Jamaica
News - Real Estate - Finance (July 23, 2004)
USAID, RBTT launch retooling loan
The United States Agency for
International Development (USAID) is to offer J$300 million in guarantees to
Jamaican manufacturers seeking commercial bank loans for projects that would
improve their technologies and stem production waste.
USAID announced on Tuesday that it would
partner with RBTT Bank for this programme, expected to begin within two to three
weeks.
The Americans will guarantee RBTT the repayment
of up to 50 per cent of any exposure it faces in the event that any of the
borrowers under the project default on their payments.
Manufacturers seeking funding for what is
being called 'environmental retrofitting' will be offered lending rates that are
lower than current general rates, as part of the effort by the USAID to help
Jamaican companies prepare for exporting into markets that will start imposing
stringent environmental standards as part of their trade practices.
At the announcement of the guarantee programme on
Tuesday, the president of the Jamaica Manufacturers' Association, Doreen
Frankson, welcomed the help to the sector against which she said environmental
standards were now being used as a barrier to trade.
"Increasingly, environmentally-sound and
cleaner production methods are becoming barriers to trade - a factor we did not
have to contend with in the past," said Frankson, herself a manufacturer
and exporter of auto paints and finishes.
Frankson made a pitch for "more wide-scale
offers of this kind" arguing that current rates of 25 per cent per annum
for retooling made such projects uncompetitive.
RBTT will be collaborating with an
environmental agency to provide technical expertise for the project.
Howard Batson, USAID representative stated that
the loan would be for a period of over six years, and that the partners were
"striving for a competitive interest rate, which will be less than 25 per
cent" but above the 9.5 per cent rate that was offered by Scotiabank via
one of its niche programmes.
The guarantee facility is one of three pilot
projects being undertaken by USAID in Central America to promote cleaner
production and improve the region's competitiveness in international markets.
Tuesday's announcement coincided with the launch
of the Resource Centre for Cleaner Production - a one-room facility located at
the downtown Kingston office of the JMA, from advice would be offered on energy,
water conservation, and eco-friendly management practices.
USAID mission director Karen Turner noted that
manufacturers would be able to consult the centre during the JMA's opening
hours, and that the programme could enhance company performance.
"The greening of the (business) sector saves
money, especially in a country that depends heavily on tourism in which the
natural resources are the major pulls," she said.
This assertion was supported by Gilbert
Jackson, USAID's environmental protection specialist, who pointed to the
positive cost benefit impact of the centre in providing advice that could
ultimately improve the financial performance of companies.
"For every $100,000 invested, the pay-back
in savings is about $100,000 in six months, and on average, the annual pay-back
would be around $200,000," said Jackson.
"The US has saved tens of billions in the
last decade through cleaner production practices. We've also seen this in 220
Latin American companies of which about 30 Jamaican hotels are included."
Jamaica's average pay-back time is one year
compared to six months in the United States and the other Latin American
countries, Jackson told the Observer.
He also provided a chart that tracks the
investment and returns involved in cleaner production or waste management, in
four steps in order of complexity:
. good housekeeping which involves simple
procedures such as fixing leaky pipes and employing energy conservation
practices - requires a small investment and gives 80 per cent returns;
. recycling and reuse - gives 60 per cent
returns;
. materials substitution which involves replacing
toxic substances with non-toxic or less toxic chemicals - 40 per cent returns;
and
. process modification which is the most
complicated and expensive step - gives a relatively small 20 per cent return.
The effort at helping Jamaica's manufacturing
sector to improve its efficiency is coming at a time when the manufacturing
industry appears to be emerging from a long period of decline. There is some
evidence, for example, that the sector may have grown 2.8 per cent during the
first quarter of 2004 - data which both Frankson and industry minister Aloun
N'dombet Assamba highlighted during the launch of the centre.
Dean Peart, minister of land and environment,
who also participated at the launch, said cleaner production practices was a
national priority. He cited the Bureau of Standards' oversight of environmental
management systems as one programme which promoted clean production policy.
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