an inability to reconcile cash collected with the entries processed, as there was no linkage even when the entries were keyed into the
computer system later. This was fertile ground for fraud, inconsistencies, and an absence of accountability.
Management of the previous approach had became almost ineffective. Customs administration had very little data available to support its
decision making process; and the data the was available generally was untimely and of questionable accuracy.
A New Approach
As part of the modernisation of Customs The Ministry of Finance and Planning (MoFP) decided to develop a paperless import entry
processing system. This would involve developing a new Customs back-end entry processing system and an application that would reside on
the importer's computer and capture, validate, and submit C78 customs entry forms electronically.
The system ensures that the entries submitted from the comfort and convenience of the Customs Brokers' offices are fully validated and
lodged, thus providing the platform to expedite the processing of shipments. Entries could be easily reconciled against the collection received
via the integrated Customs Cash Remittance System at Customs locations. With the implementation of an e-payment component to be added
soon, Customs Brokers may both lodge their entries and pay duties over the Internet.
Statistics could be gathered easily and distributed to government agencies and trade organisations; management reports monitoring of the
operation would be readily at hand to aid in effective decision making.
Implementation Challenges
There were many challenges. The Customs Brokers were not supportive initially. Many felt that their competitive advantage over each other
would be diminished by the changes in their interaction with Customs. They also feared technology, many using it for the first time. Others,
while somewhat familiar with technology, did not utilise it for mission critical functions. Reactions ranged from organised protest to sabotage.
Among Customs Officers the changes often were opposed for monetary reasons. The new system would eliminate the need for overtime, as
they had to process paperwork well into the evening to keep up with the volume of entries coming in on a daily basis. Others benefited from
private arrangements with brokers.
Telecommunication services also presented two significant obstacles:
•
Many Customs Brokers required additional phone lines for access to Internet Service Providers (ISP). As it turned out many of the
lines could not be made available due to physical infrastructure deficiency in certain areas.
•
It proved difficult to access ISPs during peak hours, and the timeliness of response to relay email messages proved problematic. This
was true initially as in the early stages we moved entries and acknowledgements via e-mail.
With the backing and determination of the Ministry of Finance, the availability of telephone lines increased. FSL moved from e-mail based
communication to an on-line web application, and Customs by then understood the seriousness of the effort. FSL assembled a technical team
to assist Customs Brokers with installation of PC's, training, application software usage, and connectivity to the Internet. In addition a customer
service center with special hot lines were setup to resolve problems quickly.
Benefits and Costs
The project has cost approximately US$5.5 million. While the Government of Jamaica had funded this, there remains a considerable amount
of work yet to be done. A World Bank loan, along with government counterpart funding measures, are being utilised to develop and implement
E-manifest, Online Release, and Warehouse Control. There isa further stage administrative reform. All of this is founded on the initial software
suites that were successfully implemented.
There has been a steady increase in revenue collection, despite little or no economic growth in the country. While the number of transactions
has remained constant or trending down slightly, revenues have increased.
The Customs Brokers have come to appreciate the convenience and increased speed in processing an entry. In contrast to lodgements being
limited to Mondays to Fridays 9:00 a.m. - 4:00 p.m., the new system permits lodgements 24 hours per day, seven days a week. Brokers are
also gratified that processing of an entry, which previously took two to three days, on average, is typically done in three to four hours. (This
does not include "fast path," which is immediate, for those who qualify, requiring only duty payment.) Now 98 percent of entries are submitted
electronically, with 95 percent of the brokers on-board.
Customs overtime has been drastically reduced and can be completely eliminated once the Customs reforms are fully implemented. Customs
supervisors are now better able to monitor and distribute the workflow, thereby achieving greater efficiency. Inconsistency and errors in duty
calculation have been totally eliminated. Changes to tariff rates and other fees are quickly and accurately accommodated. Reconciliation of
payment is now provided on demand. Management and activity reports are all easily generated and made available through the implementation
of Data Warehousing tools. Collection points require fewer cashiers, yet long queues have been eliminated. The cashiers now have only to
select the entry and collect payment, without entering large amounts of transaction details.
Source:
Lorenzo
Grant,
Fiscal
Services
Limited,
http://www1.worldbank.org/publicsector/egov/jamaica_customs.htm.
Jamaica,
June
11,
2001
available
in
full
at
56
FOR
JAMAICA
C
Part C
Ebusiness in
Key Sectors
57
FOR
JAMAICA
Chapter Seven
Information Technology
The Information Technology (IT) sector has been of considerable interest in
Jamaica and the rest of the world because of its potential for sustained rapid
growth, boosting investment, jobs, output and exports (or at least reducing
import dependence). More recently it is becoming clearer that the IT sector is a
key enabler of competitiveness and growth throughout the economy.
7.1
Situation Analysis
The Jamaican IT industry is comprised of approximately 100 companies and
can be divided into the following categories of activity:
•
software distributors and dealers;
•
professional services ie, consultants, technical support and software
development;
•
computer training companies;
•
Internet Service Providers (ISPs)/web content;
•
information technology service providers including data entry, call or
contact centres, Geographic Information Systems (GIS), CAD/CAM
operators; and
•
full service or total solution companies.
IT activities of many of the user organisations have become so significant that
that they are driving convergence and making the task of industry definition
difficult. This is especially so in the area of communications. Many analysts
now take a broader perspective and talk about the Information Communications
and Technology, or ICT, industry.
Analysts have observed that the IT industry has grown to provide some or
reasonable coverage of most major IT needs within Jamaica. The major
exceptions relate to computer hardware and telecommunications equipment
manufacturing. This should not be viewed as a major impediment. Hardware and
equipment is available at world competitive prices. Entering these markets is a
risky venture with very thin margins. Table 7.1 summarises the availability of
IT products and services within Jamaica.
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FOR
JAMAICA
Table 7.1
IT PRODUCTS AND SERVICES IN JAMAICA
Service or Product
Availability in Jamaica
Hardware manufacture
None
Hardware assembly
Reasonable
Software development
Some
Services/consulting
Reasonable
Telecommunication services
Reasonable
Telecommunication equipment manufacture
None
Internet services/ecommerce
Reasonable
Hardware/software-marketing (retail/wholesale)
Reasonable
ICT human resource recruiting/headhunting
Some
Outsourcing vendor
Some
Training
Some
Source:
Allied Research Associates 2002, p. 55.
The arrival of ISP competition in Jamaica injected the most recent surge of
growth into this dynamic sector. The IT service providers have seen sustained
growth. Data entry services drove growth in the mid nineties. Call (or contact)
centres have been a major source of employment growth in the sector in more
recent years. This is supported by Jamaica’s telecommunications infrastructure,
particularly the Jamaica Digiport International, providing fast and reliable links
to the rest of the globe. The Digiport is located in Montego Bay.
Stakeholders advised the project team that the much activity in the software
area related to the tailoring of global applications to meet Jamaican and
Caribbean needs.
Many key multinational and IT companies have a presence in Jamaica (see
Table 7.2). This is said to reflect saturation of the US and other developed
markets and the perception that Jamaica can be a gateway to the Caribbean and
Central America.
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FOR
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Table 7.2
IT MULTINATIONALS IN JAMAICA
Company
Activity
Cable and Wireless
Telecommunications
Cisco
Dealer-network systems
Compaq
Dealer-hardware systems
Dell
Dealer-hardware
Hewlett-Packard
Dealer-hardware
IBM
Dealer-hardware
Incomex
na
Microsoft
Software
Nortel
na
Oracle
Dealer-software
Fujitsu ICL Caribbean
IT Systems suppling Caribbean market
Source: The Allen Consulting Group and Allied Research Associates 2002, p. 85
Education and training of an ICT workforce is a rapidly growing activity in
Jamaica. This reflects the priority it is given in national industry and ICT policy
agendas. The INTEC project, a private-public centre for national ICT strategy,
established a goal to create 40,000 new jobs by 2003.
It is also clear that the Government of Jamaica places considerable weight on
the need to develop and expand ICT activities.
“In recognition of this new environment, the Jamaican Government has made the
integration of information technology into the Jamaican economy a high priority
and a strategic imperative…. Jamaica must become the centre for ICT activities and
investment in the Caribbean. With our proximity to the United States and other
advantages such as language and relatively low labour costs, we are well placed to
attract ICT firms and specialists, and to compete
with other developing countries
53
for market share of the global ICT business.”
Key elements of the Government’s current strategic plan are summarised in
Box 7.1.
53
Government of Jamaica 1996, National Industry Policy: A Strategic Plan for Growth and Development,
Jamaica Information Service, Kingston, p. 12.
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FOR
JAMAICA
Box 7.1: A Five Year Strategic Information Technology Plan for Jamaica
The Government of Jamaica has made the integration of information technology into the Jamaican
economy a high priority and a strategic imperative. It aims to promote Jamaica as a Caribbean hub for
IT activities and investment. A three-pronged approach envisages transformations in human resource
development, in infrastructure and in the enactment of an enabling legislative and policy framework. A
Cabinet sub-committee for IT is steering the process, together with a newly set up Central IT Office
(CITO). The former Ministry of Industry and Commerce now has "Technology" added to its name and
the Government of Jamaica has publicised its intention to generate 40,000 IT-related jobs in the coming
three-year period. Strategic and other measures being adopted in the short term include:
•
the annual allocation of 2 to 4 per cent of the national budget to IT initiatives
•
catalysing Ministry tactical plans, with an emphasis on education, for the harnessing of ICT in
the various socio-economic sectors
•
the introduction of a strong IT component in the Public Sector Modernisation Programme
•
accelerating the introduction of computer labs in educational institutions
•
facilitating private sector initiatives to dramatically increase public access to the internet
•
create a Chief Information Officer position within each Ministry
•
the establishment of a transparent regulatory framework, adaptable to the emerging e-business
environment and covering areas such as privacy, intellectual property and digital signatures
•
a system of investment incentives to spread IT activities geographically across Jamaica
•
the development of an appropriate infrastructure to facilitate the delivery of governmental
services.
In addition, a series of high-profile pilot projects are being undertaken to demonstrate the benefits of IT in
the short-term. These projects are intended to further the goal of universal access and emphasise public
access to information. The post office network is earmarked for the delivery of a wide range of
community services, such as online health-care, weather and disaster preparedness bulletins, the
marketing of products and agricultural extension services. Expansion of this infrastructure will also
facilitate greater public access to government services, communication with government agencies,
Parliament and parliamentarians, thereby reinforcing the democratic process.
Longer term goals include:
•
the creation of a nation wide public IT network which is competitively priced, utilises multiple
sources and relies on the private sector
•
the provision of efficient government services to the public through the use of IT
•
the use of IT to increase international trade
•
the adoption of ecommerce for government functions, as a stimulus to private sector take-up.
The latter will also be facilitated through the provision of the infrastructure components for the
take-up of ecommerce and e-business, particularly by SMEs.
Source:
United Nations Educational Scientific and Cultural Organization & Comnet-IT 2000
7.1.1
Electronic Commerce Developments
One means of assessing an industry’s use of ebusiness is to see what it offers on
the Internet. By exploring the www in the much the same way that an
ecommerce consumer would when looking for goods and services it is feasible t o
assess:
•
the presence of Jamaican companies on the web;
•
the nature of services offered including static marketing information (or
‘brochure-wear’), the capacity to lodge queries, capacity to exchange
information between buyer and seller, placing orders (not necessarily paid
online), and capacity to make an electronic payment;
•
the location of the website (often by asking the webmaster where the site is
hosted); and
•
other information, such as patterns in the application of privacy policies,
security and management of complaints.
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The project team also assessed how easy it is to find relevant sites. Essentially
testing presence in the range of widely used channels (portals and search
engines).
This approach does not, of course, provide insight into companies’ use of the
internet for email, purchasing, participation in EDI and many other online
activities. It is also recognised that the approach is not scientific, reflecting
more about perceptions and qualitative insights. Insight about these other
matters has to be collected through other means.
This section briefly reports on insights obtained from the consultants
investigation into Jamaica’s IT sector.
The Jamaican IT sector is not as visible on the Internet as the other key
sectors. The project team was unable to find a large number of Jamaican I T
company web pages, but if there are only a 100 or so IT companies that should
54
not be surprising. About two dozen IT companies were identified. This suggests
that nearly a quarter of the total have websites, which is considerably more than
the national average.
Some observations about selected identified IT company websites are provided
in Table 7.3.
Table 7.3
SELECTED JAMAICAN IT COMPANIES ON THE WEB
Company
Activity
Ebusiness Enablement
Web site location
Web Address
Advanced Digital
Services
Software development
and IT consulting
company that
specialises in
applications for the
insurance industry
Company information and
marketing. Some price
information.
Jamaican development
and hosting
www.advancedigital.com
Amaze Internet
Limited
Website Design,
Ecommerce and Site
Marketing
marketing.
n.a.
www.amaze2000.com
Cable and
Wireless Jamaica
Telecommunications,
ISP, web hosting etc
Company information,
product information, mail
for further information, can
review bills. Chat line. No
online payment facility.
Jamaica
home.cwjamaica.com
Colis Internet
Services
ISP and Internet
services including
web page design and
hosting.
Company information,
product information
(including some prices).
Email for further
information. No online
sales facility.
Jamaica
www.colis.com
54
The project team found many more listed in various internet directories of computer service companies;
there were more than 120 listed in one category of Jamaican computer dealers alone — Jamaica: ComputerDealers,
CaribbeanOnLineYellowPages,
viewed
19
July
2002,
<http://www.caribbeanonlineyellowpages.com/listings_3/3_category_C_1945.html>.
62
Company
FOR
JAMAICA
Activity
Web site location
Web Address
Coltron
International Ltd
Computer sale, repair
and maintenance.
Network installation.
Structured cabling,
Web page
designing/hosting.
Company information.
Some product information
and prices. No information
exchange. No online sales.
n.a.
www.coltronja.com
Computer
Merchant
Computer products
and services. website
design. Technical
support. Training.
Software downloads.
Electronic product quote
and shopping under
development.
n.a.
www.compumerchant.co
m
Cybervale
ISP, web hosting and
portal for business in
St Catherine
Prices. Chat room. No
electronic exchange
facilities. Local content
directory.
St Catherine, Jamaica
www.cybervale.com
Digital Technology
Inc. Ltd.,
Internet and eBusiness Solutions
Provider. Specialising
in software
development, website
productions and IT
consulting
marketing.
Overseas (Jamaican
content)
www.digtechinc.com
InfoChannel (Allied
with Centennial
Communications
Corporation)
ISP. Web hosting.
Global roaming.
Product information.
Electronic sign up (email)
and support. No electronic
payment.
Jamaica
www.infochan.com
Jam Web (a wholly
owned Grace,
Kennedy
Company)
ISP (satellite) Web
hosting, consulting,
and Internet services.
Company and product
information (prices). No
electronic orders or
payment facility.
n.a.
www.jamweb.net
Jamaica Focus
Website development
and hosting.
Company and marketing
information. On line orders.
Developed in Jamaica.
