Zone Profile: Montego Bay Free Zone
The Montego Bay Free Zone is one of the largest service-specialized SEZs in the Caribbean. It is home to numerous call centers, telecom providers, and many other technology service providers.
Basic Overview
The Montego Bay Free Zone (MBFZ) is a limited liability company, owned equally by the Port Authority of Jamaica (PAJ) and the Jamaican government.
The free zone is located close to Jamaica’s second-largest seaport and just 15 minutes from Donald Sangster International Airport. Information and communications technology (ICT) is the largest sector in MBFZ, particularly various tenants serving major companies in the United States. Services range from data processing to software development. [1]
History
Montego Bay Free Zone (MBFZ) was established by the Port Authority in 1985, [2] two miles outside of Montego Bay [3], and was inspired by the success of Kingston Free Zone (KFZ). The first company to start operations in MBFZ was Akom Garment Manufacturer, occupying the first 35,000 square foot building [4]. The initial industries established in the zone were garment manufacturing, data processing, and communications. [5]
MBFZ initially operated under the Jamaican Free Zones Act, passed in december 17th, 1982 [6]. Under this regime investors were allowed to perform activities which did not enter the domestic market, in certain activities such as warehousing and storing, manufacturing, and service operations such as insurance, banking, and professional services.
The incentives offered are: 100% tax holiday in perpetuity; no import licensing requirements;exemptions from customs duties on capital goods, raw materials, construction materials, and office equipment. [7] By 1989, there were 21 companies operating under the free zone regime in Jamaica, of which 8 were in MBFZ, with the MBFZ employing over 1000 people [5].
In 1988, the PAJ built a 30,000 square foot building for data operations. The zone became home to Jamaica Digiport International (JDI), which is a joint venture between Telecommunications of Jamaica (TOJ), AT&T (USA), and Cable and Wireless (UK). It offers high speed, state-of-the-art telecommunications facilities enabling international voice and data transmission [8].
By 1992 the number of employees had reached 3600. The retained earnings from Kingston and Montego free zones were valued at $14.7 million USD, representing 46% of the total foreign exchange earnings. [3] By 1997, 430,000 square feet of space had been built [8].
The zone contributes to the development of higher-level ICT skills in Jamaica by partnering with CIT (Caribbean Institution of Technology) and other entities to offer courses for entry level programmers and software designers. [7] Since the opening of the telecommunications market in the 1980s, up until 2004, more than $500 million USD in investments were pumped into CIT. [10]
In 2009, MBFZ ran out of space for new tenants. This pushed Mark Kerr Jarrett, who was a member of the board at the Housing Agency and National Works Agency of Jamaica, to start planning a second ICT business park. This park is up and running today, Barnett Tech Park. [11]
Main industries
Most of MBFZ’s revenue comes from BPO (Business Processing Outsourcing) with earnings amounting to 46 % of the total ICT/BPO earnings in Jamaica in 2012. MBFZ houses 66% of outsourcing companies in Jamaica, including Xerox and Teleperformance [12]. A 100% occupancy rate was secured during 2013-2014, resulting in $121.9 million USD in foreign exchange earnings. [13]
By 2015 the zone provided 7000 direct and 3000 indirect jobs. In order to better service its tenants, the zone offers a BPO incubator and training school, bonded warehouses, health clinics, transportation, and canteens. [8]
From Free Zone to SEZ
The evolution from a Free Zone to a Special Economic Zone (SEZ) began as an initiative by the government of Jamaica’s Ministry of Industry, Investment and Commerce (MIIC) [6]. The SEZ Act was enacted on February 15, 2016, and came into force on August 1, 2016 effectively repealing the Jamaica Export Free Zone Act. Under the SEZ Act the Jamaica Special Economic Zone Authority (JSEZA) was established. [14] It was revised again in 2018 [15].
