Tue | May 23, 2017

Logistic hub crucial to growth

Published:Sunday | June 21, 2015 | 6:00 AMDensil Williams, Contributor
Densil Williams, professor of international business and executive director of the Mona School of Business and Management, UWI, Mona

Positioning Jamaica as the fourth node in the global logistics chain is not a choice but an imperative if this tiny island nation is to have any chance of surviving this inhospitable global trading system. Jamaica's competitive advantage rests in its location, a very powerful selling point in international trade. The country is an important gateway to the Western Hemisphere with almost one billion persons.

Importantly, it has the capacity for expansion of its port facilities, especially its harbour, when compared with Miami, which cannot engage in further dredging of its harbour to accommodate larger vessels. International trade is moving swiftly from North to South and East to West, and logistics will be at the heart of this rapidly evolving system. It, therefore, means that countries with superior locational advantages should position themselves to be the gateways into markets that are remote and have untapped potential.

Singapore, in the 1960s, took advantage of its location in Asia and developed a logistics-centred economy to become the gateway for international businesses that want to reach the rest of the Asian continent. That country's success today is not in question. Singapore's logistics hub is one of the nodes in the global logistics system. Jamaica has all the necessary ingredients to become the node in this hemisphere similar to Singapore in Asia. We should not allow this opportunity to pass. Time is of the essence and we need to act now.

The Ministry of Industry, Investment and Commerce has been at centre stage in trying to sell Jamaica as the fourth node in the global logistics system. A significant amount of work has been put into this project, which, no doubt, have resulted in Jamaica's logistics index moving from 124 to 70 in 2014, a strong and positive gain indeed. There is also a logistics secretariat at the ministry that is spearheading this initiative. To date, they have done a commendable job in informing the public about what it means to become a logistics-centred economy.

Anyone can visit their website to see the vast array of literature on the subject. Additionally, there is a weekly spread in one of the daily newspapers in Jamaica explaining the 101 of logistics and providing answers to critical questions that persons might have on the subject. While the efforts at marketing and PR for this project is commendable, there is still more to be done in order to reach the mass of persons who will, no doubt, benefit from this timely endeavour.

 

CYNICISM

Despite the progress being made to date, including significant improvements in the country's doing business and competitiveness scores, there appears to be a level of cynicism towards this project since the minister of industry announced in his Sectoral Debate that an MOU will be signed with European and US interests to pave the way for a US$5-billion investment in logistics-related projects.

The media and sections of the society have been having a field day with this announcement, since Dunn and Bradstreet raised concerns about the likelihood of the interested firms being able to afford the price tag to take on the investment. Some persons have even gone as far as calling for the minister's resignation.

Further, the Professor Gordon Shirley-led National Logistics Initiative Council (NLIC) is reported to have raised concerns about the ability of the interested firms (Krauck and Anchor) to undertake the investment. This report from NLIC is to be made public by Cabinet in the near future, the media have reported.

Jamaica's logistics hub initiative is bigger than Krauck, Anchor and, I will also say, Minister Hylton. The project is a most desirable initiative which the country cannot afford to abandon. The benefits from having Jamaica as part of the global logistic system are immeasurable. We talk about the BPO sector, which needs to expand and create more jobs. The link between business process outsourcing and logistics is very clear.

We talk about revival in manufacturing. A logistics-centred economy is a sure way to get light manufactured goods back on track. We talk about export-led growth if Jamaica is to become the 21st century example of moving from austerity to prosperity. Then, surely, logistics has to be at the centre of this growth. The gains from the logistics initiative are just too great for us to not focus on the relevant issues to get the project going.

If Krauck and Anchor are not able to put the necessary financing together to undertake this project, the critical thing to do is to move to the next best alternatives rather than waste a lot of time quibbling over non-essential issues such as signing of a MOU that seeks to discuss, under confidential terms, the feasibility of the project happening. In public/private partnership these things will happen, so we should not allow them to detain us from getting the job done.

As a country, our energy should now be spent on trying to secure deep-pocketed investors (like we have done with the Kingston Container Terminal) who can help us to get this initiative off the ground. This, I submit, is the most germane issue to moving the logistics hub initiative forward. Importantly, it must be pointed out that Jamaica did not commit any resources to these firms (Krauck and Anchor), so taxpayers have nothing to lose if the firms are unable to secure the financing for this project.

 

MOVING FORWARD

Looking ahead, agencies like JAMPRO, the Development Bank of Jamaica and other interested parties need to establish the necessary criteria for the likely investor(s) for this project and move aggressively to secure the investment. Similarly, the investment ministry should invest its time in trying to ensure that the urgent reforms and institutional re-engineering across the Government are done in order to prepare for the investments in this critical project so that Jamaica can reap the long-term benefits.

Further, the domestic private sector should start putting into place the necessary capacity-building mechanisms, the re-engineering of their business processes in order to plug into this hub when it is realised. The academic community must also start preparing its curriculum to produce graduates to meet the demands of this new sector.

Our local media have an important role to play in sensitising the population on the criticality of becoming a logistics-centred economy like Dubai, Singapore and other small nations that have used their unique location to their advantage in driving economic growth and prosperity for their citizens.

The preoccupation with whether or not the current parties that have shown an interest in the project can afford to finance the plans is unnecessary. If it is shown that they cannot finance the planned projects, we need to urgently drop them from the watch list and move on. The investment dollar is out there and looking for a home. We need to ensure that Jamaica positions itself to be that home.

- Densil A. Williams is professor of international business and executive director of Mona School of Business and Management. Email feedback to columns@gleanerjm.com and densilw@yahoo.com.