ECONOMY-JAMAICA: Technology Sector Struggles to Regain Focus

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Claude Robinson

KINGSTON, Mar 13 2002 (IPS) - Despite an audit cataloguing mismanagement of public funds and continued opposition calls for his resignation, Jamaica’s embattled Minister of Industry, Commerce and Technology, Phillip Paulwell , says his technology policies will attract investment and create jobs. His critics say neither will happen.

“This is corruption in the worst degree” said opposition spokesman on finance Audley Shaw, reacting to a report by Auditor General Adrian Strachan that concluded the management of a multi-million dollar fund to kick start the Information Technology (IT) sector was “inadequate in several respects”.

Paulwell, who had ministerial responsibility for the fund, said he accepted the Auditor General’s strictures and was ready to implement the recommendations to tighten financial controls. “We are going to see jobs continue to be created”, he said in a radio interview Wednesday.

Paulwell, who just turned 40, built a reputation as one of the more able ministers in the cabinet of Prime Minister P.J. Patterson. His star shone brightest two years ago when he successfully sold two cellular telephone licences for nearly 100 million dollars. The deal also ended the monopoly of the British multinational firm Cable and Wireless, still the major player in the telecommunications sector in the English-speaking Caribbean.

From the proceeds of the two licences, the government committed more than 20.8 million dollars to create the Information Technology Fund (Intech) to provide soft loans and training grants to firms promising to create some 40,000 jobs in call centres and telemarketing firms.

Jamaica’s telecommunications policy evolved through the late 1990s, culminating with a ‘Five Year Strategic Information Technology Plan’ of January 2001. The vision was to “transform Jamaica into a knowledge-based society” and to make the country “the centre for IT activities and investments in the Caribbean”.

The plan included expansion of training of specialised workers for the sector at the Caribbean Institute of Technology in Montego Bay, installing computer labs and Internet access in 30 percent of primary and secondary schools by the end of 2002, phased liberalisation of the telecommunications sector and creating 40,000 jobs over three years.

The government’s Intech Fund loaned 14.6 million dollars to a handful of mostly U.S.-based firms that promised to generate the jobs.

Most of them have run into problems and last year, one of the flagship firms, NetServ Communications (Jamaica) Ltd., crashed just six months after receiving more than four million dollars, leading to the call for the Auditor General to do an audit of the entire fund. It is believed that fewer than 5,000 jobs have been created.

The Auditor General’s report, tabled in Parliament Tuesday, noted that loans were made without the firms providing matching equity capital and procedures were breached. The financial and business capacity and personal integrity of some of the firms’ principals were not checked out thoroughly.

“Based on the many shortcomings noted in connection with the projects so far financed under the Intech Fund it must be concluded that the management of the fund was inadequate in several respects”, the independent auditor said.

Political oversight for the Fund has now been transferred from Paulwell to Patterson, who will face the polls later this year and is seeking to stem fallout from what is being called the Netserv scandal.

A knowledgeable industry analyst described Paulwell’s projection of 40,000 jobs as “reckless on any one of a number of fronts. First, no minister should risk his career on such promises; second, the infrastructure to support this was based on weak partners with a shaky track record; thirdly, it assumes that the intake of employees will meet the requirements for the job. Sadly in Jamaica this is not the case” as there is not a sufficiently large pool of trained workers.

Even before the Auditor General’s report, Senator Aloun N’dombet Assamba, the junior minister of industry and technology, announced a major policy shift way from loans and grants to technology firms.

Under the new policy, small investors can borrow some 208,000 dollars if they have at least as much of their own money at risk. And they can get back up to 416 dollars per person actually trained and employed after a year.

The government’s IT policy aims to get the country into the hugely competitive global information and communications technology (ICT) business arena. Telecommunications is the third largest sector of the global economy, after healthcare and banking, with equipment and services revenue in 2001 accounting for an estimated 800 billion dollars.

The U.N. Development Programme’s 2001 Human Development Report noted that countries that invest heavily in human resource development and create the conditions for capital investment in competitive ICT networks have seen economic benefits. These are from international firms willing to establish research centres outside their borders and outsource some production such as data processing and customer service.

In 1999, 52 percent of Malaysia’s exports were high tech, as were 44 percent of Costa Rica’s, 28 percent of Mexico’s, and 26 percent of the Philippines’, UNDP reported.

A recent agreement by Sitel Caribbean, a customer service provider based in Montego Bay on Jamaica’s northwest coast, with Philips Electronics of the Netherlands for certain customer care services has been cited by government officials as an indication of where the Jamaican ICT business should be heading.

The Human Development Report contained a ‘Technology Achievement Index’ (TAI) that ranked 72 countries and classified them as leaders, potential leaders, dynamic adopters and the marginalised. The index measured four dimensions of technological capacity that are important for reaping the benefits of the network age, namely, technology creation, diffusion of recent innovation, diffusion of old innovation, and human skills.

Jamaica ranked 49th, eight places behind Caribbean neighbour Trinidad and Tobago. Placed among the dynamic adopters, it scored fairly well on diffusion of old technologies such as telephones and electricity consumption but lagged on diffusion of newer technologies such as Internet host and high- and medium-technology exports as well as education and training.