Hosted Jamaica and
overseas.
www.jamaicafocus.com/Arrival.htm
Jamaica Online
ISP. Web and mail
hosting with roaming
capacity. Interactive
and event
broadcasting services.
Company and product
information with prices.
Portal for information about
Jamaica. No electronic
sign up or payment
facilities.
Kingston, Jamaica and in
the US
www.jol.com.jm
Jamaica Web
Services
Web hosting, web
design, and domain
services.
Product and service
information.
Jamaican and overseas
inputs. Hosted in USA,
Europe and Asia.
www.jamaicawebservice
s.com
Jam Chat
Internet telephony
reseller
Prices. Electronic
payments (US$ and
Jamaican$ credit card)
n.a.
www.jamchatjm.com
JM.Net
Web site consulting,
design and hosting
services. Off the shelf
web presence in See
Caribbean OnLine
Business directory as
well as custom web
sites.
Product and service
information.
US
www.jm.net
J Zone
Ecommerce, business
consultancy and
custom development
Company and product
information.
Developed by Jamaicans.
Hosted in USA.
www.j-zone.com
(US partner
Qualitech
Computer
Services)
63
Company
FOR
JAMAICA
Activity
Web site location
Web Address
Teleservices
Jamaica
Telemarking services
including call centre,
data entry, telephone
survey, and Internet
help desk.
Company and service
information. Contact
details.
n.a.
www.telejamaica.com
Fujitsu ICL
Caribbean
IT Systems suppling
Caribbean market
Company and service
information.
Developed and hosted in
Trinidad
www.fj-icl.com
Source:
The Allen Consulting Group
It is clear from even this partial listing of Jamaica IT company websites that
this sector of industry has made a significant investment in engaging in ebusiness
and the information economy. A sense that the project team obtained when
reading the company histories was that most of these companies have been in
the industry for some time, most over five years, which is a very long time in
Internet terms. They mostly appear to be durable companies of substance. A
further sense is that they are expanding the nature and range of the products and
services they offer. They are growing.
Use of the Internet also seems to be well integrated into their business model.
They are not ‘dot coms’ throwing away value for nothing. Most have an
underlying business and are progressively using ebusiness to extend and expand.
It appears that Website use by Jamaican IT companies are largely limited t o
advertising at present. Only a handful had implemented the capacity t o
exchange information beyond an exchange of email. Only a couple have the
capacity to place an order online and only one allows for online payment (via
credit card). This is at odds with experience in many other countries where the
IT sector is a leader in engaging in ebusiness. IT companies tend to be
innovative and their clients generally have access to PCs and the Internet,
making use of ebusiness a natural transition.
It is not clear why the telecommunications companies and ISPs (who make up a
large part of Jamaica’s IT industry) have not advanced further in electronic bill
monitoring and payment. Service providers in other countries have encouraged
55
this not just as a way of winning customers but also of reducing costs.
It is not surprising that the IT service companies engaged in web design and
hosting do not have electronic payment systems on their web sites. Most value
for these businesses is created in a small number of transactions with business
clients, rather than a large number of small transactions with consumers.
Ebusiness for this group is largely about raising awareness about their abilities.
The project team also observed that inputs are increasingly global. While many
IT company websites are developed locally, most are hosted offshore. Most of
the value added in a website is in its development and it is encouraging to see use
of local development in the companies that responded to questions from the
55
It is notable that one of the major challenges (and a barrier to entry) for the new Jamaican ISPs would have
been finding customers and also working out how to collect payment from customers all over the island. The
irony is that every customer with a new Internet account, was also acquiring a new means of paying bills.
64
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project team. Offshore hosting is not clear cut. When marketing to a global
audience businesses should send their message through the most efficient means,
and this can mean using a host located offshore. Businesses should also draw on
the best the world has to offer when designing their products. The ability to do
this at a relatively modest cost is one of the strengths of Internet technology
and is a driver of globalised production. It would be a concern, however, if
offshore hosting reflected structural disadvantages in the Jamaican system
forcing some businesses to go offshore.
The comments obtained from website managers contacted for this study suggest
a mixture of views and factors.
“Our website was developed and is maintained by one of the several local
companies that offer this service. When it was launched back in 1997/98 it was
hosted at a facility in Canada. This decision was made purely for technical reasons
in that there were 5 T1 lines serving that facility. The hosting service has since
been changed on at least 2 occasions, and I don't know the identity or location of
the current hosting service, nor do I really care as long as the site is up and access
times are good (hosting might even be done locally now).”
“…most of the web projects are being developed by Jamaicans and me…”
“Local companies offer a very bad relation between service and price, many website
companies even just resell hosting space from companies inside USA or Canada.
That made the establishing of a website to a very expensive investment.”
“Yes, our site is hosted at our ISP in Jamaica. We constructed it ourselves at the
time of it's last update, so that's probably the reason for its facility. Most Web
design companies then were more concerned with putting their logo on something
flashy rather than functional.”
“Yes we are Jamaican! Our web site is hosted in the USA, and our web hosting
services are provided by servers located in the USA, Europe, and Asia (to provide
the best service to various international markets).”
“I am a Jamaican living [overseas]. The site is not hosted in Jamaica… our
approach is about value for money. It is easier to do businesses [here]… we need a
lot of bandwidth and leased lines cost much less… can take credit card payments,
process payments… having easy access to distribution centres was another factor in
why we are here.”
“The site was developed by [non-Jamaicans] and is hosted [overseas].”
Development of Jamaica’s capacity to build and operate websites competitively
is a key consideration for the future of ebusiness on the island. Stakeholders
consulted through this project indicated that Jamaicans were talented web
designers and builders. Jamaicans are involved in many successful websites hosted
and operated in Jamaica. It is likely, however, that Jamaican businesses face
more constraints in conducting their business in Jamaica than they do if they
draw upon capacity from overseas. The technology is making this easier than
ever.
The leakage of value offshore points to a theme of the consultancy project that
is even more apparent in other Chapters. There isn’t a shortage of ebusiness
sites about Jamaica. What is in shorter supply is Jamaican ebusiness, that is,
ebusiness capacity built and operated by Jamaican industry in Jamaica.
65
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It is not clear that there is a single, consistent factor that drives leakage. It is
more likely that it is a range of factors that is shaping outcomes. many of these
were identified in earlier Chapters and suggestions made about addressing them.
7.1.2
Finding Jamaican IT Websites
The project team was unable to locate an internet portal or gateway page that
reliably collected information and links about the full range, or even a large
range of Jamaican IT websites. This is in contrast to sectors such as
entertainment and tourism where there are many such portals with much
content. Some of the websites that promised a directory of Jamaican IT and
telecommunications websites were found to be unreliable (eg, links were often
out of date). Some were assembled by community groups or industry associations
on a voluntary basis and the organisations have apparently ran out of resources
or interest declined.
While the portals are not reliable (it is necessary to scan two or more to be sure
that the searcher has found what is desired), there is no shortage of portals.
Some of the major portals and comments about them from the perspective of
using them to identify Jamaican IT websites are provided in Table 7.4.
Table 7.4
MAJOR INTERNET PORTALS REGARDING JAMAICAN IT SITES
Portal
Type
Comment
Yahoo.com
Global portal
Few Jamaican IT site listings. Most links were operational.
handilinks.com
Global portal
Good Jamaican IT site listings.
Caribseek
Caribbean portal
Stronger on tourism. Limited number of IT business sites.
See-caribbean.com
Caribbean portal
Limited number of Jamaican IT sites listed. The see-caribbean site
was not found quickly by the project team.
Jamaican Yellow Pages
Jamaican portal
netsearchjamaica.com
Jamaican portal
Largest number of IT sites. Many links were unreliable. It was not
easy to find the netsearchjamaica.com site itself.
Top 5 Jamaica
Specialist host for Jamaican
sites, although it is hosted and
developed in Canada
Small number of IT sites. All were operational. This site reliably
comes up amongst the 1st few results when using search engines
about Jamaica.
Jamaicans.com
Jamaican portal
Limited links to IT business sites. Better site for Jamaican culture.
Jamaica-gleaner.com
Jamaican
Business directory has some links to IT business sites.
Source:
The profusion of portals is not unique to Jamaica. In fact the large number is a
positive sign, indicating that Jamaica is maintaining a broad and vibrant Internet
presence. It remains the case, however, that it is relatively difficult for
foreigners or new investors into Jamaica to find Jamaican IT suppliers on the
web.
It is possible that Jamaican IT companies could obtain more awareness and
higher levels of demand if it was easier to find them on the web.
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They may also gain value if they could raise the level of online commercial
functionality. That is, enable more transactions. Alternatively, they could
reduce costs (for themselves and their consumers) if they enabled electronic
payment rather than physical payment.
7.1.3
Export Potential and Trade Impacts
There is export potential from the IT companies that have an online presence.
By definition, those companies that are online are already marketing
themselves worldwide. From the review of selected websites the project team has
observed that:
•
many of the web development and web hosting sites have exported web sites
to buyers overseas. Some are operating business Internet directories and
portals for the Caribbean at large from Jamaica (although the host may
actually be located at Network Access Points (NAPs) in the US);
•
many of the multinational IT companies located in Jamaica have a specific
Caribbean mission;
•
the call centres and related services have also built their business on export
potential;
•
some ISPs have located in Jamaica as a base for their Caribbean services; and
•
the domestic equipment suppliers appear to be the least export oriented.
It is not clear that it is feasible to encourage the export potential of IT enabled
Jamaican IT companies without also growing the domestic foundations of many
of these companies. Few, and perhaps none, of the existing companies reviewed
were ‘born global’ in the sense that they started as a purely export business. As
noted already, most have a foundation in domestic sales.
While the IT sector is export capable, it is also clear that it is import intensive.
Many goods and services to support the industry are imported. Certainly the
hardware is. Service support is also being effectively imported (eg use of
overseas web designers or hosting of websites offshore). In an interesting
paradox some of the most sophisticated countries in the world experience an I T
trade deficit (including Germany, France, Italy the UK and Canada, with the US
56
having the largest deficit within OECD countries). The countries that have a
sustained IT trade surplus are generally those countries that specialise in I T
hardware exports (eg, Japan, Korea and Finland).
It is quite likely that rapid expansion of the IT sector in Jamaica would also
induce a rapid expansion of imports.
In other countries the IT trade deficit is not a major concern. The sector is seen
as rapid source of domestic growth and employment and more recently, as a
critical enabler of competitiveness in other sectors of the economy. This should
also be so in Jamaica, although having a small, more vulnerable economy, trends
56
Organisation for Economic Cooperation and Development 2000, Measuring the ICT Sector, OECD, Paris, p.
27.
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in the IT trade deficit should be monitored as part of a strategy to expand the
sector.
7.2
Challenges
Some years ago the National Industrial Policy identified many challenges for
this sector. These included:
•
limited capital availability for start up ventures;
•
vigorous competition from other countries such as the Philippines, India,
China, and Bangladesh;
•
evolutionary change in data entry and data collection that erode some of
Jamaica’s advantages;
•
bias in the incentive legislation that has favoured only those firms within
the free zones; and
•
weaknesses in the supply of technical
and analytical skills from the
57
education and training system.
Consultations with key stakeholders indicate that these challenges remain a
concern. There is also a significant new challenge, the global downturn in the
ICT industry. This is expected to be cyclical rather than structural, but it is still
the case that it is very difficult to encourage investment in the IT industry at
present. The IT industry in many countries is static, or even shrinking. In this
context maintaining trend growth in the IT over the next year or so should be
viewed as a major achievement.
A major observation from examination of the Jamaican IT sector is that while
it has made progress and built something of a foundation, it is not yet at a
position to support widespread adoption and use of ebusiness. It is still unclear
what factors are impeding development of the range of activities that support
and develop Jamaican ebusiness. Major possibilities that have been raised in
discussion with key stakeholders include:
•
shortage of technical skills — building a website is not a significant technical
challenge. The most complex aspects (such as payment and security
arrangements) can be purchased as components “off the shelf”. People with
useful skills are emerging from the education and training system but are not
finding employment in Jamaican workplaces;
•
lack of capacity to do large projects — large projects require teams of
people with experienced leaders with project management skills.
Stakeholders report that there are very few IT companies in Jamaica that
can manage large projects;
•
difficulties facing startup companies — including limited access to venture
capital funds and entrepreneurial know how;
•
difficulties in using the Jamaican banking system to support electronic
payment and exchange — discussed in more detail in Chapter Eight);
57
See Government of Jamaica 1996, National Industry Policy: A Strategic Plan for Growth and Development,
Jamaica Information Service, Kingston.
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•
poor access to affordable bandwidth — business websites need to be reliable
and fast. High speed fibre-optic cable is often the only feasible technological
approach. While this is available in Jamaica, there is evidence that it is
relatively expensive; and
•
lack of a domestic demand — demand for domestic IT/ebusiness
development services may be insufficient to build the industry to a
competitive scale. A range of factors that shape demand for services
including lack of awareness about the potential for ebusiness, where to find
Jamaican companies that can provide advice about ebusiness, its applicability
to business in general, especially for SMEs, may be at play. In addition, as
noted at the outset of this study, Jamaica has not yet reached the take off
point where the Internet has penetrated most walks of life and web
development bursts ahead as the community finds new ways of making life
and business easier.
7.3
Suggested Approaches
Some specific actions that would advance the strategic goals set earlier in the
report are suggested below.
Action
Continue to implement the Five–Year Strategic Information Technology Plan
For Jamaica.
Action
Raise knowledge about ebusiness use and developments within the IT industry.
Action
Expand incubation of IT ebusiness start up companies.
Action
Engage in post-incubation support for emerging IT companies.
Action
Raise opportunities for partnership building within Jamaica and abroad. A key
limitation has been lack of understanding in depth about the actual Jamaican
IT industry as it stands.
Action
Make it easier for companies to find Jamaican IT companies and learn about
their market offerings. Encourage co-operation in the development and
maintenance of a private sector ICT/ebusiness portal site. This could include
working together to improve the positioning of an existing private sector site.
Action
Promote awareness about Jamaican IT/ebusiness success stories and interesting
new ventures.
Action
Obtain greater Jamaican development leverage from government purchasing of
IT inputs.
Action
Review progress against key performance indicators (KPIs) within three years
and make changes as necessary to the policy mix and strategic approach.
Some of these measures are straightforward and require no further explanation;
others do.
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7.3.1
Development of Key Performance Indicators
The development and application of KPIs is an important step in any whole of
government strategy; what gets measured gets noticed. In this regard, some
effort should be devoted in the short term to the development and clear
exposition of the indicators and the target benchmarks for which the
Government of Jamaica should be aiming. In general, it is reasonable for Jamaica
to aim to be in the top two Caribbean best performing countries for every KPI.
Some suggested KPIs include:
•
Internet host penetration;
•
Internet user penetration — in addition to being in the top two per capital
Internet users in the Caribbean, Jamaica could seek to pass the ‘takeoff
point’ of eight to ten Internet users per one hundred inhabitants (see section
1.2);
•
the cost of telephone access and associated dialup Internet use; and
•
the cost of broadband Internet use.
