Paradigms Jide Lewis, CFA, FRM 1 Official External Sources of - - PowerPoint PPT Presentation

Financing Development in Jamaica A Panoramic View: Opportunities, Challenges and New Paradigms

Jide Lewis, CFA, FRM

1

Official External Sources of Development Financing

Official Sources of External Financing (Annual Profile)

• 6.0
• 5.0
• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 4.0 CY2012 CY2013 CY2014

Per cent of GDP

Government loan flows Government Bond flows Official Grant Flows

INFLOWS (-) OUTFLOWS (+)

Three main sources of

• fficial external financing

[Loans, Bond and Grants] have played an integral role in Jamaica’s development agenda. Loan flows, with the exception of 2014, have represented to the largest source of official financing. Bond flows has re- emerged as a main source of financing in 2014

Official Sources of External Financing (Quarterly Profile)

• 6.0
• 5.0
• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 4.0 5.0

2012:Q2 2012:Q3 2012:Q4 2013:Q1 2013:Q2 2013:Q3 2013:Q4 2014:Q1 2014:Q2

Per Cent of GDP

• Govt. Portfolio Securities
• Govt. Loans

Official Grant Flows

NET CAPITAL OUTFLOWS CAPITAL INFLOWS

Bond flows, however, has exhibited much volatility in the aftermath of the global financial crisis. Loans flows and Grant flows from Multilateral Financial Institutions have been much more stable over the last two years.

Official Loan Flows by Multi-Lateral Financial Institution (MFIs)

• 0.50

1.00 1.50 2.00 2.50 3.00 3.50 4.00 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0

2008:Q1 2008:Q3 2009:Q1 2009:Q3 2010:Q1 2010:Q3 2011:Q1 2011:Q3 2012:Q1 2012:Q3 2013:Q1 2013:Q3 2014:Q1 2014:Q3

% of GDP

US$ Millions

Other EU KFW CDB OECF USAID IDB IBRD Grants-to-GDP Ratio

Jamaica has partnered with a wide range of multi-lateral financial institutions since the height of the global financial crisis. Supporting liquidity when global capital markets where exhibiting low levels of liquidity. These partners have included the IBRD, IDB and the CDB, among

• thers.

Official Transfers\Grants

• 0.05

0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

2008:Q1 2008:Q3 2009:Q1 2009:Q3 2010:Q1 2010:Q3 2011:Q1 2011:Q3 2012:Q1 2012:Q3 2013:Q1 2013:Q3 2014:Q1 2014:Q3

% of GDP

US$ Millions

Other EU KFW CDB OECF USAID IDB IBRD Grants-to-GDP Ratio

Though grant flows from MFIs have typically represented lower proportion relative to

• GDP. These flows have

catalysed the developmental process via: a) Provision of Technical Expertise b) Application of International Benchmark standards c) Accountability along key stages of project implementation from design to implementation.

Improving Access to Global Capital Markets…

Jamaica has increasingly focused on creating the necessary supporting policy and institutional environment to promote and enhance the effectiveness of development initiatives.

Global Bond Markets

2 4 6 8 10 12 14 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 Per cent (%) EMBI GOJGB 100 200 300 400 500 600 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 Basis Points GOJGB-EMBI Spread

These efforts have resulted in a notable narrowing of the spread between yields on GOJ Global Bonds and the Emerging Market Bond Index. Jamaica is one of twenty middle income countries (MIC) which has access to global capital markets.

Other External Sources of Development Financing

Private Sources of External Financing (Annual Profile)

3.7 3.3

• 0.7
• 2.8
• 5.2
• 5.0
• 12
• 13.7
• 15.0
• 13.0
• 11.0
• 9.0
• 7.0
• 5.0
• 3.0
• 1.0

1.0 3.0 CY2012 CY2013 CY2014

Per cent of GDP

Non-FDI Private Capital Flows/GDP FDI inflows/GDP Remittance Flows/GDP

INFLOWS (-) OUTFLOWS (+)

Three other sources of external financing have been Remittances, Foreign Direct Investment and Private Capital Flows.

