Mon | Jan 23, 2017

Logistics hub pipe dream?

Published:Sunday | October 5, 2014 | 12:00 AM
This January 21, 2014 photo shows one of the uninhabited, mangrove-fringed Goat Islands in southern Jamaica. The islands are the proposed site of a Chinese-led port development to be part of a broader logistics hub network in Jamaica. - AP

Ian Boyne, Columnist

The Caribbean Policy Research Institute (CaPRI) has just published an excellent and well-researched paper assessing Jamaica's prospects for the development of a logistics hub. It is the kind of paper that deserves serious attention from policymakers, stakeholders, as well as opinion leaders.

Titled 'Creating National Wealth Through the Jamaica Logistics Hub: Looking Beyond Ports and Parks to People and Processes', the empirically rich paper shows the many areas in which Jamaica is behind regional competitors. "Although significant improvements have been realised in a relatively short time, Jamaica is not currently among the best-positioned economies in the region to reap the benefits of a logistics hub," the paper says soberly, and devotes its 48 data-laden pages to demonstrating just that. "The private firms in Jamaica that are involved in the transport and logistics system are in need of significant bolstering if the country is to be a leading regional hub location," the paper continues.

The researchers, headed by lead researcher David Tennant from the Department of Economics, University of the West Indies, are acquainted with the latest research and documentation. This paper is a fine piece of scholarship that is realistic without being pessimistic. And it is characterised by a refreshing balance.

You must bear in mind that it isn't only Jamaica that is seeking to exploit opportunities from logistics hub development. Countries like the Bahamas, the Dominican Republic, Cuba, Mexico, Martinique, Trinidad and Tobago, Uruguay and Brazil have also expressed such intentions. Therefore, a comparative analysis vis-à-vis those countries is critically important. Hence, the usefulness and timeliness of this important CaPRI study.

Comparisons with nations

What the paper does is not only to compare Jamaica with its regional competitors, but also with world-class leaders in logistic development like Singapore and Dubai. I read this paper a day before I listened to a very fascinating lecture by Harvard's associate professor, Dr Matt Andrews, who, on the invitation of HEART Trust/NTA, spoke last Thursday on 'A Growth Diagnostic for Jamaica - Getting Past Binding Constraints'. Andrews was very blunt in dealing with Jamaica's policy failures and disappointing economic performance over the last 50 years.

One of the strong points he made as he compared Jamaica with high-performing Singapore is that Singapore did not develop its economy by simply pursuing general macroeconomic stability. As I pointed out in my critique of Dr Damien King recently, Singapore applied industrial-policy strategies and picked winners. Singapore targeted particular sectors. Andrews pointed to Singapore and also to Costa Rica as examples of industrial targeting. Costa Rica, when it wanted to develop its ICT industry, specifically targeted one of the biggest firms, Intel, and provided incentives for Intel to invest, pulling other IT firms in the process.

Here in Jamaica, we are being advised against targeting sectors or picking winners. We are told to just apply general neo-liberal strategies which should then draw investors. But Andrews said something I was forced to write down: "General policies for general growth lead to general failure." That's memorable! I hope our policymakers are reading this.

Says the CaPRI paper: "The development of Singapore's logistics hub was catalysed by the attraction of a number of multinational giants in the hub core through providers of logistics and transportation services, as well as in the supported and related industries in sectors such as petrochemicals, IT and finance. Dubai followed a similar model and by 2006 was able to attract a quarter of the world's top 500 companies."

Jamaica has done relatively well in attracting foreign direct investments (FDI) as evidenced by the latest World Investment Report, but what this paper points out is that it is important not just to have strong aggregate FDI figures, but for a logistics-centred development strategy, you must attract certain types of investments.

Lack of diversity

More than 80% of the FDI inflows into Jamaica are concentrated in three sectors. In contrast, our competitors for logistic-hub development are more diversified. So these countries are already way ahead of us in terms of logistics readiness. Just last weekend, I was reading the latest issue of Foreign Affairs journal (September-October) and I saw an interesting advertising supplement by Trinidad and Tobago, where that country proudly proclaimed it was "moving from red tape to red carpet". It was an impressive advertising supplement in a journal read by the world's most powerful and influential decision-makers. Trinidad certainly means business.

In this supplement, Trinidad does what I don't remember ever seeing: It compares its fellow CARICOM member Jamaica unfavourably with itself, stating, quite boldly: "The cost of electricity in Trinidad is about 3.5 cents per kilowatt-hour, while in Jamaica it costs about 40 cents." The gloves are off when it comes to marketing! I used to write promotional and advertising copy for JAMPRO and we would never think of unfavourably mentioning a fellow CARICOM member. But Trinidad is revving up its efforts to attract investments in this post-crisis era.

The Trinis went on in their advertising copy: "Located between Brazil and the US, Trinidad can become a maritime hub and offer trans-shipment port and dry-dock services. Over 60,000 vessel voyages take place just 25 nautical miles outside our coast, passing by Trinidad because we don't have the appropriate facilities. Once we develop these facilities, we will be able to attract a great deal of traffic." Trinidad has invested heavily to advertise in this prestigious journal to reach some of the most important power brokers in the world.

So CaPRI is to be commended for publishing this paper amid the hype over our proposed logistics hub. We are not the only game in town, guys, and we had better take a good, hard look at how we stock up with others who are going after those same investment dollars. We have to look at our ease-of-doing-business and development approval processes. (Which thankfully we are.) Trinidad tells would-be investors to Jamaica: "Trinidad is now placed 66 out of 189 countries in the World Bank's ease-of-doing-business 2014 rankings ... . Our Government has cut red tape, simplified procedures and provided incentives to attract investors ... . Individuals can now access over 20 e-services of the Government. This IT platform has such a success that Trinidad and Tobago received international acclaim in the 2013 United Nations Public Services Awards in the category 'Promoting Whole-of-Government Approaches in the Information Age'."

No automatic wealth

The CaPRI paper says, "It is very unlikely that the Jamaica Logistics Hub will automatically create wealth in Jamaica. This is because the country currently does not specialise in areas of service provision typically associated with logistics operations, is outperformed in three key components of the logistics environment by most of the potential regional competitors, and has one of the worst records among comparator countries of attracting FDI inflows to sectors that are critical to the logistics hub core and supported related industries."

CaPRI draws on the 2014 World Bank Doing Business Report that shows that Jamaica has one of the world's worst rankings for trading across borders (No. 118). We have the second-highest number of documents required to facilitate an export; the highest number of days required to export; the second-highest costs associated with exporting; the third-highest number of documents required to facilitate an import; the third-highest number of days required to import; and the second-highest costs associated with importing.

Opines CaPRI: "The continued poor performance of Jamaica in import-export procedures ... highlights how far the country is from being - and, more importantly, how much remains to be done if Jamaica's logistics hub is to be - competitively positioned." Special economic zones will not solve that problem, as our regional competitors also have those plans.

Government will have to intensify its public-sector reform and red-tape-busting efforts if it is serious about a logistics-centred development model.

Ian Boyne is a veteran journalist working with the Jamaica Information Service. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.