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Economic Analysis Of The Jamaican Market Economics Essay

Economic progress is a term generally measured by the quantity of development in a country or region on the certain period of time. It may also be referred to as the increase of per capita gross local product (GDP) or other options of aggregate income, typically reported as the annual rate of change in real GDP. Monetary growth is mainly driven by advancements in productivity, that involves producing more goods and services with the same inputs of labour, capital, energy and materials. For the purpose of this project we will be concentrating on economical growth in the long run FY 2012-2014.

Jamaica's economy encounters major long-term problems: a significant goods trade (imports and exports) deficit, large-scale unemployment and underemployment, and a general public debt-to-Gross Local Product (GDP) percentage of almost 130 per cent. Jamaica's onerous general public debt obligations - the fourth highest per capita is the consequence of administration bailouts to ailing areas of its economy, especially the financial sector in the mid-to-late 1990s, and hinders federal government spending on infrastructure and facilities and public programs as open public debt servicing makes up about nearly half administration costs.

Inflation rates increased noticeably in 2008 and also have kept on increasing as a result of high prices or pricing for brought in food stuffs and coal and oil. High unemployment continues to aggravate the significant problem of criminal offense and violence, which includes the gang violence that is fuelled by the medication trade (imports and exports). The Golding led government encounters the difficult prospect of having to achieve financial discipline to be able to sustain open public debt payments while simultaneously attacking a major and expanding offense problem that is hampering progress of the market.

The Jamaican Overall economy has encountered many economic issues over the go away years especially through the recent tough economy period. The economy is still recovering from the direct strike which the country sustained in 2009 2009 where exports and capital inflows weakened leading to negative expansion. A steep depreciation of the nominal exchange rate has elevated the expense of servicing changing rate debt, as well as the price tag on rolling over existing lending options. Amid volatility, macroeconomic coverage remained tight despite the downturn. For the lender of Jamaica (BOJ), defending the currency were required to take precedence over inflation concentrating on and stimulating GDP progress. Such global crisis has also adversely afflicted the fiscal accounts, with lower revenue and a significantly higher interest monthly bill.

The government integrated a new Personal debt Management Effort, the Jamaica Personal debt Exchange (JDX) on January 14, 2010 to control future monetary downturns, that they had experienced in earlier years (2007 to 2009), which acquired resulted in a poor progress period for the country. The initiative would see holders of Federal government of Jamaica (GOJ) bonds coming back the high interest earning devices for bonds with lower produces and longer maturities. The offer was taken up by over 95% of local finance institutions and was considered successful by the government.

The financial situation of Jamaica has worsened significantly, with the ongoing world financial crisis which has experienced devastating results on the current economic climate. The mining sector has been the hardest hit, while tourism and remittances moves have been on the decline. Most forex originates from remittances, travel and leisure, and bauxite. Remittances account for practically 20% of GDP - approximately equivalent to travel and leisure earnings. Three of Jamaica's four bauxite businesses suspended operations in 2009 2009 credited to slipping demand amid the global economic downturn. The united states will continue to lose valuable resources from its exports in 2012-2014 while these firms are out of operation. This decline in remittances, and a contraction of consumer demand resulted in a deep recession with stubbornly high unemployment and underemployment. With such hardship the federal government of Jamaica possessed no choice but to turn to the International Monetary Finance (IMF), a multilateral loaning agency. The federal government of Jamaica, with help from multilateral systems, is solved to addressing the country's challenges better, thereby creating a sustainable growth route for increased international purchases in the new ten years. For the 4th of February 2010 the International Monetary Finance (IMF) approved a US$1. 27 billion Stand-By Center loan contract for an interval of three years to underpin structural reforms and help Jamaica to resist spill-overs of global financial storms that impacted main income streams. The IMF mentioned: "The federal government has successfully completed a home debt exchange procedure, which has added to a far more equitable sharing of the burden of the overall fiscal modification. The exchange in addition has struck an appropriate balance in conditions of providing necessary cash flow cost savings while taking appropriate profile of the need to ensure financial sector balance that ought to continue for the FY2012-2014. " With such great assistance from the IMF, the government believes "The update sends a significant signal to international and local investors and will help in reinforcing confidence in the market for Jamaica's arrears. This first step in the recovery of Jamaica's ratings reflects the government's hostile policy activities as put forward in the economical programme, and the positive impact and success of the JDX. "

Economic outlook

The kick off of the Jamaica Debt Exchange Offer (JDX) in early 2010 has been regarded as a positive part of the right course, and the appreciation of the Jamaican buck since it hit a low of J$89. 73 in February 2010 has been moderate but dependable.

The federal government has begun implementing essential structural reforms, that ought to enhance the fiscal balance by over 5% of GDP in FY 2010-2014 and onwards. Among them, a debt-swapping plan aimed at achieving interest personal savings of about 3% of GDP and two-thirds decrease in the amount of maturing debt over another three years has been successfully integrated, with an acceptance level of almost 97% of bondholders.

Governor of the Bank of Jamaica, Wynter B. (2010), stated that "The exceedingly high participation rate in the exchange makes the Jamaica Credit debt Exchange one of the very most successful debts exchanges on earth. " The JDX replaces 350 expensive government local bonds with 24 new bonds, priced at a lesser (12. 5%) interest rate with longer maturities, providing gross annual cost savings of J$40bn. The Governor further mentioned that "Additionally, the magnitude of maturing debts is likely to decrease by 65 percent over the next 3 years, and the significant reduction in the government's refinancing needs will ease the crowding-out aftereffect of the government debts and the upwards pressure that this would have positioned on domestic rates. "

Jamaica's four-year programme for the financial calendar year 2010-2014 targets four key aims:

To strengthen government funds by reforming public enterprises and passing a fresh fiscal responsibility legislation.

Reforms of the financial sector to lessen systemic hazards and improve the country's capacity to raised withstand external shocks.

A pro-active debt management technique to eliminate 'credit debt overhang' and reduce personal debt servicing costs. Jamaica spends J$182bn (US$2. 1bn) on total annual interest payments, which in turn, audience out capital expenses.

Make the duty structure better, whilst improving taxes collection and supervision. That could increase resources for targeted sociable projects.

Despite the launch of the Jamaica Debts Exchange Offer (JDX), it has been seen by analysis's' as a confident step in the right path, and with the marginal appreciation of the Jamaican dollars in Feb 2010.

