‘Plan for growth in a new Digital Economy’
DISCUSSION PAPER:
“E-COMMERCE, INTELLECTUAL PROPERTY AND ICT
IN JERSEY - THE CREATION OF DIGITAL JERSEY
TO DEVELOP THESE SECTORS”
January 2012
Contents
Preface
1 Executive Summary
2 The Opportunity – The E-Explosion
2.1 The Digital Economy and E-Commerce defined
2.2 Intellectual Property (IP)
2.3 The Global Market and Growth Potential
3 Building on Existing Competence
3.1 E-Commerce Business – A Current Reality
3.2 Intellectual Property Sector
3.3 Financial Services and Other Supporting Sectors
4 The Competitive Landscape
4.1 Challenges within Fulfilment
4.1.1 Background
4.1.2 Business and Political Opposition to LVCR
4.1.3 Recent Developments
4.1.4 Reaction
4.2 E-Gaming
4.2.1 Offshore Growth
4.2.2 Marketing Activity
4.3 Smart Competitors
4.3.1 Malta – Smart Island
4.3.2 Guernsey and the Isle of Man
5 Why Jersey – Accentuate Positive and Close Gaps
5.1 General Location Criteria
5.2 E-Commerce Criteria
5.3 Tax
5.4 Self-Assessment
5.4.1 Connectivity and Technology
5.4.2 Business Environment
5.4.3 Social and Cultural
5.4.4 Legal Environment
5.4.5 Government Policy and Vision
5.4.6 Consumer and Business Adoption
5.5 Marketing the Opportunity
6 Strategic Choices
6.1 The Need for Action
6.2 Individual Firms and Trade Associations
6.3 A Co-ordinated Approach
7 Digital Jersey Limited – The Overview
7.1 Aims
7.2 Structure
7.3 The Operation
7.3.1 The Board
7.3.2 Appointments
7.3.3 Other Staffing
7.4 Funding Principles
7.4.1 Annual Grant
7.4.2 Private Sector Funding
7.5 Governance
7.6 Constitution/Service Level Agreement (SLA)
8 Digital Jersey’s Short and Long Term Objectives
8.1 A 100 Day Plan
8.1.1 IP Project
8.2 One-Year Plan
8.2.1 Targeted Research
8.2.2 Develop and state the digital strategy for Jersey
8.2.3 Develop and Implement a Marketing/Communication Plan
8.2.4 Assistance to Fulfilment Industry
8.3 Strategic Overview
8.4 Strategic Development – The Boundaries
9 Financial Requirements
9.1 Staff Costs
9.1.1 Chief Executive
9.1.2 Chairman and Board
9.1.3 Administrative Support and Other Staff Related Costs
9.2 Other Expense – Including Market Research
9.2.1 Market Research
9.2.2 Other Items
10 Timings
11 Recommendation
This paper sets out to highlight the potential economic opportunities that the Island of Jersey has in the areas of E-Commerce, Intellectual Property and Information Communication Technology (ICT) whilst also outlining the steps that might need to be taken capitalise on these opportunities.
It seeks to build on work previously undertaken and is designed to highlight certain actions that should lead to the effective development of these subjects.
The goal is to start delivering on the relevant elements of the States of Jersey Economic Development Department’s recently published ‘draft’ Economic Growth Strategy[1].
The content has emerged from both desk and qualitative research and includes input from a number of private and public sector stakeholders.
Primarily the output for this paper has been from the Digital Jersey Working Group (formerly named the E-Commerce Working Group). This is an unpaid group for whom the development of these economic sectors is viewed as vital to the future of Jersey. The individuals who comprise this Group are as follows:
- Frank Walker (Chair)
- Alan Cox
- Andrew Sugden
- Chris Evans
- Chris Bull
- Ed Daubeney
- Graeme Millar
- Ian Jauncey
- Julian Box
- Karen Paterson
- Mark Loane
- Mike King
- Paul Marett
In meetings held to advance this subject much debate centred on the Group’s objectives and the following key messages emerged as central:
Guiding Statement:
“Plan for Growth in a new Digital Economy”
Overarching Goal:
“Establish Jersey as the offshore jurisdiction of choice for the development
of E-Commerce and Digital industries.”
It is this backdrop that ultimately guides this paper.
- The growth of Digital Economies and E-Commerce related businesses is a global phenomenon. The use of the internet is set to increase by 40% globally between 2011 and 2015. Similarly, Intellectual Property as a concept is a fundamental means of both organisations and individuals commercially exploiting their ideas.
- Both the business community and Government in Jersey understand the potential of this sector and previous studies have validated the opportunity. E-Commerce is not a new concept locally and there is already significant activity in this field with the growth of Island-based Fulfilment, Online Merchants, Data Warehousing and Consulting organisations. E-Gaming, although relatively new is looking to build its presence on the Island.
- Relative to its size, Jersey has strong Telecommunications and ICT companies all of which are looking to the future. The development of ‘Gigabit Isles’ by JT will further strengthen this position and would facilitate further growth of a Test Laboratory environment. Intellectual Property firms also have a strong and long standing presence on the Island and opportunity is seen if the full set of laws and treaties can come to fruition.
- Ultimately Jersey has a strong competence in this whole area. It should also be noted it is very complementary to existing Financial Services activities. Indeed it is the strength of the Island in this area and its brand generally that makes it attractive to Digital and E-related businesses.
- This whole sector is increasingly competitive with all the Island’s competitors moving into this space. The recent announcement by the UK Treasury to remove Low Value Consignment Relief for Jersey businesses as from 1 April 2012 threatens the whole of the local Fulfilment industry. Similarly, Jersey is facing threats in E-Gaming. Whilst the Global online gaming market is set to grow to £30bn in 2012, (a 40% increase since 2008) Jersey is struggling to enter into the market whilst Alderney, Guernsey, Malta, Gibraltar and the Isle of Man that have seen real growth.
- Competitor jurisdictions are very effective at marketing themselves as places in which to conduct E-Commerce. Malta has been particularly strong in this area. In 2001 the Maltese Government created an eMalta Commission to develop a National ICT Strategy and more recently this has lead to it its ‘Smart Island’ and ‘Smart City’ strategies.
- To attract companies to the Island it is vital that the reasons for locating in a particular jurisdiction are clearly identified and potential gaps filled. Jersey’s Tax Neutral environment is an undoubted advantage although the absence of widespread Double Tax Agreements presents difficulties for Intellectual Property holding. Work is currently being undertaken by the States of Jersey to rectify this issue with a number of agreements under negotiation.
- The investment of £41.5m in a high speed fibre optic network by JT creates real opportunity to develop a new cluster of technical businesses utilising this new infrastructure and would usher in real growth of the ICT sector.
- In an assessment of its overall Business Environment, Legal Framework and Quality of Life, the Island was viewed positively but concerns were identified in areas such as transport links, access to skilled labour, cost base and speed of enacting legislation.
- It is believed there was a general lack of awareness of both the economic benefits and opportunities that were inherent in this sector and that a greater level of sector specific marketing and communication of the Island’s benefits needed to be undertaken.
- There has been support for the creation of a body to effectively promote and lobby on behalf of the E-Commerce and Intellectual Property sectors. It is believed this body could be called Digital Jersey Limited. Mindful of previous failures with this type of initiative it was clear the body should have:
- Appropriate goals
- Structure and resources to achieve goals
- Accountability for measurable outcomes
- In setting up Digital Jersey it is clear that three further factors should be identified:
- Key Aims
- Structure
- Funding
- Aims - Digital Jersey’s main aims would be to position the Island as the offshore jurisdiction of choice for companies looking to develop in E-Commerce, Intellectual Property and Digital areas and set the strategy for the digital industry’s development. Through this it should be focussed on promoting and lobbying to create employment opportunities within the sector and will have a major role in working with Government to facilitate understanding and promoting legislative and other changes.
