The regional stock market experiment has so far had limited success, Jamaica's former finance minister, Dr Omar Davies, has said, raising doubt on whether the idea of a single institution, with the existing national entities becoming subsidiaries, will play itself out.

Speaking in Port of Spain, Davies told an investment conference that the national players that the regional market has been constrained by an inability to agree on what seems to be minor issues.

Single regional entity

"It is obvious that the crosslisting, which had been seen as the vehicle to lay the foundation for the single regional entity, has met with limited success," he said.

"Furthermore, cooperation between the national entities has been hampered by what would seem to objective observers to be minor issues. However, above and beyond the challenges of cooperation at the regional level, there are national factors which, independently, have limited the development of this area of the financial sector.

As example of the latter, he cites recent developments in Jamaica where Audley Shaw, the new minister of finance and planning, took the policy decision to abolish income tax on dividends paid out by publicly listed companies.

The objective was to create a clear bias in favour of such companies, leading to greater participation in trades involving them by investors and, consequently, an increase in the number of companies seeking to go public, Davies said.

Lobby mounted

Describing the results as moderately successful, he said at the same time, a very strong lobby was mounted to grant equal treatment to private companies, which the government at the time resisted.

Shaw in April announced a widening of the net to private companies that similarly pay dividends to shareholders.

"Hence, in the Jamaican case, there is no tangible advantage for the majority shareholders of a private company to seek to have it publicly listed, or for ordinary shareholders to opt for participation in publicly traded companies.

"In fact from the point of view of majority shareholders in private companies, one may argue that there is a strong incentive not to change the status quo, as the same tax benefits can be obtained without being subjected to the regulatory scrutiny of the stock exchange."

The upshot, he said, was that the dividend tax policy, which was "expected to provide 'critical mass' for either deeper collaboration of the existing institutions or for the single regional entity, has been thwarted."

business@gleanerjm.com