SECTORAL DEBATE 2005 PRESENTATION BY HON. PHILLIP PAULWELL, MINISTRY OF COMMERCE, SCIENCE AND TECHNOLOGY ON JUNE 1, 2005

Mr. Speaker, I rise to make my contribution to the 2005/06 sectoral debate in a very upbeat mood which has come about from a sense of significant accomplishments along the journey to the development of our people.
It has been a challenging year which saw some disappointments but which also had significant achievements in a number of critical areas under the portfolio responsibility of the Ministry of Commerce, Science and Technology.
I therefore begin with thanks, firstly to my Permanent Secretary, Dr. Jean Dixon and her hardworking team of senior managers and staff of the Ministry. And equally Mr. Speaker to the Chairpersons and all Board members, the Managers and staff of the over 25 statutory boards, companies and departments which comprise the Ministry. They are all delivering on their respective mandates whether in energy, telecommunications, regulation of commerce or science and technology.
The performance of many of these government agencies has improved to the point where they are self financing and can now contribute to the Consolidated Fund rather than wait for monthly subventions through the warrant system. Many of them are on the way to attaining world-class standards in service delivery and we will be setting even more aggressive targets to ensure that they all meet or beat industry standards worldwide.
I should point out Mr. Speaker that all of this was achieved without any major query from the Auditor General or the Contractor General as the recent reports to Parliament show. In fact several of them were passed with flying colours. Mr. Speaker, although I am tabling Ministry Papers highlighting the performance of all the Ministry’s agencies I want to give you a few examples of these achievements.
Mr. Speaker, we are achieving much through the healthy cooperation between private enterprise and the government. I believe that we are rapidly maturing as a nation; we realize that in the face of global competition we must operate as one enterprise, the enterprise “JAMAICA”. As the eternal optimist Mr. Speaker, I believe that as we strengthen the relationship between the various entities within the Jamaican Enterprise, between government, the private sector, academia, NGOs we will be unbeatable on the global landscape.
One of the responsibilities of this Ministry which we take very seriously is the provision of an enabling environment for business and there are a number of agencies including the Registrar of Companies, Fair Trading Commission, the Trade Board and the Consumer Affairs Commission which have very onerous responsibilities to ensure a level playing field for business as well as consumer education.
During last year, the Consumer Affairs Commission achieved resolution of 91% of total complaints and secured compensation for aggrieved consumer of $15.58M.
The target next year is to resolve 80% of customer complaints in 10 working days. With the effective date of the new Consumer Protection Act being today, June 1, 2005 the Commission will be moving more aggressively against vendors who continue to perform outside the boundaries of fair trade.
With the coming into effect of the new consumer protection law, I have directed the Fair Trading Commission to concentrate on competition matters and to leave consumer protection issues to the CAC to avoid overlapping and duplication. Last year, the FTC launched investigations into 1,145 cases. Misleading advertising continues to account for majority of complaints, comprising 84% of cases during the period. Used Car Dealers, furniture and appliance dealers and computer retailers continue to be the high offenders in publishing misleading advertising. Mr. Speaker, I want to use this opportunity to make an appeal for businesses to provide accurate information when promoting their products. Mr. Speaker, we are not going to turn a blind eye, we must ensure fair market practices and the CAC is now under legal obligation to protect the consumer.
Significant progress has been made on the enactment of new regulations under the Fair Competition Act and the Ministry has also submitted draft amendments to the Act for comments from relevant government bodies. For the new financial year the FTC’s target is to initiate investigations into all complaints within 15 working days
The efficiency of the commission will also be significantly enhanced with a US$400,000 grant from the Inter-American Development Bank.
The Trade Board Mr. Speaker, has been given a new mission to execute Government’s policy on electronic transactions, commerce facilitation and import/export licensing and other regulatory matters. The organizational structure of the Trade Board has been reconfigured to fit its new responsibilities including attaining self-financing through increasing the range of services offered as well as the charges for its services.
One specific function the Board now has is to ensure that Jamaica meets its international obligations under the WTO Agreements on Rules of Origin and WTO Agreement on Import Licensing. Work on the Trade Board Information System (TBIS) which is a component of the e-Government project has been tested and evaluated and is now ready for implementation subject to the agreement between the Ministry of Finance and the Banks for electronic revenue collections.
The Trade Board issued a total of 17,232 import permits, an increase of 11.2% over the previous year, motor vehicle applications accounted for 13,937, a small decrease of 2.2% over the previous year.
Another important agency to facilitate commerce, which had significant achievements last year, is the Jamaica Intellectual Property Office. Under a new Board headed by Tony Laing, JIPO is about completing the work on the new Trademarks Registration Systems, which will become fully operational by the end of next month. Work on the automation of the Patent Registration Systems which began last December is now fully operational and a National Intellectual Property Assets Audit was initiated in March.
Among the new pieces of legislation and regulations which JIPO will complete during the coming year are amendments to the Copyright Act arising out of Jamaica’s ascension to the WIPO Internet Treaties, the new Patent and Design Law, the Protection of the Rights of Breeders of new varieties of Plants and regulations under the Protection of Geographical Indications Act.
JIPO will also begin shortly offering on-line services to clients and IP Advisory Services to the public.
Mr. Speaker, the final agency I would like to mention under this section is the Companies Office of Jamaica (COJ), previously the Office of Registrar of Companies, which during the year surpassed all its targets for guaranteed services, including new company registration which achieved actual delivery time of three working days for regular applications and one working day for expedited applications.