- Structure – The new body would be structured as a Public Private Partnership with appropriate governance, including a Board and the necessity for the provision of public monies to be set against a Partnership Agreement and the effective development and implementation of an Annual Business Plan. Whilst additional roles may be required in the future, to include specialist Technical and Marketing positions; the initial will be on a lean approach and the new body would comprise the following roles:
- A remunerated Chief Executive to represent Jersey’s Online, Intellectual Property and ICT industries at the highest levels and frame strategy.
- A remunerated Chairman
- Non-remunerated Independent Non-Executive Directors. One member of the Board would be a Government representative but it would be independent in its actions.
- Funding - This would be from Government in the first instance but the body would also be comprised of Private Sector ‘Members’ who would provide subscription funding as well. In effect the concept would not be unlike Jersey Finance Limited.
- Conscious of the need to provide value to both Public Sector and Private Sector stakeholders, some clear goals and objectives are considered as key and these are as follows:
- A 100 day plan
- One-Year Plan
- 2-5 year Strategic Overview
- The 100 day plan is an overview of the tasks that are required to get the new body branded, operational and launched.
- The One-Year Plan outlines the key objectives and measurements that would be need to be done in the first twelve months and includes the following four key deliverables:
- Research - Conduct targeted analysis as to who are potential customers, where are they and what do they want?
- Digital Strategy - Develop and state the digital strategy for Jersey
- Marketing - Develop and implement an effective marketing and communications plan
- Online Operations - Provide assistance to the Fulfilment Industry
- Going forward the body would then be required to develop a more comprehensive strategic plan based on the research and experiences gleaned in the first year. A number of measures are identified as witnessing tangible success at the end of 5 years and they would include the following:
- E-Commerce and Intellectual Property sectors to contribute a minimum of £100m + to the Island’s Gross Value Added (GVA)
- The E-Commerce and IP sectors make a measurable contribution to total employment and this figure stands at somewhere near 1,500 people
- It is recognised that there is a need for a digital strategy for the Island and that Digital Jersey should act as the focus and nucleation for this strategy. Consulting, forming and stating the strategy is a key Digital Jersey deliverable, this would include ensuring the Island has the requisite skills in the workforce to enable growth but Digital Jersey should not be responsible for effectively implementing the strategy. Whilst actively contributing to such a strategy in the future, too wide a brief in its early stages would dilute Digital Jersey’s initial focus.
- The initial financial requirement and Government funding for the first year of Digital Jersey’s operation is calculated to be £300k. Although receiving some shared services, the fundamental basis of this calculation is that the organisation will be of a ‘standalone’ and ‘start up nature’. This core budget has been created on a conservative basis on the grounds that its results are as yet unproven. If additional monies from Government were required then any request for supplemental funding would be supported by the appropriate justification.
- The split of the costs would be £190k for staff related activities and £110k for other operating expenses including a provision for market research.
- The bulk of the staff costs would be broken down as follows:
- £120k for the appointment of a Chief Executive. Consideration has been given to be the recruitment of a more experienced and expensive role but it is felt that this would not be appropriate at this juncture but may be required in the future.
- £35k for a Chairman. It is deemed important that this role is active.
- £25k for administrative support.
- Figures may have to be reviewed if appropriate appointments cannot be made.
- The bulk of the other cost is on account of a minimum of £60k being dedicated to conduct independent Market Research so that a targeted strategy can be fully developed in the future.
- In terms of timings, it is planned that approval for the creation of the new body should be completed by the end of January 2012 with the body being launched by the beginning of Q2 in 2012. A clear timetable of events has been outlined and the major risk to the achievement of this goal would be the requirement of full approval by the States of Jersey.
- This paper concludes by reinforcing the opportunities in the sector and the support that is prevalent for the formation of Digital Jersey. A failure to act could leave the Island at a real economic disadvantage. It is recommended that initial funding of £300k is agreed and that Governmental monies are provided and that based on positive results provisions are made for future and incremental funding.
“The challenges ahead for most countries, in our view, will be in learning how to extract the maximum economic and other benefits from digital technology[2]”
Whilst not distinct concepts The Digital Economy and E-Commerce are key forces globally, their influence will continue to grow and they will have an increasingly important effect on all areas of Jersey’s economy and society.
Although definitions are many the following provides an effective summary of how the Digital Economy should be viewed:
‘The global network of economic and social activities that are enabled by information and communications technologies, such as the internet, mobile and sensor networks.[3]’
Clearly, the Information Communication Technology (ICT) sector is core to the Digital Economy.
In reviewing the specific elements of E-Commerce, the original E-commerce Working Group (latterly named the Digital Jersey Working Group took an inclusive approach at the high level and stated:
“E-Commerce should be viewed as any economic activity that involved the Internet as key medium in some form or other”
For Jersey the concept of E-Commerce needs to be viewed as all encompassing from an economic perspective. The internet is a global technology with no specific reference to borders and geography. Ultimately its presence enables Jersey to effectively co-operate and compete in a global marketplace. Whilst this report will go on to deal with specific elements for potential growth within the Island’s economy, this breadth should not be forgotten when looking at the benefits that E-Commerce can bring.
Intellectual Property provides the rights by which an individual or an organisation can actually protect their creations or inventions. It is a vital concept in its own right as a means of enabling the commercial exploitation of ideas; as such it has a real importance to all businesses currently in Jersey or wanting to set up here.
At the same time, it is also closely linked to E-Commerce in that effective laws and structures, particularly in the area of Copyright and Trademarks will allow Jersey based or registered companies to commercially develop their operations.
In any business plan it is valuable to define the market opportunity and seek to put ‘a number on it’. In a recent report published in June 2011 by Oxford Economics, research indicated that total E-Commerce transactions would account for $16trillion by 2013 and that this figure would equate to 10.8% of all sales flowing through the global economy[4]. Appendix 1 is the report in full.
The table below graphically demonstrates how the use of the internet is now growing. It is calculated there are 2 billion users in 2011 (30% of the global population), growing to 2.8 billion (38% of the global population) in 2015. This represents a predicted increase of 40% on 2011 figures.
Source: Oxford Economics[5]
In analysing regional growth it should be noted that geographical markets such as the Middle East and Africa and Asia Pacific are expecting to see growth rates of 30% and 50% over the period 2011-15. This is particularly relevant to Jersey as it is continually looking to develop economic links with these regions. Europe does not have the same level of E-Commerce penetration as the UK, which is widely viewed as one of the most sophisticated E-Commerce economies in the world and with whom Jersey has its closest trading links[6].
Jersey as a business community understands these wider trends and companies in all areas of its economy are already exploiting these opportunities. The key is to heighten this awareness, identify existing and new sectors that can be profitably exploited and actually deliver real business opportunities.
In analysing the Island’s position, it should be noted that it is well placed to take advantage of E-Commerce and intellectual Property related opportunities.
In order to provide an independent assessment of the potential for economic benefit in this area Deloitte LLP produced a report for the States of Jersey which was published in November 2010[7]. The report should be read in its entirety but whilst it outlined that there were strategic issues to be dealt with (that are covered in this paper), it also provided some encouraging conclusions:
“There appears to be an opportunity for Jersey to attract certain segments of E-Commerce and IP related businesses, subject in the case of IP businesses to enhancing its legal framework”
“The businesses that Jersey may be able to attract are likely to include less concentrated digital end-to-end services or IP/E-Commerce support services, drawing on Jersey existing business base in financial services, web-design, disaster recovery and nascent E-Gaming activities[8]”
Formally defining the future economic and social value of the Digital Economy or E-Commerce for Jersey is a challenge. The concepts are relatively new and the economic sector is nascent and a quantifiable number is not yet available. Part of the role of a future body would be to provide this granularity. However there is a real danger of ignoring broader trends on the grounds that a precise financial value cannot be provided at this moment in time.
What is not in doubt is that the Island already has a strong presence in a number of related E-Commerce areas, particularly in the following sectors:
- On-line Merchants/Fulfilment Companies – Jersey has several companies operating in this space, including Play.com, Indigo Lighthouse, Cheapsmells.com, HealthSpark, Jersey Choice, Hub Europe, ProFS etc.
