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close this bookThe Courier N 138 - March - April 1993 Dossier: Africa's New Democracies - Country Reports : Jamaica - Zambia (EC Courier, 1993, 96 p.)
close this folderCountry reports
close this folderJamaica
View the documentHarnessing the winds of change
View the documentP.J. Patterson - The new man at the helm
View the documentInterview with Senator David Coore, Minister of Foreign Affairs and Foreign Trade
View the documentHospitality is big business - Jamaica's tourist sector
View the documentInterview with Bruce Gokling Chairman of the Jamaica Labour Party
View the documentDancing to a Jamaican tune
View the documentProfile
View the documentCooperation with the European Community

Cooperation with the European Community

by Jean-Claude HEYRAUD

Since 1976, many of the privileged relations between Jamaica and the United Kingdom have been taken over by the European Community, through the Lomonvention, and are now based on reciprocal interests in a new spirit of equal partnership. They and the EC's relations with the other countries of Africa, the Caribbean and the Pacific have been institutionalised in various ways and one of the institutions, the ACP-EEC Council of Ministers, which takes place at least once a year, met in Kingston, the capital of Jamaica, in May of last year.

The main thing which the Lomonvention provides is a stable, long-term framework, both for the development of trade relations with Europe and for the country's economic and social development in general, while there is also shorter-term support for the stabilisation and structural adjustment of the economy.

Jamaican bananas, sugar and rum-Community alcohol.

Trade with Europe remains dominated by two Jamaican exports, sugar and bananas, once the bulwark of relations with the United Kingdom. Two Lomrotocols guarantee continuing access for these two products, which are vital to Jamaica in terms not just of economic advantage and export earnings (12.6% of the total in 1991, and 78% of agricultural export earnings), but of employment and a safe income to small peasants and rural workers.

As with other ACPs in the region. Jamaican bananas have so far had completely free access to their only export market, that of the United Kingdom. But with the coming of Europe's single market this year and the disappearance of national markets inside the Community there is to be a new system though. as agreed in the Convention, it attempts not to place traditional ACP suppliers in a less favourable situation on the Community market than they were before. Like other countries in the region. Jamaica has remained alert and still keeps a very close eye on Community decisions in this field-on which the ACPs are always consulted first.

Although Jamaica's banana output was hit hard by Hurricane Gilbert in 1988, it recovered fast and exports rose to 75 290 t in 1991, with even better figures expected for 1992.

Bananas and 15 of the island's other agricultural products are covered by the Lomonvention's export revenue stabilisation system, Stabex, which cushions drastic fluctuations in earnings. Jamaica has used it once for bananas in 1981.

ACP producers have to compete with the cheaper Latin American bananas by ensuring high quality and low costs. One of the reasons for spending ECU 1.5 million of EDF money on the rebuilding and extension of Boundbrook Wharf at Port Antonio-due to be the point of export for about 75% of Jamaica's bananas after completion in March 1993 is to cut losses and costs at the port and during transport.

For sugar, the protocol provides an annual quota of almost 119 000 t of white sugar (the ACPs fourth largest) at a price related to the price paid for Community sugar, which is far higher than the world market price. This amount is slightly more than half the island's output, which thus supplies domestic needs and the privileged external markets in the Community and the United States (quota of roughly 22 000 t in 1991). There are also special access arrangements for a sugar product, rum, which are gradually being liberalised, with larger Community entry quotas as from this year. The Community will be laying down the arrangements for stopping the quota (planned as from 1996) in advance, in the light of ACP exports and the situation and outlook on the Community rum market.

Under provisions which are not part of the Lomonvention, Jamaica is also able to purchase European wine alcohol on favourable terms, turning it into ethanol and re-exporting it, also on favourable market access terms, to the USA. This is almost the only example of a commodity imported by an ACP country and re-exported in processed form to the North.