The COJ between November and February last had a successful amnesty for outstanding annual returns. Under the amnesty, companies were allowed to file outstanding annual returns at reduced cost and a waiver of late fees. In addition companies which wanted to be removed from the register could do so without having to file any documents once they provided an audit certificate that they had no assets or liabilities and have ceased trading. Mr. Speaker, the amnesty was an overwhelming success with companies filing 28,788 annual returns and the agency earning $43.1M in revenues.
The new Companies Act took effect on January 1, 2005 and the COJ had major responsibilities for ensuring adequate preparation for the new Act. I congratulate the staff and thank the Advisory Board of the COJ on achieving an extremely smooth change over to the new Act which is contributing to an even more efficient registration and administration system. I am aware that the new Act is not perfect, but we will await comments from the public before any amendments are proposed to this Parliament.
Mr. Speaker, combined work of all the agencies including the regulatory agencies under the department of commerce has contributed significantly to the continued improvement of business confidence in Jamaica. Their work also contributed to Jamaica being ranked in the top 10 countries in the world to do business.
ENERGY
Mr. Speaker, I now turn to the critical subject of energy. Access to energy supply at reasonable prices is the most critical factor facing the Jamaican and Caribbean economies today.
Jamaica is an oil deficient country in which oil accounts for over ninety percent (90%) of the fuel consumption. Our oil bill in 2004 reached US$935 million up from US$813.1M in 2003. In 2005 it will break the US $1 billion mark, more than the combined net earnings from any two of Jamaica’s top foreign exchange exporting industries. And what is more Mr. Speaker, at this time last year even with prices soaring in the high US$30s to US$40 a barrel none of us dreamt that the era of over US$50 a barrel would already be with us.
These prices are being driven by political instability in the Middle East and the demand for energy in general and for oil in particular in China, India and other parts of Asia. Twenty years ago, Asian consumption was 17% of the world’s oil production in the next ten years it will be consuming 32%.
It seems Mr. Speaker that there is an insatiable global demand for oil and Jamaica is following the global trends. The widespread perception that oil producers and refiners are running out of spare capacity is making matters worse. Even the mere hint of a supply disruption can trigger a jump in prices. There is no indication that demand for oil will flatten anytime soon, developments in China and other Asian economies continue to put pressure on the market and as long as the supply is limited, then we may well expect to see sustained high prices as a feature of the immediate future.
Today, June 1st, the world will use approximately 77 million barrels of oil and 86 trillion cubic feet of natural gas. The volumes of these fuels have respectively increased by about 1% or 2% per annum each year over the past decade.
For these reasons, Mr. Speaker, we are acutely aware of the need to develop strong initiatives in energy conservation. I intend to lead by example and so I have acquired a hybrid motor vehicle which uses a combination of gas and electricity and will give up to 60 miles per gallon of gasoline.
But while we focus on energy conservation, we cannot forget the crucial matter of security of energy supply, Jamaica has benefited from the friendship and partnership of oil-rich regional neighbours such as Venezuela, Mexico and Ecuador. I wish to express our gratitude to these countries that have supplied crude oil to our Kingston refinery over the years, and continue to do so.
PetroCaribe, a new initiative of the Venezuelan Government, will undoubtedly provide a means for future cooperation in the area of energy with positive spin-offs for all participants.
It is aimed at extending the participation of Venezuela in the Caribbean region as it relates to the petroleum industry. It proposes to benefit the region through lower energy costs, as well as through the development of supply infrastructure, joint refining, and coordination of hydrocarbon supply and distribution.
The PetroCaribe initiative is expected to deepen both political and commercial ties between the countries of the region and Venezuela, in pursuit of regional integration and economic development.
There are several facets to the PetroCaribe initiative. Some key features include:
Strengthening of the existing San Jose and Caracas Accords for providing crude oil and refined products at favourable terms eg. Allocated volumes could be increased and the finance will be revisited as also the accessibility under the Caracas Agreement in particular.Lowering transportation costs via the elimination of intermediaries by direct provision of transportation. Integrating existing refinery infrastructure in Jamaica, Trinidad and Tobago, Dominican Republic and Cuba to support Venezuela’s crude oil sales. In addition, it could provide for assistance to be given for revamping/upgrading of regional refineries. Ensuring the benefits that accrue under these trading agreements strengthen the fibre of all the countries, this would include education, housing and health.Providing a forum for cooperation in respect of oil exploration and production among the countries of the region.Establishment and strengthening the oil storage infrastructure in the region. Establishing an Energy Fund to provide grants and concessionary loans to member States for financing sustainable/renewable energy projects.
There is a need now to ensure that our regional refining capacity will meet the demands of all Caribbean countries adequately, and at the best possible prices. Mr. Speaker, crude oil refining capacity in the Caribbean countries that would participate in PetroCaribe exceeds 1.7 million barrels/day. Smaller refineries are geared towards meeting domestic demand, while the larger refineries in Venezuela and Trinidad and Tobago serve both local and export markets. We are aware Mr. Speaker that Jamaica has a small 35,000-barrel/day hydro skimming refinery; I have this afternoon tabled information on the performance of this Refinery in the Ministry Paper.
For the energy deficient countries of the region, the immediate and longer term sustainability of economic development depend on facilitating the advancement of an enabling environment which allows increased domestic productive capacity, and production of goods and services at the most competitive prices. Fundamental to the realization of this objective, and the competitiveness of regional products in the international market, is the cost of inputs, and particularly of energy.
