Letter of the Day | Jamaica must recalibrate its SEZ framework
Published:Thursday | July 3, 2025 | 12:06 AM
THE EDITOR, Madam:
The Jamaica Special Economic Zone Act (2016) included a transitional safeguard – the “Zone Establishment Period”– which temporarily restricted existing Jamaican companies from qualifying as SEZ entities. This provision was designed to prevent tax leakage and ensure alignment with international base erosion and profit shifting (BEPS) standards, particularly as Jamaica restructured its incentive regime under OECD and WTO scrutiny.
While effective in preserving fiscal integrity, the provision unintentionally excluded productive, high-potential domestic firms from participating in the SEZ regime during a critical period of economic reform and global value chain realignment. As a result, local business integration into SEZ-enabled ecosystems has remained limited, constraining Jamaica’s ability to fully leverage SEZs as instruments of industrial upgrading and export diversification.
With the expiration of the Zone Establishment Period in 2026, Jamaica faces a strategic opportunity – and imperative – to recalibrate its SEZ framework. The central challenge is to enable broader participation by local firms without undermining the regime’s tax credibility, while also repositioning SEZs as platforms for innovation, nearshoring, and regional economic leadership.
If left unaddressed, this inflection point could lead to underutilised SEZ assets, stagnant domestic investment, and suboptimal foreign investor confidence. Conversely, with targeted policy reform and strategic outreach, Jamaica can unlock the full potential of SEZs as catalysts for Vision 2030 – advancing inclusive growth, productivity gains, and sustainable export-led development.
THE ORIGINAL POLICY LOGIC
The 2016 Act’s transitional provision was essentially an anti-avoidance mechanism designed to prevent what tax economists call “passive benefit claiming” – where existing businesses simply relocate operations to capture tax advantages without generating new economic activity.
From a compliance perspective, this approach aligned Jamaica with OECD standards on harmful tax practices and demonstrated commitment to substantive economic activity requirements, criteria increasingly scrutinised by international tax bodies and development partners.
However, the policy created what might be termed an “incumbency penalty” for domestic firms. Established Jamaican companies with proven track records, existing market relationships, and institutional knowledge were effectively excluded from participating in what was intended to be a transformative economic development tool. This is particularly problematic given that successful SEZ programmes often depend on anchor tenants and demonstration effects from credible local participants.
The restriction may have inadvertently created a two-tier system where foreign investors could access SEZ benefits more readily than domestic firms, potentially undermining the zones’ role in building local industrial capacity and technology transfer.
STRATEGIC RECALIBRATION OPTIONS
As 2026 approaches, Jamaica has several pathways for reform that could maintain tax integrity while expanding participation:
Performance-based eligibility: Rather than blanket exclusions based on establishment dates, Jamaica could implement criteria focused on measurable outcomes – export growth targets, employment creation thresholds, technology adoption benchmarks, or value-addition requirements. This would allow established firms to qualify based on substantive economic transformation rather than merely temporal factors.
Sectoral prioritisation: The framework could prioritise sectors aligned with Jamaica’s comparative advantages and Vision 2030 objectives – perhaps creative industries, agribusiness processing, renewable energy, or digital services – while maintaining stricter controls on sectors prone to passive benefit claiming.
Local content integration: Reformed SEZ regulations could incentivise domestic firm participation through requirements for local sourcing, skills development, or technology transfer partnerships, creating symbiotic relationships between foreign investors and local capabilities.
Jamaica’s SEZ recalibration occurs within an increasingly competitive Caribbean landscape. A reformed Jamaican SEZ regime that successfully integrates domestic firms could create demonstration effects for regional value chain integration while positioning Jamaica as a hub for Caribbean-wide industrial development.
The transition period itself presents opportunities for pilot programmes or graduated entry mechanisms that could test reformed frameworks while maintaining safeguards against abuse.
Jamaica’s post-2026 SEZ evolution represents more than tax policy adjustment – it’s an opportunity to demonstrate how small developing economies can design investment incentive frameworks that balance fiscal responsibility with inclusive growth objectives. The outcome could influence SEZ design across the Caribbean and provide valuable lessons for other middle-income countries navigating similar development challenges.
DR ERIC DEANS