- Data Warehousing/Disaster Recovery – Companies such as Foreshore and Itex etc are already providers of these services
- E-Gaming – although in its relatively early stages the passing of a new Gambling law through the States of Jersey on the 3rd March 2011 now sets the platform for growth
- Supporting Services – many local companies provide a wide range of related services including Software as a Service, Cloud Computing, Managed Services, Web Design and Digital Marketing etc.
The Online Fulfilment sector is undoubtedly an important contributor to Jersey’s economy. However as outlined in Section 4, this area faces a severe threat. The June 2011 Labour Market survey indicates the employment figure for Fulfilment stood at 770 (1.4% of total employment), a reduction of 180 people from the prior year[9]. In addition to this figure there are a number of other local businesses such as Jersey Post who are directly associated with supporting this industry and there is a significant seasonal employment spike over the Christmas period.
In viewing E-Commerce as a whole it should be noted, that similarly to Financial Services, it has a large number of areas. There is diversity within the Online Fulfilment sector, not all activity is directly linked to Low Value Consignment Relief (LVCR). Additionally there are many Support and Consulting related business already involved in internet related commerce
As well as the above the Island also has an exceedingly strong Information Communications Technology (ICT) sector that services the Financial Services sector, the wider business community and Island society as a whole. As a ‘snapshot’ of interest and activity there are over 280 members of a ‘Linked In’ forum called Digital Jersey.[10] This forum has been active in looking to develop the local ICT sector.
In addition to a wide range of IT providers, the presence of JT Global, Air-Tel Vodafone, Cable and Wireless and Newtel ensures that the Island has not only current competence but also has the capability to leverage its Telecommunications activities in the future. The development of ‘Gigabit Isles’ by JT is evidence of this move and will further strengthen the Island’s position and it is anticipated this would facilitate further growth of the Island as a Test Laboratory environment for new technologies.
This sector also has a strong existing presence on Jersey. CPA, Spoor and Fisher and Lysaght and Co are already leading Intellectual Property firms who have long-standing operations in the Island. These businesses employ several hundred people between them and it is their strongly held view that if legislation could be developed in the future then commercial activity would increase.
Chris Bull, a Partner of Spoor and Fisher based in Cape Town has provided an overview of the potential that the formation of Intellectual Property Holding Companies could bring to the Island if all the relevant legislation, treaties and Double Tax Agreements could be in place. Appendix 2 and 3 highlights this commercial potential and a proposed implementation plan is also included.
Historically there has been a misapprehension that E-Commerce as a sector should be viewed as a separate ‘leg’ of the economy whose growth would be at the expense of existing Financial Services related activity. As the Deloitte report indicates, it is the Island’s actual strength in this area that adds to its potential attraction.
Banks, Legal, Accounting, Trust and other related firms are currently deriving existing business from E-Commerce activities. They are also committed to its potential expansion as not only will this provide commercial opportunity but it will lead to technological advances that will allow the cost effective development of the Island’s digital infrastructure for the ultimate benefit and efficiency of the sector as whole.
As a result of a European Directive, when goods are shipped into the European Union (EU) from a non-EU territory Member States can allow for Value Added Tax (VAT) to be exempt on goods of low value. This exemption was designed to allow for items to pass quickly through customs and reduce costly tax collection. Each Member State can set the maximum allowable value of the goods but it has to be between a threshold of €10 and €22. Up until 1 November the UK had set its de-minimis level at £18 (the equivalent of €22).
Jersey’s status of being outside the EU has meant that businesses have been legitimately able to import goods into the UK so long as they adhered to the relevant LVCR guidelines as previously laid out by HMRC. The previous application of LVCR has allowed Online Fulfilment to grow within the Island in recent years.
UK based businesses and politicians have been concerned by both Jersey and Guernsey’s activities in this area. From a commercial perspective small business bodies such as the ‘Forum of Private Business’ and ‘Retailers Against VAT Abuse Schemes’ (RAVAS) have claimed this exploitation of LVCR by the Channel Islands has put their fulfilment operations at an unfair advantage as against smaller UK business selling books and CDs etc. At the same time there has been political pressure on the grounds, that in a similar vein to the growth of its Finance Industry, the Channel Islands are being seen to exploit their non-EU status and Tax-Neutrality to gain a commercial advantage.
Jersey reacted to this pressure and in 2006 implemented a policy whereby licences would be required to continue fulfilment in the Island and non-locally based retailers such as Tesco were requested to cease their operations from the Island.
Despite these actions, pressure on the issue has remained. In March 2011 the UK Government announced in its 2011 Finance Bill it would seek to reduce the current LVCR threshold from £18 to £15. This measure came into force on the 1st November 2011.
As part of this measure the UK Government issued a broad policy objective:
“It is the Government’s intention to stop the LVCR from being exploited for a purpose for which it was not intended and to improve the competitive position of UK small and medium enterprises[11].”
As part of this statement the UK Government indicated that it would revisit the issue in 2012 and consult with the EU over limiting the scope of LVCR.
On Wednesday 9th November 2011 the UK Treasury announced that from 1st April 2012, Low Value Consignment Relief (LVCR) would not apply to any goods imported into the UK from the Channel Islands. This means that all goods, regardless of value, will be subject to UK VAT at 20%. Full details of this measure were confirmed on Tuesday 6th December 2011.
Whilst developments in LVCR were anticipated in that the de-minimis level could be reduced to £7 (€10) and the UK Treasury may seek to remove LVCR over time, its speed and blanket nature on the Channel Islands were unexpected.
It is fully recognised that these developments have severe consequences on both local jobs and businesses. Both the States of Jersey and the Fulfilment industry itself have reacted quickly to the UK’s stance and actions such as a full legal challenge, industry support and redeployment of labour are all being undertaken.
This issue provides a real challenge. Potentially negative connotations about both the sector and the Island as a whole need to be effectively contained as this could have the potential to cause considerable reputational damage. The legal challenge by the States of Jersey could also have significant connotations for Jersey’s relationship with the UK Government.
Going forward, it will be important that the right messages about Jersey and its Online businesses are effectively co-ordinated and communicated.
E-Gaming, like Fulfilment, is a totally legal operation than can be conducted offshore via Jersey. However there can be no complacency in that a similar stance may be taken by major jurisdictions in looking to bring forward legislation that could bring these operations ‘on-shore’ or restrict their activity.
This could have a significant effect on a rapidly growing opportunity that is already being competitively exploited by Jersey’s competitors.
The growth of online gaming has been significant in recent years with the global market forecast to have grown to $30bn in 2012 an increase of some 40% from 2008[12].
The opening up of the E-Gaming market in Europe and the UK in particular (which has an estimated value of £1.48bn[13]) has provided opportunities for significant growth in offshore jurisdictions such as Alderney, Gibraltar, the Isle of Man and Malta.
In the case of Alderney it is now the major employer and source of revenue. The Manx e-Gaming Association (MeGA) recently conducted a survey as to the value of the industry and in 2011 it is forecast that it will generate £165m in revenue and employ some 700 people. Year-on-year growth was calculated to be 24% in 2010. In a similar type of survey, Gibraltar calculates that the industry employs some 2,000 people.
Whilst all the major Tier 1 E-Gaming jurisdictions have their own Gambling Control Commissions, there is also a significant amount of marketing activity supporting the industry, including major summits and Governmental initiatives.
Jersey now has a full set of relevant legislation and a Gambling Commission and the sector is being actively marketed by interested parties and Economic Development’s Inward Investment Department. However, on account of its relatively late arrival the Island will need to look at additional avenues to support its development.
In the sectors above and in others such as Intellectual Property, E-Commerce Consulting, and the Creative Industries etc; all jurisdictions are busy planning for the Digital Revolutions and E-Commerce growth. In the UK (amongst others) this is well advanced.