Mr. Speaker let us discuss for a moment the refining industry. Unlike oil and gas production, refining margins are dictated by commodity prices because the input feedstock, crude oil, is purchased at the market price, and the output products, of which there is a range, are sold at different individual commodity prices. The implication of this is that refineries do not necessarily benefit from high oil prices. In fact they may face reduced margins when crude oil prices are particularly high.
It is important for us to realize that developing a competitive refining industry is of the greatest importance to the regional economic integration process.
To this end, the upgrade of the Petrojam refinery will be given high priority in the upcoming period.
PETROJAM
There are certain problems facing the Petrojam refinery. The first is that there are physical and technological challenges which limit its ability to meet market demand for the full range and quantity of products. Therefore, certain high value products such as LPG and high octane gasoline (90 grade) now have to be imported.
The refinery’s production annually is 9 million barrels, whereas the demand from the non-bauxite sector is just over 16 million barrels. Consequently, significant quantities of petroleum products have to be imported, primarily from Trinidad and Tobago. So there is an urgent need to expand the refinery capacity as well as improve product specifications.
In regard to product specifications, an upgrade of the refinery is required to meet new international low sulphur standards for both gasoline and diesel. Producing low sulphur diesel is important because Jamaica is now moving to diesel-engined vehicles. Further, the planned phase out of MTBE as the octane enhancer in gasoline will take place in 2007/2008, so there is the need for higher octane material to be produced from the domestic refinery.
A two-phase approach is being planned for the upgrade of the refinery, with the first phase costing approximately US$ 170 million. This will involve capacity expansion from 35, 000 to 50, 000 barrels of crude oil per day; installation of a new reformer unit, which will increase gasoline production to meet local demand; a new vacuum unit to produce vacuum gas oil as well as asphalt for export. There will also be facilities for the de-sulphurisation of diesel to less than 500 parts per million.
The cost of phase two is yet to be determined in detail, but it will involve the conversion of heavy fuel oil to higher value products. This is important because with the introduction of liquefied natural gas (LNG) the Jamaican market will no longer require the same high volumes of heavy fuel oil.
I am pleased to advise this House Mr. Speaker, that the technical proposal for the upgrade has been finalized. The basic engineering design which will also include an economic and environmental study will be completed in January 2006. Execution of the detailed engineering and construction phase should take approximately 24 months. The new plant start-up and commissioning could take place in the third quarter of 2008.
Mr. Speaker, through a competitive process a company has been selected to prepare the financing proposal and we have strong indications of interest from external investors for joint venture financing. Petrojam has been a profitable state owned company Mr. Speaker, and I have requested that the offer of shares to the Jamaican public be factored into the proposal.
The Refinery has restarted operations since its closures last year due to an explosion. Last week I received the full report on the cause of the accident. The report including its recommendations will be submitted to Cabinet next week and after that I will be disclosing it publicly and announcing the steps being taken to prevent reoccurrence.
OIL EXPLORATION
Mr. Speaker, there will have to be other major initiatives in oil and gas exploration, renewable energy projects and conservation if Jamaica is to have a sustainable energy policy which will ensure economic survival.
The matter of oil exploration is of course not new to the nation, with a total of 11 wells (9 onshore and 2 offshore) already drilled in Jamaican territory during the period 1955-1982. In light of technological and scientific advances over the past 20 years, the country is again seeking to attract investment from oil and gas exploration companies, in the pursuit of finding commercially viable reserves within the nation’s territory, both offshore and onshore.
Drilling for oil and gas is an expensive venture. Mr. Speaker, there are associated risks but, technological advances over the years have lowered these risks. Allowing foreign companies to participate in exploration activities minimizes the costs to the national budget, and it brings the appropriate advanced technologies to the industry while allowing the nation to benefit from the production of domestic oil and gas resources.
Mr. Speaker, this is one of the many projects that has me rearing to go to work each day. Should we discover oil or gas reserves, this landscape will be significantly changed. Jamaica announced its First Formal Licensing Round on January 1st; this will close at 12 noon on July 15, 2005. To facilitate this bid round, the Jamaican area has been divided into twenty blocks, 20 offshore and 4 onshore.
The terms of engagement with the exploration companies have been laid out in a model Production Sharing Contract. Companies will be asked to make a commitment towards the training of Jamaican personnel in exploration and production activities. Provided there are successful bids, there will no doubt be well-needed investment and employment opportunities.
We keenly await the results of the Licensing Round. We are encouraged by the fact that a number of large companies have shown interest in the exploration possibilities. Eight companies have purchased the new report on the oil and gas potential of Jamaica and four companies have purchased the logs and seismic data package only.
Mr. Speaker, as a responsible government, we must seek to balance development initiatives with appropriate environmental protection measures. We must also engage stakeholders in the decision making process as we move forward. In this regard, I have established a working group including the Jamaica Fishermen Cooperative Union, the University of the West Indies, NEPA, the Fisheries Department of the Ministry of Agriculture and the PCJ. This group will ensure that a comprehensive public awareness programme is implemented and that all interests receive full attention as we move forward with this project.
In relation to renewable projects, last year saw the successful commissioning of 20 megawatts of wind energy at the Wigton Windfarm in Manchester at a cost of US$25 million. The Ministry is committed to examining the feasibility of expanding that project as well as to conduct tests for other suitable windfarm sites in the eastern and northeastern sections of the island.
In relation to hydropower projects, PCJ and ENTEC of Switzerland are presently completing a feasibility study, design and business plan for a proposed 2 megawatts hydropower projects at Laughlands Great River.