The tourism sector, which comprises a big chunk of Jamaica's current economic climate, was badly strike by the global economical crisis, but a marginally more favourable criminal offense rate as well as new marketing strategies being produced by the Jamaica Ministry of Tourism and their counterpart throughout the Caribbean region bodes well for the industry's slow-moving restoration over next five years. "The IMF however says that they don't foresee Jamaica changing its growth patterns soon, " mentioned Charles Ross. The debt has itself become an obstacle for progress because the united states has to allocate so much of administration resources into servicing your debt that hardly any is kept for general public investment in infrastructure that would facilitate expansion.

The island of Jamaica however has proven itself resilient by surviving the steepest contraction in world trade because the 1930s, and its own macroeconomic basic principles are slowly but surely improving. The federal government of Jamaica, with help from multilateral systems, is solved to addressing the nation's challenges more effectively, thereby creating a sustainable growth route for increased overseas assets in the new decade.

The 2010/11 budget provides for increased social spending while reducing recurrent expenses.

Fitch, the Western european rating agency, improved Jamaica's long-term local and foreign currency Issuer Default ratings to B- (with steady view). Also, Standard & Poor's and Moody's have upgraded Jamaica's sovereign evaluations, reflecting strong determination to tackling fiscal imbalance and the successful final result of the Debt Exchange (JDX) programme. The government feels "The upgrade directs a significant sign to international and local buyers and will assist in reinforcing confidence searching for Jamaica's debts. This first rung on the ladder in the restoration of Jamaica's ratings reflects the government's ambitious policy actions as put forward in the economical programme, and the positive impact and success of the JDX. "

Economic theory suggests that sustainable raises in real income must be based on increases in output. Productivity may be thought as the quantity of result produced (in conditions of goods or services) per unit suggestions used. Commonly applied methods include labour output as productivity per employee or result per labour-hour, and total efficiency as output in accordance with all inputs used. Both actions have been used in modern times to explore the dynamics of Jamaica's monetary performance.

Jamaica is constantly on the get ranking favourably on a number of indices of competitiveness and business environment. The 2010 Index of Economic Liberty, publicized by the Traditions Foundation (US), ranks it the 57th freest market of 179 countries, surpassing proven EU participants such as Portugal, France, Poland, Greece and Italy. The country has a track record of utilizing micro-reforms that help encourage private business and foreign direct investment (FDI).

Reforms of trade routine and tax supervision for the forthcoming period 2011- 2014 should improve Jamaica's global position in the foreseeable future business signals. This reform is aimed at reducing tariffs, import fees and some transfer/export bans and the latter is aimed toward simplifying tax payment steps. Jamaica's relatively versatile labour legislation could be further increased to increase job creation and productivity growth in approaching years Dr Williams D. (2010) of the College or university of the West Indies.

The government aims to improve the export sector's contribution to GDP from its current one-fifth to one-third by 2013 through increasing volumes and higher value addition in main concern industries as well as seeking new marketplaces, thereby lowering over-reliance on North America, which in 2008 accounted for 50% of Jamaica's exports.

The latest projections by international finance institutions (IFIs) show the current economic climate stabilizing in FY 2010/11 and thereafter (2012-2014). Outcome is expected to develop at 2%, with inflation abating to 6%. Higher Foreign Direct Investment (FDI) in mining, tourism and other industries increase imports. However, continued FDI and slowly but surely rising forex reserves (forex reserves) should offset the impact of current consideration deficit on the total amount of repayments. The IMF envisages the exterior deficit slipping to 5% of GDP in the medium-term. The currency's depreciation in real effective conditions has improved upon the competitiveness of exports both obvious and unseen (i. e. services). The government aims to cut the budget deficit by 50 % by 2014/15, whilst lowering the net community credit debt to GDP percentage. In a nutshell, Jamaica is adding its house in order.

The country's first long-term development plan 'Vision 2030 Jamaica' (launched in 2008) inspires to realize developed country position by focusing on four primary areas: a captivating macro-economy; effective governance; world class education and training (especially technology/technology); and greater security and safety. Jamaica has a realistic chance of attaining its national goals by 2030. However for the time 2012-2014 the three business which are expected to execute well are the financial sector, the travel and leisure industry and the Developing industry.

Industry Analysis

Financial Sector

The financial services industry in Jamaica contains commercial banks, merchant and trust finance institutions, credit unions, building societies and licensees under the FINANCE INSTITUTIONS Act as well as non-deposit taking establishments including insurance companies, development lenders and securities sellers. In 2008 there were 129 licensed finance institutions in Jamaica including 7 commercial lenders, 46 credit unions, 17 insurance firms and 48 securities retailers, as well as 4 building societies, 3 FIA corporations and 4 development banking companies. Consistent with the existing trend in producing countries, there are also a large amount of forex Cambios, remittance and money copy companies and monthly bill repayment companies that aid transactions between your local and international marketplaces.

There is a reduction in the total number of establishments functioning in the financial sector over the past decade, from 189 in 1996 to 129 in 2008. The low numbers echo closures, mergers and downsizing, with the effect of the very most efficient institutions appearing. Commercial banks are the most significant sub-group within the financial sector. In 2008, possessions of commercial finance institutions accounted for about 76. 0 per cent of total assets of the financial system, with Building Societies at 19. 0 % and FIAs at 5. 0 per cent.

The Financial Services Fee (FSC) was set up in 2001 and there were several significant amendments to the lender of Jamaica Function, Banking Take action, Money Laundering Action and Financial Institutions Function. The regulatory construction for the guidance of pension cash and credit unions also offers been strengthened. The Jamaica First deposit Insurance Corporation (JDIC) was integrated in August 1998 to provide insurance against the risk of lack of deposits presented in insured finance institutions. The JDIC obtains premiums from covered by insurance financial institutions at a level of 0. 15% of their total insurable deposits and the cash are invested to construct the Deposit Insurance Account.

After such severe restructuring the financial sector regained some buoyancy which includes seen its show of GDP climb to 10. 8% to GDP in 2008 and the total investments of deposit-taking establishments in the financial sector increase from J$238. 9 billion in 1999 to J$715. 8 billion in 2008. However, a lot of this financial activity has been fuelled by the explosion of local debt, which also offers seen the increased progress of the Jamaican money market as an intermediary between specific holders of capital and the federal government securities market (about 50 % of the dealers' funds under management are with retail clients). This has reduced the ability of the sector to supply the capital needed by the private sector for beneficial purchases. As the sector restructures and the market becomes more competitive, financial institutions continue to refocus their focus on their core functions, as evidenced by increased loans to the successful sectors.