It is only after a number of years that these KPIs would have had time to adjust
to the reforms outlined in this report, and it is at this time that the success of
the ebusiness strategy will be truly apparent. A three year period is proposed.
7.3.2
Raising Knowledge — An ICT Ebusiness Audit
It is proposed that the Government of Jamaica undertake an ICT ebusiness
audit. This is not an examination of the use of ICT with different sectors of the
economy as proposed under the Government’s Five Year Strategic Information
Technology Plan For Jamaica. The focus is not upon inputs, rather what
factors lead to competitiveness and raising demand.
Key dimensions examined should include:
•
learning with more precision what kind of companies are in the sector, how
many people they employ, which ones are online (ie, have or use a website)
and which are not?;
•
what skill sets are required to go online? How are ebusiness facilities enabled?
(eg, self owned and operated, outsourced in Jamaica or overseas);
•
how are ebusiness facilities in the sector financed? (eg, retained earning,
bank finance, venture capital);
•
how ebusiness relates to the underlying business model and strategy in forms
in the sector, what are their online markets, who are their competitors
online and through traditional channels?;
•
how companies in the sector interface with global supply chains, and ways
that ebusiness is changing this; and
•
the extent to which firms in the sector are pursuing new partnership
arrangements to facilitate ebusiness, or where ebusiness facilitates
partnerships for other reasons.
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Aggregate data should be compiled and reported, although an underlying data
base should be retained for analysis over time.
A natural fit for this task would be to conduct it within CITO, although other
agencies may be able to contribute. This should not be viewed as an overly
demanding process. A team of two reasonably qualified personnel could be able
to do this within two to three months (there are after all only 100+ companies
to identify and review).
Data from the audit should be used to establish benchmarks upon which to assess
performance of policy measures. KPIs could include numbers of companies,
levels of employment, levels of investment, volume of sales, entry and exit
from the industry.
The ICT ebusiness audit results should be distributed widely within the
Government of Jamaica to raise awareness and understanding about the sector,
its ebusiness potential and its challenges.
Findings from the audit should be discussed within various forums. CITO could
organise forums in key parts of Jamaica to discuss the findings and the
development of performance indicators.
7.3.3
Obtaining Greater Leverage From Government Purchasing
Government agencies should be required to:
•
formally evaluate the potential for local sourcing for IT inputs on all
projects. This is mainly to ensure that local producers are not overlooked,
not to induce a bias against imports, which would be against the spirit of the
WTO and TRIPS; and
•
structure tenders to allow (or at least not put up actual or perceived barriers)
for local firms to bid as part of local consortia or in conjunction with
overseas suppliers. This is to overcome perceived problems associated with
the small size of Jamaica IT firms and their consequent ability to undertake
large projects.
Where local inputs are inadequate, unsuitable or not competitive, the
procurement process should formally require investigation of the potential for
the involvement of Jamaican inputs. This should be given a high weighting in
procurement decisions.
The Government of Jamaica should apply ‘moral suasion’ to multinationals
operating in Jamaica to demonstrate a commitment to developing the Jamaican
IT industry. Many countries have ‘Partners for Development’ schemes which
require that multinational companies report on additional activities that
contribute towards local IT industry development over a predetermined
timeframe (often two to three years). Companies that ‘graduate’ from such
programs are given preferential treatment in terms of competition for
government procurement contracts.
The Government should expect complaints against this initiative from
multinational ICT companies. These companies, especially those from the US,
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are typically initially fractious about the idea of governments posing conditions
upon contracts. That said, once the global companies see that the Government
of Jamaica is serious in this matter and they start looking for new ways of
meeting requirements, as well as making a profit, and they discover the benefits
from making a real commitment to the market they are operating in, they
generally acknowledge value in the approach.
If some global ICT companies are genuinely not interested in providing any
more than a sales and marketing office in Jamaica, the leverage approach will at
least highlight quickly who they are, encouraging the Government of Jamaica t o
quickly move on in forming closer relationships with those that offer more. If
this seems somewhat discriminatory it should be recalled that the small open
economies that are making the most rapid gains in accelerating competitiveness
in recent decades have done so through close relationships with businesses that
offered to do more than just make a profit in the host country, as well as
providing an environment where business in general could thrive.
This is an activity that could be administered by CITO or perhaps other
elements of the MCST.
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Chapter Eight
Banking and Finance
Banking and finance is a key sector of interest when considering acceleration of
ebusiness and ebusiness usage. This reflects the potential benefits that greater
use of ebusiness can bring to the sector, as well as the importance of this sector
in enabling and facilitating ebusiness in other areas of the economy.
8.1
The Sector and it’s Role
The banking and finance sector contributes significant value added in the
Jamaican economy. The most important contribution of the sector, however, is
in its role in mobilising funds. The sector plays an intermediary role, bringing
savings and investment together as well as facilitating financial transactions.
The funding intermediary function has been a rapid adopter of ecommerce and
ebusiness in many other economies.
This Chapter looks at the use of ebusiness approaches three aspects of the
banking and Finance sector:
•
Upstream banking
•
Downstream banking
•
Capital markets
8.2
Upstream Banking
Upstream banking deals with the multitude of arrangements and transactions
that the customer rarely sees between banks and related financial institutions.
Most of these arrangements involve use of, or have implications for, the
payments system.
The 'payments system' refers to arrangements which allow consumers,
businesses and other organisations to transfer funds usually held in an account at
a financial institution to one another. It includes the payment instruments cash, cheques and electronic funds transfers which customers use to make
payments – and the usually unseen arrangements that ensure that funds move
from accounts at one financial institution to another. While not exciting for
many, the payments system is a vital item of infrastructure that underpins the
functioning of modern economies.
Delivery costs for a variety of mechanisms for different banking institutions are
reported in the table below.
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Table 8.1
DELIVERY CHANNEL COST COMPARISONS (INDEXED WITH IN-BRANCH DEPOSIT COSTS=100)
In-Branch
Cash
Deposit/Withdrawa
l
Cheque
Deposit
Own
ATM
Withdrawal
EFTPOS
Direct Credit
Institution A
100
-
31
18
-
Institution B
100
80
33
18
3
Institution C
100
109
25
24
10
Institution D
100
121
59
29
-
Institution E
100
116
57
29
7
Source: Financial System Inquiry 1999, Final Report , AGPS, Canberra, p. 226.
The table above shows that cheque deposits are typically more expensive than
conducting business through a teller, while electronic based systems (such as
Automated Teller machines (ATMs) or Electronic Funds Transfer (EFTPOS) or
even direct credit (often via phone banking) are consistently cheaper for banks
to provide.
Migration from cash and cheques (ie, paper and often manual based payments
instruments) to electronic payment mechanisms, especially direct entry credit
(or ‘direct entry’) systems, would yield significant cost savings.
Reflecting the potential cost savings for participants in payments systems, they
have been rapid adopters of electronic technologies. Doing so involves
cooperation between the participants in the payments system and coordinated
action.
There is evidence of cooperative measures being taken leading to gains in
Jamaica. Details of projects and progress is summarised in the box on the
following page.
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Box 8.1: JETS Facilitating Ebusiness
J.E.T.S. Limited is a company created by the seven members of the Financial Service Sector in Jamaica
(BNS, FCIB, NCB, RBTT, JCCUL, JNBS, VMBS) to address the needs for banking and finance sector to
improve efficiencies in customer service and reduce processing costs. To date JETS have implemented 3
major projects that have made improvements in very specific areas.
1. MultiLink ABM Network - June 1, 1997:
This network allowed customers from any one Member Institution to use their debit card to perform
withdrawals or balance inquiries at the ABM terminals of any other Member Institution.
2. MultiLink POS Network - April 1, 1999:
This project extended the use of debit cards into Merchant stores so that card holders could make direct
payments via the debit cards using the POS terminals of any of the 4 Members providing Merchant
Terminals.
As of November 2002 the MultiLink network boast 267 ABM and 5,869 POS terminals across the island with
terminal presence in all 14 Parishes. Over 865,250 cards have used on the network and about 155,000 users
are online in the typical month performing about 3.57 transactions per card. The users who use both ABM and
POS networks tend to produce about 6.48 transactions per month.
3. The Automated Clearing House (ACH) - October 1, 2002:
a) Working with the Jamaica Banker's Association (JBA) J.E.T.S. Ltd. has implemented and operates the
ACH on the behalf of Automated Payments Ltd.. APL is own by the 6 Commercial Banks in the island (BNS,
FCIB, NCB, RBTT, Citibank and FGB). This project benefited from financial and technical assistance from
the USAID (New Economy Project). The ACH had effectively doubled the speed of clearing cheques (moving
from 5 or 7 days down to only 3 days).
b) In the second phase of the project JETS expect to implement electronic direct debits and credits to
significantly reduced the volume of paper cheques related to payrolls, insurance PAPs and other distributed
credit and debits.
c) Also the second phase will seek to introduce cheque imaging to reduce the cost for handling paper items.
This will require, in addition to changes in the system, changes in the laws to remove the dependence on the
paper item from several areas of law (Evidence Act, Banking Act, Bills of Exchange Act, etc)
JETS is working on two new projects:
1. A Credit Bureau Service:
The project, in its first phase, aims to capture all consumer and corporate credit information in the major
financial institutions into a single database for use in producing credit reports on individuals and companies
seeking loan financing. The measures depends upon the passage of legislation. JETS hope to have the Act in
place by 2003 and expect that once that green light is given Jamaica could have a functioning Credit Bureau
within 18 - 24 months. (See Box 8.3 below for more details about this project).
2. A Fraud Database:
The Fraud Database will seek to capture information on the instances of fraud within the financial service
sector to record the a) the details of the events, b) analysis of the techniques uses c) advice on how to prevent
the attempts d) a database of persons found to be implicated in the frauds. This will not be a public service as
in the case of the other services, but rather a private and confidential service to the Financial Institutions
themselves to help reduce the cases and costs of fraud.
A Model For Cooperation
As a general observation the key to the success of these projects have been the willingness of the Financial
Service Sector to work together on a equal footing on joint processing infrastructure projects. Pivotal to that
success is the shared processing platforms remain in the background to their individual and very competitive
marketing fronts to their consumers. Participants call it "Collaborative Competition" based on the J.E.T.S.
model where each has equal ownership in a separate services company that works on developments in the
best interest of all the participants.
An adaptable feature of this model is that some special business efforts can be entertained, as was done with
the ACH System. In the ACH case a new company was created with a separate ownership structure among a
subset of the banking sector (4 JETS Members and 2 non JETS Members) which in turn contracted services
from J.E.T.S. to handle the technical implementation and daily operations. It is likely that the Fraud Database
and the Credit Bureau will follow this strategy.
Source: E. Jenez, JETS Limited, Personal Correspondence, December 2002.
Automation of many upstream banking processes has almost certainly involved
significant gains for Jamaica’s financial institutions. The previous processes
were labour intensive and subject to long delays and error. Automation has also
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given management better, more timely information about transactions that
relate to the core business of financial institutions. This should result in better
decisions and reduced risk. Many of these benefits have in turn been passed on
to the consumer in terms of increased convenience or lower fees and interest
rates.
Banking stakeholders with responsibilities for the payments system see that
Jamaica is progressively advancing towards less costly means of exchange,
gradually moving away from cash and cheques, towards electronic systems
including ATM and debit cards, within the constraints of a strong cultural
preference for cash.
Action
The Government of Jamaica should continue to encourage cooperative
competition with and between banking institutions leading to development and
use of more efficient electronic payment instruments.
8.3
Downstream Banking
Downstream banking represents the activities that customers are likely to be
more familiar with. It involves the routine activities of retail or commercial
banks as they provide banking services to customers and businesses.
It is likely that the automation of back–office banking functions (or upstream
processes) discussed above represented the initial opportunity from digitisation
and increasingly pervasive communications networks. Financial institutions in
many economies are in the process of making further use of emerging
communication capabilities in the downstream aspects of their business.
8.3.1
Electronic and Online Retail Banking
The kinds of activities that are being developed are discussed in the box on the
following page.
The use of ecommerce and ebusiness solutions in banking and finance has
enabled financial institutions to:
•
Reduce costs. Many banks have shed high cost branch networks by providing
services through a range of innovative means. The cost saving potential
seems to be significant. Cost savings have been shared between investors (ie,
bank shareholders and bank customers through lower cost of funds).
•
Increase customer convenience. Customers value their time highly and are
quick to move to services where they do not have to queue and waste time in
order to conduct mundane business.
•
Lock in higher margin customers. Some financial institutions have identified
that Internet literate customers tend to have higher incomes and more need
of financial services. Meeting these needs has helped to retain these
customers.
•
Offer specialised ‘Internet only’ services. These provide customers with
higher interest rates on their deposits and greater convenience.
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Raise consumer confidence in the new business media. The fact that banks
were associated with cheques and credit card systems appears to have helped
raise confidence in those means of exchange when they were new. Banks in
many countries are being supportive of new electronic systems. In many
cases, they use their websites as portals to showcase the goods and services
offered by their business customers.
Box 8.2: Electronic Banking and Finance Services to Customers
Emerging electronic customer interface activities include:
Electronic banking. Banks have facilitated electronic data entry for customers that undertook financial
transactions on a large scale for some time. Features included electronic record keeping, settlement and
electronic payroll, among others. These services generally involved custom made applications that were
expensive. The progressive rollout of electronic payment facilities that are akin to Automated Teller Machines
(ATMs) included within business customers’ business operations (ie, connected to customer registers) has
simplified and deepened these arrangements.
PC banking. This was often facilitated through special software made available to the banking client. This
generally involved dedicated facilities that were relatively expensive to install and maintain. The most
successful users of these systems seemed to be medium to larger sized businesses. Some smaller scale
customers (ie, depositors) experimented with such services.
Telephone banking. The capability to conduct banking activities over the telephone has been developing for
some time. Current systems include account balance information, bill payment, transfer of funds between
accounts, transfer to other banks, and others. These systems have typically been slower in obtaining
consumer acceptance than over the counter support, but customers appear to see significant benefits once
they are familiar with the system.
Internet advertising. Financial institutions provide information about products and services available online.
This can be updated at considerably less cost than paper brochures. This has helped customers make
informed decisions, but institutions have generally found that unless they supported an immediate opportunity
to conduct an actual transaction, they were at risk of losing customers to providers who could.
Internet service availability. Initial online systems focused on making limited services available such as the
ability to calculate mortgage payments. Provision of services relating to customers’ confidential information
came later and included services included facilities to obtain account balances or electronic statements.
Internet banking. Banks have upgraded their PC banking facilities with Internet systems that require the
customer to have no more than a basic web browser and Internet access to use. These systems have tended
to provide more functionality than PC banking, frequently providing scope for real time transactions between
accounts, payments and account details.
Customer Internet banking. The Internet banking facilities have generally been made available to general
customers once higher value customers (ie businesses) have been catered for and the systems have been
tested thoroughly.
