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) Three main sources of official external financing CY2012 CY2013 CY2014 Per cent of GDP -6.0 [ Loans, Bond and Grants ] have played an integral -5.0 INFLOWS (-) role in Jamaica’s -4.0 development agenda. -3.0 -2.0 Loan flows , with the -1.0 exception of 2014, have represented to the largest 0.0 source of official financing. 1.0 Bond flows has re- 2.0 emerged as a main 3.0 OUTFLOWS (+) source of financing in 4.0 2014 Government loan flows Government Bond flows Official Grant Flows

Official Sources of External Financing (Quarterly Profile) -6.0 Bond flows , however, Per Cent of GDP -5.0 has exhibited much CAPITAL INFLOWS volatility in the -4.0 aftermath of the global -3.0 financial crisis. -2.0 -1.0 Loans flows and Grant flows from Multilateral 0.0 Financial Institutions 1.0 have been much more 2.0 stable over the last two NET CAPITAL OUTFLOWS 3.0 years. 4.0 5.0 2012:Q2 2012:Q3 2012:Q4 2013:Q1 2013:Q2 2013:Q3 2013:Q4 2014:Q1 2014:Q2 Govt. Portfolio Securities Govt. Loans Official Grant Flows

Official Loan Flows by Multi-Lateral Financial Institution (MFIs) 450.0 4.00 Jamaica has partnered with a wide range of 400.0 3.50 multi-lateral financial 350.0 3.00 institutions since the 300.0 2.50 height of the global US$ Millions % of GDP 250.0 financial crisis. Supporting 2.00 200.0 liquidity when global 1.50 capital markets where 150.0 exhibiting low levels of 1.00 100.0 liquidity. 0.50 50.0 0.0 - 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 These partners have included the IBRD, IDB Other EU KFW and the CDB, among CDB OECF USAID others. IDB IBRD Grants-to-GDP Ratio

Official Transfers\Grants Though grant flows from MFIs have typically 70.0 0.45 represented lower 0.40 proportion relative to 60.0 0.35 GDP. These flows have 50.0 0.30 catalysed the US$ Millions 40.0 % of GDP developmental process 0.25 via: 0.20 30.0 a) Provision of Technical 0.15 20.0 Expertise 0.10 10.0 b) Application of 0.05 International 0.0 - 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 Benchmark standards c) Accountability along key stages of project Other EU KFW implementation from CDB OECF USAID design to IDB IBRD Grants-to-GDP Ratio 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.

Per cent (%) 10 12 14 0 2 4 6 8 capital markets. Jamaica is one of twenty middle income countries (MIC) which has access to global GOJ Global Bonds and the Emerging Market Bond Index. These efforts have resulted in a notable narrowing of the spread between yields on Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 EMBI Feb-11 May-11 Global Bond Markets Aug-11 Nov-11 Feb-12 GOJGB 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 100 200 300 400 500 600 0 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 GOJGB-EMBI Spread 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

Other External Sources of Development Financing

Private Sources of External Financing (Annual Profile) Three other sources of external financing have CY2012 CY2013 CY2014 -15.0 been Remittances , -13.7 INFLOWS (-) -12 -13.0 Foreign Direct -11.0 Investment and Private Capital Flows . -9.0 Per cent of GDP -7.0 -5.2 -5.0 -5.0 -2.8 -3.0 -1.0 -0.7 1.0 3.0 3.3 OUTFLOWS (+) 3.7 Non-FDI Private Capital Flows/GDP FDI inflows/GDP Remittance Flows/GDP

Other Sources of External Financing for Development -4.0 Per Cent of GDP -3.0 -2.0 CAPITAL INFLOWS -1.0 0.0 1.0 2.0 3.0 4.0 CAPITAL OUTFLOWS 5.0 2012:Q4 2013:Q1 2013:Q2 2013:Q3 2013:Q4 2014:Q1 2014:Q2 2014:Q3 2014:Q4 FDI Inflows/GDP Non-FDI Private Capital Flows/GDP Remittance Flows/GDP 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? 75% of Recipients In terms of other are women sources of income Education: - 40 per cent of recipients were 85% have at least Household employed full-time Secondary-level Size: 4 education - 11 per cent were 25% have self-employed Tertiary-level - 25 per cent where education unemployed Modal Age: - 13 per cent were 25 – 40 not seeking a job 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

Annual Foreign Direct Investment by Economic Sector China is playing an increasingly 900.0 5.8 important role particularly in the 5.7 800.0 5.6 development of infrastructure in 4.8 Jamaica. 700.0 Total FDI as a Per cent of GDP 5.4 600.0 5.2 Tourism investments particularly US$ Millions 500.0 from Spain has also buoyed FDI 5.0 400.0 inflows. 4.8 300.0 There have also been ongoing 4.6 200.0 investments in the areas of 4.4 100.0 telecommunications, mining and agriculture and distribution. 0.0 4.2 CY2013 CY2014 Agricultural/Manufacturing/Distribution Divestment Information Tech/Communication Infrastructure Insurance Minerals & Chemicals Mining Other Retained Earnings Tourism TOTAL

Making “Doing Business” in Jamaica Easier • 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.

Domestic Sources of Private Sector Development Financing

Distribution of Private Sector Loans by Economic Sector (2010 – 2015) 350,000,000 Other 300,000,000 Distribution 250,000,000 Entertainment 200,000,000 Tourism JMD ('000) Transport, Storage & 150,000,000 Communication Manufacturing 100,000,000 Mining 50,000,000 Agriculture 0 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Personal

Credit Reporting Activity

Access to Trade Finance – Enabling Trade Index

350,000,000 25.0 300,000,000 20.0 250,000,000 15.0 Per cent (%) 200,000,000 JMD ('000) 150,000,000 10.0 100,000,000 5.0 50,000,000 0 0.0 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 Loans and Advances to the Private Sector (LHS) Growth in Private Sector Credit (RHS)

Quarterly Direct Investment by Sector (US$MN) 250.0 1.8 1.5 1.4 1.4 1.4 1.4 1.6 1.3 1.2 200.0 Total FDI as a Per cent of GDP 1.4 1.2 US$ Millions 150.0 0.8 1.0 0.8 100.0 0.6 0.4 50.0 0.2 0.0 0.0 Q1:2013 Q2:2013 Q3:2013 Q4:2013 Q1:2014 Q2:2014 Q3:2014 Q4:2014 Tourism Retained Earnings Other Mining Minerals & Chemicals Insurance Infrastructure Information Tech/Communication Divestment Agricultural/Manufacturing/Distribution FDI as a Per Cent of GDP

FDI Inflows by Source Country China is playing an increasingly important role particularly in the 600.0 development of infrastructure in Jamaica. 500.0 US$ Millions 400.0 300.0 200.0 100.0 0.0 CY2013 CY2014 Barbados USA Spain Japan Korea Mexico UK Canada Dom. Rep. India China