Jamaica has noticeably strengthened financial system oversight carrying out a costly financial crisis in 1996-97. The financial system is deep and well-developed, the regulatory platform has in many respects been helped bring into series with best international routines, and supervision is apparently carried out in a organized and professonally executed manner. Remaining regulatory spaces and weaknesses in the financial infrastructure are well recognized by the regulators, who have implemented important reforms. Regulatory capital has also increased in most financial institutions to levels that permit a reasonable amount of resilience against macroeconomic shocks. However, data limitations prevented a complete system-wide quantitative evaluation of dangers.

During 2000-2008 the total stock of loans and advances increased by 587 percent and 308 percent, for commercial banking companies and FIA establishments, respectively. However, the volume of government arrears placed by these establishments decreased. THE LENDER of Jamaica and the Financial Services Commission rate continued to strengthen their individual regulatory framework to be able to maintain steadiness within the industry also to conform to new advancements in international benchmarks. As at 31 March 2009, the seven commercial lenders and two merchant banks (at that time) had total possessions of J$582, 515, 204 billion with liabilities of J$516, 216, 670 billion leading to total capital of J$35. 649 billion.

Manufacturing Sector

The Creation Sector represents a critical element of the economies of many expanding countries including Jamaica. Jamaica's developing sector is diverse and modern. Products encapsulated under this sector's activities are: drinks, processed foods, chemicals, plastics, cosmetics, pharmaceuticals, nutraceuticals and attire. The island also produces spices and condiments, canned ackee and callaloo, as well as natural juices, soft drinks, ale, wines, spirits, and liqueurs.

The manufacturing sector makes up about 12. 8% of GDP per annum, utilizes about 7% of the labour push and is also second in terms of sector contribution to real GDP. Jamaica's developing sector grew during 2007 and contributed about 12. 6% to total GDP, with total income exceeding US$700mn. Made exports grew by 7. 3% in 2007 to US$705. 8 million, a reflection of higher export revenue from both non-traditional and traditional produced products; and total investment in the production sector facilitated by Jamaica Trade and Invest amounted to J$3. 6 billion during 2007. These investments spanned several sub-sectors including agro-processing, plastics, petrochemicals and cement. The petrochemical sub-sector was positively impacted by the introduction of an ethanol dehydration service at Slot Esquivel, St. Catherine. Further growth also took place in the plastics sub-sector and in the concrete sub-sector through modernization and upgrading of clinker and concrete production facilities. However, this overall picture of growth during 2007 was complemented by the Government's focus on increasing productivity in order to impact growth. Government implemented programs that facilitated international competitiveness included staff member skills training, technology upgrading, research and development, the Private Sector Development Programme (PSDP) and the Quality Jamaica Project, which include training in Hazard Research Critical Control Point (HACCP). Designed exports represent approximately 12. 6% of GDP in 2007, while the sector utilizes about 6. 1% of the total labour push. Exports grew by 7. 3% in 2007 to US$705. 8 million, a representation of higher export revenue from both non-traditional and traditional made products.

The global economic crisis within the last 1 / 4 of 2008, spurred by the financial collapse in america emerged, which possessed implications for the fruitful sector. Devaluation of the dollar, high interest rates, reduced domestic and export sales, market meltdown, high inflation, soaring olive oil prices, and skyrocketing type costs of natural material were some of the challenges experienced when confronted with the world financial crisis.

For the entire year 2008, the Jamaican overall economy contracted by an estimated 0. 6%. Real Gross Domestic Product (GDP) for the products Producing Sectors contracted by 3. 0%, while the Services Industries grew by 0. 3%. The performance of the market was adversely affected by the sharpened rise in item prices, the subsequent decrease in item prices because of the global financial meltdown, decline in exterior demand for Jamaican goods and services, razor-sharp drop in the availability of capital for fiscal budgetary support and private sector investment as well as the lingering effects of hurricane Dean and exotic storm Gustav.

The sector contributed 8. 5% to GDP and the total employed labour force grew by 3. 5% to 80, 100 folks. For the period, total manufactured exports also increased amounting to US$1, 224. 75 million, a rise of 37. 5%. This was attributable mainly to increased export profits from Non-traditional Exports of US$1, 094. 7 million. However, the sector declined by 1. 2% scheduled to a challenging environment and the global financial meltdown which contracted the performance of the meals, Beverage and Tobacco and Other Making components of the industry by 2. 4% and 0. 2%, respectively.

Tourism Industry

Jamaica's economy relies heavily on tourism, which has become the country's largest way to obtain foreign exchange. Most tourists remain on the island for several days or weeks, although increasing figures disembark only briefly from cruise ships at Ocho Rios, Montego Bay and the newly renovated and opened up Falmouth Pier. These and other towns on the north shoreline, as well as Kingston, are the visitor sector's main bases of activity. Jamaica is well-known for its pleasant weather, fine beaches, and superb landscapes, including the waters of Montego Bay and the majestic Blue Mountains.

Industry Performance

The tourism industry has shown strong and sustained growth since Independence. The total amount of visitor arrivals to Jamaica has grown from some 271, 692 in 1962 and 670, 202 visitor arrivals in 1982 to a complete of 2, 860, 544 visitor arrivals in 2008, an annual increase of 5. 3% within the 46 time period. The island saw an archive 3, 016, 898 guests in 2006. The island's tourism accommodation stock increased from 10, 327 rooms in 1982 to

29, 794 rooms in 2008, while total receipts from travellers grew from US$337. 8 million in 1982 to US$1, 975. 5 million in 2008. The introduction of the tourism sector over this era has seen a rise in the relative importance of cruise trip traveler arrivals which grew from 29% of total visitor arrivals in 1982 to 38 % of total arrivals in 2008. There also has been the emergence of internationally competitive Jamaican-owned all inclusive hotel chains such as Sandals, SuperClubs and Lovers, and the diversification of tourism markets including progress in arrivals from the United Kingdom, Europe and

the Caribbean in addition to the traditional North American markets.