Merchant Internet transaction support. Many vendors or merchants that offer products online rely on banking
and other financial services support to conduct transactions. Credit card payments remain the most common
means of making payment online. These systems often involve bank provision of increasingly standard and
less expensive support systems to merchants that integrate with the other equipment operated by the
merchant to support their online offerings.
Other support for ebusiness. Some financial institutions are assisting in the development of ebusiness. Some
sites act as portals. Their own sites attract considerable visitation and they are able to encourage visitors to
look at the offerings of online merchants through links to their websites. building confidence in online
transactions by providing links (naturally these are often institutions that are a customer of the relevant
financial institution). Some financial institutions seek to highlight that they apply rigorous standards to the
Internet vendors that they support.
Source: The Allen Consulting Group
Use of the Internet by the banking sector in Jamaica in downstream activities
appears to be in its formative stages.
•
not all of the Jamaican banks have established a presence on the web yet;
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•
a few have offered PC banking for government agencies and larger
merchants for some time, with some testing of on-line systems with trusted
clients or are global banks that offer global online products in Jamaica;
•
generally domestic banks have been slow to make a general offer of online
banking facilities (ie, including services such as the capacity to actually
transfer funds online); and
•
no domestic bank at the time of writing (February 2003) offers online retail
banking services, although at least one bank (NCB) indicated that they were
close to the launch of such a service.
These observations are the findings of an analysis of the banking sector in
Jamaica based largely upon what the financial institutions say about their
services on their web pages. The table below summarises the findings.
Table 8.2
ONLINE CAPABILITIES OF COMMERCIAL BANKS AND BUILDING SOCIETIES IN JAMAICA
Institutions
Internet Sites
Online Business
Capabilities
Online Consumer
Capabilities
Commercial Banks
The Bank of Nova Scotia
Jamaica Limited
www.scotiabank.com.jm
Online access to account balances,
transaction information, transaction
history, transfer of funds, make
payments, cheque reconciliation.
None apparent.
Parent company systems may be
implemented in Jamaica.
Support for merchants’ electronic
transactions (via credit card) for
selected customers.
Citibank N.A.
www.citibank.com/jamaica
Electronic transfer between Citibank
accounts,
cheque
stop
and
immediate stop etc
Online banking, apparently
business clients only.
None apparent.
for
RBTT
Bank
Jamaica
Limited (formerly Union
Bank of Jamaica)
www.rbtt.com/RBTTJamaica.ht
m
None apparent
None apparent
CIBC Jamaica Limited
www.cibc.com
None apparent
Comprehensive
capacity.
National Commercial Bank
Jamaica Limited
www.jncb.com
Loan payments, enquiries.
Phone banking.
‘Swipe’ point of sale payment option
for merchants.
Significant
online
services
available to customers soon
online banking
Payroll possessing.
Advice that online services for
merchants will be available soon
First Global Bank Limited
None apparent
n.a.
n.a.
www.jnbs.com
uncertain
Online international payments and
remittances
Building Societies
Jamaica National Building
Society
Online utility payments
Victoria
Society
Source:
Mutual
Building
www.vmbs.com
uncertain
None apparent
The Allen Consulting Group and Bank of Jamaica
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8.3.2
Credit Card Issues
Currently most business-to-consumer (or ‘B2B’) business conducted online is
paid for through the use of a credit card.
Jamaican consumers indicate that obtaining a credit card through a Jamaican
bank is not easy. The tests that the banks apply appear to block access for
many people.
Many merchants that the project team consulted in the course of the study
advised that it was very difficult to obtain banking support for credit card
transactions sourced from on line sales from Jamaican banks. Leading banks that
the team consulted indicated that they did in fact offer such support, but that
they have been very selective about merchants that they supported. (These
banks indicate that they are in the process of broadening availability of
ebusiness facilities).
The approach of the banks in Jamaica towards credit cards has implications for
the development of ebusiness. Marshall has summarised how this reluctance t o
support consumer and business ebusiness facilities are intertwined:
“Businesses involved in eCommerce in the region, are limited in terms of their
customer base to those people who have access to credit cards. Let us consider
what percentage of the total population of Jamaica have credit cards. Whatever that
percentage is, that is the maximum number of potential eCommerce customers
today. Most online transactions cannot be done today without credit cards. On the
other hand, every Jamaican has money to spend. We are not talking about wealth,
we are simply talking about the ability to purchase a good or a service.
Electronic commerce, as it is presently conducted, is therefore restricted to a small
segment of all our societies and will not become widespread until we develop ways
to extend it to a greater segment of our societies.
This is again not a purely domestic issue. In much of Latin America, a region that
the Caribbean is drawing close to, banks have forbidden merchants from clearing
credit card sales online. Most people cannot participate in online commercial
activity unless they have a bank account with one of the few banks which will
58
allow you to manage your account online and make payments via this medium.”
These factors limit the capacity of Jamaicans to use credit cards for online
purchases. This in turn restricts the ability of Jamaican businesses to be paid by
the domestic market. While policymakers encourage business to go global, the
fact remains that most businesses find it necessary to learn their business dealing
with local customer base and growing from there. These arrangements also limit
the capacity of Jamaican businesses to take credit card payments from overseas
customers.
58
Marshall 1999, 'Exploiting the Potential of Electronic Commerce: Opportunities and Challenges', paper
presented to FTAA Joint Government/Private Sector Committee of Experts on Electronic Commerce at the WIPO
Regional Consultation on Electronic Commerce and Intellectual Property, Montego Bay, 9 June, p. 4.
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8.3.3
Implications For Ebusiness
The findings of an independent cross country comparison suggest that,
reflecting the factors discussed above, online payment systems are not widely
used in Jamaica. These findings are reported in Figure 8.1.
Figure 8.1
USE OF INTERNET-BASED PAYMENT SYSTEMS (GIVEN COUNTRY POPULATION)
Online Internet payment systems in your country are (1=not available, 7=used by most people)
Country
Finland
Estonia
Sweden
Iceland
Canada
Norway
Netherlands
United States
Australia
Korea
New Zealand
Denmark
Singapore
Turkey
United Kingdom
Germany
Hong Kong SAR
Switzerland
Belgium
Brazil
Austria
Ireland
Slovenia
France
Latvia
South Africa
rinidad and Tobago
Israel
Italy
Japan
Peru
Philippines
Portugal
Sri Lanka
Chile
Czech Republic
Spain
Taiwan
Panama
Slovak Republic
Venezuela
Colombia
Malaysia
Mexico
Argentina
El Salvador
Poland
China
Costa Rica
Hungary
Thailand
Uruguay
Dominican Republic
India
Lithuania
Nicaragua
Ukraine
Greece
Mauritius
Guatemala
Indonesia
Jamaica
Paraguay
Zimbabwe
Jordan
Russian Federation
Egypt
Bulgaria
Nigeria
Ecuador
Bolivia
Honduras
Bangladesh
Vietnam
Romania
3.7
MEAN
0
1
2
3
4
5
6
7
Value
Source:
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It is concerning to note from Figure 8.1 that Jamaica is ranked behind many
neighbouring countries.
While the capacity to engage in transactions online is viewed as being a subset
of ebusiness activity, it is likely that lagging in this area is unlikely to be helpful
in encouraging the more widespread adoption of ebusiness. In fact, restrictive
access to online banking facilities has been identified as a factor limiting
59
Jamaican ebusiness offerings.
Many merchants told the study team about the difficulties that they had
encountered in obtaining banking support for online transactions. In the
context of inquiries conducted for other chapters many business people
indicated that one key reason for locating their business selling Jamaican goods
and services offshore was the capacity to bank it there. Banks overseas were said
to have the systems to support ebusiness whereas Jamaican banks were not.
Consultation with leaders in the industry suggest that banks have been obliged t o
‘make haste slowly’. Many Jamaican bankers saw banks overseas invest
significant sums in electronic banking systems that failed. Some stakeholders
make the point that banks and other participants in the financial sector that
implement electronic exchange arrangements face significant commercial risks
when they engage in ebusiness. Existing legislative arrangements undermine the
standing of electronic records if payments were disputed. Essentially, it was held
that at law the only record that would be acceptable to a Jamaican court was a
signed piece of paper. This concern would be addressed by reforms discussed in
Chapter Four.
While the reluctance to facilitate credit card and online merchant services may
be justified as a conservative response to the stability problems faced in the
60
1990s, it is time to move on and acknowledge that concerns about repudiation
and fraud can now adequately be addressed.
Indeed, it is acknowledged by the financial sector that change is inevitable and
the financial system must respond positively:
“The elimination of barriers to trade and financial flows and the surfacing role of
ecommerce will undoubtedly further encourage the design of alternative payment
instruments. The need may fast arise for reform of the current payment systems in
the Caribbean to meet the changing requirements of the marketplace. In order to
have an efficient payment system, it will be necessary 61to institutionalize more
sophisticated e-payment technologies than currently exist.”
Recognising that something needed to be done, some banking stakeholders
advise that progress was imminent regarding the facilitation of more effective
electronic settlement arrangements.
59
See Grant (ed.) 2001, A Regional Initiative for Informatics Strategies: Workshop on Sectoral Planning for
Information Technology — Final Report, Government of Jamaica, Commonwealth Secretariat, Caribbean
Development Bank, United Nations Educational, Scientific and Cultural Organization, Kingston.
60
Langrin 2001, 'Forecasting the Future of Caribbean Business and Trade: Are We Ready for Payment Systems
Reform?' CaribExchange TradeNet, vol. 1, no. 1, pp. 17-8.
61
Ibid., at 18.
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The concern is that the pace of change is not adequate and that the financial
sector is unduly cautious to the detriment of Jamaica’s ebusiness development.
8.3.4
A New Approach
There are few means at hand to encourage banks to invest more in providing
banking services online or to change their approach in relation to access and use
of credit cards. History tells us that the use of heavy handed compulsion in
financial services tends to cause more problems that it fixes.
The key approach is to use competition the leverage better outcomes. Two
means of doing so include:
•
providing banks with a strong incentive to offer online payment systems.
Government agencies that operate banking accounts with commercial banks
could be asked to undertake a review their arrangements. This could be
scheduled to be undertaken over time so that all agencies were not under
review at once. When undertaking the review agencies would be instructed to
place emphasis upon the bank’s ability to provide the service using
electronic means or preferably, online systems, as well as meeting other
identified needs. All else being equal switching to electronic approaches
would result in significant cost savings for agencies. If implemented over
time most of the banks would have time to get the message and respond with
the offer of modern banking services (to government and eventually to all
of their customers); and
•
ask the central bank to indicate that it would be amenable to consider
applications for a Jamaican banking authority (ie a license) from an Internet
bank in Jamaica. That is, a bank that offers to conduct all of its business
online, or without a cumbersome and expensive branch network. Of course,
the bank would be subject to prudential supervision on the same basis as
other banks.
Both approaches are recommended.
Action
The Government of Jamaica should use the purchasing power of its agencies to
encourage the banking sector to provide electronic banking services and obtain
modern, efficient banking services.
Action
The Government of Jamaica should indicate that it would be willing to consider
applications for a banking authority from an Internet Bank, subject to it
meeting required prudential and product regulation.
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Box 8.3: A Credit Bureau For Jamaica
The New Economy Project is working with the Jamaica Bankers Association to develop a Jamaica Credit
Bureau. The task involves establishment of a new institution that would collect information about companies
and make it available online, as well as traditional means.
The Challenge
Most businesses in the Caribbean are small and micro enterprises. In Jamaica they account for at least 40
percent of GDP. Jamaica’s credit systems are compromised by an absence of accessible profiles on potential
borrowers in this category. Lenders have compensated for this deficiency by “over-collateralizing” consumer
as well as business loans. One consequence is that SMEs, home offices (SOHOs) and individuals are often
forced to prepay vendors for essential services (cell phones, utilities etc). Another is that they can be
effectively disqualified from accessing non-collateralised credit. Excessive collateralisation and prepayment
systems are impediments to SME development and economic growth.
New Economy Project Activity
The goal of the project is to improve SME access to loans and other financial services in Jamaica. In mid2001, the Jamaica Bankers Association (JBA) asked the New Economy Project to provided advice on the
operational and legal aspects of establishing a consumer credit bureau in Jamaica. The proposed bureau will
be a for-profit company owned and operated by the country’s leading financial institutions.
The New Economy Project hired a specialist with 25 years experience in owning/ managing four bureaus in
the USA to provide similar advice to the JBA. The specialist reviewed the proposed legislation; made
presentations to interested parties on key success factors; and provided preliminary advice on sourcing
technology and creating a bureau as a going concern in Jamaica.
Project Status
In early 2002 a private company was established to provide credit bureau services in Jamaica. The New
Economy Project reports that the Government of Jamaica is in the process of reviewing/assessing the
proposed legislation.
The move towards establishing a consumer credit bureau fits with other industry reforms aimed at elevating
the financial sector’s operating framework to First World status. As has proved to be the case elsewhere in
the world, credit bureau services make it much easier for SMEs to pursue expansion opportunities based on
lenders access to their personal and business credit histories.
Phase II of the project involves providing assistance to the new company in its start up mode once legislative
and privacy issues have been carefully addressed.
Source: http://neweconomyproject.com
8.4
Ebusiness and Capital Markets
Similarly to financial institutions such as banks, the key role of capital markets
is to mobilise capital. Capital markets work by introducing a more direct
relationship between those with capital and those that wish to use it. Essentially,
they disintermediate financial institutions such as banks and finance companies.
The benefit is more access to capital at a lower cost.
Most countries have one or more exchanges to support transactions in the
capital markets. They are often labelled ‘stock exchanges’, although they
generally deal with a range of asset classes in addition to stocks (ie shares),
including bonds, futures and various derivative products.
A key aspect of the effective operation of capital markets is the provision of
information and information services (eg recording transactions). It is not
surprising that stock exchanges have been at the forefront in adopting emerging
information technology capacity. Similarly to financial institutions, progress
was made first in supporting back office functions.
Widespread access to the Internet and its use by investors and businesses seeking
capital has enhanced the information available to all of the parties operating in
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capital markets and introduced new ways of conducting business in this activity.
Key aspects of these changes include:
•
detailed real time information about market developments, regulatory
decisions and company performance;
•
imposition of rules about disclosure at a high level of detail and open access
to that information;
•
information about the exchange members (ie, brokers) to facilitate
transactions; and
•
the capacity to trade in capital markets (ie, exchanges) using progressively
more accessible means.
It is likely that the effect of these changes has been to increase access and
participation in capital markets. They are also likely to reduce transaction
costs. There is widespread evidence, for example, of brokerage fee reductions
per transaction across the globe. Search costs including in relation to obtaining
information about companies in various stock exchanges appear to have fallen.
These factors appear to have benefited smaller scale parties in capital markets
as much, if not more so than large players or entrenched players that previously
enjoyed privileged access to information. These impacts seem to have the
effect of enhancing the capacity and role of capital markets in mobilising
capital.
Any country or economy that fails to keep pace with the capital market leaders
is likely to be bypassed. Funds will go to markets where investors have access t o
systems that are convenient, trusted and consistently show returns.
