Mon | Oct 15, 2018

Editorial | Linkages start with being competitive

Published:Monday | July 23, 2018 | 12:00 AM

Adam Stewart clearly has a point that the Government should robustly encourage foreign hotel investors to purchase the goods consumed in their properties from domestic producers. For, according to Mr Stewart, as the deputy chairman of the hotel chain with the most rooms in the country, "I am yet to find a need ... that I cannot find at least one Jamaican company to fill."

That is a reassuring declaration not only of the availability of locally produced goods and services, or of the commitment of Mr Stewart's Sandals chain to purchase Jamaican products, but that domestic suppliers are competitive both on quality and price. For, Adam Stewart runs not a welfare agency, but a highly successful enterprise in one of the world's most competitive sectors, of which a critical ingredient is the efficient management of costs.

Given the hotel industry's complaints about the competitiveness of Jamaican suppliers, this endorsement is a signal achievement, much of which would have been the result of the economic reforms of the past six years that have brought order to the Government's fiscal accounts and, more broadly, macroeconomic stability.

Such assumptions, however, have to be corroborated by rigorous analyses if the Government is to have a basis for serious engagement with investors rather than relying, in the formulation of policy, on the anecdotes of interested parties like Mr Stewart.

Mr Stewart, in that regard, is in a good position to help advance the agenda. He is chairman of the Tourism Linkage Network, a government-promoted body of business interests whose job it is to promote linkages between tourism and other sectors of the Jamaican economy. Primarily, that means getting big hotels to buy more of their supplies domestically.

No one now has a clear handle on the value of the goods and services that Jamaica's hotels and related entities sourced in the local market, but the potential is obvious. Last year, for instance, Jamaica hosted more than 2.5 million stopover visitors who, on average, stayed in the island's hotels for a little over eight days. The sector, including cruise shipping, grossed $2.9 billion, of which no more than an estimated 30 per cent stayed in Jamaica.

Yet, tourists consume a wide range of goods and services, from the beds on which they sleep, to the electricity that powers the facilities they use, to the food they eat. Critical for policymakers, therefore, is to ensure that a greater portion of this earning, and any incremental spending by tourists, stays in Jamaica.

 

MARKET RESEARCH NEEDED

 

In a free market, such as is Jamaica, local firms have to be competitive with foreign suppliers. It would help if they knew what, in what value and quantities, hotels purchase. In other words, they need market research. There has already been some tentative movement on that front.

In 2015, at the behest of the network that Mr Stewart now leads, and with support from the tourism ministry, the Centre for Leadership and Governance at the University of the West Indies, Mona, completed such a study. Using 2014 data, it calculated that Jamaican hotels spent around J$70 billion a year importing manufactured goods and agricultural products, of which up to J$5 billion related to the latter. That study had clear gaps. It nonetheless provided a road map of possibilities.

Updated research is clearly necessary. But while Government has a role in stimulating the linkage agenda and establishing broad policy, with vehicles like Mr Stewart's network, it can't, in a market economy, appropriate the job of the private sector and certainly has no place harrying investors - which no one, to be clear, suggested it do. Private-sector firms, and their sector groups, have to take the lead in building relations and advancing their interests, which starts with being competitive.