“Building a Digital Knowledge Economy in the 21st Century will be fundamental to the UK’s future prosperity[14]”
The ‘Digital Britain’ report and subsequent follow up is evidence of a desire by the UK to develop the creative and IP sectors of the UK’s economy.
Canada has taken similar steps and annual forums such as Canada 3.0 are a means of looking to foster growth.
Smaller offshore jurisdictions are no less active. Although part of the EU and therefore not a direct comparator, the Maltese Government has been quick to look at opportunities that it believes are apparent within E-Commerce and ICT generally.
It set the process in train with the formation of the Government backed eMalta Commission in 2001; this was followed by a National ICT Strategy in 2004-06 and backed up by the ’Smart Island’ strategy[15]. This ICT Strategy for Malta 2008-10 sets the strategic direction and outlines a number clear objectives and goals. In its 7 major work streams there were targets that were aimed at ensuring it improved its competitiveness and E-Credentials:
- A robust ICT environment and next generation Infrastructure
- A connected society
- The development of a Smart workforce
- Enhancing our Citizens Quality of Life through ICTS
- Re-inventing Government-Transformation and Open Government
- Taking care of E-Business
- Developing a World Leading ICT Industry
These last two streams are of particular interest and the development in 2007 of Malta’s ‘Smart City’ project indicates further commitment to this area. In line with Malta, Mauritius also has a National ICT plan with a clear vision to be a ‘Cyber Island’.
The concept of ‘Smart City’ is to create a technology and media park for growth in this sector. There remains some scepticism as to whether the full goals of the plan will be achieved but the direction of travel has been established.
By launching its ‘Smart Island’ approach, Malta has sent a message that it wishes to grow in this area. Indeed the World Economic Forum ranked Malta as the 2nd most effective jurisdiction in the promotion of ICT[16].
The Island has offshore competition closer to home with both Guernsey and the Isle of Man providing stated objectives that they want to see growth of E-Commerce and Intellectual Property.
Guernsey is now actively looking at the development of a Technology Park, which will be financed privately and has already introduced a suite of Intellectual Property laws.
The Isle of Man has been pursuing its E-agenda for a number of years. The Isle of Man Government has a Department dedicated to this and has used a consulting firm called Charteris to develop and subsequently maintain its E-credentials over the last decade.
In seeking to develop Jersey as a competitive jurisdiction to locate E-Commerce activity and Digital Industries, certain factors are considered by both individuals and their advisors. Jersey needs to analyse these factors to identify where it can do better to attract and retain businesses.
In broad terms the following factors are viewed as being of central importance in taking a decision to locate and develop a business in a particular jurisdiction:
- Legislative and Regulatory Environment
- Tax Neutrality
- Financial Environment
- Commercial Networks
- Institutional and Political Stability
- Communications Connectivity
- Skilled Workforce
- Geographic Position and Links
- Quality of Life
This last factor, ‘Quality of Life’ should not be overlooked. In a recent report conducted by Charteris for the Isle of Man, this factor was given a major weight by business people[17].
This observation was also fully endorsed by the on-island business community whose views were gathered in the development of this paper. It is also consistently stressed as important by individuals who have recently relocated to the Island as quoted in Jersey Enterprise’s ‘Open for Business’ brochure[18].
In looking at comparative E-Readiness across international jurisdictions, the following criteria were given appropriate weightings by the Economic Intelligence Unit:
EIU Category | Weight |
Connectivity and technology infrastructure | 20% |
Business environment | 15% |
Social and cultural environment | 15% |
Legal environment | 10% |
Government policy and vision | 15% |
Consumer and business adoption | 25% |
In analysing this list it is clear that whilst similar to the more general criteria, a strong weighting is given to actual on-island businesses and consumers adopting technology as well as the major importance being accorded to the importance of fast and cost effective connectivity.
Whilst the above is of undoubted value, most studies indicate that for Offshore Jurisdictions the importance of the Tax Environment is paramount.
The recent endorsement of Jersey’s 0/10 corporate income tax regime by the EU Code of Conduct Group and ratification of this decision by ECOFIN should be viewed as being very welcome. In its report Deloitte LLP saw the Island’s tax regime as being of critical benefit to the Island in terms of its attractiveness as a location.
Whilst the preservation of 0/10 is of undoubted value to Jersey and may lessen the need to introduce a significant number of tax incentives to mitigate higher corporate tax rates, it should be observed that in looking at E-Commerce and Intellectual Property in competitor jurisdictions they do utilise a wide range of tax incentives to reduce the effective tax rate a company pays to a lower level. In addition, direct subsidies or incentives are also provided.
In considering its attractiveness the Digital Jersey Working Group (previously titled the E-Commerce Working Group) and other private sector firms reviewed Jersey’s position dispassionately at a Strategy Meeting held on the 3rd August 2011. Appendix 4 contains the full notes of this event but the following summarises some of the key observations that were made in relation to Jersey’s competitive position:
Overall connectivity was viewed positively as was JT’s plans for a ‘Gigabit Isles’ project. The potential investment of £41.5m by JT in a high speed fibre optic network was believed to create a real opportunity to develop a new cluster of technical businesses. The project will look to deliver fibre to every Island home within 5 years and should lead to Jersey having the some of the world’s fastest Broadband speeds. This is intended to provide a major Unique Selling Point for the Island in attracting new business. In addition to the Test Laboratory environment already outlined there would be potential in data and video streaming related industries that could effectively utilise this new infrastructure. The new development would also support existing data hosting and potential E-Gaming opportunities and would look to usher in real growth of the ICT sector.
Notwithstanding JT’s plans, concerns remained as to the cost of Broadband on the Island and this was a major issue for potential growth. In addition, co-operation with the other Telecommunications companies would be required.
Continuity of power supply was also seen as critical. Up until recently Jersey Electricity had a strong record in this area with the just 10 average customer minutes being lost in 2009/10[19]. Although significantly ahead of competitor jurisdictions, recent power supply disruptions in September 2011 could undermine short-term confidence.
A high level of confidence remained in Jersey having a positive business environment for attracting opportunities. The Island’s tax neutrality, strong financial services and professional services community were all viewed as attractive.
Concerns were as follows:
- Lack of Double Tax Agreements (DTAs) – a particular problem for IP
- Potential lack of an appropriately skilled workforce for E-Commerce, IP and ICT could be a major inhibitor and would require actions to rectify skills shortages
- Insufficient transport links (sea and air) for both business travel and logistics – with particular reference to links to the EU.
- Requirement for appropriate planning and housing polices to support growth
- General costs needed to be kept competitive
As indicated above these factors were viewed favourably. The fact that English was spoken was seen as an additional advantage.
The Island’s ability to create its own laws was a distinct advantage but there was a concern that things took too long to be enacted as witnessed in both the delay in bringing forward both E-Gaming and Intellectual Property legislation.
Going forward there needed to be the ability to develop and implement appropriate E-Commerce related legislation and regulatory environments in a timely manner.
At a general level, it was believed that there was insufficient political awareness of the importance and economic value of the sector as a whole and therefore action could be slow. There needed to be a vision to embrace the ‘Digital Revolution’ within Government.
An example of relative inaction previously was provided in E-Gaming where it took considerable time and effort to get appropriate legislation passed and in that period competitor jurisdictions such as Alderney had moved forward.
Efforts needed to be made to ensure the political community were more aware of the Digital Economy and its value.
There was general recognition that Jersey Enterprise’s Inward Investment and other Government related departments were supportive. Areas such as the Population Office had seen the business need and were reacting accordingly. However there was insufficient consistency throughout all Governmental Departments and this needed to improve.
It was fully acknowledged that whilst there were strong areas of the business community that saw future value in E-Commerce related activity within the Island, there was still significant room for improvement. Legal and Accounting firms have indicated that there has been insufficient activity within their own networks to publicise opportunities.
Drawing parallels with Jersey’s Finance Sector, which had faced real animosity from within sections of the local community; it was acknowledged that there was an undoubted need to fully communicate the value of the sector internally.
