JAMAICA LOSES almost US$800 million a year in repatriated profits, due to the large amount of subsidiaries and joint ventures and company franchises that exist in this country.
While it is good for the employment generation (direct and indirect), international contacts, expertise and other positive attributes that these multinational companies bring into the island, we must not overlook that they also help to put pressure on the foreign exchange rate when they repatriate a large portion of the profits they make in the economy.
In the year 2000 the outflow figure was US$417.3 million but this had jumped to US$747.3 million by 2004. If we compare the January-June figures for 2004, which was US$317.2 million (which ended up with the over $700 million outflow) and the January-June figures for 2005, which are slightly higher at US$329.5 million, the indications are that the outflow level for 2005 should easily hit the US$800 million mark (Primary data from Econ. & Social Surveys of Jamaica).
PERPETUAL DEFICITS
With Jamaica's balance of payments current account running perpetual deficits, it is not something that that we should just shrug our shoulders and accept as inevitable, while being consoled by the inflows being generated on the other side by flow of remittances.
We know that Michael Lee Chin (of NCB fame) has thrown down the gauntlet to other multinational owners by stating that his holding company (AIC) will not seek any such repatriated funds out of NCB, and that others should do the same.
Fortunate or unfortunately, he is Jamaican-born, so his motivation for keeping all of NCB profits here will be much different from, say, a foreign investor using the country as a springboard to other ventures. Other multinational companies may quite rightly ask that when they were risking putting their investment funds into your country, they heard no one telling them that if they made a loss they would be compensated by local funds, so why put restrictions on what they do with their profits. In this global world of easy and mobile transactional capital flows, it is also easy to move money out of any country, even with stringent capital controls in place.
The JPS, for argument's sake, will see it as right and proper to help to remove its parent company from bankruptcy situation at home in Atlanta where they have difficulties (using its profits gained from subsidiaries all over the globe) even if Jamaicans complain about this profit outflow.
SOLUTIONS
There have to be several solutions that could be pursued to bring about greater use of such repatriated funds. One is to undertake greater dialogue with the investment companies in order to encourage them to build greater partnerships with their locale, and so inject more funds into the economy. Two is to facilitate greater domestic investment levels so that more of such funds stay here (although one would be foolish to believe that some locally-owned companies don't move money overseas as well, but to off-shore accounts). We should also encourage greater local equity participation in the local ownership of these companies, perhaps by setting out specified time frames for share conversion and minimum equity targets.
We must, however, bear in mind that in the current globalised world of mobile capital flows, we may just be tilting at windmills like Don Quixote, in search of an ideal use of repatriated funds.