The consultancy team undertook a rudimentary benchmarking/comparison of
the online presence of the stock exchanges in selected countries. The results are
summarised in the table on the following page.
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Table 8.3
COMPARISON OF STOCK EXCHANGE ONLINE CAPABILITIES: SELECTED EXCHANGES
Institutions
Exchange Name
Jamaica
Trinidad and
Tobago
Malaysia
Australia
Jamaica Stock
Exchange
The Trinidad and Tobago
stock exchange
Kuala Lumpur Stock
Exchange
Australian Stock
Exchange
Jamstockex.com
Stockex.co.tt
klse.com.my
asx.com.au
Company listing
Y
Y
Y
Y
News and announcements
Y
N (some summary data is
available)
Y
Y
Annual reports/performance
Y
N
Y
Y
Website links
Y
Y
Y
Y
Prices (current)
Y
Y (not real time)
Y
Y
(history)
Y
Y
Y
Y
Broker details
Y
Y
Y
Y
Website links
Y
Y
Y
Y
Exchange statistics
Y
Y (partial)
Y
Y
Exchange regulation/rules
Y
Y
Y
Y
Online trading capacity
N
N
?
Y
Y
Y
Y
Y
N
N
Y (Not all)
Y (Not all)
Website
Listed Company Information
Member Information
Exchange Information
Brokers
Websites
Electronic
capability
exchange
in
transaction
Domestic
Key: Y=yes, N=no, ?=uncertain
Source:
The benchmarking suggests that Jamaica’s stock exchange has made substantive
progress in engaging and supporting ebusiness. It offers facilities that are ahead
of countries that it is normally compared with and which are in line with
markets operating in larger economies.
Similarly to banking, much progress in using electronic technologies has been
made in the settlements area — see Box 8.4 on the following page.
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Box 8.4: Jamaica Central Securities Depository (JCSD)
The JCSD, a wholly-owned subsidiary of the Jamaica Stock Exchange, is a facility for holding securities
which enables share transactions to be processed by book entry. A book entry system is an accounting
system that facilitates the change of ownership of securities electronically between parties, without the need
for the movement of physical documents. In short, the JCSD is a means of recording the ownership of shares.
The JCSD allows participating entities such as brokers and institutional investors to place their securities on
deposit at the JCSD.
The JCSD registers the stock in its nominee name, in this case, the JCSD Ltd. The JCSD maintains the
certificates physically in its vaults, records securities movements, and will debit or credit a participating
firm's position through a book-entry computerized system. The JCSD will shorten the settlement cycle.
The settlement cycle
When a trade takes place, there's a buyer and a seller. The buyer has to pay for the stocks purchased and the
seller has to deliver the stocks sold. This is referred to as a "settlement cycle".
In 1987 regulators worldwide decided there was need for stronger measures to reduce risks and promote
safety and soundness in the market place. Since 1991, an international committee of regulators has been
examining shortening the settlement cycle, among other initiatives, to achieve this goal. Even though
Jamaica’s market is safe, the regulators and securities firms operating in Jamaica want to do everything
possible to ensure it stays that way.
To achieve even better efficiency, our shift to a shorter settlement cycle in Jamaica, moves the country closer
to the international standard that is T+3. A number of advanced markets are contemplating moving to T+1 by
2004.
As of September 2, 2002, the Council of the Jamaica Stock Exchange decided to move the stock market to a
T+3 settlement cycle. T+3 means "trade day" + 3 business days. With a T+3 settlement cycle buying clients
will be expected to pay for their purchases on T+2, that is, two days after the trade had been effected. On the
sell side, clients can expect to receive payment at latest on T+4, that is four days after trade had been affected.
This change is consistent with the JSE's objective of providing Jamaican investors with a stock market that
conforms to international standards.
Advantages for investors and the financial market
As the transactions in shares increase, the ability to settle these transactions through the physical delivery of
certificates becomes more cumbersome and error prone. Manual processes are no longer practical. The cost
of manual process is also prohibitive.
The immediate advantage for most investors is convenience. Lessening the time before a transaction is
completed means it will be posted to investors’ accounts more quickly. All that changes is an entry in the
JCSD's book of record showing who owns the shares and bonds and who owes money to pay for them. That
is convenient when investors need to buy and sell quickly. It also shortens the period in which there is
settlement risk.
Safety is a further gain. Risks to the safety for physical certificates are significantly decreased as physical
movement of securities is no longer necessary.
This approach is consistent with International practices.
Source: http://www.jamstockex.com
The key drawback is that Jamaica’s exchange does not support online trading.
This is largely a responsibility of the brokers (ie, members of the exchange),
although, similarly to banking, it is probably the case that Jamaican law is
uncertain about the status of electronic transactions. The legal issues should be
addressed if recommendations provided in Chapter Four are adopted.
The ability trade shares online was one of the first ‘killer applications’ of
ebusiness. Electronic transaction capability introduced discount brokers and
made the process more accessible for ordinary people. While Jamaican’s can
access markets electronically and buy and sell shares with the click of a mouse if
they invest abroad, domestic investment faces higher costs and inconvenience.
Addressing this issue could assist in retaining capital in the domestic economy,
or attracting it back from elsewhere.
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Many factors may be at play in impeding development of electronic
transactions on the Jamaica Stock Exchange including the relatively small size
of the market (raising costs per transaction) and the need to develop key
infrastructure elements first (which now appear to be largely in place with the
JCSD).
Exploring what could be done to accelerate change towards implementation of
an electronic transactions facility should be a task of an organisation such as
CITO or its equivalent. This should be undertaken in cooperation with the
exchange and the brokers. This is a project that may benefit from international
cooperation either within the region or further afield.
Action
Establish a task force to identify and remove impediments to electronic
transactions within the Jamaica stock exchange, its members (ie brokers) and
among investors. The task force should involve business and government
leaders.
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Chapter Nine
Tourism
9.1
Situation Analysis
Tourism and tourism related services contribute significantly to Jamaica’s
economy. In 1992 these activities contributed 13 percent of GDP, 45 percent
62
of foreign exchange inflows and about eight percent of national employment.
Tourism is also a substantial contributor to growth — total arrivals have grown
by about 16 percent over the period since 1996 (see Table 9.1).
Table 9.1
TOURISM PERFORMANCE INDICATORS 1996-2000 (AVG. '000)
INDICATORS
1996
1997
1998
1999
2000
2001
1,053
1,085
1,128
1,147
1,219
1,187
12.7
-2.7
Non-resident Nationals
109
107
97
101
103
89
-18.3
-13.4
Cruise Passengers
658
711
673
764
907
840
27.7
-7.4
1,820
1,903
1,898
2,012
2,230
2,117
16.3
-5.1
Foreign Nationals
TOTAL
Source:
% Change
1996/2001
% Change
2000/2001
Planning Institute of Jamaica 2002, p. 15.1
Similarly, over the same period, foreign exchange earnings grew by 13 percent.
Table 9.2
TOURISM-RELATED FOREIGN EXCHANGE EARNINGS (US$ MILLION)
1996
1,092
Source:
1997
1998
1999
2000
2001
1,131
1,197
1,279
1,333
1,234
The sustained underlying growth of the sector is attributed to a range of factors
including the success of the all-inclusive resort concept, significant expenditure
on promotion by the Government of Jamaica and industry, and the underlying
qualities of the destination product (natural resources, culture, entertainment
and ambiance). Key strengths listed by government agencies are listed in
Box 9.1.
62
National Industrial Policy, April 25, 1996, A Strategic Plan for Growth and Development.
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Box 9.1: Jamaica’s Key Tourism Strengths
•
•
•
•
•
•
•
•
•
•
•
An incredibly diverse topography and superior natural product
High levels of destination awareness (our name is well known internationally)
Jamaica's invention and spread of all-inclusives together with our sophisticated market
segmentation
High quality and wide range of visitor accommodations
Vast expenditure on promotion and advertising, especially by all inclusives
Close proximity to North America
Jamaica's location in the hub of major air and shipping routes
Domestic airline connections to major resort areas
Incentives offered for the accommodations and attractions sub-sectors
Jamaican hotels are more profitable than other Caribbean hotels and provide better return on
investment.
Payroll costs are three times lower than wages in the US
Source:
www.jamaicanetlink.com/business/opportunities/tourism.shtml
The commitment by the Government of Jamaica to the sector is substantial. In
addition to Ministry of Tourism there exists two other offices given the
mandate of developing a growth path for tourism in Jamaica. The Tourism
Office within the Office of the Prime Minister is an overseer to all the
organisations within the industry established to develop the tourism product,
such as the Jamaica Tourist Board (JTB) and the Tourism Product Development
Company (TDPCo). Secondly, JAMPRO, Jamaica's export and investment
promotion agency, also has a Leisure Industry Department responsible for the
promotion, development and facilitation of investments within the sector.
Fiscal investment incentives also apply to large scale and small tourist activities.
These are provided under the Hotels Incentives Act; the Resort Cottages
Incentives Act; and the Hotels Refurbishing Act incorporated under the
Modernization of Industry programme. Incentives are in the form of Corporate
Income Tax Relief, and Duty Waivers on capital items for periods ranging from
63
seven to 15 years.
Despite its strengths and support from the Government of Jamaica, the tourism
industry suffered a setback in 2001. Total visitor arrivals fell to 2.1 million, 5.1
percent less than the previous year. The economic recession in the United
States and other source markets reduced activity in the early part of 2001.
Security concerns following civil disturbances in Kingston in July and on
September 11 resulted in a sharp reduction in arrivals and tourist related
economic activity.
9.1.1
Electronic Commerce Developments
Similarly to the analysis in other sectors the project team has examined the
state of play in Jamaican Tourism ebusiness by looking at what is in place today
on the web. The project team examined the use of the web regarding Jamaican
Tourism in relation to four broad kinds of services:
63
See JAMPRO Tourism, viewed 19 July 2002,
<http://www.jamaicanetlink.com/business/opportunities/tourism.shtml>.
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•
travel — basically, how to get to the tourist destination. This generally
involves dealing with transport links (airlines, train, road transport), as well
as travel agency ticketing services;
•
accommodation — where to stay at the destination;
•
experience — what to do when you get there. Often involving a range of
activities including sightseeing tours, cultural/heritage tours, weddings,
conference planning, bus and car rentals, and destination management; and
•
locality guides — these often bundle all three of the above services with an
emphasis upon a specific region. They are emerging as very important sites
for groups of smaller tourist operators.
The project team also looked at the overall balance of sites. In other countries
it can be observed there has to be a balance of all types of functionality. People
will not go to a place that does not look attractive. Equally they need to know
they can get there affordably. It is noted that the definition between types of
sites is often blurred, where some sites deal with, for example, accommodation
and information about attractions.
Table 9.3 summarises observations about selected Jamaican tourism web sites.
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Table 9.3
SELECTED WEBSITES FOR JAMAICAN TOURISM FACILITIES
Institution
Travel
Accommodation
Experience
Locality Guides
Source:
Internet
Online Capability
Air Jamaica
www.airjamaica.com
Company and product information.
Prices. Schedules. Booking via
Expedia.
Air Negril
www.airnegril.com
Company and service information.
Prices. Schedules. Affiliated with
cheapairlines.com with booking and
payment capacity.
Information site for Montego
bay cruise ship passengers
www.cruisemontegobay.com
Travellers information. Schedule of
cruse ship visits.
Derrons car rentals
www.derrons.com
Prices. Telephone and email
contact.
Apec car Rentals
www.apex-cars.com
Product information. telephone, fax
and email contact details.
Jamaican Travel Specialists
www.jamaicantravel.com
Listing of accommodation and travel
services. Electronic bookings.
Great Vacations
www.greatvac.com
Product information. Phone, fax and
email contact. Bookings and online
airline reservations via Sabre.
Sandals
www.sandals.com
Product and service information.
Some online reservation capacity.
Superclubs
www.superclubs.com
Product and service information.
Online reservation and payment
capacity.
Inns of Jamaica
www.discoverjamaica.com/gleaner/in
ns
List of accommodation providers.
Telephone and email contact.
Jamaica Tourist Board
www.insidersjamaica.com
Directory of hotels. Booking system
did not appear to work when
accessed.
Holiday Services
www.holiday-services.com
Relies on fax and email.
Leisure For Pleasure
Holidays & Tours Ltd
www.leisurejamaica.com
Price information. Electronic
booking.
Jamaqua Dive Centre
www.jamaqua.com
Prices. Email and phone access.
Chukka Cove Equestrian
Centre
www.chukkacove.com
Telephone and email contact.
Calico Sailing Cruises
www.montego-bayjamaica.com/ajal/calico
Price information. Phone and fax
contact details.
Port Antonio Jamaica
www.portantoniojamaica.com
Locality information.
Montego Bay
www.montego-bay-jamaica.com
Negril
www.negril.com
From this analysis it is clear that tourism is Jamaica’s leading ebusiness sector.
The key points are:
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•
there is already a very large number of websites projecting Jamaican tourism
opportunities onto the global marketplace;
•
Jamaican tourism facilities are already present in every one of the four broad
types of services;
•
ebusiness is still at an early stage of development. Most sites about Jamaican
tourism activities provide information about services offered. Most rely on
telephone and fax contact details to make reservations and transactions, or
receive payment in person. This reduces the cost of the site. It was the
team’s sense that many Jamaican tourist sites or web pages are probably less
expensive to operate than more traditional forms of advertising, such as use
of newspapers;
•
the large majority of website relate to smaller tourism operators. They have
been quick to take this opportunity to use the Internet to advertise to the
larger, global market at modest expense;
•
very few use the Internet as aggressively as other operators have in other
countries. This is especially so in relation to pricing and discounting. The
project team observed that many Jamaican advertised prices were set at a
higher end of the range and did not seem to vary often. The team was not
able to find many Jamaican operators using the Internet to sell temporary
excess capacity at discounted prices in the way highly successful businesses
such as wotif.com or lastminute.com have in hotel reservation or Virgin has
in air travel;
•
some Jamaican operators are at the leading edge of ebusiness development.
The Superclubs and Sandals websites offer content that is equal to or superior
to global competitors. These businesses may be slightly behind in online
booking systems and in not offering customer benefits for online bookings
and are ahead of the Hilton in terms of having some non-English content.
Table 9.4 sets out summary finding from a rudimentary benchmarking study
of ebusiness in this area;
•
some Jamaican tourist operators are partnering with global or regional
players. Jamaica air transport operators rely on global internet systems to
undertake reservations and electronic payment. Other sites link within other
tourism supply/marketing chains such as Sabre; and
•
some Jamaican businesses have partnered to form portal sites, maintaining
presence and reducing costs.