This paper highlights the need for more detailed research to be undertaken as to where the Island stands competitively but there was a general consensus that the E-Commerce sector had to be more comprehensively marketed.
The Charteris report for the Isle of Man made a major observation that does have significant resonance for Jersey’s efforts in this area:
“A key overall observation is that the technical differentiating factors between jurisdictions (such as having a resilient telecoms infrastructure, an attractive taxation package and access to global markets) are evening out across jurisdictions, thus making the strategic organisation and execution of the marketing of the Island to candidate businesses a much more important differentiating factor than it was previously.[20]”
There has been general and sector specific marketing of the Island by a number of both Government and Industry led bodies for a number of years. The activities of Jersey Enterprise, Jersey Tourism, Jersey Finance Limited (JFL) and Genuine Jersey etc have greatly assisted all commercial activity in the Island. The E-Commerce sector presents real opportunity but it also faces competition and threats, so making it increasingly important that messages about the sector are effectively transmitted.
On the grounds of the economic difficulties globally, Jersey’s situation remains uncertain. A recent report by Jersey’s Fiscal Policy Panel forecasts that growth could be between 2% to -2% in 2012 with a bias toward the lower number. The report also states:
“Jersey should plan on the basis of a global recovery that will be more fragile and drawn-out than expected...”[21]
This, allied to potential future pressure on the Island’s banking sector as a result of the Vickers report in the UK and the previously stated challenges for the Fulfilment sector evidences the difficulties.
Based on the need to develop and diversify the Island’s economy alongside the real time challenges it faces, the imperative to invest in the E-Commerce, Intellectual Property and ICT sectors becomes more compelling. As well as the attraction of building on existing competence rather than re-invention there is one other fundamental benefit:
- The introduction of the technology and innovation that these sectors bring will herald a step-change in the Island’s overall competitiveness on account of significant technological efficiency
Whilst tempting to think that the development and marketing of these activities could be done through existing bodies such as the Chamber of Commerce, Institute of Directors, JFL and Inward Investment it is probable that they will not be able to provide the dedicated focus that is required.
Undoubtedly there will be support from these bodies but they already have a broad existing portfolio of interests to protect and promote and as such it would be difficult to allocate the appropriate resource to new activities.
Similarly, local companies in this sector as a whole will continue to take steps to fully represent their individual and collective interests.
It is noted that Fulfilment companies have in recent times coalesced around the threat to LVCR to seek to represent their sector effectively. Similarly, locally based Intellectual Property firms have sought to lobby for new legislation and action within this field.
Jersey Telecom has recently re-branded itself to JT Global and has put a focus on both its Broadband speed and desire for global growth. This is part of a wider move by the Telecoms sector to promote expansion. Members of the Island’s ICT community are also actively pursuing the need for a coherent ‘Island Wide’ strategy in their specific area.
Legal, Accounting and Trust businesses are also seeking commercial advantage and are beginning to work together and accompany local politicians on Trade Missions to markets such as India, China and Israel and the promotion of links in E-Commerce is definitely on the agenda.
Whilst all this activity is of undoubted value, through discussion with the Digital Jersey Working Group and other interested parties, a consensus has emerged that there is a need for greater cohesion and focus. To this end there has been a call and support for a collective body to be created to really drive things forward.
However, there was a clear acknowledgment of previous failures in this area; therefore to be successful it was believed that such a body would have three clear things:
- Appropriate goals
- The structure and resources to achieve goals
- Accountability for measurable outcomes
The desire for a body to represent E-Commerce, IP and ICT interests has been evidenced. The real challenge is for it to be set up effectively with appropriate aims, funding and structure. Initial discussion indicated that such a body should be called the ‘E-Commerce Commission’. This was the term initially utilised by the Working Group and in the Economic Development Department’s ‘Economic Growth Strategy’. On reflection this term indicates a regulatory role rather than a broader strategic and promotional entity and so the term Digital Jersey has been initially adopted and will be utilised for the remainder of this paper.
In outlining the requirement for a representative body, certain elements have to be outlined in principle, namely:
- Its Purpose - Key Aims
- Structure
- Funding
Ultimately it is envisaged that a Commission would be a partnership between both the Government and the Private Sector. Government would seek to develop the body through initial funding and support. The Private Sector would be responsible for both the direction and success of the organisation as well as providing funding going forward.
In its broadest sense the aim of Digital Jersey should be to forward the Jersey’s commercial objectives in these areas. The following two aims should be at its core:
- Market and promote Jersey as ‘the offshore jurisdiction of choice for the development of E-Commerce and Digital industries
- To oversee the growth of companies and employment opportunities in these sectors
In seeking to market and promote the Island, Digital Jersey would want to work with Government to provide information on forthcoming trends in the sector and to prioritise legislation or a strategic direction. In reality, it is viewed that the role of Government is to take action in order to facilitate necessary changes to the legal and fiscal frameworks that support the relevant industries. As such Digital Jersey would want to work with and, if necessary, persuade Government of the need to take certain actions to enable change whilst seeking to ensure that an agreed programme of actions was delivered as against appropriate deadlines.
To achieve these major aims would also necessitate Digital Jersey achieving the following subordinate goals:
- Become the united voice for the E-Commerce, IP and ICT sectors within Jersey and to promote their economic and social benefits
- Ensure the effective development of strategic plans and regulative and legal changes required to develop Jersey’s E-Commerce, IP and ICT sectors
- Support and communicate with all related parties to promote Jersey’s commercial interests to identified external markets
- Take a lead role in the creation of the necessary on-island skills and resources to develop the sectors
As and when Digital Jersey was formed these aims would move towards the goals outlined in Section 8.
It is proposed Digital Jersey Limited is set up and structured as a ‘Non-Charitable Purpose Trust’.
In essence the creation of Digital Jersey would be a partnership between the Private Sector and the States of Jersey’s Economic Development Department (EDD). There will be a formal relationship between the Economic Development Minister and the legal entity itself. Technically this would be a variant of the Public Private Partnership model.
There would be a legal structure that would enable EDD to provide a prescribed level of funding but this would be set against three key criteria:
- Digital Jersey has an appropriate corporate governance framework
- Digital Jersey delivers objectives as against an agreed Annual Business Plan, which has financial requirements included
- Performance can be independently monitored via several channels (eg an EDD seat on the Board, independent audit and formal meetings etc)
The structure would be such that Digital Jersey does remain wholly independent from Government and there is no direct influence from EDD.
Although subject to its own corporate governance and constitution, it is believed appropriate that Digital Jersey Limited should be comprised of Private Sector organisations that have a direct (or indirect) interest in the commercial development and success of the E-Commerce, Intellectual Property Sectors and ICT sectors. These ‘Members’ would be ultimately viewed as providing input as to the strategic direction of Digital Jersey as well as making a financial contribution to its operation and activities.
Appendix 5 provides an overview of a potential Partnership Agreement between Digital Jersey Limited and EDD and provides initial details on the objectives of Digital Jersey, its operation and basic funding.
The Board, of no greater than nine members, would be comprised of the following roles:
- A Chairman – this post would be suited to a candidate with a broad business experience at senior level and would be suitably remunerated.
- The Chief Executive – this remunerated position will propose the strategic direction of Digital Jersey and will be responsible for its operation and achievement of set and agreed objectives. The role will provide the link between the Board, the Members and wider political and other stakeholders.
- Economic Development Department representation - by appointment of the EDD Minister. This is likely to be the Chief Officer of EDD (or his/her nominee) with specific responsibility for ensuring that Board policies are consistent with those of Economic Development and to oversee the adherence to Financial Directions as applied to private organisations funded by the States.
- Up to six independent and non-salaried Non-Executive Directors, drawn from relevant parts of the commercial world (including those with skills and expertise external to Jersey). The role of the independent Non-Executive Directors as a body would be to provide an overall balance of complementary skills that ensures that a wide spectrum of the E-Commerce, Intellectual Property and ICT sectors are covered, whilst also allowing for specific managerial (operations, finance, marketing etc) and/or technical skills (legal, accounting etc) to be available.
