This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 KINGSTON 001363 
 
SIPDIS 
 
WHA/CAR BNICHOLS AND BENT 
 
E.O. 12958: N/A 
TAGS: PREL PGOV KCRM JM
SUBJECT: WHA/CAR DIRECTOR BRIAN NICHOLS GETS DOWN TO 
BUSINESS WITH AMCHAM 
 
REF: A. KINGSTON 1328 
 
     ¶B. 04 KINGSTON 2888 
     ¶C. 04 KINGSTON 3385 
 
¶1. Summary:  On May 11, Director of Caribbean Affairs Brian 
Nichols, accompanied by Econoff, met with American Chamber of 
Commerce President Anthony Jenkinson to discuss the business 
climate in Jamaica. While citing the ongoing difficulties 
caused by the high crime levels and the GOJ's heavy debt 
burden, Jenkinson stated that the overall climate for doing 
business was very good, with the GOJ acting as a facilitator 
rather than a hindrance most of the time, and that the GOJ 
attitude towards the private sector had greatly improved 
since the dark days of the 1970s.  End Summary. 
 
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Business Climate 
---------------- 
 
¶2. On May 11, Brian Nichols, Director of Caribbean Affairs, 
accompanied by Econoff, met with Anthony Jenkinson, President 
of the American Chamber of Commerce in Jamaica.  Jenkinson 
outlined the history of the current debt crisis, attributing 
it to a financial crisis in the late 1990s, when all the 
local banks and insurance companies collapsed and were bailed 
out by the GOJ at great expense.  The weakened financial 
institutions were sold off to Trinidadian interests during 
the recovery period, and there was a prolonged period in 
which there was no capital available for lending in Jamaica, 
constraining growth.  Jenkinson stated, however, that the 
banks are much healthier today and that the private sector is 
confident and stable, mostly due to the GOJ's economic 
pragmatism and steadfast commitment to a balanced budget 
since the crisis. 
 
¶3. Describing how the GOJ has made major reforms in its 
policies and practices to facilitate business growth, 
Jenkinson stated that the recent tax reform committee 
engineered a simplification of the tax structure that will 
make life much easier for corporations, though some observers 
worry that it may cause a shortfall in GOJ revenues. 
Overall, Jenkinson said, there is very little GOJ 
interference with the private sector: no exchange controls, 
no requirement to gain GOJ approval to transfer assets 
overseas, and no restrictions on having foreign business 
partners.  In this environment, telecommunications firms, 
distribution companies and real estate brokers have the most 
potential, while manufacturing is nearly dead, Jenkinson 
noted.  He added that tourism could be boosted by the 
introduction of casinos (Ref B), which are a "when", not an 
"if", in his view. (Note: Prime Minister PJ Patterson, 
believed to be one of the primary obstacles to the 
legalization of casinos, is expected to step down before the 
next elections.) 
 
¶4. Jenkinson stated that the primary factor impacting the 
business climate in Jamaica was the ongoing security problem, 
which affects every business.  Due to high crime, he argued, 
every company has to spend a significant portion of its 
operating budget on security services, which do not come 
cheap.  Fear of crime increases recruiting costs for 
expatriate personnel, and demotivates both employees and 
investors.  Despite high profile GOJ efforts to combat the 
situation, crime does not appear to be going away. 
Enforcement efforts are not addressing the root cause - 
poverty.  Thus, crime is a factor that every business in 
Jamaica will have to deal with for the foreseeable future. 
Jenkinson also noted that the legal system is generally fair, 
with no sign that the "highly professional" judges are being 
politically influenced.  However, the court system is 
severely overburdened and it can take years for matters to be 
litigated.  In order to get more rapid resolution to their 
problems, some businesses have begun looking into binding 
arbitration, a practice that is beginning to gain popularity. 
 
¶5. When asked if the positive trends would continue if the 
opposition party were to win the next elections 
(constitutionally due by October 2007), Jenkinson answered 
that both the People's National Party (PNP) and Jamaica Labor 
Party (JLP) want investment to continue.  The left wing/right 
wing ideological battle has ended, and both parties now 
contend for office on the basis of their technical skills in 
managing government.  He stated that Jamaica's Westminster 
election model tended to allow professional politicians and 
party insiders to rise to the top levels of government, 
rather than individuals with experience in the private 
sector, and that this sometimes leads the academically-minded 
politicians to announce policies that sound good on paper, 
but are unworkable in the real business world.  He gave, as 
an example, the recent imposition of new weights and measures 
regulations on the petroleum industry (reftel), which may 
have the effect of increasing fuel costs and driving away 
investment. 
 
--------------------------------------------- --- 
The Trouble With Air Jamaica and Organized Labor 
--------------------------------------------- --- 
 
¶6. Jenkinson commented briefly on the recent resumption of 
direct GOJ control of Air Jamaica, the national airline (Ref 
C).  He stated that the current situation is a "disgrace", 
and that the GOJ has been "very disingenuous" throughout the 
whole affair.  While the GOJ was supposed to be providing 
oversight, USD millions in losses were concealed from 
regulators.  Jenkinson commented that Jamaica doesn't need a 
national airline flying routes to a variety of destinations 
worldwide and that other international carriers should take 
care of connecting service while Air Jamaica focuses on 
ferrying tourists from the U.S., Canada and the UK to Jamaica. 
 
¶7. Despite the recent disputes between the GOJ and organized 
labor regarding adherence to the 2003 Memorandum of 
Understanding, Jenkinson stated that unions weren't having a 
significant impact on the business climate.  He said that the 
weak state of the economy has caused union leaders to realize 
that there is a limit to how much they can push for increased 
wages and benefits.  Also, the unions lack strong backing in 
government, as organized labor is split between the JLP and 
the PNP.  As a result, the unions have moved away from 
aggressive tactics, and industrial disputes are down. 
 
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COMMENT 
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¶8. Jenkinson's portrayal of the Jamaican business enviroment 
showed it as a place that is welcoming to international 
investors, where the GOJ has removed many of the regulatory 
burdens that once constrained private sector activities. 
However, the GOJ's ongoing fiscal crisis occasionally leads 
to attempts by the GOJ to implement and enforce new 
revenue-generation plans that have negative effects on the 
business community and the island's economy in general.  The 
other key constraint mentioned by Jenkinson, the impact of 
crime, has also been cited by numerous private and public 
sources as Jamaica's number one problem. 
 
¶9. This cable has been approved by WHA/CAR Director Brian 
Nichols. 
ROBINSON