As one of the best-known hawaiian islands, Jamaica likes significant competitive advantages in Travel and leisure and Travel Services. Based on its strong brand image, an appealing natural environment and real human and cultural resources, the Jamaican Tourism industry has been identified among the key industrial clusters deemed capable of driving sustainable economic growth in the long run. Jamaica has had a long experience as a vacationer destination, being a favoured retreat for travelers from Europe since the eighteenth century. The travel and leisure industry, however, were only available in earnest in the past due nineteenth to early on twentieth century, with the first systematic efforts by Government to market the industry, and by private investors to determine large hotels. The introduction of the industry coincided with the immediate economic development of the United States, which has continued to be the main way to obtain visitors up to the present.

Jamaica has been one of the best-known vacation resort vacation destinations on the globe for decades. Originally known because of its stunning physical beauty and since a playground for the wealthy and famous, the island has since seen its travel and leisure industry experience significant progress and diversification. Jamaica presently boasts one of the most diverse visitor accommodation areas in the Caribbean, including world-famous all-inclusive resorts, upscale hotels and villas, and a range of distinctive tourist accommodations and visitors attractions.

While the tourism sector is a significant earner of forex there is a relatively high leakage of the benefits through imports of goods and services and obligations of interest and investment income to overseas providers of capital. In order to maintain more of the value added by the tourism sector linkages between the travel and leisure and the other areas of the market, including agriculture, creation and services have to be enhanced.

In-depth research of the developing industry

Manufacturing Sector

The Processing Sector represents a crucial component of the economies of several expanding countries including Jamaica. Jamaica's manufacturing sector is diverse and modern. Products encapsulated under this sector's activities are: beverages, processed foods, chemicals, plastics, makeup, pharmaceuticals, nutraceuticals and apparel. The island also produces spices and condiments, canned ackee and callaloo, as well as natural juices, carbonated drinks, beverage, wines, spirits, and liqueurs.

The making sector makes up about 12. 8% of GDP per annum, uses roughly 7% of the labour force which is second in conditions of sector contribution to real GDP. Jamaica's creation sector grew during 2007 and added about 12. 6% to total GDP, with total profits exceeding US$700mn. Manufactured exports grew by 7. 3% in 2007 to US$705. 8 million, a reflection of higher export cash flow from both non-traditional and traditional made products; and total investment in the developing sector facilitated by Jamaica Trade and Invest amounted to J$3. 6 billion during 2007. These opportunities spanned several sub-sectors including agro-processing, plastics, petrochemicals and cement. The petrochemical sub-sector was positively impacted by the development of an ethanol dehydration center at Slot Esquivel, St. Catherine. Further development also took place in the plastics sub-sector and in the concrete sub-sector through modernization and upgrading of clinker and concrete creation facilities. However, this overall picture of progress during 2007 was complemented by the Government's focus on increasing productivity to be able to impact progress. Government implemented programs that facilitated international competitiveness included worker skills training, technology upgrading, research and development, the Private Sector Development Programme (PSDP) and the product quality Jamaica Project, which includes training in Hazard Evaluation Critical Control Point (HACCP). Designed exports represent roughly 12. 6% of GDP in 2007, while the sector employs about 6. 1% of the total labour push. Exports grew by 7. 3% in 2007 to US$705. 8 million, a reflection of higher export earnings from both non-traditional and traditional manufactured products.

The global monetary crisis within the last quarter of 2008, spurred by the financial collapse in the United States emerged, which had implications for the effective sector. Devaluation of the buck, high interest rates, reduced domestic and export sales, credit crunch, high inflation, soaring petrol prices, and skyrocketing suggestions costs of uncooked material were a few of the obstacles experienced when confronted with the world financial meltdown.

For the year 2008, the Jamaican market contracted by around 0. 6%. Real Gross Home Product (GDP) for the Goods Producing Sectors contracted by 3. 0%, while the Services Areas grew by 0. 3%. The performance of the market was adversely damaged by the well-defined rise in product prices, the next decrease in product prices because of the global financial crisis, decline in exterior demand for Jamaican goods and services, sharp decline in the availability of capital for fiscal budgetary support and private sector investment as well as the lingering ramifications of hurricane Dean and exotic storm Gustav.

The sector contributed 8. 5% to GDP and the total employed labour drive grew by 3. 5% to 80, 100 folks. For the period, total made exports also increased amounting to US$1, 224. 75 million, an increase of 37. 5%. This was attributable mainly to increased export income from Non-traditional Exports of US$1, 094. 7 million. However, the sector declined by 1. 2% credited to a challenging environment and the global financial crisis which contracted the performance of the Food, Beverage and Tobacco and Other Manufacturing the different parts of the industry by 2. 4% and 0. 2%, respectively.

Economic prospect for the Manufacturing sector

A more economical perspective for the Jamaican manufacturing is to see interest rates trending down, Lenders beginning to make loans and sustained stableness in the exchange rate. This sector is exhibiting some renewed buoyancy and shows significant growth over the last two quarters. Regardless of the tough financial conditions, making is forecasted to contribute positively as this area is a focal part for the federal government as this area should harness more expansion and development. The government expects to boost this sector to make employment through the amount of money it gets from the International Monetary Fund (IMF). We expect that this will continue, as this is an essential sector representing a huge chunk of overall GDP. So whatever happens to processing will have an overall effect on the economy. They are some very good investment opportunities for the production sector for the coming years.

Agro- control: Canned fruit and vegetables and canned super fruit present good opportunities for investment in the food handling sector.

Chemicals and chemical substance products: Reference is being made particularly to aluminium sulphate, detergents and paints, which demonstrated steady growth in 2007. That is expected to continue as the building industry is projected to develop by 4. 5 percent in 2008 which will be facilitated by the expansion in Non-residential and hotel sectors as well as development of the ocean and international airports.

Bio- technology: Jamaica is blessed with lots of indigenous herbal selections which is often found in the campaign of health and fitness.

Food processing, Drinks and Tobacco: The meals handling sector grew by 3. 3 per cent in 2007, while progress in the drinks and tobacco sun-sectors stood at 1. 8 per cent. These sectors are anticipated to grow due to the anticipated upsurge in the food development.

For the Making Sector in Jamaica the recognition of advantages and weaknesses presents the internal examination of the sector as the thought of opportunities and risks represents the research of the external environment for the sector.