Should approval be given to form and fund Digital Jersey Limited, steps will be taken to draft up job descriptions to enable the recruitment of appropriate individuals to the identified roles. The support of the Appointments Commission will be actively sought in the development of this process.
For practical reasons it would be proposed that Members could not be directly responsible for appointment to the initial Board but that this could be introduced going forward.
It is not planned that Digital Jersey will require a high level of initial staffing. Analysis by the Working Group has outlined the potential need for Technical and Marketing roles in the future. However in the same way JFL started relatively small some 10 years ago, it is believed that the growth should be reliant on identified future need and based on proven results.
It is budgeted that the Chief Executive would require some initial administrative support. Whether this support is provided on a salaried or outsourced basis would be subject to operational considerations.
The nature of the funding model would be that the States of Jersey, through EDD, would provide initial funding for Digital Jersey for the first year but that going forward there would also be a clear provision for Digital Jersey to receive a financial contribution from its Members, who would pay an annual subscription.
EDD would provide an Annual Grant to Digital Jersey. In effect this would be to provide an agreed level of financial resources to enable the organisation to deliver its Annual Business Plan.
The grant would be paid at a set date annually and would vary in accordance to agreed requirements.
Having reviewed comparative rates, JFL charges over £20,000 for organisations with over 500 employees, whereas the lowest corporate fee is £825. By way of comparison an organisation with over 500 employees would pay just over £500 to be a member of the Chamber of Commerce, with the lowest fee being just over £50. Although market driven it is believed the maximum rate should be £3,000 and the lowest £300 and the target would be an average return of £1,000 per Member.
Additional levels of funding could be based on a band of services provided to each Member company. A premium could be paid to enable an organisation to receive specific business leads or sector related materials. An affiliate level of membership could be offered to those companies who only wish to receive a basic level of communication and support.
In terms of projected levels of Members and potential financial support, it should be noted that despite being in operation for over 10 years and representing the largest economic sector in Jersey, Jersey Finance only has some 160 members[22].
Financially, it is estimated that JFL members contribute a total of some £600k pa out of an estimated annual budget of £2.8m. This leaves the balance of £2.2m being funded by the States of Jersey. Large banking institutions pay a significant financial levy to JFL. These levels are unlikely to be realistically achieved by Digital Jersey, particularly in its early years.
Digital Jersey Limited should have a governance structure and constitution in line with best practice.
Although not set up to be a formal public body, on account that it will be in receipt of public monies Digital Jersey will seek to adhere to the to the appropriate Codes and Standards of Corporate Governance, including Nolan‘s ‘Principles of Public Life’.
A formal constitution or SLA is not proposed between Digital Jersey Limited and EDD as the Partnership Agreement should cover much of this area. However if such a document is deemed necessary it could be drafted.
In terms of responsibility, the Chief Executive and the Board will be mindful of fully representing the interests of its Members. A balance will need to be struck in terms of looking after sectional interests whilst also looking to promote the sector as a whole. These are matters that could be effectively dealt with via a SLA but it is proposed that an Annual Meeting may be just as effective in leading to accountability.
For financial and other practical considerations, Digital Jersey should be viewed as something that will develop over time, there has to be a staged approach.
- 100 day plan to get the body up and running as an entity
- A One-Year plan to provide the foundation for development
- 2-5 year strategic overview with certain stretch objectives
If high level approval for the creation of a Commission is given, certain key steps need to be taken to get the body operational. It is believed that the following items would take circa 100 days to complete:
- Circulate ‘Draft’ paper to Working Group and EDD
- Circulate ‘Draft’ paper to other key stakeholders and communicate objectives
- Identify key ‘Corporate Members’ who will support and promote Digital Jersey
- Finalise content
- Aims
- Funding requirements
- Partnership Agreement, Constitution and Governance
- Staffing requirements
- Fees and Services to Members
- Deliverables
- Gain Ministerial/Political/Private Sector ‘sign off’ – establish if States Debate is required
- Finalise requirements of Chief Executive, Chairman and Board Members – commence recruitment process
- Identifying and implementing operational requirements
- Premises – rental agreements
- Operational systems/support – IT, Finance
- Creation and Communication of a Brand for Digital Jersey
This last point is an important step in this whole process. An effective brand name and logo for Digital Jersey would be used in all subsequent materials, including electronic and social media. The name is not set in stone and it would be advisable to ensure the name and potential logo will be recognisable, represent the values of the organisation and add value to future communication and promotional activities.
The initial funding and timeframes for the above will be provided in Sections 9 and 10. This will be an iterative process and changes will be expected based on feedback received.
The challenge in the first year for the prospective Chief Executive of Digital Jersey and the body in general is to prove the value of the sector and its worth as a body. In effect it must start effectively promoting the wider industry whilst gaining credibility by uniting disparate elements, recruiting Members and delivering tangible results. Measurements should be set and consideration should be given to enlisting the support of the States of Jersey’s Economic Advisor to do independent evaluation.
Ultimately it would seem appropriate to set important but specific deliverables for the first year:
- Conduct targeted research – what do potential customers want?
- Develop and state the digital strategy for Jersey
- Develop and implement an effective marketing and communication plan
- Provide assistance to the Fulfilment Industry
Work with industry representatives to identify what would be the key commercial targets in these sectors. Identify appropriate agencies that could carry out research into which industries would be attracted to the Island and identify what would be their reasons for locating to the Island. Ultimately a ‘Gap Analysis’ would be necessary to evaluate what would be required to compete. As part of this process it is vital to ascertain both the current and future value of the E-commerce, IP and ICT sectors to the Island. By way of example it is noted that London Business School undertook a piece of work for JFL called ‘The Future of Finance 2015’ which assisted in defining the roadmap for this industry.
As part of the process Digital Jersey would conduct a competitive tendering process prior to having the work the work produced in a cost effective and timely manner.
In addition to more general research, Digital Jersey should undertake specific projects where a particular ‘hot topic’ item needs resolving. This may be the provision of specific legislation to develop a sector or an investigation that may require the revision of a potential barrier to entry, eg DTA’s, logistics, cost base etc.
Measurement
The deliverable would be to have a clear indication of future targets that can be presented as part of a future strategy at the end of the first year. This strategy and the research behind it would be widely communicated.
Based on analysis presented in this paper there is an undoubted need for an overarching Digital Strategy for the Island and this would comprise an approach similar to that undertaken by Malta as highlighted in Section 4.3.1.
Digital Jersey will work with other bodies to establish the overall strategic direction of the Digital and ICT agendas for the Island. The term strategy means different things to different parties but ultimately it is a statement of where to go and how to get there.
Digital Jersey should derive and state the strategy – but is not responsible for delivering it. Responsibility needs to be for specific elements of commercial development.
In order to gain traction for both the subject and its broader aims it will be necessary to develop an effective communications strategy to raise the profile of the sectors, whilst also seeking to bring a diverse industry together.
In general terms there will be a need for a ‘Hearts and Minds’ campaign to inform the business and political community as to the value of the sectors. This would include having a programme of political and media briefings as well as identifying key companies and individuals to target both within the Island and externally.
A key area of potential internal leverage is to work with and achieve the support of the following internal bodies:
- The ICT/Digital Jersey Communities
- Jersey Finance Limited
- The British Computer Society (Jersey branch)
- The Chamber of Commerce
- The Institute of Directors
- Economic Development – with particular focus on Inward Investment
- Legal and Accounting firms
Ultimately all the above bodies have the promotion of the Island’s interests as a core activity. Therefore a structured approach is required so that no unnecessary duplication of effort takes place and that key messages on E-Commerce, IP and ICT are promoted and understood.
