3. Evolution of FDI by sectors
Foreign direct investment (FDI) has been of great importance to CARICOM economies. This importance is obvious, in part, by the establishment of investment promotion agencies at the national and regional levels. Net inflows of FDI for CARICOM have increased at a steep path since 1989 to 1990 when there was a 235.4% increase from US$118.4 million to US$385.1 million. By 1994, net inflows had grown to US$932.8 million. Trinidad and Tobago alone received US$516.2 million (55.3%) of the inflows followed by Jamaica and Guyana with US$129 million (13.9%) and US$106.7 (11.4%) respectively.
CARICOM’s FDI net inflows received a huge improvement in 1997 after significant investment in Trinidad and Tobago’s oil industry resulted in a 183.2% increase in FDI net inflows to US$999.3 million for that country and an overall increase of 93.8% to US$1.72 billion for CARICOM. This figure remained relatively unchanged until 2000 when there were net inflows of US$1.66 billion. As it refers to Gross Fixed Capital Formation (FDI/GFCF), in 2000, FDI/GFCF ratio for CARICOM averaged 20% but between 2005 and 2009, this ratio grew progressively and averaged approximately 40% in 2009. Temporarily, as a percentage of GDP, FDI to the Caribbean averaged 14.1% in 2008, declined to 11.8% in 2009 and much lower in 2010. Jamaica, The Bahamas and Trinidad and Tobago are the top FDI receivers, particularly in the primary and tourism sectors. Source countries are mainly Canada, the United Kingdom and the United States, with the latter dominating. Most of this investment is directed towards activities in the petroleum and natural gas industries in Trinidad and Tobago and mining, extracting and agriculture/forestry in Jamaica and Guyana. For Jamaica, investment in tourism has also become a significant feature. Increasingly however, Caribbean States have been developing and implementing strategies to encourage investment into non-traditional sectors such as ICT and logistics and new sources, such as Chinese investors.
At the regional level, Article 68 of RTC provides for a common investment policy. Nevertheless various restatements of a CARICOM Investment Code, the policy has not yet been finalized. The absence of an investment code has not prohibited intra- and extra-regional investment from taking place, however, particularly in the financial services sector that has seen major activity (Kirton, 2006). For non-financial services, there are about 25 areas of economic activity in which CARICOM firms are involved across the region. These include hotel and tourism, food and beverage, cement, and air transport. More recent cross-border activities include entertainment, media, packaging, pharmaceuticals and professional services. Given the CSME and movement of skills across the region, it is expected that the latter set of activities will continue to increase in value and volume across the region.