In addition, other projects which may have economic potential are to be examined by the Petroleum Corporation these include:
Great River, Hanover ——— 8.0 MWRio Cobre ——————— 1.0 MWYallahs River —————– 2.6 MWWild Cane River ————— 2.5 MWMorgans River —————– 2.3 MWRio Grande ——————– 3.9 MW Martha Brae River ————- 5.4 MWBack Rio Grande ————— 50 MW
Apart from the Back Rio Grande all the potential hydropower projects are small run of river schemes. Back Rio Grande is the only hydropower development project with a large installed capacity and with regulation for dependable peak energy generation. A hydropower plant with these characteristics would be a valuable addition to the presently predominantly oil fired power system.
Mr. Speaker, with the assistance of UN – ECLAC, my Ministry has finalized a report which provides details on the potential renewable energy projects in Jamaica. We expect this to excite Jamaicans here, those in the diaspora as well as other investors to the opportunities that exist in the renewable energy sector in Jamaica.
ETHANOL
Mr. Speaker, ethanol production is also on the front burner. Ethanol is a widely used alternative automotive fuel. Jamaica, being a producer of sugar cane, has the potential of making significant local inputs to our gasoline demand by the production of fuel grade ethanol from sugar cane for blending with gasoline. Ethanol is quite similar to the alcohol in rum, but there is no intention of depriving the rum industry of any of the molasses which it requires.
The Government has engaged the services of a team of Indian experts to study our situation and to determine how we might successfully upgrade our sugar industry from one which produces only sugar and rum to a multi-product industry, which views sugarcane as a raw material, producing sugar, rum, food products, fuel ethanol and electric power, all from the sugar cane.
That study began in November of last year and an options report is being analysed by local stake-holders. The final report is scheduled for completion in the second half of June.
The benefits which can flow from the reorganization of the sugar industry are considerable. Ethanol is a better and more environmentally friendly octane enhancer than Methyl Tertiary Butyl Ether (MTBE). Industrialized countries are already in the process of phasing out the use of MTBE and are moving instead to ethanol. The Cabinet recently agreed to phase out MTBE and to replace it with ethanol.
Mr. Speaker, if Jamaica makes that change, at least 10% of the gasoline we consume can be replaced by locally produced ethanol. The foreign exchange savings would be considerable. The necessary studies of the blending process and of the local motor vehicle fleet, are being undertaken with the assistance of Brazilian expertise in preparation for this change which should take place in 2007/2008.
The fuel ethanol business is not new to Jamaica. For a number of years we have imported wine alcohol from Europe and have dehydrated it in local ethanol plants, exporting the finished product to the United States under the Caribbean Basin Initiative (CBI) – regime. The European countries are now using that wine alcohol for their own purposes and so we have had to do two things.
Firstly, we have had to source hydrous or wet alcohol from Brazil and secondly we have to consider the production of ethanol feedstock from locally grown sugar cane. This local production of ethanol will help to revive the sugar cane industry.
In regard to the processing of Brazilian alcohol in Jamaica, the arrangements are well underway. A 40 million gallon-per-year ethanol dehydration plant is now under construction at Petrojam through a joint venture arrangement between Petrojam and a Brazilian company, COIMEX. Construction of the plant commenced in November of last year and is scheduled for completion this month.
RETAIL SECTOR
Mr. Speaker, petroleum is a critical factor in our economy and this industry is big business. The industry has always relied on successive governments to help maintain balance between the different sectors. One area of ongoing competitive tension is the practices that influence the retail sector.
I issued a directive based on which an investigation was carried out into the practices within the petroleum industry, with particular focus on gasoline retailing. The directive required that the FTC prepare and implement a Code of Conduct to govern the relationship between petroleum marketing companies and retailers. The mandate required that the focus of the Code be the protection of the Jamaican consumers.
Market conduct was also investigated to determine whether there was evidence of predatory pricing, price discrimination, price fixing, resale price maintenance and exclusive dealing. The investigation found no evidence of predatory pricing, price fixing or resale price maintenance but that there is evidence of exclusive dealing and price discrimination in the sector.
The FTC produced a Code of Conduct to govern the relationship between retailers and marketing companies and circulated it to all the relevant players in the industry. Mr. Speaker, the Code of Conduct was published on the website of my Ministry (www.mct.gov.jm) and I urge all Jamaicans to peruse this document, as it is now being implemented by the FTC.
During last year the Bureau of Standards also stepped up its pump sticker programme and over 70% of the island’s gas stations have been tested and certified. It is hoped that consumers will help to ensure compliance by the marketing companies.
In relation to the Petroleum Company (Petcom), the Government-owned retail company, it is being withdrawn from the list of companies to be privatized. Mr. Speaker, industry statistics show that Petcom now has about 12 % of the local market.
At a later time I expect to inform the country in more detail about the new role Petcom will play in order to ensure a vibrant petroleum retail sector.
POWER GENERATION
Mr. Speaker, you will recall that the electricity licenses require that the sector Minister approve a least cost expansion plan developed by the Office of Utilities Regulation in consultation with the Jamaica Public Service Company. This plan was completed a year ago and was reviewed by a technical team further to instructions by the Cabinet.
Among the key considerations for this expansion is the time needed for competitive tendering for the first tranche of new capacity, the time frame for conversion of existing steam units to LNG and, the rate of growth in peak electricity demand.
As at March 1st, the available capacity is 780 Megawatts with JPSCo providing 621 Megawatts and independent power providers 159 Megawatts. Peak demand is now about 600 Megawatts leaving a reserved margin of almost 25%.
The study has shown that the country will require 230 Megawatts of additional electricity generating capacity over the next three years in order to meet increasing demand and maintain an appropriate reserve margin. 76 Megawatts is required during this year, 38 Megawatts next year and the remainder by 2008.
