ICT and the Jamaican Economy: Challenges and Growth Strategies

Introduction: Jamaica in the Global Digital Economy

Advances in information and communication technology (ICT) have led to significant changes in the economies of developing nations, forcing them to conduct business in the global marketplace. ICT development has produced an integrated marketplace in which businesses that previously had no access to international trade can now engage on a global level. However, in order to receive the benefits this new technology offers, developing nations must have the infrastructure and social structures in place to allow their populations to take advantage of it.

Manufacturing is a growing sector in Jamaica, but resource-based production remains the mainstay of the economy. As resource-based economic pursuits continue to dwindle, the Jamaican economy must undergo substantial changes if it wishes to compete internationally. The development and acceptance of ICT within the business community and among the general population is an important step in this process.

Moving from a resource economy to an information economy is filled with challenges. There are economic, social, and policy considerations that must all work in concert to allow the transition to take place smoothly. This research explores each of these major areas and the data available in order to devise a set of recommendations for the continued development of ICT in Jamaica. It focuses on the participation of small and medium enterprises, as these entities are the driving force of the Jamaican economy.

The arrival of new technologies — such as broadband providing fast communication, ease of access to computers and the Internet, and changes in the collection and management of information — have broken down geographic, social, and economic barriers, setting the stage for countries to operate in a global environment. Jamaica, as a developing country, has no choice but to participate in this global economy. These changes in the international environment will continue to reorient the economy toward a knowledge-based model, and as such, major policy initiatives must be designed to take advantage of the opportunities presented by this global village.

According to an E-Readiness report prepared for Jamaica's Central Information Technology Office, the principal strategy for achieving growth and employment is investment in the ICT sector, which has been designated the principal industry for generating thousands of jobs over the near term. It is considered the route to improving productivity and efficiency, better targeting and delivery of services, and extending the benefits of development programs to citizens island-wide.

Jamaica has been experiencing economic difficulties for several years. The country faces balance-of-payment problems coupled with high public debt, relatively high interest rates, a declining local currency, and a high inflation rate. The ICT industry is targeted as the principal engine for growth and is expected to generate a significant number of new jobs. The major policy initiatives are geared toward creating a stable economic environment.

To realize the benefits of these initiatives, there needs to be a careful assessment of the global competitive environment and the state of ICT readiness in the country. The readiness to embrace ICT is contingent upon a number of factors, including competition within the sector, an adequate policy and regulatory framework, investment facilitation initiatives, macroeconomic and social stability, and the fostering of an entrepreneurial culture.

It must be made abundantly clear that technology by itself will not bring about development — it should instead be viewed as an enabler. In a knowledge economy, both material goods and human capital are important for benefit realization. It is the embrace and proper application of knowledge to the material world, with worthwhile objectives, that will lead to social advancement and economic development. Initiatives such as the introduction of the smart card in the transportation system, new toll roads, electronic meter reading, and an electronic voting system are likely to improve productivity. These, coupled with the pending rollout of additional broadband services and plans for all public-sector companies to begin accepting payments by way of e-commerce (termed e-Government), represent a significant leap toward improved productivity.

The benefits of science and technology are translated into quantitative and qualitative variables and indicators such as social and economic conditions, access to ICT, and the extent of organizational learning. The status of the ICT environment, as well as the social and economic dynamics surrounding it, will ultimately determine the success or failure of these new initiatives.

Hypothesis and Research Objectives

The financing and promotion of the ICT industry — or the lack thereof — is critical to Jamaica's growth. Indications are that Jamaica's financial system has increasingly become an inefficient intermediary of funds, which is creating problems for the financing of the ICT industry. It is in this area that venture capital financing could play a significant role, and policymakers ought to examine the legal framework to determine how a true venture capital market can be encouraged. The government should examine new models for creating innovation within the ICT sector and explore ways in which it can generate a more vibrant venture capital funding industry. Arrangements should be examined between local banks, development banks, the Export/Import Bank, and other funding agencies to design financial instruments, venture capital products, and small business loans that will stimulate innovation in the sector.

So far, most of the funding in the sector has come from either the government or large foreign-owned telecommunications companies. However, greater participation by local private companies is urgently required to maximize economic benefits. The purpose of this study is therefore to assess the current state of technological readiness in Jamaica and to establish the initiatives the country must undertake in order to benefit from new technological trends. It supports the hypothesis that in order for ICT use to grow in Jamaica sufficiently to boost the economy, education and infrastructure are the primary challenges that need to be addressed.

The research will not only support the stimulation of venture capital financing but will assess the various resources currently available. It examines the infrastructure, as well as social, economic, political, and current resources. The objective is to assess the current status and needs of ICT usage in Jamaica, to address ways to fill in the gaps so that ICT use will continue to grow, and ultimately to provide solutions to the problems associated with ICT growth and its role in boosting the Jamaican economy.

Literature Review: ICT and Developing Nations

The impact of advancing technology, and ICT in particular, is a subject that currently occupies the minds of many scholars. Government entities at the local, national, and global levels recognize the impact of ICT on the ability to participate in the global economy, and much of the information currently available stems from government agencies involved in ICT initiatives.

As far back as 1996, UNESCO, in the document entitled "UNESCO and an Information Society," made the point that ICTs have the potential to dramatically reshape the ways people organize their lives and interact with each other. These technologies form the basis for a shift from industrial definitions of development to a new paradigm based on the model of information societies.