The transition to a SEZ regime meant that the General Consumption Tax (GCT) would no longer be charged, and operations would be under the World Trade Organization’s Agreement:
- The export subsidy of the 15% cap on domestic sales would be removed;
- A Corporate Income Tax of 12.5% will be charged;
- Application fees would be $3000 USD for developers, $1500 USD for occupants and $100 USD for users;
- Developers will also be charged an annual fee of $0.20 per sq. ft. The fiscal benefits are asset tax relief and customs duty relief. [16]
There is a list of prohibited industry activities in Jamaican SEZs, however a user may acquire a permit from the JSEZA to engage in these activities. The below list may be amended - through consultations between JSEZA, the Minister responsible for JSEZA and the Minister of Finance. The list of prohibited industries include: [16]
- Extractive industries
- Tourism services
- Telecommunication services
- Public utilities
- Financial services
- Constructions services
- Real estate and property management services
- Health services
- Catering services
- Retail trade
The operations of the zone are guided by priorities such as providing a more favourable environment for operators, transitioning operations to align with the SEZ regime, increasing market presence, awareness of the zones’ offerings,digitalization of the services sector, and improving the scope of services offered to existing and potential clients. [17]
The profit in the period of 2019/2020 was $41.43M. For the period of 2020/2021, the estimated profit is $17.12M and the projections for the period of 2021/2022 are to earn a profit of $4.6M. [17]
Recently, the zone was renamed to Montego Bay Special Economic Zone. [18]
Controversy
On January 23 2020, Donnia Johnson, 22, was found dead in a male bathroom at Vikings Production, where she used to work. Vikings Productions is a tenant in the Montego Bay SEZ. The day before, when she did not come home as she normally did, her family became concerned and wanted to visit the SEZ to look for her.
However, when the family arrived, they were informed that no one was allowed to enter at night. The next day, at 9:20am, the family received a call informing them of the discovery of the body. [19] A month later, an autopsy was done but it did not ascertain the cause of death. It did, however, confirm that the 22-year-old was pregnant.
The case remains open and the family of Donnia is still looking for justice. [20]
Conclusion
Montego Bay Special Economic Zone is an example of how free zones primarily focused on export processing are able to slowly move into higher value-added sectors. Jamaica has, in recent years, been adjusting its zone policy to better cement its regional leadership in the BPO and value-added services sector, which will be an interesting case study for any island economy to learn from.
See more about the Montego Bay Special Economic Zone on our Open Zone Map here.
Sources
- Montego Bay Free Zone Co. LTD. https://mbfz-jamaica.com/
- Integrating marine policy into the national development strategies of Jamaica https://commons.wmu.se/cgi/viewcontent.cgi?article=1853&context=all_dissertations
- A Sociological Analysis of Methods of Organising Used By Women in Caribbean Free Trade Zones: Implications for Development https://core.ac.uk/download/pdf/46518052.pdf
- MBFZ to Surpass 10000 worker mark by December https://www.pressreader.com/jamaica/jamaica-gleaner/20181128/282626033741596
- Export Processing Zones and Women in the Caribbean https://repositorio.cepal.org/bitstream/handle/11362/41286/S9000023_en.pdf?sequence=1&isAllowed=y
- The Jamaica Export Free Zones Act https://moj.gov.jm/sites/default/files/laws/The%20Jamaica%20Export%20Free%20Zones%20Act.pdf
- Investment Climate Update https://www.thefreelibrary.com/INVESTMENT+CLIMATE+UPDATE-a079154116
- Montego Bay Free Zone 30th Anniversary Magazine https://repositorio.cepal.org/bitstream/handle/11362/41286/S9000023_en.pdf?sequence=1&isAllowed=y
- Vision 2030 Jamaica: Plan National Development Plan https://planipolis.iiep.unesco.org/sites/default/files/ressources/jamaica_draft_ict_sector_plan.pdf
- Caribbean Institute of Technology is Now Heart CIT https://www.my-island-jamaica.com/caribbean_institute_of_technology.html
- $356m investment for new call-centre park http://mobile.jamaicagleaner.com/20090318/business/business1.php
- Elephant Group Gobbles Up ICT Space In Montego Bay – Factories Corp Resolves to Add New Capacity https://dobusinessjamaica.com/news/2014/01/4152/
- Montego Bay Free Zone Generates US$121.9M in Earnings https://jis.gov.jm/montego-bay-free-zone-generates-us121-9m-earnings/
- Connecting the Dots https://www.jseza.com/wp-content/uploads/2017/12/Nov2017_VolI.pdf
- Gov’t Exploring Revision Of Special Economic Zones Act https://jis.gov.jm/govt-exploring-revision-of-special-economic-zones-act/
- Frequently Asked Questions - Jamaica Special Economic Zone Authority https://www.jseza.com/invest-in-jamaica/frequently-asked-questions/
- Estimates of Revenue and Expenditure for the Year Ending March 2022 https://mof.gov.jm/downloads/publicbodies/esre-2021-2022-042921_1.pdf
- Montego Bay Free Zone - Jamaica Special Economic Zone Authority https://www.jseza.com/sez/montego-bay-special-economic-zone/
- Woman found dead in bathroom http://jamaica-star.com/article/news/20200123/woman-found-dead-bathroom
- Autopsy fails to determine what killed pregnant MoBay woman http://jamaica-star.com/article/news/20200218/autopsy-fails-determine-what-killed-pregnant-mobay-woman
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