Mr. Speaker, on the recommendation of the OUR, the Cabinet has approved the first 49MW of capacity, to be provided by Jamaica Energy Partners.
REP
Mr. Speaker, you will recall that last year the mandate of the REP was broadened to incorporate the regularization of urban electrification to minimize unauthorized connection and reduce the risk of fires and to enhance safety. Mr. Speaker, the REP has undertaken a number of community based meetings to promote the idea and a pilot project has started in selected urban communities.
This work Mr. Speaker, will not be undertaken at the expense of the rural electrification programme. In the meantime the company started some 5 extensions at West Albion, Norwich, Quarry Hill, Duckensfield Estate and Ragsville, 3 have been certified and completed. 800 houses in 8 constituencies were also targeted with 692 completed.
During the next year, the REP will increase the number of inner-city householders in the pilot phase of the urban programme and will complete wiring of another 1250 houses from its revolving fund. As connection to the national grid becomes almost universal the company will also be involved in private projects funded outside the budget in order to enhance its financial viability.
SCIENCE AND TECHNOLOGY
Mr. Speaker, I now turn to the subject of science and technology, critical to the development of our knowledge-based society and our quest to improve productivity and increase production in the manufacturing sector.
Mr. Speaker, as a government, we must work assiduously to promote innovation. We also need to be relentless in the drive to shift our culture to one that recognizes the critical importance of scientific and technological solutions to enhance competitiveness, add value to our natural resources including our biodiversity.
Significant work has been done under the auspices of the National Commission on Science and Technology while the Scientific Research Council and the Jamaica Bureau of Standards are collaborating on a number of initiatives to popularize science and technology.
A feature of this programme was last year’s Science and Technology month’s activities at which I announced a $15 million competition for high schools. The celebration of Science and Technology month last November included an Exhibition, an Awards Banquet and a Lecture hosted by the Scientific Research Council and the National Quality Award Programme sponsored by the Bureau of Standards.
The lecture which was given by Professor Juma of Harvard University had over 500 students and teachers in attendance, while the National Quality Award for Excellence provided a comprehensive quality assessment encompassing organizational focus, customer focus, process management and business results.
This year, to highlight our work in science and technology a prestigious Ministers Award for Innovation in Science and Technology will be initiated. I expect that shortly, the Committee named to recommend projects for consideration will make public the criteria for nominations for the Award.
The Ministry will also be working with the University of the West Indies and the University of Technology to create a research and innovation park at Mona and a biotechnology park at Utech. They will serve as a mechanism to link innovative products which already exist to capital investment. The Ministry will be investing $10M in each park.
The Mona R&I park will facilitate research and innovation from local and global knowledge institutions and firms to foster the establishment and growth of science and technology based enterprises in Jamaica and the Caribbean. It will also be the engine of an evolving innovation system for the region. Nine centres are proposed covering analytical services, mariculture, bioscience, eco-tourism/ecology, web/software solutions, materials research, ICT and electronics, food technology and nanotechnology.
The Utech biotechnology park will be developed along similar lines. Those proposals are less advanced but both will require developmental assistance to determine technical feasibility, commercial viability and preparation of business plan.
These are extremely important issues Mr. Speaker, as no country has achieved “developed status” without robust scientific and technological capacity and innovation.
ICT
Mr. Speaker, no where has the commitment of this Government to science and technology been more evident than in the development and implementation of our information and communication technologies (ICT) policies and strategies. Five years ago, the Government presented its five-year ICT plan and we are in the process of reviewing and revising that plan so that our people can continue to participate in and benefit from ICT.
In the 5-years ICT has itself been an engine of growth and development. For ICT to continue yielding the expected returns, there must be a co-incidence of connectivity, sustainable commercial usage, rich content for which there is extreme demand, available capital and skills.
Later this year the second part of the World Summit on Information Society (WSIS) convenes in Tunis for a global assessment of just where we are in reaching this knowledge-based society which dominates our visions. The digital divide is still very much a reality for most developing countries, including Jamaica, but we have come a long way on the route to a knowledge-based society. The urgent need to bridge the digital divide through planned economic activity and regulatory intervention is one of the greatest challenges facing governments of developing countries.
Mr. Speaker, the 2004/05 Global Information Technology Report was published a few days ago. It acknowledged that the report was appearing at a critical juncture in the evolution of the world economy, coming amidst a realistic assessment of the role of ICT in the development process of markets and economies. It covered a number of areas ranging from the now well established Networked Readiness Index Ranking to an examination of the role of the internet in the provision of government services; to the challenges posed by rapid technological change for the formation of credible regulatory frameworks.
The Report looked at 104 countries across the globe using data collected by the World Bank and the International Telecommunication Union (ITU). Jamaica ranked 49th out of 104 countries in networked readiness, first in the Caribbean and falling only behind the United States, Canada, Chile and Brazil in this hemisphere.
Other rankings achieved by Jamaica:ICT Usage – 44thRegulatory Environment – 51stIndividual Usage – 43rd Business Usage – 54th
The latest international update on Jamaica’s e-readiness status, released in April 2005, by the Economist Intelligence Unit (EIU), the business information arm of the Economist Group, who publishes The Economist magazine, ranks Jamaica 41st out of 65 of the world’s major economies. The Central Information Technology Office (CITO) made the request to the EIU, to include Jamaica in its e-readiness rankings, because CITO sought to ensure that the country’s Information & Communication Technology (ICT) development could be internationally benchmarked, in order to facilitate accurate ICT strategic planning within a global context.