An indication of the type of activity that would be planned is outlined as follows:
- Create networking events where interaction and cross-fertilisation of ideas is promoted within the E-Commerce sector as a whole
- Develop a programme of presentations (eg Chamber of Commerce) or ‘road shows’ to inform the local business community and opinion formers of opportunities
- Identification of and presentations to selected local external bodies and intermediaries – work with the JFL and other agencies etc to identify potential targets
- Develop electronic communication, including the use of social media – encourage interactive communication
As a complement to the above approach, Digital Jersey should work with other parties such as JFL and Inward Investment and plan to physically attend a minimum of 3 industry related conferences, seminars or Expos in the first 12 months. Pro-active communication with other bodies who attend similar or complementary events can allow sharing of intelligence and contacts, leading to an effective cross-selling and promotion of Jersey as a place to do business. In light of Jersey’s relatively new entrance to these sectors, this additional leverage can only be of assistance.
Measurement
The development of an Annual Business plan ensures that objectives that are included in it are achieved. In terms of specific targets, certain KPIs could include:
- Getting a minimum of 30 Members ‘signed up’ and committed to an ongoing financial contribution in the first year
- Developing a database of a 100 contacts – 50 of which are external/new
- Measuring the level of activity and enquiries – is internal and external activity increasing
- Benchmarking attendance and feedback from participants at events and presentations
On account of the threat to LVCR, this particular issue will certainly be on the agenda of Digital Jersey if it is formed within the next few months.
Affected firms are working on this issue with their counterparts in both Jersey and Guernsey, as well as the Governments of both Islands. This activity should continue as there is an immediate need for action. However this issue provides a chance for Digital Jersey to demonstrate both its visibility and value. There is a risk involved that this issue could ‘hi-jack’ Digital Jersey at its start with broader agendas being lost in the short-term. However, the immediate and negative ramifications for the Island’s Fulfilment sector, allied with the potential longer-term damage this could do to the Island’s other E-Commerce activities would demand immediate action and support.
Practically, Digital Jersey should look to get appropriate messages communicated. Depending on activity prior to its formation, it could assist internal and external lobbying to protect the industry. Alternatively it could also assist in generating future courses of action including the identification of new markets and potential re-deployment opportunities for affected staff. A clear focus would be to allow for the planning of a potential long term change of direction in the sector whilst identifying areas for immediate financial support to either develop new channels or ease the transition. Digital Jersey should pro-actively get companies together to ensure that there is a coherent and united stance on commercial matters which is communicated to all parties.
Measurement
Digital Jersey should be viewed as having had a significant and positive input into supporting the Fulfilment sector at a critical time. If needs be this should be independently verified by industry practitioners, EDD or Independent Non-Executive Directors from the Board.
At the end of its first year of operation, Digital Jersey should be well placed to evaluate the progress it has made and report on its first year’s activities. Allied to this would be an overview of the objectives and financial requirements for the second Annual Business Plan allied to the preparation of a more strategic overview as to the way forward.
Based on the initial Aims of Digital Jersey, it is possible to look at what the longer term objectives and goals of the organisation should be working towards in the next 3 to 5 years:
- Digital Jersey is firmly established as the ‘voice’ of the Digital industries in the Island
- Membership is increasing and the services Digital Jersey provide are valued
- It is the first port of call for both Government, the Private Sector and the media when issues on the sector arise
- Digital Jersey is well regarded internationally as a body that can effectively represent the Island’s interests in the sector
- Jersey is increasingly regarded as a jurisdiction companies want to consider when seeking to develop an E-Commerce related business
- Intellectual Property legislation and treaties are in place and Digital Jersey is looking to actively promote the Island as a centre for Intellectual Property Holding companies
- Representatives from Digital Jersey are regular attendees of major conferences and seminars in related fields
- Digital Jersey hosts a major conference in a related sector
- Strategic alliances with other on-shore and off-shore jurisdictions are built
- Commence a review of potential co-operation with Guernsey if mutually beneficial
- Provide input into the development of a potential Technology Park and/ or Technical Institute
- Jersey has developed a reputation of having a skilled workforce in these sectors
- Jersey to be viewed by the Venture Capital community as a good source of early stage E-Commerce and ICT businesses into which to invest
At the end of a 5–year period it is planned that Digital Jersey will be a long way to achieving the Aims set out in 7.1, with measurable progress being achieved towards Jersey becoming the offshore jurisdiction of choice in this whole area.
Measurement
Measurement may be difficult as certain factors could be beyond the body’s control. In addition to an ‘activity based’ approach to measurement, the following could be utilised as initial benchmarks for potential success. It has to be recognised that these measures may need to change with the passing of time and the availability of more detailed data:
- E-Commerce, ICT and Intellectual Property sectors make a measurable contribution to the Island’s Gross Value Added (GVA)
- The sectors contribute a minimum of £100m + to GVA – a contribution of some 3% of the Island’s total GVA (equivalent to the Hospitality Sector)
- The E-Commerce and Digital industries, alongside IP make a measurable contribution to total employment and this figure stands at somewhere near 1,500 people
- Profit per employee in the sectors is higher than all others apart from Finance and Legal Activities[23]
- During the first 5 years of its operation the body has assisted in the location of 10 new businesses in the Island creating 200+ jobs
- Jersey is ranked as a Tier 1 jurisdiction for at least one sub-sector of E-Commerce, ICT or Intellectual Property activity
- Membership of Digital Jersey is in excess of 50 firms
- Members are contributing up to 20% of the annual budget
It has to be acknowledged that the whole Digital Economy field is sizeable and as such there needs to be clear parameters established as to what is not in the remit of the body.
The body would intend providing strategic input on ensuring that the Island’s workforce has the requisite level of future skills to enable the growth of the sector and encourage inward investment. Placing a significant focus on access to technology and software development in the educational system will enhance the Island’s overall reputation. Digital Jersey would look to make recommendations for change and seek to develop partnerships rather force things through the education system.
Ultimately Digital Jersey will work with other bodies to establish the overall strategic direction of the Digital and ICT agendas for the Island but it could and should not be responsible for their overall implementation. If its aims become too broad, costs will creep, focus will be lost and the danger of failure will increase.
Going forward, as the role of Digital Jersey becomes more established it would plan to become more directly involved in strategic implementation. In the immediate short term it needs to deliver its objectives and work on specific targets.
To achieve the objectives outlined above will require a significant commitment to both human and financial resource. In initial discussions with EDD there is an opportunity for some shared/services which should reduce certain costs for items such as rent, rates, IT and the provision of utilities such as telephones and electricity as well as office support etc. However it is assumed that the operation will operate on a ‘start up’ and ‘stand alone’ basis so elements of operational cost have been provided for. The figures provided below are initial estimates and will require subsequent refinement in line with the process outlined in 8.1. No major levels of capital expenditure have been assumed.
Total costs are evaluated to be £300k pa.
In creating this overview budget, it is recognised that this is a new venture and its results are yet unproven. Therefore a conservative approach has been adopted and no Member income has been accounted for in the first year. It is hoped that up to £20k could be contributed and it would be planned to utilise these monies in addition to the figures provided below. This budget has been created on seeking to achieve the core objectives outlined in the initial phase of Digital Jersey’s life and therefore a complete restriction of financial resource is likely to lead to the failure to effectively develop its aims. As stated in Section 8.1.1., additional monies may be needed to develop the IP element of Digital Jersey’s activities. A similar approach will be taken if other funding is required to achieve specific goals. This would include the need for specific research required to enable the development of the ICT sector or additional monies to recruit appropriate individuals or commission specific activity.
The table below provides a breakdown of the costs:
Item of Expense | Cost pa (£) |
Staff Related | |
Chief Executive | £120,000 |
Chairman | £35,000 |
Administration | £25,000 |
Travel + Entertainment | £5,000 |
Training/Attendance at Events | £5,000 |
Sub-Total | £190,000 |
| |
Other Expense | |
Rent + Rates + Insurance | £6,000 |
Heat + Light + Telephone | £3,000 |
Market Research + Website | £75,000 |
Legal + Professional | £12,000 |
Office Costs (IT Equipment + Furniture + Stationery etc) | £7,000 |
Sundries + Contingency | £7,000 |
Sub-Total | £110,000 |
| |
Total | £300,000 |
Ultimately the major cost will be on people and a provision will be required for the recruitment of a Chief Executive. Although the majority of the Board will be unpaid there will be the need for an active and visible Chairman who will require appropriate remuneration. It is also likely that there will be a requirement for administrative support either on a salaried or outsourced basis.