Other Sources of External Financing for Development

• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 4.0 5.0 2012:Q4 2013:Q1 2013:Q2 2013:Q3 2013:Q4 2014:Q1 2014:Q2 2014:Q3 2014:Q4

Per Cent of GDP FDI Inflows/GDP Non-FDI Private Capital Flows/GDP Remittance Flows/GDP

CAPITAL OUTFLOWS CAPITAL INFLOWS

While Foreign Direct Investment and Remittance inflows have been stable and robust, Private Capital Flows, though improving, have been very volatile.

Other External Sources of Development Financing: Remittances

Remittances: Who are the recipients?

In terms of other sources of income

• 40 per cent of

recipients were employed full-time

• 11 per cent were

self-employed

• 25 per cent where

unemployed

• 13 per cent were

not seeking a job

75% of Recipients are women Modal Age: 25 – 40 Household Size: 4 Education: 85% have at least Secondary-level education 25% have Tertiary-level education USD 222 per Month 680,000 Persons

Usage of Remittances for Frequent Recipients

14 per cent 9 per cent 6 per cent 7 per cent

19 per cent

Other External Sources of Development Financing: Foreign Direct Investment

4.8 5.7

4.2 4.4 4.6 4.8 5.0 5.2 5.4 5.6 5.8 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 CY2013 CY2014

Total FDI as a Per cent of GDP US$ Millions

Agricultural/Manufacturing/Distribution Divestment Information Tech/Communication Infrastructure Insurance Minerals & Chemicals Mining Other Retained Earnings Tourism TOTAL

Annual Foreign Direct Investment by Economic Sector

China is playing an increasingly important role particularly in the development of infrastructure in Jamaica. Tourism investments particularly from Spain has also buoyed FDI inflows. There have also been ongoing investments in the areas of telecommunications, mining and agriculture and distribution.

• Reducing regulatory complexity and cost and strengthened legal

institutions

• Making it easier to start a business : Simplified preregistration

formalities (publication, notarization, inspection, other requirements)

• Cut or simplified post registration procedures (tax registration, social

security registration, licensing)

• Ease of getting electricity Improved regulation of connection processes

and costs

• Jamaica made getting electricity less expensive by reducing the cost of

external connection works.

• Jamaica made starting a business easier by consolidating forms, but

also made it more time-consuming as a result of delays in the implementation of the electronic interface with different agencies.

Making “Doing Business” in Jamaica Easier

Domestic Sources of Private Sector Development Financing

50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14

JMD ('000)

Other Distribution Entertainment Tourism Transport, Storage & Communication Manufacturing Mining Agriculture Personal

Distribution of Private Sector Loans by Economic Sector (2010 – 2015)

Credit Reporting Activity

Access to Trade Finance – Enabling Trade Index

0.0 5.0 10.0 15.0 20.0 25.0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000

Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15

Per cent (%) JMD ('000)

Loans and Advances to the Private Sector (LHS) Growth in Private Sector Credit (RHS)

0.8 1.4 1.3 1.2 1.4 1.5 1.4 1.4

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 0.0 50.0 100.0 150.0 200.0 250.0 Q1:2013 Q2:2013 Q3:2013 Q4:2013 Q1:2014 Q2:2014 Q3:2014 Q4:2014

Total FDI as a Per cent of GDP US$ Millions

Quarterly Direct Investment by Sector (US$MN)

Tourism Retained Earnings Other Mining Minerals & Chemicals Insurance Infrastructure Information Tech/Communication Divestment Agricultural/Manufacturing/Distribution FDI as a Per Cent of GDP

0.0 100.0 200.0 300.0 400.0 500.0 600.0 CY2013 CY2014

US$ Millions

Barbados USA Spain Japan Korea Mexico UK Canada

• Dom. Rep.

India China

FDI Inflows by Source Country

China is playing an increasingly important role particularly in the development of infrastructure in Jamaica.