Although Jamaica is the only English speaking Caribbean country currently included in the EIU’s e-readiness rankings, our 41st position on the list, places us in the middle of Latin American countries in the region. Four countries placed ahead of Jamaica: Chile (31st), Mexico (36th), Brazil (38th), and Argentina (39th). Four countries placed behind us: Venezuela (45th), Colombia (48th), Peru (53rd), and Ecuador (55th).
The report confirms that Jamaica is paving the way for growth in its e-business sector because of good rankings in the areas of Business Environment (69th percentile), and Legal & Policy Environment (72nd percentile), in relation to the highest scores in those categories. Our weakest performance was recorded in the category, Connectivity and Technology Infrastructure (35th percentile). Later I will address the strategies to improve our performance in these areas.
Mr. Speaker, when one examines Jamaica’s performance in terms of this global information technology report, the e-readiness ranking and the ITU’s Digital Access Index which now estimates Jamaica’s tele-density in excess of 80%, the success of our ICT policy is very evident.
Mr. Speaker, the genesis was the historic agreement in 1999 which ended the Cable and Wireless monopoly originally destined to last until 2038. Had this government not blazed a trail in negotiating our country out of that agreement, a legitimate question today would be, could Jamaica have achieved such tremendous growth and investment in the sector, meriting high world recognition and rating for our ICT policies and programmes?
The phased deregulation which began in 2000 has been successfully completed; we now have to set policies for the future which must include new legislation. The government must also turn its attention to ensuring that all the primary reasons for deregulation are met. It was not just for more voice lines or cellular telephones, even though that has been achieved. At the end of 2004, the total number of lines in Jamaica was 2.11 million, 423,000 landlines and 1.687 million mobile lines. The industry itself has attracted investments of over US$700 million and has revenues in excess of J$60 billion.
Many of our new entrants have done very well and Digicel has gone on to establish a Caribbean network employing in excess of 1,000 people.
The impact of the increase access to communication technologies on our social and business culture must not be overlooked. Consumers have a responsibility to educate themselves on product choices, pricing plans and most importantly to prioritize how limited disposable income will be spent.
Investors who commit their time and resources to pursuing business opportunities must avail themselves of the legal and financial resources required to protect and guide their businesses in this newly competitive environment.
I am frequently asked to comment on why mobile network number assignments are not done to enable easy identification of the different networks. I am at present in dialogue with the companies for them to put in place a network identification system so the calling party can know the network into which they are dialing.
I am also aware that many operators who started business in 2000 and in 2003 are no longer in the market. This is oftentimes the high price of competition, but there are many occasions when businesses could be saved through better management and understanding of this dynamic industry. Investors and operators both have a duty to ensure the survival and sustainability of their businesses, and where the government can enhance or facilitate this process through policy and regulation, this Ministry stands ready to do so.
As Minister, I am determined to understand the reasons for the failure of these operators and minimize the opportunity for recurrence.
In this regard, I have directed the OUR and the FTC – pursuant to my powers to issue policy directives respectively under the Telecommunications Act and the Fair Competition Ac, to conduct an investigation of the Telecommunications Industry and advise me on the impact of competition generally, and specifically as it relates to the experience of new entrants, and the barriers to entry, growth and sustainable investment.
Service by the 4th mobile Licensee, Wireless Ventures Jamaica Limited, a wholly owned subsidiary of AT&T Wireless of the United States which received a license just over a year ago is yet to begin. There are some issues, Mr. Speaker.
You will recall that shortly after the License was granted AT&T was acquired by another US Mobile company, Cingular. Preparations continued up until the approval of the merger by the US Regulatory Authorities towards the end of last year. I should point out that the Jamaican License was one of some twelve acquired across the Caribbean as part of AT&T’s strategy to have one network from “Seattle to St. Lucia”.
In relation to the Jamaican license for which we received the full payment of $360M, I note two points. Firstly, the license cannot be transferred without the approval of the Minister and secondly, a specific condition of the mobile spectrum license was that the authorization of the use of the frequencies could be withdrawn by the Minister on one month’s notice if the frequencies remain unused for a period of twelve months. Last week, I advised the Spectrum Management Authority to issue such a notice.
I want to emphasize to the House that the Jamaican policy prohibits the sale of telecommunication licenses without regulatory and Ministerial approval. In addition, spectrum frequencies cannot be passed from a licensee to any other party. It must be returned to the Authority or the transfer specifically approved by the Minister.
Jamaica’s connectivity to the world and specifically our broadband/fibre capacity will be significantly boosted because of the Government’s decision to award two new undersea fibre-optic cable systems licenses to Fibralink Jamaica Limited and Trans Caribbean Cable Company Limited, earlier this year. The provision of these new access channels promises significantly lower prices in high speed broadband Internet and other data services, in the next several months.
The ripple effect of increasing the capacity of infrastructure, by having these two new data highways into the country will improve our performance in the areas of:
Consumer & Business Adoption of technology and e-business/e-government servicesSocial and Cultural Environment, where ICT knowledge and entrepreneurship are key measuresand Supporting e-services, which pertains to the availability of e-business consulting and technical support services
These areas will be boosted because of the anticipated proliferation of choices in Internet and data services providers, competing at internationally competitive rates. The recent removal of GCT from computer hardware and software products will certainly also foster an advance in these areas. Further, the high penetration of mobile technology creates the platform for providing universal access to a rich set of information and e-services by Jamaicans of all walks of life.