Other trade

Jamaica exports 31 .1% (by value) of its products to the Community. but goods from the Community only account for 13.8% of its total imports (1991 figures). It has managed to boost its foreign exchange earnings and reduce its dependency on sugar and rum over the past decade by increasing its output of nontraditional products (fruit and vegetables, spices, flowers, cigars, textiles etc.), thereby bringing about a substantial and steady increase in its exports to the Community, which levies no import duty on them. Indirectly, this improvement should also go some way towards helping both sides alter the balance of trade.

The Commission wanted to make an effective contribution to this and so, in January of this year, it approved the Target Europe Programme to provide support for the recent, joint initiatives of JAMPRO, Jamaica's public trade and production promotion board, and private exporters in the Jamaica Europe Business Club. The ECU 3 million for this are to come from the first LomV national indicative programme (19901995).

Table 1: Summary of EC assistance to Jamaica since 1975

Structural adjustment

Jamaica has been negotiating economic stabilisation and structural adjustment programmes with the international financial institutions since 1978. The special structural adjustment support provided under LomV is timely, because, over the past two years, Jamaica has taken the most stringent economic stabilisation and liberalisation measures, giving it access to the IMF's Extended Financial Facility (EFF) for the three coming years.

The Community's structural adjustment support includes LomV financing for an ECU 8.4 million general import programme (ECU 2.5 million special support and the balance from the LomV and ex-Lom national indicative programmes) to support the balance of payments. The counterpart funds accruing from this provide social sector budget assistance and in some cases supplement Community activity in other areas-rural development for example. These funds are targeted at a meeting of the Finance Minister, the Planning Institute and the Delegation.

Other EDF projects are also designed to support the Government's programme of reform. For example, plans are being made for an ECU 7 million credit line programme using the balance of the LomI and III NIP special loans and grants to promote employment and production, two vital factors for the policy's success. This programme, in which a good percentage of the loans to final users will be managed by Jamaican NGOs, should not just help small firms. Enterprising individuals who want to open workshops will also benefit. The various organisations will have technical assistance to optimise their distribution and loan recovery. The prospects of success are particularly sound in this developing country, where private enterprise is expanding and industrial production outside the mining sector already accounts for 16% of GDP.

The European Investment Bank, which was involved in the sector before the EDF, has laid on ECU 30 million in the shape of three credit line programmes, via the National Development Bank, and has financed two ECU I million company share operations via the appropriate organisations.

Economic restructuring has also involved the Government in a World Bank-supported civil service reform, of which one of the main features so far is a hefty 20% staff cut. It goes hand in hand with a come-home policy to encourage expatriate Jamaicans to return and use their skills and experience in the national administration to help development. An ECU I million programme (tome IV) is currently being set up under the responsibility of the International Organisation of Migration in Geneva to get more than 40 of these qualified Jamaican expatriates home and settled.

Budget restrictions have hit education hard, but the University of the West Indies has benefited from all the successive Lomegional funds for wide-ranging development of its four campuses in Jamaica (Mona), Barbados (Cave Hill) and Trinidad & Tobago (Saint Augustine and Mount Hope). It has also received ECU 16 million from LomI and III to rebuild the university hostels on the four campuses as well as at CAST (College of Art, Science and Technology) and the CTC (an arts and culture training centre), which are two Jamaican institutions serving the whole of the Caribbean.

Lastly, the Community and various NGOs cofinance a number (more than 32 since 1977) of small projects, mainly in the social field, to help cushion the social repercussions of the adjustment policy.

Focal sectors of Community aid

Jamaica has stuck to the approach of previous Conventions, LomII especially. The first national indicative programme (1990-1995) of LomV focuses funds on economic infrastructure and agriculture, two sectors affected by the adjustment measures.

