JIS News

Prime Minister Bruce Golding, in a broadcast to the nation earlier tonight, announced a package of assistance for the major sectors such as tourism, manufacturing and small business, as the Government puts measures in place to stave off the worst effects of the unfolding global financial crisis.
Effective January 1, the General Consumption Tax payable by hotels will be reduced by a half to 4.125 per cent. This will be for a period of six months at which time the situation will be reviewed, the Prime Minister said.
The Development Bank of Jamaica will make available a special loan facility of $500 million to provide working capital to players in the tourism sector some of whom are experiencing cash flow problems. Loans will be offered to a maximum of $50 million at an interest rate of 10 per cent for a period of two years. This is in addition to the $100 million already being provided by the Tourism Enhancement Fund.
Turning to manufacturing, the Prime Minister said that the sectors faces difficulties resulting from the downturn in demand for goods and the drying up of credit facilities. As at January 1, the Customs User Fees payable on capital goods and raw materials will be removed and the time allowed for depreciating the cost of capital equipment will be reduced from two years to one year.
In addition, Government procurement policy will be adjusted to provide a 10 per cent margin of preference to Jamaican-owned companies. “Preference in the award of contracts will be given to a Jamaican-owned company over a foreign-owned company if the bid submitted by the Jamaican-owned company is not more than 10 per cent above that of a foreign competitor. It may cost us a little more but we have to support our local manufacturers and suppliers,” the Prime Minister stated.
Support will also be provided for the small business sector, which employs the largest number of people but is particularly vulnerable to the economic stress.
The Development Bank of Jamaica will be allocating $350 million through the Jamaica National Small Business Loans Limited to provide additional funds for lending to small businesses and micro-enterprises.
A total of $150 million has been provided to the Jamaica Business Development Centre for on-lending at 10 per cent to small businesses and micro-enterprises that are unable to meet the full collateral requirements for conventional loans. The Prime Minister made it clear that these loans must be for the production of goods or the provision of services and not trading.
He said an additional $150 million will be provided at similar rates through designated Credit Unions for similar purposes.
In addition, all government agencies will be mandated to ensure that at least 15 per cent of their total procurement is reserved for small business and micro-enterprise suppliers. These are defined as businesses or enterprises with an asset base of less than $30 million.
As of January 1, only businesses with annual sales of more than $3 million will be subject to General Consumption Tax requirements. Approximately 2,800 small business operators are expected to benefit from this provision. Currently, businesses with annual sales above $1 million are required to register under the GCT and submit monthly returns.
As it relates to bauxite/alumina the Prime Minister said the industry is “in a precarious position” due to the virtual collapse of the market for alumina. He noted that while plants all over the world are shutting down, “we have been in intense discussions with the bauxite/alumina companies here in Jamaica and the unions, which represent the workers to try to avoid the closure of any of our alumina plants, which would result in hundreds of workers being laid off. The government has had to offer certain concessions and we may not be able to avoid a cutback in production but we are doing everything possible to keep the plants in operation and save the jobs of the workers in the industry”.
He said that the discussions have been going well and “we hope that shortly we will reach agreement with UC Rusal in respect of Alpart, Kirkvine and Ewarton. The situation will have to be kept under constant review based on developments in the world market. At the present time, there is no immediate danger to the operations at Jamalco and St. Ann Bauxite Company but we are in constant dialogue with those companies as well”.
In addition to assistance provided to the targeted sectors, the Prime Minister also announced measures to provide some general relief and stimulus throughout the economy.
“We have negotiated a US$300 million facility with the Inter American Development Bank to provide loans to the productive sector to be made available through commercial banks and the EX-IM Bank,” he announced.
“I expect to sign this agreement in January and the disbursement of these funds by the IDB will commence in that same month,” he said.
In addition, effective January 1, the tax on dividends paid by all locally owned companies will be abolished “to help them to keep going, to protect the jobs of their workers and to encourage them to invest even in these difficult times”.
The transfer tax on property transactions will be further reduced to five per cent to provide some stimulus to the real estate market and construction sector. In April, the transfer tax on property transactions was reduced from 7