Foreign direct investment heading in right direction, says Clarke

Thursday, July 12, 2018

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Finance Minister Dr Nigel Clarke is reporting an annual average increase in foreign direct investment to Jamaica, pointing to data from the central bank to support his point.

“According to data provided by the Bank of Jamaica, for fiscal years 2016/17 and 2017/18, the average annual foreign direct investment (FDI) was 20 per cent higher than average annual FDI over the fiscal years 2012/13 to 2015/16,” Clarke said yesterday.

Clarke is in Frankfurt, Germany, leading a delegation on the European leg of Jamaica's investor roadshow,

“FDI fluctuates on a year over year basis and, by definition, FDI can be lumpy with one-off anomalies. To get a better picture of the trend or the direction of FDI, it is better to look at averages over periods of time. Averages smooth out one-off aberrations. The latest trend shows that FDI is moving in the right direction, this period being 20 per cent higher than the previous,” a news release from the finance ministry quotes Clarke.

He explained that one way to get a good sense of investment into the Jamaican economy is to look at the importation of capital goods — equipment and machinery used in production of goods and services.

“The higher the importation of capital goods, the more investment for future production, manufacturing and growth,” he pointed out.

“The 2017/18 fiscal year saw capital goods importation rise above US$1 billion for the first time in several decades compared with 2015 when capital goods importation was just over US$500 million,” the minister stated.

“In fact, when you compare the period 2012/13 to 2015/16 with the period 2016/17 to 2017/18, Bank of Jamaica data show that average annual importation of capital goods has increased by 84 per cent. This kind of movement is hugely significant and is consistent with what we know: there is heavy investment in the production, manufacturing, construction, energy, infrastructure, logistics and tourism sectors which is an excellent indicator for the Jamaican economy,” he stated.

Another measure that Clarke referenced was bank loans combined with capital market credit to the non-financial private sector.

“While this measure hovered between 33 per cent and 34 per cent of GDP (gross domestic product) between December 2013 and December 2015, total private sector borrowing jumped to 40 per cent of GDP by December 2017. This again reflects increasing investment in the Jamaican economy which augurs well for the future,” Clarke said.

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