STRENGTHS

Sourcing and Procurement

Current option of high quality uncooked Jamaican materials (including agricultural products, limestone, concrete)

Strong international source relationships

Reduction of tasks on imported natural materials

Production

Largest contributor to GDP of most goods-producing sectors

World-class enterprises in a number of developing subsectors and market sectors (including food handling and beverage companies, paint, plastic pots)

Ability to make high quality products

Numerous small and diverse creation facilities allowing for a range of focused niche market segments and products

Environment

Availability of some 'green' raw materials

Limited use of environmentally friendly/clean creation technologies

Finance

Downward style in deposit interest rates making equity investment funds in creation relatively more attractive

Human Resources

Large employer of labour

Pool of trainable workforce

Innovativeness of people

Success of purchase performance systems

Limited entrepreneurial spirit

WEAKNESS

Sourcing and Procurement

Poor supply string management by local manufacturers

Weak procurement networks

Inconsistency in quality and offer of domestic organic materials

Production

Insufficient product development

Lack of support services (e. g. maintenance, environmental services etc. )

Outdated processes, systems and work organization

Low existing productivity

Low existing capacity usage (e. g. single-shift development)

Limited program of clean technology in production

Finance

Lack of low priced capital to invest in expansion

Lack of venture capital and bonuses for start-ups and MSMEs

Environment

Lack of use of waste products as a resource

Low usage of Environmental Management Systems (EMSs)

Human Resource

Limited option of skills necessary to build viable

Low worker motivation

Transport and Logistics

Inadequate supply string management

Shortages in warehousing

OPPURTUNITIES

Sourcing and Procurement

Expansion potential for local uncooked materials

Potential launch of rapid progress trees and shrubs for soft-wood lumber

Applications of bio-technology to agricultural raw materials

Pooled/joint purchasing by local manufacturers

Ease of access to US, Western and ASIAN delivery routes via the Interface of Kingston and Panama Canal

Production

Available ways to increase competitiveness through bringing up productivity

Available equipment and techniques for re-tooling

Transport and Logistics

International delivery providers present in Jamaica

Freight consolidation

Proximity to global delivery routes

Major trans-shipment port with prepared expansion

Good primary road network

Environment

Growing demand for environmentally-friendly products

General

Increased integration with other areas including agriculture, travel and leisure, mining and quarrying and telecom

THREATS

General

Risks to macro-economic stability

Crime and violence

Weaknesses in cooperation between open public and private sectors

Lack of any long term intend to increase linkages with other sectors

Potential impact of unfair international trade procedures by rivals (dumping, subsidies, non-tariff obstacles etc. ) on market for local created goods

Environment

Impact of international environmental laws and regulations as potential obstacles to trade

Potential impact of natural and man-made hazards on sector

Technology

Intense and ongoing international adoption of new technology by foreign competitors

Transport and Logistics

Inadequate control and monitoring at jacks, enabling illegal importation of products into the country

Delays in shipment and across port clearance

Problems with street network in some areas

Production

Uncompetitive energy costs

Emergence of China and other low-cost creation centres

Sourcing and Procurement

Increased demand for recycleables in other growing countries (e. g. China) resulting in upward pressure on prices and supply shortages

Five makes model used to analyze the Processing industry

In order to truly have a booming industry, the government must protect the firms on the market. We are using the Five causes model to access the manufacturing sectors in Jamaica, The model has five causes which will be the treat of admittance, Risk of rivalry, Threat of buyers, Threat of substitutes and Threat of suppliers.

The danger to entry

There aren't much measures devote location to protect the production industry, with the implementation of the Caribbean solo market economy (CSME), we will see the integration of goods and service moving across Caribbean countries with no hassle. This movements opens up higher market segments for companies since it allows companies to export their goods to different countries.

The threat of rivalry

Each company in the developing industry must put procedures in destination to safe shield them against their rivals. Companies have to ensure that the goods they produce are considerably superior from their rivals. Two major company in the developing sector in Jamaica are Grace and Lasco, these businesses have having the ability to produce good quality products that can compete with other imported products. Wisynco partnering with ocean spray has created an impeccable product called cranberry normal water which includes being doing perfectly on the market. Rivalry among competitors in this industry has being low because organizations have being able to distinguish their products.

The risk of powerful suppliers

A significant part of Grace profits comes from it agro-processing department and in order for Grace to continue featuring its dominance in the industry Grace has to ensure that suppliers are always producing quality goods. Not only quality goods but also ensuring they are obtaining it at a reasonable price where that they can compete with their competition.

The threat powerful buyers

If a firm has only 1 buyer, or a little number of customers, theses buyers can be very intimidating. Companies such as Grace, Lasco, Wisynco have many different customers. They do not rely using one buyer to buy their products. It is always good for companies to produce quality goods that will keep customers satisfied.

Projections

The developing industry is projected to continue its projected way predicated on the recent performance of the industry. This industry is a very vital sector in the development of the Jamaican economy. As the major players in the industries continue to develop new ideas and also enhance their product to meet up with the ever changing consumers. Also, you will see much improvement in this industry because companies have the ability to access loans much easier. There is certainly real variety in Jamaica's production industry, which really is a likely factor that plays a part in the strong year-on-year progress. In 2008/2009, JTI facilitated J$5 billion (US$56. 6 million) in capital expenses in the sector. Companies involved with manufacturing add the small to the very large; the ones that produce canned foods to the ones that package with the removal and processing of natural resources and chemicals.

Company Research - Berger Paints

Company Overview

Berger International Limited (Berger) is a Singapore-based investment keeping and management company. THE BUSINESS'S subsidiaries are principally mixed up in manufacture, sale and distribution of car paint and related products. THE BUSINESS runs in two sections: paints segment, and structure and other services section. The paints portion includes the produce, sale and circulation of paint and its own related products. The building and other services segment comprises painting, repainting and redecoration of complexes, way to obtain building materials and other standard service provider works, and other sundry sales. Its subsidiaries include Berger Paints Singapore Pte Ltd, Berger Building Services (Singapore) Pte Ltd (Singapore) and Lewis Berger (International Holdings) Ltd (United Kingdom).