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Table 9.4
BENCHMARKING HOTEL/RESORT CHAIN EBUSINESS FACILITIES
Sandals
Superclubs
Hilton
Club Med
Product Information
Views of facilities
Y
Y
Y
Y
Views of rooms
Y
Y
N
Y/N
Current price details
Y
Y
Y
Y
Specials/discounts
Y
Y
Y
Y
Additional languages
Y
Y
N
Y
Online Information Exchange
Email
Y
Y
Y
Y
Oral help online/free
N
Y
N
Y
Telephone hotline (toll
free
Y
Y
Y
Y
Online consumer
bookings/reservations
N
Y
Y
Y
Online travel agent
bookings/reservations
Y
Y
Y
Y
Online payment
N
Y
N
N
Discounts available
online
N
Y
Y
N
Exchange
Trust
Privacy policy
statement on homepage
Y
Y
(resort pages)
Y
Y
Security policy
statement on homepage
N
N
Y
Y
key: Y = feature/capability is available. N = feature/capability is not available
Source: The Allen Consulting Group
As with other sectors the project team reviewed the ease of accessing
information about Jamaican tourist websites online. Key portals and perceptions
of their role played by consultants is set out in Table 9.5. Just as there is a
dynamic and growing number of tourist related websites, portals for this market
are also emerging to make navigation easier.
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Table 9.5
SELECTED TOURISM-RELATED INTERNET PORTALS WITH JAMAICAN CONTENT
Portal
Type/ address
Comment
Yahoo.com
Global portal
A significant number of links. Links were operational. The project team
observed that there were many global quality Jamaican websites that
were not present on this index.
Handilinks.com
Global portal
Relatively large number of travel and tourism listings (large compared
to other Caribbean offerings). Most listings are active. The project
team observed that there were many global quality Jamaican websites
that were not present on this index.
Top 5 Jamaica
Specialist host for Jamaican
sites
Large number of Jamaican tourist related websites. The portal is
largely Jamaican, although there are also a few Caribbean sites.
Jamaican Tourist Board
(www.jamaicatravel.com)
Jamaican portal
Information intensive site with exclusively Jamaican sites.
Jamaica-netlink.com
Jamaican portal
Strong cultural content exclusively about Jamaica. Limited range of
sites aggregated. Ability to make reservation for some services via
partnership arrangements. Not very visible to the consumer from
abroad.
Netsearchjamaica.com
Jamaican portal
Large number and range of travel and accommodation sites.
Caribseek
Caribbean portal
General portal with a focus on tourism.
See-caribbean.com
Caribbean portal
Limited number of Jamaican IT sites listed. The see-caribbean site
was not found quickly by the project team.
Jamaicatravelnet.com
Jamaican portal
Deeper information for explorers a bit off the beaten track. Information
about discounts. email services.
Source:
One portal site is in the process of seeking to carry over the success and brand
recognition of a telephone marketing channel, using a well known 1-800 code
to an Internet service channel. Details are provided in Box 9.2.
Box 9.2: JAMAICA RESERVATION SERVICE (JRS)
The Jamaica Reservation Service (JRS), through 1-800-JAMAICA, is a specialised reservation centre
and tour operator offering a variety of quality vacation packages throughout Jamaica. The service
permits customers to customise their vacation and seek quotes and place reservations online.
1-800-JAMAICA markets Jamaican vacations exclusively, utilising the services of over 130 hotels, car
rental companies and ground tour operators. 1-800-JAMAICA (1-800-526-2422) is open 7 days a week:
Monday to Friday 9AM to 9PM Saturday & Sundays 10AM to 5PM EST.
The service operates with the support of the Government of Jamaica.
For more information call 1-800-JAMAICA, or visit 1-800-jamaica.com.
Source:
www.1-800-jamaica.com
There is an interesting tension between portals that offer Jamaican exclusivity
and those that do not. The global portals have the capacity to influence and
shape the direction taken of a large Internet audience. Obtaining a prominent
presence there can generate a large market, although other tourist offerings are,
in Internet technology, ‘just a click away’. On the other hand, sites that are
exclusive to Jamaica tend to be a little harder to find. Their value proposition is
that they can retain the interest of buyers who have already indicated that they
are thinking about visiting Jamaica with reduced leakage to competitor
destinations.
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It is likely that rather than one strategy proving to be the right or wrong one,
that both will be important to success. Certainly it seems that banking on only
one or the other appears to entail avoidable risks. Meanwhile, it appears that
the Government of Jamaica offers most support to exclusive portals. While this
is most clearly in the national interest, there may be some additional benefit at
modest cost to ensure that Jamaican Tourist companies’ websites are also well
represented in the global portals. Obtaining value from the Internet is about
maximising the benefits from a range of marketing channels.
9.1.2
Export Potential and Trade Impacts
Clearly, tourist operators are investing in electronic commerce facilities and
raising their marketing presence on the Internet. The depth of involvement
that has been achieved in just a few years, some of which have been difficult
economically, suggests that the investment is paying off for business. It is
therefore likely that ebusiness in the tourism sector already plays a significant
role in Jamaican exports.
Ebusiness is still at its early stages in the rest of the world as well as Jamaica and
online transactions and export earnings are still at very modest levels. It is
likely that the full impact on exports from ebusiness in this sector is yet to be
felt.
Dependence on the US market has been found to be a strategy with an
occasional downside. The Government of Jamaica has already indicated that it is
keen to encourage access to other markets. Use of the Internet offers to help
Jamaica to broaden its audience, extending to countries beyond the US.
Very few of the Jamaican sites surveyed had a capacity to undertake actual
transactions over the Internet. Those that did so via partnership arrangements
with global service providers.
9.2
Challenges and Threats
The Government of Jamaica is already addressing real world challenges
confronting tourism. These include combating coastal water pollution, tourist
harassment and inadequate road infrastructure. Ebusiness is not relevant in
dealing with those substantive issues.
One of the key issues is that little is known about this sector and its transition
to ebusiness. More information would be valuable in terms of ensuring that
effort was being directed wisely.
One of the key issues in economies concentrating upon tourism is to raise
occupancy levels. There has been a global shift towards more flexible pricing for
many Tourism facilities to raise occupancy and profitability. This has been
enabled by the Internet and ebusiness which permits more flexible price systems
and provides the means to reach a larger number of people that are able to take
advantage of a special offer. It has to be emphasised that this is not merely a
strategy for budget hotels. Developing this capacity in Jamaica or leveraging off
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global systems that are already involved in offering this service could be of
strategic value.
Enhancing awareness about Jamaica to non-English speaking countries will
involve much more sophisticated use of websites.
While it was noted that many Internet sites represent smaller businesses, it is
also likely that a smaller portion of smaller tourism operators have invested in a
presence on the web, or Internet technologies. If Jamaica is consistent with
patterns of ebusiness development seen elsewhere, and the evidence suggests
that it is, then small business tends to lag in ebusiness adoption. There is much
to be gained in brining the remainder of the sector online, if this is done in a
way that is consistent with the operator’s business model.
A broader challenge is to keep pace with the rate of change that can be expected
to accelerate. Other countries in the region are becoming increasingly
sophisticated. Travellers are becoming increasingly demanding having
experienced the best that the Internet has to offer in other areas.
9.3
Response
Key measures that are suggested include the following.
Action
Conduct an audit of ebusiness use within Jamaica’s Tourist industry. This
should focus on use and benefits, but also obtain additional information
including the cost of ebusiness facilities and difficulties encountered. Use the
audit results in activities promoting use of the Internet by Jamaican Tourist
operators.
Action
The Government of Jamaica should continue with its plans to assist in the
marketing of Jamaican tourism businesses through exclusive sites such as the
revised JRS facilities being developed. It should ensure that SMEs are effectively
catered for as well as larger businesses.
Action
As part of marketing Jamaican tourist activities abroad JAMPRO and the
Jamaica Tourist Board should devote resources to identifying global tourism
and travel sites and assist Jamaican companies to become listed on those sites.
The focus should be upon producing ‘how to’ guides to assist local tourism
providers become listed on these sites.
Action
Include fundamental and simple ebusiness development and maintenance
within tourism industry training systems.
Action
Develop a network of ebusiness driven tourism industry venture incubators.
Incubators should be located in the existing tourist districts and then extend into
les developed areas.
Action
Support ebusiness use by new tourism ventures.
Action
Support demonstration programs for non-English web site development. The
Government of Jamaica should also purchase translation inputs from a
Jamaican supplier for its own tourist related websites. This should assist with
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highlighting the relevance of this approach and developing a Jamaican
capability to do it.
Action
Encourage the Jamaican tourism industry to adopt the more flexible pricing
strategies that are feasible with ebusiness as a means of raising capacity
utilisation. Smaller businesses may need most assistance in this regard.
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Chapter Ten
Music and Entertainment
Jamaica's culture, in the words of Prime Minister P. J. Patterson, is “the
linchpin that bonds us as a people and is vital to our quality of life", and like
that of many other countries, it is reflected in everything that Jamaicans do.
Jamaica’s culture influences and affects belief systems and the goals set for
64
Jamaica’s overall future.
The Government of Jamaica has engaged many initiatives aimed at making
Jamaica a cultural ‘mecca’, capable of bringing in significant economic benefits
and greater worldwide recognition to the nation in this area. These include
improving infrastructure at the community level to facilitate cultural exposes,
more systematic recording of cultural events and places, and encouraging
educational institutions to offer youth and community-based training
programmes, by the provision of necessary funding and expertise.
The Jamaican cultural expression / landscape is dynamic. Change is an essential
part of the picture. As soon as one becomes accustomed to a particular trend, it
changes, hinting at the level of creativity and diversity of the people, and their
passionate desire to be constantly on the move to embrace the next adventure.
The Internet has added to complexity. It is added a new global media through
which performers can convey their message. This is likely to have an impact on
the message itself. Culture is also a business. The Internet is changing the way
that business is done. It changes what people buy, how they buy it and where,
and the price the pay. It is also changing the relations in the cultural supply
chain, the links between performers, producers, marketing agencies, venues,
broadcasters and shopfronts.
The music and entertainment industries contribute significantly to growth and
wellbeing in Jamaica. Not all of its contributions are revealed in easier t o
measure economic statistics. This sector is important in maintaining global
interest in Jamaica and the culture of Jamaicans that spills over to commercial
activities.
10.1
Music
10.1.1 Situation
The music industry is global in nature and has a number of key characteristics
that need to be recognised:
•
the global music consumer market is dominated by a number of particular
regions — Europe and North America each account for around one third of
64
See http://www.jis.gov.jm/information/Culture.htm.
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total music sales, with Asia also accounting for a little under a quarter of the
global sales of recorded music. The fastest growing markets, however, are
located in the developing world;
•
the industry has been subject to considerable volatility — the unpredictable
nature of consumer tastes means that non-price factors such as fashion, herd
behaviour, and experimentation have had a profound influence on the music
market. Adapting to and channelling these influences has become a major
focus of the leading firms in the music industry and an increasingly dominant
influence on investment strategies; and
•
the music industry has tended to become steadily more concentrated under
the dominance of a small number of very large international firms with
broad entertainment interests.
Through various oligopolistic practices these firms are able to earn the large
rents needed to maintain their leadership role in the industry, and to generate
the considerable financial resources which allow them to carry the risks and
costs involved in identifying and developing artistic talent and marketing a risky
65
final product with very large sunk costs.
Despite the financial dominance of the majors, the global industry still contains
a plethora of smaller independent firms offering a diverse range of services and
products:
•
independent record companies have been able to survive often by
specialising in market niches, although increasingly these companies have
only been able to continue by establishing ‘alliances’ with the majors; and
•
there also exists a highly complex system of sub-contracting on the
production side among firms of different sizes. Most recording studios are
independent and many producers sub-contract their services to the majors.
This continued role for large numbers of highly specialised firms explains the
geographical clustering of the music business in a small number of key centres
around the world. This reflects:
•
the professional advantages that songwriters and musicians themselves can
derive from being part of a closely knit community of talent; and
•
the need for a readily available supply of specific assets and the advantages
from having close communication where relations
of trust have to be
66
established (eg, between artist and producer). Even for the largest
companies, the presence of music centres such as London, Los Angeles and
New York allow for close links to and familiarity with financial markets
enabling a degree of intimacy to develop between creditor and borrower,
which is necessary when large but inherently risky investment projects are
involved.
Arguably, a developing country such as Jamaica is better positioned to compete
in the music industry than in many traditional industries. This is because:
65
See Towse 1999, 'Copyright and Economic Incentives: An Application to Performers' Rights in the Music
Industry', Kyklos, vol. 52, no. 3, pp. 369-90 at 379; Vogel 1998, Entertainment Industry Economics, Cambridge
University Press, Cambridge (MA), p. 147.
66
Fink 1989, Inside the Music Business, Schirmer Books, New York, p. 58.
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•
the basic raw material, such as talent to create new music, is readily available
and entry costs, at least in the case of music, are not as prohibitive as in
many industries; and
•
despite the global image of the music industry, there remains a very strong
regional dimension to musical tastes. This regionalisation of musical tastes
points to potential markets for Jamaican music in other Caribbean countries.
Unfortunately, in recent years Jamaica has been unable to consistently
commercialise its own music, and returns to Jamaica are on a long-run decline
(see Figure 10.1). Given the oligopolistic nature of the industry this is not
surprising as Jamaica does not have the large music businesses and financial
structures necessary to invest significant capital into a sophisticated marketing
and distribution machinery with a global reach.
Figure 10.1
EXPORT EARNINGS FROM SELECTED MUSIC FORMATS (US$ ’000)
Earnings (US$'000)
400
300
200
100
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year
Source:
Despite this challenge in the outlook, music offers a real hope of providing
sustainable ebusiness in Jamaica:
“Caribbean entertainment and culture, I believe, has the strongest potential to be a
large sustainable business on the Internet as it relates to the global village. It is in
culture that the Caribbean has a sustainable comparative and competitive
advantage. From music to dance,
it is this area that the Caribbean can use to reach
67
out to a global marketplace.”
Ebusiness offers the opportunity to bypass traditional oligopolistic supply chain
barriers and make, market and distribute music directly to consumers. This
67
Chaplin 2001, 'Forecasting the Future of Caribbean Business and Trade: The Caribbean Commune Online',
CaribExchange TradeNet, vol. 1, no. 1, pp. 18-9 at 18-9.
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therefore may address some of the criticisms directed at the Jamaican music
68
industry.
10.1.2 Response
A key criticism of the Jamaican music industry is that it has lacked the
centralised support necessary to work with and against the oligopolistic global
music industry; this is changing.
The Government of Jamaica has been active in seeking to create the institutions
to support the Jamaican industry:
•
the Jamaican Cabinet has given approval for Jamaica to accede to the WIPO
Internet Treaties, the WIPO Copyright Treaty (WCT) and the WIPO
Performances and Phonograms Treaty (WPPT), which provides for the
protection of copyright material over digital networks. Such clarification
69
will provide additional certainty to the Jamaican music industry; and
•
JAMPRO has developed a strategic plan for the industry, which involves the
establishment of two new entities:
– the Jamaica Music Commission — the Jamaica Music Commission is t o
be developed as a statutory non-commercial body operated on a
partnership basis by a conglomeration of recognized organisations and
the Government of Jamaica. Its focus will be on education and training,
infrastructure, product development, marketing and financing within the
entertainment industry;
– the Music Development Foundation — the Foundation is to
be
established to finance activities such as the National School Music
Instrument Programme, the National Band and Choir Competition,
music business education and scholarships. It is proposed that revenue
will be generated through the receipt of grants and donations, taxes
levied on audio-visual and entertainment products, and various other
ventures; and
– the Jamaica Intellectual
Property Office’s (JIPO’s) establishment
demonstrates a commitment to the administrative framework t o
support the entertainment industry. We understand that JIPO will aim
to expand the public education
programme on intellectual property in
70
primary schools and colleges.
