Wed | Dec 7, 2016

Column: Robust growth sectors needed

Published:Friday | March 6, 2015 | 12:00 AM
A cane harvester in operation at Monymusk Sugar Factory in Lionel Town, Clarendon.

In a tough economic atmosphere in which growth is hard to come by, one is pleased that there are a couple of sectors that are showing signs of some economic growth.

Recent announcements from the European Union (EU) suggest that a traditional agricultural economic activity such as sugar production is moving from a quite prosperous pricing regime over the last five contract years to a time of financial leanness.

The EU has unleashed home-grown competition in the form of beet farmers on our not-always-efficient sugar industry.

With my knowledge of the sugar industry, I am aware that there are opportunities that Jamaican businesses can glean from this once dominant economic sector, even if the lustre of the business is much less bright this century.

All our sugar estates and factories should be encouraged to become robust providers of renewable energy from bagasse - the thrash which is left after the juice is extracted from the sugar cane - and from cane grass and similar organic material which grows easily in Jamaica.

New government policy needs to be set to allow energy producers from bagasse to make a decent return on their investment.

This is fairly easy to do when the renewable nature of this form of energy is viewed through the prism of the US$2 billion to US$2.5 billion we use to import fossil fuels every year.

The only thing renewable about that kind of fuel is the fact that we have to keep spending those billions every year.

Factor in the benefits of the employment of local Jamaicans in sugar cane and bagasse production - not distant Saudis or even friendly and generous Venezuelans who produce the oil we buy - which is much cheaper than even the reduced price of today's fossil-fuel-produced energy, and the policy direction and support becomes easy to legislate and implement. There is another private-sector angle the Government should be encouraging.

It appears as if one of sugar's downward price cycles is just beginning. This is a time when Jamaica should find investors to build a 200,000-tonne sugar refinery in the country and use cheap sugar bought on the world market - and maybe some from local production - to be processed into refined sugar for the CARICOM region. The refinery should be large enough to meet the 70 per cent threshold of the common external tariff arrangements in CARICOM.

Once that threshold is met, the producing nation would be in a position to secure a 40 per cent tariff benefit against any import into the free trade area. It could be one of the few tangible benefits Jamaica gets from CARICOM. Minister Paulwell says much cheaper energy is on the way and if that happens, a major cost hurdle would be less challenging.

Encouraging investments in the renewable energy and sugar-refining businesses - both new enterprises in Jamaica - would ensure an investment permanence that would tend to defy the temptation to cut and run. We could save on scare foreign exchange, employ currently unemployed Jamaicans, and earn foreign exchange which is needed badly.

BPO AND TOURISM

There are two other industries that are much younger than the sugar business - at least one is - but are not entirely new to Jamaica, that are experiencing growth and should be encouraged.

The business process outsourcing (BPO) and tourism sectors are growing. The really positive side to this growth is the fact that it's a good mixture of Jamaican and foreign investors who are driving the economic activity in these two prospering areas.

Sagicor Group Jamaica has been investing in both sectors. Richard Byles, the co-chair of the Economic Programme Oversight Committee and president/CEO of Sagicor Group, has been investing his firm's money where he has put his mouth. Local investors, he often encourages, should step up to the investment plate and plunk down their money.

Earl Jarrett of Jamaica National Building Society has taken more cautious investing steps toward the BPO sector and in helping young entrepreneurs find their financial feet.

The Sagicor president divides Jamaica into two economic zones. The more prosperous of the two stretches from Ocho Rios to Negril and may have been blessed with new investments totalling about US$1 billion in the last couple of years. The other is not so blessed. It is just about everywhere else in Jamaica, with the epicentre of deprivation in the Corporate Area of Kingston and St Andrew.

The Hendricksons have invested heavily in the tourist industry with heavy concentration in New Kingston, where they own the three biggest properties on the hotel strip of Knutsford Boulevard.

Byles and Sagicor are relative newcomers to this investment destination and their big bucks in the tourism sector have been placed in the Ocho Rios - Negril corridor. So have the Spanish, not-so-new, and Mexican, really new, investments.

This columnist is really pleased that some, if not all, of these investments are not financing all-inclusive hotel models and so will have more tourist dollars finding their way into ordinary Jamaican businesses and communities.

We need more investors in new sectors that are geared to earning foreign exchange and the employment of tens of thousands of people. The recent slippage in our GDP growth statistics highlights the need; the relatively high unemployment and underemployment, and the broad-based, severe, human hardship puts a sharp edge to the urgency of the need.

• Aubyn Hill is CEO of Corporate Strategies Ltd and chairman of the Economic Advisory Council of the opposition leader.

Email: writerhill@gmail.com

Twitter: @hillaubyn

Facebook: facebook.com/hillaubyn