Berger International Small, through its subsidiaries, engages in the manufacture, sale, and distribution of paints and related products worldwide. It offers defensive coatings for petrochemical or gas plants, essential oil rigs or just offshore platforms, and air port hangars or shipping and delivery terminals. The company also provides various architectural and timber surface finishes, such as topcoats, undercoats, and ancillaries; paints for interiors and exteriors; and water-based and alkyd based mostly products for various substrates like cement, wood, and steel. In addition, it includes emulsions and enamels in a variety of sheen levels. Further, the company provides marine coatings, which can be suitable for various types of vessels and crafts, including cargo service providers, crude essential oil tankers, yachts, ferries, barges, and tugboats. The company was founded in 1760 which is headquartered in Singapore, Singapore. Berger International Small operates as a subsidiary of Asian Paints (International) Limited.

Risks and Concerns

The coloring sector is natural material extensive and effective handling of risk ensures the successful progress of the organization. Several raw materials work as commodities; hence fluctuation in prices, specially the volatility in crude prices and supply bottlenecks, may affect the performance of the industry. The Company counters this through mindful buying and producing alternate distributors. The demand of attractive coatings is partially reliant on good a downpour and, like the majority of industries; a better performance in the agriculture sector is desired for the color industry also.

Foreign-exchange risk and risk management

Exchange rates are volatile and open up short or long currency positions can result in sizeable losses. Capital thus must be held to protect such prospects. When investing in international countries Berger Coloring Ltd. must consider the fact that currency exchange rate can transform the price of goods necessary for production as well as the property. Foreign-exchange risk pertains to all financial devices that are in a money apart from your domestic currency. The Group transacts business in a variety of currencies, including USA dollars, English pound, Bahraini dinar, Jamaican buck and United Arab Emirates dirham. The Group has a policy to ensure forex forward deals are taken up to mitigate the risk of exchange rate fluctuations according of responsibilities denominated in foreign currencies.

Interest rate Risk Management

Berger International Small is subjected to interest rate price risk for financial tools with a set interest rate and to interest or cash flow risk for financial musical instruments with a floating interest rate that is reset as market rates change. The Group handles its interest risk by monitoring the movements in the market interest rate directly.

Credit Risk Management

The Group places its cash and amounts with high credit quality financial institutions. The Group functions ongoing credit evaluation of its debtors financial condition and ensures that sale of goods was created to customers with an appropriate credit history. The Group does not have any significant amount of credit risk as the visibility is disperse over a more substantial variety of customers.

Operational Risk Management

Operational risk is inherent in every business activities and gets the potential for financial loss and business instability arising from failure of interior controls, operational operations or systems that support them. The objective of functional risk management is to balance risk and dividends within the constraints of the chance urge for food of the Group and the necessity for advisable management.

The Group's investment funds are subject to risks common to the paint industry. These risks include competition from other color manufacturers and inventory build-up if demand forecasting is not appropriate. All major investment proposals are published to the Plank for acceptance.

The Group has in place policies, operating guides and a regular reporting construction which encompasses functional and financial reporting

Compliance & Risk Management

Compliance risk arises from failure or inability to adhere to the laws and regulations of the united states and the duty to ensure conformity with applicable laws and regulations lies with the principle Executives of the respected subsidiaries. Steps to report and monitor statutory compliance is in place and compliance is also audited throughout inner audits.

Human Resource Risk Management

The Group places great focus on establishing comprehensive individuals resource procedures for recruitment, compensation and development of its employees. This ensures that the Group's recruiting are nurtured and maintained and give the Group a competitive edge

SWOT Analysis

STRENGTHS

Importance of brand image as a barrier to new entrants

For companies like Asian Paints, the brand image is of real importance. This is because the presence of the brand image has made it very difficult for new entrants into the market to obtain a good hold on the market. This makes the Coloring Industry an extremely oligopolistic market as a result of difficult accessibility of new companies.

Market Leaders

Asian Paints currently loves about 37% market show, and the closest competition which is Goodlass Nerolac (GNPL), has not even half of Asian Paints' market show.

Comprehensive nation huge coverage of the market

Urban, semi-urban and rural areas all get access to Asian Paints' products. They may have quite a number of brands, covering all segments and filling up all gaps. For example, they may have brands in various price slots like Utsav for rural lower-end markets and Apcolite for high end-markets.

Asian Paints' custom logo 'Gattu', an impish boy with the car paint tin and brush, is most popular and easily regarded.

Widest product range in conditions of products, hues, pack sizes - 40 different decorative, some in 150 hues, 8 different load up sizes.

Good technology backup

A good technology backup helps the industry because the failing of any one of the technical thresholds might be supported by other technical backups which can prevent ay further problems in the foreseeable future.

High GDP Growth

A high GDP may allow increasing authorities spending and will therefore gain the Car paint Industry and vice versa.

Reputed Companies

Most of the major companies in this sector are respected companies and therefore the possibility of ventures from other foreign companies is good.

The charges strategy is focused to middle/lower end consumers

The costs strategy is such that both the midsection and lower end individuals are beneficiaries of the product scheduled to low rates for some variants of the product. Therefore they can enjoy the product and the nice quality provided by it.

Asian Paints is strong in inventory control

Asian Paints' average inventory level is 28 days and nights sales against 51 times for the industry and it includes 45% edge in inventory having costs

In-house development, no outsourcing, high consistency in suppliers, superior in quality assurance

Corporate reputation is a major strength for Asian Paints. The image is that of an effective and well-managed company. They have gained many accolades and honours. For example, 1995 Corporate Superiority Prize from HBSA and ET, IDBI analysis graded Asian Paints as one of India's perfect companies. Another analysis graded Asian Paints among top 5 color manufacturers on earth. They have got an enviable track record in breaking the position of MNCs in the Indian color industry.

WEAKNESS

Scarcity of Raw Materials

There is a major weakness in the availability of raw materials because they are quite scarce. RECYCLEABLES such as Titanium Dioxide, Pthalic Anhydride, Pentaerythritol and other Organic and natural Pigments are really meager in their supply and for that reason it becomes quite difficult in making in bulk

Requirement of high working capital

There is a frequent requirement of a substantial amount of working capital for daily operations of the business and therefore that presents that constant revenue and sales is very important

Widening product blend puts pressure on production distribution, accounting and administration

Innovation in expanding new products is not adequate

The innovation that goes into the benefits of services is not enough and for that reason that contributes to a similar type of products being available on a regular basis without new thrills for the consumers.