Action
JAMPRO should allocate resources to include Internet exhibition of the
Jamaican music industry within its mix of export promotion activities.
Action
JIPO should be active in providing an education programme on intellectual
property in primary schools and colleges. Information about basic IP rights
and obligations should be made available on the JIPO website in a form that is
interesting and relevant rather than legalistic. Links to this information should
68
See McKenzie
Jamaican Music Lacks Mainstream Support, viewed 17 July 2002,
<http://ska.about.com/gi/dynamic/offsite.htm?site=http://www.jamaica%2Dgleaner.com/gleaner/20001105/ent/en
t3.html>.
69
JIPO Intensifies Work on Patents and Designs Act, 2002, Jamaican Observer Internet Edition, viewed 21
July
2002,
<http://www.jamaicaobserver.com/news/html/20020712T2000000500_28720_OBS_JIPO_INTENSIFIES_WORK_ON_PATENTS_AND_DESIGNS_ACT.asp>.
70
Ibid.
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be posted on sites that Jamaican artists and others in the industry visit often.
Budding artists (as well as experienced ones) need to have a working
understanding of their rights (and responsibilities) in relation to intellectual
property.
This newfound support for international legal frameworks and domestic
institutional structures has been reflected in private sector. For example, this is
evidenced by a new regional anti-piracy campaign in the Caribbean, and the
establishment of a national agency — Jamaica Association of Composers and
Publishers (JACAP) — to monitor copyright violations and return revenues t o
71
the copyright owners.
For good or for bad, the Jamaican music industry is associated with reggae. As
such, a reasonable objective is to ensure that ebusiness is used to promote reggae.
There are a number of ways that this is being, and could better be, done:
•
there are numerous sites, mostly hosted outside of Jamaica, that provide
portals and value-added information about reggae; and
•
Jamaican radio stations have proven to be ambassadors of Jamaican music
over the Internet, and in some cases are based on a subscription model.
Examples include IRIE FM (iriefm.net), the Radio Jamaica Group
(radiojamaica.com) and until recently HOT 102 FM
(www.homeviewjamaica.com/hot102).
There is always the hope of new technologies radically breaking down existing
distribution networks for the financial benefit of artists. For example, in an
African context, some commentators have suggested that:
“state-of-the-art technology could enable African musicians to be compensated
automatically and transparently for the use of their music on the Internet. New
technology from IBM has the potential to prevent access without payment, and to
deliver instant
payments to musicians for the online sale and performance of their
72
music”.
The potential for such technologies is limited in the short term.
Even direct distribution of music over the Internet (ie, ordering an album and
having it physically dispatched) is also unlikely to be a panacea at the present
time. For example, as shown in Figure 10.2, only about three percent of all
music purchased in the US was ordered using the Internet.
71
See Young 2001, Developments in the Entertainment Industry, viewed 17 July 2002, <http://www.mfglaw.com/dec2001-b.html>.
72
Cox Developing the Music Industry in Africa: A Resource for Economic Growth - Experts Look at the
Nashville
Model,
viewed
17
July
2002,
<http://lnweb18.worldbank.org/essd/essd.nsf/All/CA8F5DDF16D1D00485256923006AE103>.
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Figure 10.2
AVENUES OF MUSIC PURCHASE BY US RESIDENTS (%)
Percentage (%)
60
50
Record Store
40
30
Other Store
Tape/Record Club
20
10
TV, Newspaper, Magazine Ad or 800 Number
0
1992
Source:
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year
Recording Industry Association of America 2002, p. 1
Some comparison may be made by referring to the Internet capabilities of
73
members of the US National Association of Recording Merchandisers. In the
Association’s most recent survey they found that:
•
almost 85 percent of respondents had a web site, primarily to promote and
sell entertainment products, promote companies and provide information to
consumers and investors;
•
online, CD sales are increasing, but product diversification is carrying over
to the online retail arena with increasing number of DVDs and videos being
sold;
•
most of the respondents offer digital downloads for both promotional and
sale purposes, although sales of digital downloads were almost too small to
measure;
•
reflecting efforts to strengthen their customer service activities, more than
80 percent of companies answer inquiries within a day, and over half of
click-and-mortar sellers accept returns at their physical stores;
•
email to customers, affiliate relationships and advertising are the key
ingredients of most companies’ Internet marketing strategies; and
•
most hope to be 74profitable on the Internet by the end of the year or in the
next 18 months.
These US purchasing and sale characteristics suggest that in the short to medium
term there will be little benefit in individual artists or businesses. As a result,
there may be some scope for a public-private partnership to provide for digital
payment and delivery of music over the Internet.
73
National Association of Recording Merchandisers 2001, 2000 Annual Survey, National Association of
Recording Merchandisers, Marlton.
74
Ibid., p. 7.
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Explore the potential for a public-private partnership to assist individual artists
to make their work available digitally. This may be complimented by a portal
site bringing together information on independent Jamaican artists and
information as to where and how to purchase their works.
The reality, however, is that the major electronic distribution hubs are likely t o
be based overseas. This is unlikely to be overcome, but it therefore creates a role
for the Government of Jamaica to assist independent artists in having their
music available for purchase through these sites.
Action
JAMPRO should construct an inventory of existing and emerging websites where
Jamaican music is sold or played and should be available to the global
audience. It should identify gaps where it is not available, identify the reasons,
and identify actions to close such gaps.
Action
Following discussions with major online music distributors, coordinate and
facilitate the uptake of Jamaican music on these sites by producing ‘how to
guides’ to assist local music producers make their work available on major
online distribution sites.
It is on the supply side that ebusiness is particularly relevant:
Action
•
with recording of music is increasingly digitised, there is an increasing
demand for high bandwidth connections to transmit in production and final
works; and
•
Internet directories of musicians, production companies, and so on will assist
people purchasing such services. The Jamaica Film, Music and
Entertainment Commission currently publishes a75 paper directory for the
Jamaican film, music and entertainment sectors, and
a similar web
76
directory is made available through Invest Jamaica. A concern is that the
web directory is very incomplete and out of date in a number of respects (eg,
it does not list JIPO almost six months after its formation).
A single directory of firms operating in the Jamaican music industry needs to be
maintained reliably on the Internet.
10.2
Film
10.2.1 Situation
The film industry (broadly defined to include the filming of television,
commercial, music video, still shots, etc) is important for Jamaica (see
Table 10.1)
75
Jamaica Film Music & Entertainment Commission 2001, Sounds of Jamaica: Music Industry Directory,
JAMPRO, Kingston.
76
See Invest Jamaica 2002, viewed 17 July 2002, <http://www.investjamaica.com/industries/filmmusic/index.html>. Although similar directories are provided by private sector organisations over the Internet
(although these tend to rely on organisations self-identifying themselves to the sites — see Reggae Fusion
Jamaica: The Encyclopedia of Jamaica’s Music Industry, Don-Getz Limited, viewed 15 July 2002,
<http://www.reggaefusion.com/Resources/Organs.html>.
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Table 10.1
PROJECTS ADMINISTERED BY JAMPRO’S FILM & MUSIC DIVISION (2001)
Project Type
Number
Earnings
(J$ million)
Employment
Feature film
3
22.3
1,188
Television production
23
33.3
274
Television
commercials
5
19.3
475
Music videos
10
27.7
169
Documentary
13
8
81
Still shoot
22
18
48
Entertainment
production
3
12.2
170
Television series
1
45
532
Short film
1
0
1
TOTAL
81
185.8
2,938
Source:
To undertake these tasks the Government of Jamaica and local industry has
developed a comprehensive network of support services and skills to meet the
needs of the international industry. Greatest demand areas include:
• sound stages;
• mobile film production units;
• make up and wardrobe supplies;
• underwater services and equipment;
• set design and construction services;
• editing and post-production facilities;
• props suppliers, (eg, marine and land craft);
• marketing and distribution; and
• processing laboratory.
The Government of Jamaica provides attractive support and incentives t o
encourage the development of the film industry. For example:
•
the Entertainment Division of the Ministry of Tourism and Sport has
developed and proposed an entertainment sector policy to facilitate the
development of a globally viable Jamaican entertainment industry and the
preservation and enhancement of the creative expression of the Jamaican
people;
•
profits from overseas release of film and video are tax free for nine years
when the production company is incorporated in Jamaica;
•
equipment, machinery and material for building studios and support facilities
are duty and tax free; and
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JAMAICA
dividends paid to resident shareholders with investments in film companies
are tax free, and not subject to withholding tax; non-resident shareholders
earn dividends taxed according to the provisions of the Double Taxation
Treaty with their country.
It is on the production side that ebusiness is particularly relevant:
•
the Internet is already being used as a means for advertising:
– possible shooting locations — the Invest Jamaica site has some 300
location photographs for production planners
to view and provides
77
additional information to facilitate filming;
– service providers — the Invest Jamaica web 78site also has information
regarding production companies and managers; and
•
with recording of both music and film increasingly digitised (eg, the recent
Star Wars Episode Two was filmed digitally rather than on film) there is an
increasing demand for high bandwidth connections to transmit in production
and final works.
Support for the Jamaican film industry already makes extensive use of the
Internet to facilitate inward investment. The next step may be to automate a
number of bureaucratic processes online (eg, the special licence application for
production), but the benefits will be marginal.
Rather than special ebusiness policies for the film industry, the film industry is
likely to be a beneficiary of a series of broader ebusiness-related actions that will
facilitate the availability of increased bandwidth at reasonable prices.
77
See Invest Jamaica
music/index.html>.
78
See Ibid.
2002,
viewed
17
July 2002,
<http://www.investjamaica.com/industries/film-
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Chapter Eleven
Cross–sectoral Linkages
No sector of activity functions in isolation. This chapter briefly outlines the
nature and impact of some key cross sectional linkages.
Areas where there are strong overlaps with other sectors and issues analysed in
the report are summarised below.
•
Tourism and Music — awareness and interest in Jamaica’s music and culture
is a major reason why people visit the island. Many visitors leave with a
stronger appreciation of Jamaica’s culture and are more likely to purchase
Jamaican cultural exports.
•
Jamaica’s ICT industry as a ubiquitous industry input — every sector of
industry in Jamaica will increasingly rely upon having access to reliable,
sophisticated and affordable ICT inputs if it is to be competitive. On the
other hand, if the Jamaican ICT sector is to grow it has to prove that it can
meet the needs of Jamaican industry better than foreign alternatives.
•
Banking and other sectors — tourism operators must be capable of receiving
payment in whatever form is preferred by their global customers (ie, credit
card, US dollars, electronic payments) or risk loosing them to operators that
are better in this regard. Much the same could be said for music and ICT
sector exports. Medium and smaller sized tourism operators are particularly
dependent upon local banking facilities in this regard.
•
Tourism and general issues — tourism is a leading sector for ebusiness in
Jamaica, but even here there are many legal and structural barriers that need
to be addressed if use of ebusiness is to expand.
This is a very short list of the overlaps and commonality that needs to be taken
into account when developing an ebusiness strategy. It highlights how
interconnected the issue is.
Development of stronger ebusiness capabilities and its more general use in
Jamaica would have a mutually reinforcing impact upon other sectors because of
these linkages. Equally, failure to make progress will drag down other sectors,
even sectors viewed as being relatively strong.
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D
Part D
The Ebusiness
Strategy For
Jamaica
108
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Chapter Twelve
The Strategic Framework
A blueprint is about setting out a vision for what the future could be like and
what is needed to get there. This chapter outlines the key elements that form the
foundations for the blueprint.
12.1
The Blueprint’s Goal
Ecommerce and ebusiness are means to an end. That is, they provide new tools
to facilitate the transformation of service delivery and the provision of greater
opportunities for Jamaican businesses and consumers. To this end:
The goal of Jamaica’s ebusiness blueprint is to maximise
opportunities to raise Jamaican competitiveness and wellbeing
from the widespread use of ebusiness.
12.2
Principles
Rapid progress with systematic reform requires the clear exposition of a set of
principles that can guide the bureaucracy, legislators and industry alike. Indeed,
if well defined, such principles are likely to have a greater longer-term impact
than any specific strategies of actions identified in this strategy.
There are a series of principles (some of which, at times, suggest different
directions) that should guide the development and application of Jamaican
ebusiness policy:
•
all Jamaicans should be provided the opportunity to access the information
economy, ecommerce and conduct ebusiness with sufficient bandwidth and at
an affordable cost;
•
all Jamaicans need to be equipped with the skills and knowledge to harness
the information economy’s benefits for employment and living standards;
•
the private sector must lead ebusiness uptake — choices about new
technology and the exploitation of opportunities must be led by the private
sector. The development of ebusiness will be market-driven, and led by
individuals and business innovators;
•
government should be a model user, supplier and purchaser of electronic
business services — this will provide direction, education and encouragement
to business and consumers;
•
legal and regulatory frameworks should be implemented to ensure that
ebusiness is safe, secure, certain and open. This involves a number of
elements:
– technological neutrality — approaches taken should, wherever possible,
be technology neutral. The rational for this principle is that where
technology specific legislation if favoured there is a tendency for either:
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costs to be imposed upon the development and uptake of more efficient
technologies (eg, requirements that certain bank documents be ‘in
writing’ appears to have hindered both banking by fax, phone and the
Internet); or the market will seek to innovate around the technology
specific requirements (ie, the regulatory response is likely to be
inadequate as it only covers a particular technology when in fact it
should have possibly covered every technological option);
– transparency — legal and regulatory frameworks should provide for a
predictable, simple, and consistent legal environment for ebusiness.
Where the Government of Jamaica intervenes it will do so in a
transparent way; and
– international consistency — because electronic
commerce crosses
national boundaries, where ever possible, preferred legal and regulatory
approaches should be consistent with those evolving in a wide range of
international fora.
These principles should be referred to when the Government of Jamaica seeks t o
formulate any policy that may impact (directly or indirectly) on the
development and uptake of ebusiness.
12.3
Strategic Priorities
Following consultation with a range of stakeholders, ten priority areas have
been identified for action. It is suggested that Jamaica direct its efforts to:
1. progress wider availability, use and familiarity of computers and the Internet
and raise awareness of the capacity to use ebusiness to improve business;
2. invest in appropriate human capital;
3. combat impediments to entrepreneurial development;
4. advance affordable access to world class telecommunications infrastructure
necessary to support use of the Internet and ebusiness in Jamaica;
5. build business and consumer confidence in ecommerce and ebusiness through
legislation that confirms the legitimacy of electronic communication and
transactions;
6. ensure that the regulatory framework is consistent with further development
of ebusiness in Jamaica;
7. reengineering of government service delivery using ebusiness approaches;
8. complement existing plans to encourage development of the IT sector with
measures stimulating its use of ebusiness to raise productivity and
competitiveness;
9. implement some sector specific policies in Jamaica’s strongest ebusiness
sectors including Tourism and music and entertainment complemented; and
10. develop the Jamaican banking sector’s use and support for ebusiness and
capacity to conduct payments online to remove this as a potential
bottleneck in the development of ebusiness in Jamaica.