Much has been written about the positive impact of ICT, and the World Economic Forum is one body that has consistently written on the subject. The Forum posits that the more successful countries are those in which governments, businesses, and civil society determine ways to give high priority to boosting education and training, and that the central element of this success is the ability to harness the potential of ICT to leverage the development process.

According to the Economist Intelligence Unit, governments make a difference. In their 2005 e-readiness ranking, they indicated that focused government ICT policies helped propel Mexico to a four-place rise in the rankings. The government's e-Mexico project, which opened 3,200 community centers with public Internet access kiosks, played a vital role in this improvement.

The World Economic Forum also indicates that countries such as India have transformed their economies largely due to the benefits of the ICT revolution. Other countries, such as Ireland and Israel, have also emerged as centers of software development and have benefited substantially from their commitment to ICT.

M. Desai, S. Fukuda, et al. wrote an important paper, "Measuring Technology Achievement of Nations and the Capacity to Participate in the Network Age." They put forward the view that not all countries need to be on the cutting edge of global technological advance; however, every country needs the capacity to understand and adapt global technologies for local needs. They caution against the mistaken assumption that technology transfer and diffusion are relatively easy — that developing countries can simply import and apply knowledge from outside by obtaining equipment, seeds, and pills. Drawing on Lall (2000), they remind us that before companies or farms can use and derive benefits from technology, they need to learn and develop new skills. Beyond adopting new techniques, developing countries also need the capacity to invent and adapt technologies. Poor countries must foster their own creativity to use both local and global knowledge and science to find technological solutions to their development problems.

In most case studies of ICTs and development, failures are rarely acknowledged openly; they are more often disguised under the phrase "lessons learned." O'Farrell (2001) argues that before one can advocate for the development of ICTs among the poor, one must understand the existing information systems of the poor, how they interact with formal information channels, and the best way to strengthen those channels before introducing new information sources and means of access. Access to information and knowledge are enablers in poverty reduction.

Breathnach (2000) explored the emergence of niche markets among transnational cities, highlighting the uneven impact of globalization. For some, globalization has meant tremendous growth and new possibilities. For those that were not ready — such as underdeveloped countries — globalization has meant falling further behind. Breathnach examined the growth of the call-center business in Dublin, Ireland. The historical development of Dublin established it as a center of government, bureaucracy, and international business. Dublin saw the opportunity to expand on this established business presence and develop call centers, pouring money into financing and infrastructure and creating policies that made it easy to establish these businesses. The result was an influx of foreign direct investment, especially from American firms. At the time of the study, over 70% of the firms in Dublin and nearly 80% of the employment opportunities in the call-center industry were from American companies. Approximately 90% of the call-center sector in Ireland is located in Dublin as a result of these moves, earning Dublin the nickname "The Call Center of Europe."

This case highlights the importance of examining the strengths and weaknesses of a nation. The development of ICT in Jamaica may depend on the ability to develop current markets using ICT as a facilitator (Stirton and Lodge, 2001). The Dublin case demonstrates the need for government support of efforts by cities to develop their niche markets, and the analysis of niche markets within a sector represents many opportunities for the development of local economies on a global level.

In a speech to the World Summit on Information Society, Dr. Paulwell highlighted the steps necessary to improve the development of ICT strategies in Latin American and Caribbean countries, stressing the importance of integrating many processes and strategies including "liberalization, legislation, education, infrastructure, trade, transport and logistics" (Paulwell, 2000). He emphasized the importance of clear strategic goals in the success of such a project.

Paulwell (2000) also highlighted the importance of Small and Medium Entities (SMEs) in the economies of these countries. The majority of business entities in Latin America and the Caribbean are SMEs. Encouraging the use of technology to stimulate the efficient delivery of their services and allowing them to fully integrate the supply chain will make a major impact on the region's economy. Paulwell argued that ICT offers export opportunities in many human-resource-intensive sectors — including tourism, the cultural industry, and professional services — and will help stimulate job growth, addressing both economic stimulation and employment development simultaneously.

At the time of Paulwell's speech, only about 8% of the general population in Latin American and Caribbean (LAC) countries was connected to the Internet. In order to promote the e-economy, more attention will have to be paid to the needs of the general population — a gap widely referred to in scholarly works as the "digital divide." Paulwell suggested several areas that need to be addressed to promote the development of ICT and the technology sector:

• Promote the e-economy
• Increase the budget for science and technology appropriate for an information society
• Focus on infrastructure, including involvement of the private sector
• Enlarge physical and cultural access to the Internet
• Make national governments model agents and consumers of technology
• Promote competition among Internet providers to facilitate Internet access among the general population
• Promote the development of local content and interest, including in multiple indigenous languages
• Concentrate on the use of ICT as a tool for poverty reduction and development

As the available literature demonstrates, there are many gaps that need to be filled in order to resolve the issues associated with ICT usage and growth. While there are examples of how countries have attempted to resolve these issues and promote the development of certain sectors within local communities, many challenges persist in LACs, particularly poverty and lack of access to the Internet. The focus of this research is to help resolve some of the issues that stand in the way of ICT development in LACs, with a particular emphasis on Jamaica.