Asian Paints has a significant weakness on the technology leading in commercial paints. Most color companies have technology tie-ups with manufacturers overseas. For example, Goodlass Nerolac has a tie-up with Kansai paints, which includes provided the business with Cathodic Electro Deposition (CED) technology. Since Kansai is the distributor to Suzuki, Japan, Goodlass using its Kansai connection detects it easy to touch Maruti in India. Asian Paints has not been in a position to make any significant innovations either with Maruti or the car segment in general. Berger has a technical tie up with Herbets, Germany, for automotive paints, Valspar Corp, USA for heavy-duty coatings and Teodur NV, Holland for powder coatings

Ever widening product combine throws some pressure on inventory management

Rural bias of emblem "Gattu". That is more likely to contradict the new positioning for the prime brands meant for urban markets

Seasonal demand and therefore in off conditions it can lead to cashflow problems

Paints are produced in batches and companies need to maintain an array of shades over summer and winter even though sales are concentrated in the second half of the year anticipated to seasonality of demand

OPPORTUNITIES

AP has always encashed on opportunities that contain come its way. It has maintained a product profile keeping the market movements in picture. It shifted to a predominance in industrial paints than industrial paints than in ornamental paints

Fiscal bonuses provided by Government

The Federal government has constantly given bonuses to Asian Paints for his or her production and circulation networks and that is a location to capitalize by inducing further incentives and reducing production cost

Commodity to FMCG

Rise in disposable Income

The vehicle industry accounted for 50% of the industrial paint market

Boom in Indian property sector: Increasing urbanization, cheaper real estate lending options and a shift from semi-permanent to long lasting housing constructions have been generating growth in Attractive paints segment which constitutes major area of the industry

Heavy infrastructure spending: New jobs in roads, plug-ins and industrial segments increases earnings from protecting coatings for civil applications and road-marking paints to all elements of the building paints sector, whether interior, exterior, waterproofing or floor coatings.

Rise in Income: Lifestyle centered spending by the Indian middle class is helping ornamental segment of this industry. Contemporary timber end formulations are upgrading the more traditional lacs and outside emulsions bought out from cement paints.

THREATS

Foreign Companies joining as singular players and their domination

GNPL and Berger might wrap up acquiring the Industrial Market segment

Competitors have vanished set for hi-tech with Instacolour spot mixing. For instance, J&N's Instacolour offers 626 shades

Automated paint blending in retail tips already there. ICI's Touch Color and Berger's Color Standard bank are indicative of this

Competition is catching up fast, hi-tech facilities offers abundant choices

With the decrease in excise duties, the purchase price advantage of the unorganized sector has been eroded. This has meant the reduction in the market talk about of the unorganized sector

Outsourcing is likely to show declining fads as new capacities are approaching in the arranged sector

Within a few years, manufacturing of paints wouldn't normally be profitable for some small players and a shakeout is apparently on the cards

With large players concentrating on the unbranded low value, mass amount portion, the unorganized players would need to make method for large companies. Therefore, expansion in ornamental paints is likely to come at the expenses of the unorganized sector.

Real Property in a Unhappiness Phase

The current period in the real property sector shows a Unhappiness because because of the ongoing recession, people are not willing to spend more on the houses' beautification and for that reason, there's been a slump in the sales of Asian Paints.

Porter's 5 Push Analysis

THREAT OF NEW ENTRANTS - LOW

We see that the motorists for success are different in both segments, that is decorative and commercial. In decorative portion, distribution channel becomes most important for a new player to be always a success. Thus for a new player to achieve success here, entry obstacles are huge. That might have been one of the reasons that ICI isn't such a big player in Indian attractive segment. Although, the growth rate of Indian market is very attractive, compared to global market segments, APIL, because of its distribution channel, is not absolutely all that threatened by new entrants. Whether or not an international player hopes to enter this segment, it will require him inordinately very long time to establish programs that could threatened APIL. The brands of the prevailing players may possibly also make it problematic for a potential new entrant, particularly if the Move factor further raises in the industry.

The industrial segment, which gives much more importance to the technology used, and doesn't require such huge systems, is more prone to new entrants. But the flip side of the portion is the technology. It increases the entry obstacles to forbid admittance into this portion. Also obtaining a foothold on the market is very difficult, as the turning cost is high for the clients.

BARGAINING Vitality OF BUYER - HIGH

The consumers of paints especially in the ornamental paints segment don't have adequate understanding of the quality, properties and recognized benefits of a specific paint. Hence, there is a strong reliance on intermediaries like painters, contractors and even coloring dealers in making an informed decision about the sort and even the make of coloring to buy and use, therefore becoming strong influencers. In commercial segment the customers do have some buying power. You can find fewer potential buyers with huge requirements. Loss of one customer would strike the company in quite visible way. This is overcome by elevating switching costs. The costs can be increased by giving the customers customized services, like after sale services etc.

For any industry, the key factor influencing the competitive situation on the market is the end-users or the purchasers, and the paints industry is not a exception to that. Paints can be purchased through direct selling as well through marketers. While architectural paints mainly follow the retail channels, industrial paints are sold right to end-use companies. It has been observed these buyers, both immediate end-users and retail route, are becoming increasing powerful with their growing bargaining power. End-users are demanding higher quality car paint for the same or a lesser cost. Paint manufacturers are consistently being forced to lessen prices, and those who fail to do so are dropping out to the strongly fought competition. Lately, it has also been seen that, due to economic downturn, end-users have lower purchasing power which is forcing paint companies to reduce prices to keep up their sales volumes.

THREAT OF SUBSTITUTES - MEDIUM

The risk of the substitutes is a lot higher in the rural markets, where the understanding about paints continues to be quite low, which is considered as an extravagance good. Either the wall surfaces are left as a result without any coloring on, or substitutes like whitewash are utilized. This risk is noticeable in the urban markets also, especially in the surface paint segment. White concrete is one of the most preferred substitutes for the paints for outdoor walls. Properties are increasingly made with walls, made of bricks so that the bricks become an all natural dcor. Stones are also being found in many situations. Most companies have the same range of products for the decorative-paint market. Within the industrial segment, the range of products is more personalized and led by the technology support provided by the collaborators. Regarding ornamental products the technology has been usually indigenously perfected through the years and the products can be divided on the basis of interior and exterior software or in categories like water-based and solvent-based. In addition, most companies have been advertising their products in the surface emulsions category, which has expanded the marketplace and brought about a shift from cement coloring. While solvent-based enamels are still popular in India, outside India there's a clear shift visible from solvent- to water-based glossy enamels. India will take a while before this change is accepted due to three hurdles currently faced including cost (water-based is expensive), low degree of gloss in water-based enamels and the emotional barrier that water-based coatings can't be superior to solvent-based coatings for protecting metal or wood surfaces. Companies not working on operational efficiency business models have been losing. Asian Paints and Goodlass Nerolac have been aggressively focusing on cutting costs/operating expenditures. Berger has been controlling well with economical yet acceptable formulations and low operating costs.