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12.4
Actions By Strategic Priority
Actions that have been identified as necessary to support the strategic priorities
are summarised below.
Table 12.1
ACTIONS AND PRIORITIES
Strategic Priority
Broad Approach
1.
Availability, use and familiarity
with computers and the Internet
Sustain government programs to provide PCs and Internet access in schools and
communities. Work closely with private sector bodies in joint projects.
2.
Investing in human capital
Continue to place emphasis upon acquisition of IT skills as a staple skill for most walks of life.
Evaluate the balance of supply and demand for IT skills. Make greater use of
3.
Combating impediments to
entrepreneurial development
Expand and enhance existing ebusiness incubators. Incubation should be an option for existing
businesses or new businesses wishing to apply ebusiness tools in any field everywhere where
business is done in Jamaica.
Develop approaches to support business in the post incubation phase.
Foster access to finance for emerging businesses through Pooled Ebusiness Funds (PEFs).
4.
Affordable access to
telecommunications
Maintain commitment to universal service and access to fixed line telephony which is a key
access point to the Internet.
Identify practical means of financing the Universal service/access arrangements that will apply
following fully contestable market arrangements as a matter of urgency.
Conduct an evaluation of broadband internet access to assess if it is an emerging bottleneck.
Place broadband prices on the regulator’s price watch list and indicate that the government will
develop policy options to drive prices down if competition is not effective in reducing prices in
the short to medium term.
The Government should withdraw ISP licenses from those companies that do not enter an
operational phase within 6mths, as a means of boosting substantive competition in the sector.
5.
Ecommerce and ebusiness
legislation
Introduce legislation supporting ecommerce as a matter of urgency.
6.
The regulatory framework
Consolidate the number of institutions involved in regulation as a means of addressing
convergence, reducing potential fragmentation, dealing with bottlenecks and focusing expertise.
7.
Reengineering Government as
model user
Accelerate progress made under the egovernment and government
programmes.
modernisation
Continue to be selective in services and activities that are reengineered focusing on higher
value activities rather than apply across the board targets that are unrealistic and result in
diffusion of limited resources.
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Strategic Priority
Broad Approach
8.
Continue to implement the Five-Year strategic Information Technology plan.
Development of the IT sector
Government to raise knowledge about ebusiness developments within the IT sector in
Jamaica.
Expand incubation of start-up companies.
Engage in post–incubation support for emerging IT companies.
Raise opportunities for partnership building within Jamaica and abroad.
Make it easier to find Jamaican IT companies and learn about their capacities. Encourage
development and maintenance of a private sector ICT/ebusiness portal site. This may include
working together to improve an existing site.
Promote awareness about Jamaican ICT/ebusiness success stories.
Obtain greater Jamaican development and involvement when making government purchasing
decisions.
Establish KPIs (some suggested) and review progress over next three years.
9.
Sector specific policies in
Jamaica’s strongest ebusiness
sectors
Focus industries include Tourism as well as music and entertainment.
Conduct a brief audit about the nature and extent of ebusiness involvement in these sectors.
Continue with plans to market Jamaican tourism businesses through an exclusive site. It is
essential that SMEs be involved in that process.
Identify global and regional sites that function as portals and ensure that Jamaican businesses
and Jamaica are well represented on those sites. Develop ‘how to guides’ to assist local
operators to be listed on these sites.
Include basic ebusiness practices within industry training schemes.
Enhance involvement of businesses in key sectors in ebusiness incubator programs. Ensure
that there is appropriate after incubator support.
Support demonstration programs for non-english web site development to broaden markets.
Encourage greater use of Internet purchasing and Internet price differentials (particularly for
tourism/travel services).
10. Banking sector’s use and support
for ebusiness
Government should encourage cooperative competition with and between banking institutions
leading to development and use of more efficient electronic payments instruments and
facilities.
Government of Jamaica to use the purchasing power of its agencies to encourage the banking
sector to provide electronic banking services and obtain modern, efficient banking services.
The Government of Jamaica should indicate that it would be willing to consider applications for
a banking authority from an Internet bank, subject of course, to meeting prudential and other
requirements on the same basis as other banks.
* Refer to earlier sections of the report to read the full details about recommended actions.
12.5
Timeframe For Action
Where to begin? What should be done now and what else will take more time?
The timeline for action sorts priorities into three categories:
•
immediate action;
•
medium term action; and
•
longer term action.
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12.5.1 Immediate Action
Immediate action should be very focused. Action to achieve the following
strategic priorities will be addressed first:
•
Put Ecommerce and ebusiness legislation in place.
•
Make the regulatory framework more ebusiness friendly.
These strategic priorities and the actions necessary to advance them involve
aspects that are within the core responsibility of the Government of Jamaica.
These actions should be undertaken and resolved within three months.
It has been identified that accelerated involvement in ebusiness in Jamaica
hinges upon removing barriers in these areas and preparing a favourable
environment. Essentially these actions involve the removal of bottlenecks.
12.5.2 Medium Term Action
Actions related to the following strategic priorities should be commenced within
three months with a view to making substantial progress within two years.
•
Government as model user of ebusiness in key areas.
•
Implement sector specific approaches in Jamaica’s strongest ebusiness
sectors (tourism as well as music and entertainment).
•
Stimulate the banking and finance sector’s use and support for ebusiness.
•
Development of the IT sector and its use of ebusiness approaches.
The medium terms actions involve change in existing businesses processes or
the development of new ebusiness facilities and approaches. These actions
inevitably take some time. The identified actions (detailed in the body of the
report), if adopted would establish more tangible evidence of ebusiness activities
working in the interests of Jamaicans and raise awareness and confidence in
these new approaches to business.
12.5.3 Longer Term Action
Identifying actions as requiring a longer timeframe does not imply that they are
less important than the earlier actions. In fact, the opposite applies. The items
identified for longer term attention are viewed as being crucial for Jamaica’s
prospects. They are placed in the longer term category merely because they
address structural facets that will take time to change and time to see results.
In addition, because these actions will take some time before outcomes are
evident, and because they are so important, it is crucial that work proceed t o
implement them as soon as possible. The clarification of these actions as longer
term generally relates to the notion that commitment will be required t o
achieve them over some time, rather than a notion that they can be put off for
a while.
The longer term strategic priorities and actions are:
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JAMAICA
•
Raise availability, use and familiarity with computers and the Internet
•
Invest in human capital development that builds the foundation for
involvement in ebusiness.
•
Combating impediments to entrepreneurial development – raising the
availability of capital and capability to engage in ebusiness, especially by
smaller businesses and start up businesses.
•
Develop arrangements to enhance widespread access to Internet friendly
telecommunications and monitor developments following increased
contestability in this sector, with a view to firmer regulation if competition
does not deliver expected benefits.
12.6
Concluding Points
The global shift to a digital economy poses major threats and significant
opportunities for Jamaica. As a small open economy Jamaica is dependent upon
trade and international capital. The country’s small size and traditional reliance
on a few primary products and services has constrained industrialisation and
economic development.
The opportunities are now well rehearsed. Digital technologies and ebusiness
approaches are creating new markets, reinvigorating old markets and making
every market more accessible. Success in becoming a global player could bring
economic growth, employment generation, greater social equity, administrative
efficiency and more participatory governance.
The threats are sometimes under appreciated. Economies have to re-equip and
re-skill to meet the evolving competition. Government and every sector of the
economy have to adapt quickly. Areas of the economy that once enjoyed
natural protection from imports (including many services) now face fierce
competition. Failure to address the challenges may condemn many Jamaicans t o
persistent poverty and underdevelopment.
At issue is Jamaica’s willingness and capacity to become a global player and t o
maintain or improve competitiveness. The Ebusiness challenge is not only
about websites and electronic transactions. The digital revolution is involving
profound changes. Jamaica must implement policies and provide the framework
and environment which will facilitate investment, modernise industries, enhance
productivity and broaden the worldwide presence of Jamaicans.
There is evidence that Jamaica is making progress in engaging in ebusiness:
•
there is significant interest in technology amongst the Jamaican
community, including with respect to the Internet and ebusiness. This is
strongest in areas that already have an international outlook including
sectors such as tourism as well as music and entertainment activities;
•
Jamaica has a fledgling IT sector and there is evidence that business is
turning to ebusiness techniques;
•
in general, Jamaica has a well respected regulatory regime which has made
significant reform progress over recent years;
114
FOR
JAMAICA
•
a number of recent actual and mooted legislative changes have acknowledged
the need to amend legislation to make Acts compatible with an Internet
enabled world (eg, copyright); and
•
the expatriate Jamaican community has most rapidly embraced ebusiness, as
evidenced by the number of Jamaica-related web site originated and hosted
overseas, and hence Jamaica already has a substantial presence on the world
wide web.
The last point entails potential vulnerabilities. While there is evidence of a
vibrant ebusiness presence about Jamaica, much of this activity is not conducted
in Jamaica by Jamaicans.
There is less ebusiness activity in Jamaica than there could be. Meanwhile,
because of the accessability of the Internet, global players are tapping into the
Jamaican market.
Unless this pattern is addressed there is a danger that ebusiness will hollow out
Jamaican industry, shifting higher value knowledge based activities offshore,
leaving only a shell of lower value activities in Jamaica. Jamaica would still
probably benefit from the development of ebusiness in this scenario, but it would
be by less than it full potential given adoption of an effective strategy t o
develop domestic capabilities.
There is potential to improve outcomes in Jamaica in the near to medium term
with some targeted changes in areas including:
•
removal of legal uncertainties about ebusiness transactions — digital
signatures, privacy laws, and so on — have been a barrier to investment.
These uncertainties can be addressed relatively easily and quickly in
legislation;
•
increasing access to reasonably priced ebusiness infrastructure, especially
computers and telephone lines through direct support and increased
competition;
•
encouraging the Jamaican banking and finance sector to support online
business facilities for Jamaican ebusiness businesses and for online facilities in
general;
•
access to capital is an issue for Jamaica generally, but particularly so for
small ebusiness startups. This can be overcome at low cost, and by
facilitating partnering, and through more effective venture capital
arrangements (by the introduction of innovative venture capital funding
arrangements, such as PEFs, that reward investors when they make
profitable investments – not those that are merely better at seeking
grants).).
The ‘digital divide’, the separation between the information ‘haves’ and ‘have
nots’ is a particularly important problem in a developing economy such as
Jamaica. The Government of Jamaica sees that beating this divide is not only
fair, its is essential. The objective reality is that the ease and speed of the
general population’s adoption of ICT skills, and the capacity of ebusiness
technologies to spread throughout business, including smaller businesses and start
115
FOR
JAMAICA
up ventures, will be a major determinant of the pace and nature of development
in coming years.
The thrust of measures in the longer run will turn around enhancing human
capital. Being relevant and in a position to enjoy much of what the digital age
has to offer is linked to having a well skilled and educated population with
aptitude and skills in the application of information and communication
technologies in everyday life. Translating this into economic advantage relies
upon developing more widespread entrepreneurial verve and capability.
The Government of Jamaica already sees the big picture:
“As we come to terms with the Digital Age, Jamaica has the opportunity to
embrace the new concept of a “knowledge based society” for social and economic
development. We must seize the initiative and build on the foundation that we
have already laid, to establish new partnerships, develop new industries, to become
more competitive in this new age. We have already begun the process through
human resource development, the establishment of infrastructure and the
enhancement
of new legislation and policies to create balance, stability and
79
growth…”
79
Dixon, J. 2003, “Establishing a Policy Agenda, Framework and Legislative Programme for the New Digital
Age”, Presentation to the Heart/NTA National Development Conference, Kingston, January 29.
116
FOR
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E
Part E
Appendices
117
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Appendix A
Abbreviations
ACCC
Australian Competition and Consumer Commission
ATM
automatic teller machine
BC
Broadcasting Commission
B2C
business to consumer
C&WJ
Cable and Wireless Jamaica
CAD/CAM
computer aided design/computer aided manufacture
CAP
Community Access Point
CD
compact disc
CITO
Central Information Technology Office
DVD
digital versatile disc
FTC
Fair Trading Commission
ICT
information, communication and technology
ISP
Internet service provider
IT
information technology
JACAP
Jamaica Association of Composers and Publishers
JIPO
Jamaica Intellectual Property Office
JTB
KPI
key performance indicator
MCT
Ministry for Commerce and Technology
NAP
Network Access Points
OECD
Organisation for Economic Co-operation and
Development
OUR
Office of Utilities Regulation
PC
personal computer
PEF
pooled ebusiness fund
SMA
Spectrum Management Authority
118
FOR
JAMAICA
SME
small and medium-sized enterprise
TDPCo
Tourism Product Development Company
TIC
Technology Innovation Centre
TRIPS
Agreement on Trade Related Intellectual Property
Rights
UNCITRAL
United Nations Commission on International Trade
Law
US
United States
WCT
WIPO Copyright Treaty
WIPO
World Intellectual Property Organization
WPPT
WIPO Performances and Phonograms Treaty
WTO
World Trade Organization
119
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Appendix B
Key Stakeholders Consulted
Organisation
Invited
Attended
Commented
APM Terminals
!
!
!
Bank of Nova Scotia Jamaica Ltd.
!
!
!
Broadcasting Commission
!
!
!
Cable & Wireless
!
!
!
Capital & Credit Merchant Bank
!
Centennial Digital Jamaica Ltd.
!
!
!
Central Information Tech. Office
!
!
!
Digicel
!
!
!
Fair Trading Commission
!
!
!
Fiscal Services Limited
!
!
!
Inter-American Dev. Bank
!
!
!
Ja. Intellectual Property Centre
!
!
!
Jamaica Bankers Association
!
!
!
Jamaica Business Centre
!
Jamaica Computer Society
!
!
!
Jamaica Customs
!
Jamaica Exporters Association
!
Jamaica Intellectual Property Office
!
!
!
Jamaica Promotions
!
!
!
Jamaica Reservations Services
!
!
Min. of Com’ce Science & Tech
!
!
!
Ministry of Finance & Planning
!
Ministry of Industry & Tourism
!
Myers, Fletcher & Gordon
!
!
!
N5.COM
!
!
!
National Commercial Bank
!
!
!
New Economy Project
!
!
!
Office of Utilities Regulation
!
!
!
Planning Institute of Jamaica
!
Port Authority of Jamaica
!
!
!
Port Computer Services
!
Price Waterhouse Coopers
!
Spectrum Management Authority
!
!
!
Technology Innovation Centre
!
!
!
Tourism Product Development. Company
!
!
!
120
Organisation
United States Agency for Int’l Dev.
FOR
JAMAICA
Invited
!
Attended
!
Commented
!
121
FOR
JAMAICA
Appendix C
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126

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