The rural road repairs begun under LomII (almost ECU 7.3 million) are continuing under LomV (ECU 13.5 million), as are the rural and semirural water supplies (ECU 6.7 million under LomII and perhaps as much as ECU 18 million under LomV). These sums include the institutional improvements vital to the development and better management of the organisations in charge of this work (the Ministry of Public Works and the National Water Commission). There are particularly good reasons for Community involvement in this area given that, with the Negril and Ocho Rios purification facilities (see below), almost ECU 50 million from the past three EDFs have been invested in the water sector. The linkage which is envisaged in this area is in the hands of the United Towns Development Agency, which proposes to extend the Ciudagua programme (already developed with Latin America) to the Caribbean with financial help from the Community. All this financing is of indirect benefit to agriculture and transport (shifting farm produce) and helps raise the standard of living in rural areas by discouraging people from moving to the towns.

The EIB has also helped with economic infrastructure, using capital from own resources to finance a jetty for cruisers in Montego Bay (ECU 5.25 million) and to build a container terminal in Kingston (ECU 16 million).

Table 2: Lom - II - III - IV

Agriculture contributes barely 8% of GDP, but it has considerable potential and, above all, is an essential aspect of any balanced development (employment for 27% of the working population, development of rural areas, food import-substitution and containment of the move to the towns). The aim of financing previous programmes was primarily to back up all the small growers, particularly in the coffee industry, where ECU 3.5 million was provided, mainly in the form of small loans, although cocoa and citrus fruit farmers were also helped, as were goat breeders (the meat features in curry goat, one of the national dishes). This last scheme is in fact being run on a regional scale by CARDI, with LomII financing. The technical cooperation with bee-keeping also developed under LomII is being pursued under LomV (ECU 1.7 million) with similar aims. Preparation of a programme of support for extension services and small farmers is due to start in March 1993, using the balance of several million ECU still available in the LomV national indicative programme.

Lastly, a recent evaluation shows that the support for small peasant farmers in the Saint Anne province, who have switched from ganja-growing to legal crops, has achieved what it set out to do. This is one of the four Jamaican projects financed to the tune of ECU 1.3 million from the Commission budget as part of the North-South drug control cooperation programme. The others focus on prevention and rehabilitation.

Biggest foreign-exchange earner -the tourist trade

The tourist trade, expanding constantly and only slightly dented by the Gulf crisis, has been Jamaica's biggest foreign exchange earner ($750 million) for three years now, with a big interest in visitors from Europe making up for the declining interest on the part of American holiday makers. The bulk of the investments in this sector have been made by dynamic, enterprising Jamaican businessmen.

The Community provides substantial support for this still fragile sector, which is now such an important one for the country. Montego Bay airport, the main tourist point of entry, has been expanded (ECU 7.1 million from LomII) and is already able to cater more efficiently for the ever-increasing numbers this season.

Lastly, Negril and Ocho Rios, the two tourist centres, are getting new sewage collection and treatment systems to make them more hygienic, prevent pollution of the sea and the beaches and protect the coral reef. The financing for this, ECU 25 million (approval in the first quarter of 1993) comes from the Lom1 Sysmin funds, which are being redirected from the bauxite industry to help diversify the Jamaican economy and protect the environment.

Table 3: Allocation of National Indicative Programme resources by sector

Community aid: more closely targeted and better absorbed

Not much Community aid was absorbed in the 1980s. Only an average of ECU 3.5 million was paid over each year of the decade and there was a considerable build-up (ECU 72 million in l 990) as a result, but the rate of disbursement has speeded up a lot over the past few years to reach an average of more than ECU 6 million p.a. But, far more than the increase in payments, it is the present rate of primary (financing decisions) and secondary (contracts) commitments which, combined with the Jamaican authorities' greater attention to projects, justifies the level of Community aid, most of which is in the form of grants. Primary commitments have already been made for 52% of the LomV national indicative programme. The Government knows what is wrong and is trying to cut through more red tape. The needs are still there, urgent and far from being met.

So the technical and financial cooperation schemes between Jamaica and the European Community are many and varied and they are run in many fields, all of them essential, to provide support at the most critical points in the economy of an island which, thanks to its beauty, its culture and the drive shown by its people, is unique. J.-C. H