Foreign investment in Jamaica has accounted for a large part of the capital formation of the post-1945 period. Until the early 1960s, new US and Canadian capital was invested heavily in the bauxite industry. Capital investment in bauxite and aluminum then tapered off, but investment increased in other industries as a result of a vigorous campaign by the government. Starting in 1972, however, capital investments in the private sector fell substantially. After 1980, the JLP government of Prime Minister Seaga had some success attracting foreign capital, but then the economic downturn of the mid-1980s again produced a decline in foreign investment. By early 1987, when 120 US companies operated in Jamaica, cumulative US investment, excluding the bauxite industry, was over $1 billion. There are no statuary restrictions on sectors open to foreign investment, but in practice most service industries are reserved for Jamaicans.
Increased investment, particularly in the private sector, has been identified by the government as an essential factor in the strategy for reviving and sustaining the economy. Government has therefore continued and initiated actions that are intended to encourage investment in a number of areas such as those that generate foreign exchange, utilize domestic raw materials, and generate employment. The government offers a wide range of incentives, including tax holidays up to a maximum of 10 years and duty-free concessions on raw materials and capital goods for approved incentive periods. There are in existence several acts that provide major benefits for foreign investors, such as the Industrial Incentives Act, the Export Industries Encouragement Act, and the Hotel Incentives Act. Additionally, since the liberalization of exchange controls in September 1991, investors are free to repatriate without prior approval from the Bank of Jamaica.
The United States continues to play a leading role in foreign investment. In late 1996, a US firm acquired control of Jamaica's only flour manufacturer, Jamaica Flour Mills, for $35 million. In 1997, the Financial Sector Adjustment Company privatized a large number of companies in order to support the country's financial sector.
Annual foreign direct investment (FDI) inflows into Jamaica in 1999 reached $523 million, more than double the inflow in 1997 of $203 million, but then fell to $471 million in 2000. In 2001, FDI inflow rose to $722 million. In the period 1998 to 2000, Jamaica's share of world FDI inflows was almost twice its share of world GDP (170%).
Major sources of foreign investment have been, in order, the United States, Colombia, Canada, and the United Kingdom. About half of foreign investment has gone into agriculture, 20% into films, 8% into manufacturing, 7% into the garments and textiles industry, and 5% each into tourism and information processing.