Mr. Speaker, improving the undersea fibre capacity into and out of Jamaica, although very critical to our broadband strategy, is not an end in itself; we have to ensure that there is a proper distribution system across Jamaica whether wired or wireless and any hybrid of these two.
There is already a fibre ring around Jamaica but we have to build more fibre capacity across the island. In addition new wireless technologies particularly on the 450 MHz band are presenting some interesting options for the country. The Spectrum Management Authority is now in the process of evaluating bids for a Consultant to recommend an appropriate business model for the deployment of an islandwide wireless data and voice network, utilizing CDMA Technology on the 450 MHz band.
This new network, in addition to the capacity owned by existing carriers, would provide enough bandwidth to serve all the potential internet users across the island.
To facilitate increased deployment of domestic infrastructure and more reasonably priced access, we are also proposing to unlicense the 2.4GHz and 5.7 GHz and 902 – 928 MHz bands for wireless internet access and the deployment of new technologies such as Wifi and WiMax. The proposed policy change is a fundamental shift from the licensing regime. Three frequency bands will be declared “license exempt” and will only be subject to specific operating rules and conditions of use. This is in keeping with international best practice, now employed in several countries where these bands have become congested and increasingly difficult to operate free of interference.
The Spectrum Management Authority has consulted widely amongst stakeholders in the industry and there is widespread support of this policy move. After consultation with Cabinet, I expect to announce the date for declaring these bands “license exempt”. Shortly thereafter, we should see the growth of “hot spots” which will facilitate widespread internet use in public areas such as the airports, hotels, schools and offices, even nightclubs and restaurants.
Mr. Speaker, I am pleased to announce that as of today this Parliament building now has a “hot spot”. I would like to thank Cable and Wireless fro making it available so members with the appropriate connection in their laptops can now access the internet and receive and send e-mail wireless using the parliamentary “hot spot”.
Mr. Speaker, I have spent some time outlining the policy initiatives that this government is pursuing to ensure that our country is well positioned to seize every opportunity presented in the area of ICT. I want to see the investment profile of this country re-written to include a description of our ICT infrastructure as one that is second to none.
As we develop and implement appropriate ICT policies Mr. Speaker, as a Ministry we continue to also sponsor and promote many seminars, workshops and conferences that:present cutting edge technologiesheighten awareness of global initiatives and opportunitiesbring some of the best and brightest minds to Jamaica andexpose our practitioners to opportunities for partnerships
Mr. Speaker, we take our cues from some of these exchanges and will continue to ensure that our policies evolve at a pace and in the directions that foster growth in this sector.
E-LEARNING
All these initiatives Mr. Speaker, are not an end in themselves. They are merely tools to facilitate our movement towards being a knowledge-based society. If there is one disappointment with the outcome of the liberalization so far, it is the fact that internet penetration remains very low, just over 10% of the market.
Mr. Speaker, it is for this reason that Cabinet has approved our first universal access programme, under the provision of the Telecommunications Act; the e-Learning project, which will ensure the provision of internet access for schools, libraries and post offices.
As already announced, it will be funded by a universal service levy on all incoming international minutes terminated on both the fixed and mobile networks. The payment of this levy (US$0.03 on fixed line and US$0.02 on mobile) is effective today and will go into a universal access fund which will be used to finance the implementation of the plan that was approved by Cabinet.
A Board has been put in place to collect and manage the fund and a separate company under the Chairmanship of Professor Errol Miller has been formed to implement the e-Learning project.
Mr. Speaker, this programme will revolutionize the delivery of education in Jamaica over the internet, cable and video. It will transform the learning environment in all schools by the use of computer technology and multi media information communication technologies. It is my sincere desire that it will provide new hope for all students, particularly boys who are failing in the present system.
The Ministerial Order for the universal service programme has been signed and gazetted and will last for no more than three years. The Fund Board, which has representatives from the industry has already met and approved the adoption of its administrative and operational procedures which were published as an Annex to the Ministerial Order.
Even as I speak today, I know that there are a few international carriers who are not fully on board with Jamaica’s objectives and our right as a sovereign country to impose the universal service levy based only on income generated by incoming international traffic. Some feel it is discriminatory as the income from domestic services have been excluded, but Mr. Speaker, they fail to recall that since 2003, a higher percentage of GCT has been applied to local telephone bills, while international incoming services were specifically exempt from taxation.
I should also point out that as a direct result of the benchmarking of international settlement rates by the United States Federal Communication (FCC), settlement rates have fallen from over US$1.00 to now US$0.025. Consumers have not seen the benefits of those falling rates and the expected increase in international traffic has not materialized.
In fact notwithstanding the overall growth of Jamaica’s domestic network, the FCC’s 2004 International Traffic Data confirmed that there has been a net reduction in traffic volume into Jamaica. So, whereas declining settlement rates should be incentivizing calls to Jamaica the volumes are falling because the lower rates are not being passed on. FCC figures show that the average international call in 2003 cost US$0.27 per minute when the settlement rate was US$0.08.
Mr. Speaker, in 2000, there were only 739,000 voice lines in Jamaica carrying about 289.3 million minutes of traffic from the United States. In 2003 there were 2.05 million lines almost three times the number of lines in 2000, carrying only 438.9 million minutes. In fact Mr. Speaker, traffic volume fell from 524 million minutes in 2002 to 438.9 million minutes in 2003
Mr. Speaker, over the years the FCC has systematically worked to reverse the outflow of payments to foreign telecommunications administrations, sometimes to their detriment. Our domestic operators also complain that they are forced to accept foreign contracts which do not recognize Jamaican Law and the US carriers persistently refuse to pay increased rates – holding our carriers hostage in the hope that they will accept lower rates rather than see their businesses collapse.
