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Opportunities for Caribbean logistics expansion - Governments must be proactive – Prof Gordon Shirley

Published:Thursday | May 21, 2015 | 12:00 AM
Professor Gordon Shirley

Caribbean governments must act quickly to implement appropriate regulatory policies, offer more economic and legislative incentives, and improve cooperation among their territories, if they are not to miss out on current opportunities in the trans-shipment and logistics hub business.

That's the perspective presented by President and CEO of the Port Authority of Jamaica, Professor Gordon Shirley, as he delivered the 16th William G. Demas Memorial Lecture at the Eastern Caribbean Central Bank, Basseterre, St Kitts, Tuesday, May 19. The lecture is one of the highlights of the 45th Annual Meeting of the Board of Governors of the Caribbean Development Bank (CDB) taking place in St Kitts this week.

With the Caribbean being at the cross roads of the major trade lanes between the Far East and the Americas and also being at the centre of a hemisphere of more than 800 million persons with diverse consumption needs, he said there were great opportunities for growth in Caribbean logistics, but there were important challenges as well.

Citing the examples of Singapore and Panama, which have well-developed trans-shipment hubs and are still expanding, he said while geography was important and a key attractive component to potential investors, equally important were the policies they have implemented and the economic environment they offer.

"Stable macroeconomic policies, sustained investment in logistics infrastructure and a globally competitive microeconomic business environment are important. Also essential, it seems, is the capacity of policymakers and firms to innovate and respond to the forces of change," he added.

Examples from Panama

Specific examples from Panama include the government enacting laws to enhance the attractiveness of the country to companies moving their logistics operations and their administrative and headquarters function there. Also, a 2007 law exempts foreign companies from the cap on the number of expatriates employed, eliminates income tax on provision of service to affiliates abroad, and facilitates work permits for workers coming into Panama.

An earlier 2004 law gave companies operating in special economic zones benefits such as streamlined coordination of all government functions and licences, no indirect taxes and waivers of most direct taxes, and long-term work visas, including family visas.

"More important, the 2004 law eased labour rules, facilitating a flexible workweek, capping overtime charges and easing the termination of labour contracts. Most logistics parks in Panama have been classified as special economic areas. These efforts have borne fruit. By 2009, several multinational companies had anchored their Latin American logistics and related operations in Panama," Professor Shirley told the audience.

An example of a challenge referred to by Professor Shirley was a World Bank assessment of major hub ports, including those from the region. They were assessed on a number of factors, including the quality of the trade and transport-related infrastructure, the efficiency of the customs processes, the ease of arranging competitively priced shipments, the quality of the logistics services, the ability to track and trace consignments, and the frequency with which shipments reach consignees within the scheduled time. Regional ports were found to be considerably behind several other countries, including Singapore.

"The ability to improve the logistics capacity of the countries of the region will require sustained investment in the trade and transport-related infrastructure, including the marine and air ports and the road infrastructure. It will also require investment in the automation of the trade facilitation systems," Professor Shirley asserted.

Another important challenge for some of the Caribbean nations investing in logistics enhancing capabilities is the current state of their economies.

Challenged by high debt levels, many Caribbean governments are limited in their ability to invest directly in the expanded, modernised and more efficient infrastructure required to facilitate Caribbean logistics.

"It is important that our creativity and capacity to respond to adverse conditions, which have served us well in the centuries past, not desert us at this point. The elements of this new paradigm include proactive governance to create a sound macroeconomic environment, with clear economic policies and legal frameworks; firmly managed financial regulations, a clearly articulated vision for development, clear guidelines and timetables for projects, transparency and predictability and the ability to creatively leverage state assets, including land, in order to achieve the objectives,?" he said.

Referring to the case of Jamaica?s expansion of the Kingston Container Terminal and investment in infrastructure such as Highway 2000, Professor Shirley said, historically, the government led the process of investment in infrastructure, including the sea and air ports, road and rail services.

Typically, the management of these facilities and the associated services was the responsibility of statutory agencies. The facilities were financed almost exclusively with loans obtained with government guarantees.

"With the new economic reform programme, however, a centrally important feature is the fact that the Government will no longer provide support to these entities in the form of government guarantees. The dilemma, therefore, is how to facilitate the investments in the needed infrastructure without the financial support of the government.

"The approach has been to finance the investments through public/private partnerships, encouraging and facilitating the access and use of private capital in these projects, attracting world-class businesses and reducing government risks," he said.