BARGAINING Electricity OF Provider - LOW

One of the key RM in the production of paints is TiO2. 50% of it is imported primarily because the quality of indigenously prepared chemical substance is not very high. There are very few suppliers of this materials. Also the risk of backward integration into making TiO2 is low, as the administrative centre costs are in the tunes of 450 to 500 crores, supplier's electricity further raises. In industrial portion, technology is important. There are just hardly any companies which pioneer in the technology, for example Du Pont, thus they control their prices. Price increase is constrained with the presence of the unorganized sector for the decorative segment. Sophisticated purchasers of industrial paints also limit the bargaining electric power of suppliers. It's the major reason margins are better in the ornamental segment comparatively. To aggravate the problem, the cuts in cost of product are being associated with increase in the raw materials prices. Resins prices have been rising before few years for almost all kind of paints. Thus, car paint companies are receiving squeezed from both directions resulting in thinning with their profit margins. Another obstacle on the resin entry is that the intro of newer solutions and newer types of resins are driving out few conventionally used resins. Governmental regulations against paints containing volatile organic compounds (VOC) will be a major element in tossing out certain sorts of paints from the market. This will definitely have an impact on the resin situation on the market and would require the paint companies to adjust accordingly. Companies need to be proactive and cannot sit back and wait for other companies to act because these will be the companies that will surely miss out on the market in the medium run, if not the brief.

RIVARLY AMONG ESTABLISHED Businesses -HIGH

The overall market for paints in India was appreciated at around $1. 4 Billion in 2003. The per capita color utilization in India is only around 0. 5 kg as compared to over 10kgs in developed countries. From the total market, roughly 25-30% is the unorganized sector. Competition is quite strong in the Indian coloring market. Unlike various other large marketplaces like China, the Indian market is not very fragmented. One or two top companies control major stakes in several segments of the marketplace: decorative coatings are dominated by the likes of Asian Paints, Goodlass Nerolac and Berger. Asian Paints alone claims to have over 40% of the architectural coatings market. Goodlass Nerolac is very strong in the commercial segment specifically for automotive coatings. Using its jv with Kansai Paints, it regulates over 50% of the OEM coatings market. Not merely is the competition high, additionally it is constantly increasing with companies fighting with each other for a larger talk about of the pie. Major companies, like Asian Paints, are spending heavily into pursuits like brand-building, distribution and marketing strategies. Asian Paints has reportedly setup more than 2500 tinting outlet stores, which provide customers with an increase of than 1000 shades to choose from. Besides marketing initiatives, companies are also extending their development facilities to increase their existence on the market. In 2003, Asian Paints declared the engineering of a fresh decorative and motor vehicle coatings plant in Tamil Nadu. Goodlass Nerolac's growth is also obvious in the recent capacity expansions at their Jaipur plant and the establishing of a new Greenfield flower in Haryana. Berger Paints is in the process of setting up a 25, 000 MT place in Jammu which is likely to commence full operation by July 2005. As the market becomes more sophisticated and purchasing electric power rises, customers will be more inclined towards superior quality, top quality products and greater choice. As the market matures, players in the unorganized sector are anticipated to get ever more squeezed. This technique would be catalyzed by the decrease in excise duty, which has considerably shrunk the purchase price differential between your organized and the unorganized industries. Along with some loan consolidation expected in the prepared sector, the top few players in the industry will gain a better hold on the forex market in the future. At the same time, though demand for complex and niche surface finishes keeps growing, most people don't want to pay too much more for these. The trends towards more choice in cover from the sun and effects, and better quality shifts the balance towards the larger players, who've the finances to purchase R&D and are also able to exploit economies of range to provide affordable options.

Boston Growth-Share Matrix

The Boston Progress Matrix is a collection planning model developed based on the observation a company's business units can be grouped into four categories predicated on combinations of market expansion and market share relative to the largest competition. It assists as a proxy for competitive advantage. The four categories, pups, question marks, start and cash cows give an idea of the company's competitive performance within its industry. Dogs have low market talk about and a minimal development rate thus neither make nor consume huge amounts of cash. Question grades are growing quickly and thus take in huge amounts of cash, but owing to the fact they have low market stocks they do not make much cash. Personalities generate large amounts of cash for their strong relative market share, but also consume large amounts of cash for their high expansion rate; therefore the profit each direction approximately nets out. Cash cows are market leaders and showcase a return on assets higher than the market progress rate, naturally producing more cash than they can consume.

Berger Paints Jamaica Ltd. may be grouped as "question tag" in the paint manufacturing industry. The business is growing but presently has a low market talk about value which is soon likely to change. In comparison with the other major player in this industry, Sherwin Williams, Berger had a lesser EPS and also P/E proportion. Sherwin Williams got values of $0. 40 and 20. 23 times respectively while Berger Paints got $0. 35 and 14. 43 times.

Berger Paints' Trade Activities for 29/03/11 to 8/04/11

Date

LastPrice

ClosePrice

Change ($)

Change (%)

Volume Traded

3/29/2011

3. 15

3. 15

0

0

4, 960

3/30/2011

3

3

-0. 15

-4. 76

3, 639

3/31/2011

3

3

0

0

7, 603

4/1/2011

3. 02

3. 02

0. 02

0. 67

2, 280

4/4/2011

3. 02

3. 02

0

0

0

4/5/2011

3. 02

3. 02

0

0

0

4/6/2011

3. 02

3. 02

0

0

0

4/7/2011

3. 03

3. 03

0. 01

0. 33

99, 000

4/8/2011

3. 03

3. 03

0

0

0

Growth:

Dividend Discount Model (DDM)

g= ROE -


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