It is our intention to monitor the industry very closely in the coming weeks in order to ensure compliance by all the players. I have assured the carriers, who must manage the implementation of the Ministerial Order, that they have my unqualified support for any legitimate action that must be taken in compliance with the order.
It is my sincere hope that we will come though this period without any dislocation and that our foreign partners particularly the U.S. big carriers will come on board and support our just cause.
IDB PROJECT
Mr. Speaker, a word on the IDB Project which I announced last year to promote enhanced efficiency and access, thereby reducing transaction costs and increasing ICT use in the private and public sectors and civil society. The project has now been re-scoped and the loan component of US$17 million reduced to $8.5 million. At the same time the execution period has been extended from five to eight years.
Among the areas that have been cut are the community outreach provision and the human capital component. Mr. Speaker, we have to be innovative and establish strong alliances to ensure that the community outreach component to provide internet access to communities for citizens to benefit from on-line opportunities is not compromised.
With respect to the e-government component, US$4.7 million will be spent to upgrade hardware and software and provide consulting services to enable fiscal services to conduct on-line transaction with the public. In December last year, on-line services in key fiscal agencies became a reality with the launch of the Jamaica Tax Portal Services and in April the Constant Spring and King Street Inland Revenue Offices were equipped with terminals to facilitate on-line payment, these include property tax, traffic tickets, SCT and GCT. I want to thank Cable and Wireless for the tremendous support they provided.
POSTAL SERVICE
Mr. Speaker, this year will be a very critical year for the postal service. I expect to bring to the House a Bill to establish Jamaica Post as a statutory corporation and to dissolve the Post and Telecommunications Department and the Postal Corporation of Jamaica. I would like to remind this house that the Postal Corporation was established to deal with an intermediate situation of transitioning the traditional post and telecommunication system to a more commercially oriented postal system.
The department, in the meantime, has been continuing the postal reform process and developing its “Road Map to Profitability” which will be part of the strategic objectives to be implemented by the new entity.
As part of the efforts to improve the financial position of the department, new postal rates came into effect on August 1 last year. Although the late implementation affected the revenues, the department met its revenue target for the Financial Year, which was revised to $750.6 million. The total cost of the postal service last year was $1.2 billion.
During this financial year, the department will continue to be aggressive in meeting its objectives. Although there continue to be efficiency gains, the introduction of new services, financial self sustainability seems to be elusive without a programme of rationalization of the postal network. The management of 720 postal points across the island through a manual based system is becoming increasingly difficult in today’s technological advanced world. We will therefore need to make new investment to guarantee the success of the new corporate entity.
Mr. Speaker, this year the post office will begin piloting the new postal coding system which has been developed to international standards. The eight alpha numeric characters digit system will facilitate mail sorting and the automation of letter mail. A pilot system is now being run in the Kingston 8 area.
In terms of infrastructure Mr. Speaker, we are still recovering from Hurricane Ivan when some 30 post offices sustained significant damage. Five had to be relocated, three others were repaired and fourteen have been completely refurbished. The cost of restoring all the damaged post offices is $42 million.
In the new year, three new post offices will be constructed, one at Grant’s Pen in the new community facility, the second at Sligo Ville in the new sports complex and the third at Little River in St. James by Rosehall Development Limited.
CONCLUSION
Mr. Speaker, I have tried to give a concise picture of just where we are and where we are heading with the portfolio subjects under the Ministry of Commerce, Science and Technology and there can be no doubt that there is a sound foundation and a secure future.
My Ministry has put in place a modern regulatory and administrative environment for commerce, through the enactment of legislation and regulation necessary for Jamaica to be globally competitive and to ensure that fair competition locally is as important as our commitment to observe global trading rules.
Mr. Speaker, we are also adamant that brand “Jamaica” must be protected and used only for the benefit of Jamaicans and Jamaican entrepreneurships. We are also adamant that Jamaican consumers must be educated to operate in a competitive environment by providing them with modern consumer education and legislation.
Energy supply security at the best possible prices is at the centre of our concern. There is no globally competitive economy in which energy costs are not contained through a combination of diversification of sources, the integration of alternative sources to fossil fuel and adequate local capacity. We have worked creatively with our regional partners to put in place a sensible realistic framework for the growth of the sector and the delivery of cheaper energy for the Jamaican consumers and industry.
Mr. Speaker, the work of our Scientists through research and development of products and technologies must now come to the fore enabling Jamaican industry and creating more marketable exports to grow the manufacturing sector. We will be highlighting the work of our Scientists and making them stars as we put their work before the world for Jamaica’s name to be recognized.
In ICT Mr. Speaker, Jamaica is no longer a leader only in the Caribbean but in the world. In all the international fora where telecommunication policies are discussed and distilled, the Jamaican model has become the most recognized and admired by our colleagues in both the developed and developing worlds. In my recent trip to the United States to discuss our universal service plans, all the agencies where we had consultations, whether it was the FCC, the State Department, the Department of Commerce and the US Trade Representative showed great respect for our achievements in telecommunication and look forward to our next WTO offer.
All this work is what has contributed to the sound foundation of which I speak. But Mr. Speaker, there are new horizons to conquer, new targets to meet and new trails to blaze and so the work must go on. My Ministry has the energy and commitment to go on until we realize the dreams for our society and no Jamaican is left out of the exciting prospects for development and wealth creation that must characterized the new Jamaica.
Mr. Speaker, I thank you and my colleagues for listening. God bless Jamaica Land We Love.