As described in 7.3.1 the person filling this role will need to have the capability to set up and ultimately drive the organisation in its early stages.
There has been debate that the role should be occupied by an industry expert who can bring considerable experience, gravitas and contacts to bear. Whilst this may be desirable in the longer term it is likely the requisite individual to fill this post would command a remuneration package of circa £200k pa +. On the grounds that this type of candidate is likely to be from outside the Island the total employment cost could increase due to the provision of housing or travel subsidy.
In the first instance it may be more desirable to recruit an experienced individual who has sector knowledge and senior manager/director level expertise with the ability to communicate effectively and operate at Board level. Based on the early nature of the role it is believed that a total remuneration package, (including employment costs) in the region of £120k pa may be appropriate. This figure may have to be reviewed if an appropriate candidate cannot be found.
A strong Chairman would be required with a broad skill set and experience. Undoubtedly there is a need for the individual to be visible and actively supporting the Chief Executive in the achievement of the body’s goals.
It would be reasonably expected for the Chairman to spend in excess of 30 days involved with the organisation and as such fees in excess of £30k pa would be appropriate. This figure, in addition to the payment of social security, potential travel expenses etc would mean that the total employment cost would be circa £35k pa. As above it may be necessary to increase this number to achieve the appropriate appointment.
The remaining positions on the Board would be viewed as not being remunerated although there would be some sundry costs associated with the efficient operation of the Board.
To allow for the effective operation of the organisation, some strong administrative support would be required. The main role would be to assist the building of databases, assistance in the overall communication process and the co-ordination of meetings, diaries and events. This role could be outsourced and bought in on an ‘as required’ basis. The alternative is to have a permanently employed resource but not necessarily a full time role. The cost of this resource is budgeted at £25k pa. Other costs would resolve around travel and the cost of attending events.
The remaining costs will be split into two, with the major focus being on monies required for Market Research and the balance on the operational cost of Digital Jersey.
A clear message throughout this process has been the need for independent research to be undertaken that would enable Digital Jersey to subsequently develop a tangible and targeted strategy, allied with numbers that will support any future expenditure.
Based on comparative data it is believed that it would be advisable that a figure in of in excess of £60k is provided as this would enable either two complementary or one comprehensive report to be drafted. 8.2.1 outlines the purpose of the work undertaken. As outlined previously, additional market research on the ICT sector may be required and this budgetary figure may increase.
In addition to the above, £15k is budgeted to assist with brand development and the creation of an effective website. In both cases these are important symbols for Digital Jersey and need to be effective.
The balancing £35k is comprised of monies required to operate the organisation, including provision for shared items such as rent, utility costs etc. There would be a need for professional advice in not only setting up the legal structure but there would also be a need for some accounting support (eg audit) and provision for minor and ad-hoc advice on issues. The balance would include set up costs for an office and running expenses.
In terms of time, the major objective is to gain approval in principle. This will allow for initial funding to be put in place and the concept to take shape. The following table outlines the initial milestones in early 2012:
Process | Jan 2012 | Feb 2012 | Mar 2012 | Apr 2012 |
Circulate Paper to Key Stakeholders | 06/1 | | | |
Identify Potential Corporate Members | 20/1 | | | |
Finalise Content (Aims, Funding, Constitution, Staffing etc | 20/1 | | | |
Gain Ministerial Decision and Other Sign Off | 27/1 | | | |
Finalise Personnel Specifications | | 10/2 | | |
States of Jersey Approval - If Required | | | 09/3 | |
Creation of Brand | | | 16/3 | |
Identify/Implement Operational Requirements | | | 16/3 | |
Complete Initial Recruitment Process | | | 23/3 | |
| | | | |
Launch Commission | | | | 02/04 |
The tasks are aligned with those outlined in Section 8.1 and the focus would be to have approval by the end of January 2012, all elements in place by the end of Q1 2012 ready for a full launch of Digital Jersey at beginning of Q2 and it being operational at the beginning of Q3. The dates on the table accord with when a process would be complete.
The major risks to the timeframes would be if agreement on this paper and initial funding cannot be achieved as this would be mean that a Ministerial Decision could not be made. It is believed full Sates Approval is not required but if Scrutiny wish to review the Ministerial Decision this could lead to delays particularly if they were unhappy with the objectives and funding requirements etc. Private Sector parties will need to be advised of progress but it is believed that this should not be too time consuming or lead to significant delay. The recruitment process may also contain time risk as a full and transparent process would need to be undertaken.
The technical and operational elements will need discussion but should be deliverable.
Longer term, the time frames for the ongoing development of Digital Jersey would be subject to the development of the Strategic Overview after the end of the first year of operation.
A recent paper by the States of Jersey Economics Unit outlined some clear thoughts on Economic Growth and the policies and strategies behind this. It rightly indicated that finding high-value added, low foot-print sectors that are not directly related to Finance are difficult and rare. It was also observed that where such a sector were to emerge then:
“Jersey would need to be fleet of foot to ensure that it became the place where these sectors located”[24]
The E-Commerce and Intellectual Property sectors and the overall concept of the Digital Economy and the importance of the ICT sector have been in play for some time. It is believed that there is sufficient empirical evidence at a macroeconomic level that would indicate that they are strong drivers of economic growth. Independent reports have outlined that this is an area that Jersey can exploit and activity by other jurisdictions, both large and small also points to potential value.
The majority of the jobs provided in this sector are of high value and yet due to its diversity provide a broad range of opportunity. There will also be an excellent opportunity to introduce and develop new skills into the economy. Most of the sector such as E-Gaming and Software as a Service is low footprint. At the same time certain areas of Fulfilment also offer a number of much needed but lesser skilled jobs, which are vital for a balanced economy. It is vital to see if some of these roles can be protected.
There is existing growth and innovation and the Island has a major Telecommunications provider and others within ICT wanting to invest for the future with a view to the Island becoming a ‘Technology Hub’.
Ultimately the Island has to make some choices. Government can sit back, wait and ‘let the market decide’ if the opportunities are real or not and whether Jersey is the location to conduct these activities. At the same time individual businesses can be left to pursue their interests in isolation.
The unwelcome recent developments on LVCR show the dangers of the market, particularly if it becomes distorted and you are not in charge of your own destiny. Therefore doing nothing would seem to be a dangerous strategy.
The alternative is for Government to be pro-active and provide some financial support to kick start growth and for related Private Sector interests to coalesce and actively look to convert leads that are created.
This paper and the work behind it would indicate that there is an overall belief in the sector and its ability to successfully leverage off Jersey’s existing brand to develop things in the future. A significant first step has been identified as having a body that actively promotes and supports the sector in all its guises.
It is recognised there is work to be done to prove the case and effectively target opportunities. When Jersey Finance was formed 10 years ago, the industry had already been established for 30+ years and the economic case was clear. 30 years ago none of the E-Commerce sector existed. There is now the opportunity to create a Public/Private body that can develop things in a practical, cost effective and coherent way.
- It is recommended that approval is given for Governmental support to create Digital Jersey Limited and that initial funding of £300k is set aside for 2012 to enable this body come into being
- It is proposed that subject to results from initial funding, future Government funds are pledged to support Digital Jersey Limited
- It is acknowledged that to be a success the Private Sector have to drive progress and make a financial contribution to Digital Jersey Limited
It is not pretended that Digital Jersey on its own will guarantee the Island’s transformation to a leading Digital Economy but its effective presence will certainly start this process and lead to future economic growth.
The race in this whole area has started. The formation of Digital Jersey gives the Island a chance to join it now with a view to being in the leading pack within 5 years. On account of the rapid change and the threats faced, the need for action is immediate as failure to compete in this area will put the Island at a substantial competitive disadvantage.
gov.je