Hill suggests radical break from manufacturing

Marcella Scarlett, Business Reporter

Businessman Stephen Hill said Tuesday that Jamaica has no future in manufacturing against large markets with greater economies of scale and should power down its plants to focus on sectors in which it has comparative advantage.

Industry spokesman for manufacturers Brian Pengelley and his predecessor, furniture maker Omar Azan immediately mounted a defence of the sector as a value creator and a top source of jobs.

Hill, the CEO of New York-based Caribbean International Network, says because of trade liberalisation, Jamaica is being inundated with foreign goods against which its producers cannot effectively compete, and should focus instead on agriculture, tourism and other services.

"The WTO has messed up any ambitions that Jamaica has to expand in manufacturing," said Hill.

"There is a structural problem that we will never be able to overcome. This is the problem that the WTO imposed on emerging markets."

Developed countries in North America and elsewhere benefit from lower production cost and are able to supply goods to emerging markets, Jamaica included, at cheaper prices and in greater quantities, Hill said Wednesday as a participant of an investors' forum hosted by Stocks and Securities Limited (SSL) that focused on Jamaican SMEs.

"Some companies can produce for local use. But look at it - the Chinese are going to kill us," he said.

The World Trade Organization was established in 1995 to knock down barriers to free trade. Jamaica is one of 153 signatories.

Difficult for Jamaica

"The Government needs to come up with a strategy, because the WTO has made it very difficult for Jamaica to compete in manufacturing," said Hill.

"It is too late. This cannot be amended. It is now a part of the world global system so it is not something Jamaica can go and change now. Forget about manufacturing, there is nothing we can do about it now. What we need to do is come up with an economic strategy," he said.

Jamaica's manufacturing sector is in decline. Its contribution to GDP hit a seven-year high of 9.1 per cent in the past decade, but has fallen off by a percentage point.

The sector, which employs 74,000, continues to struggle with an inefficient bureaucracy, crippling energy costs, and inefficient tax system, high labour costs and low productivity, as highlighted by speakers at the SSL forum.

But group companies such as GraceKennedy Limited, Seprod Limited, Lascelles deMercado and others, run highly profitable operations steeped in the manufacturing of food, industrial products and spirits over periods that run into centuries in the case of Lascelles' jewel, J. Wray & Nephew Limited.

Hill made no exception for them, he told the Financial Gleaner when asked to clarify that there ought to be a clean break.

Krishna Vaswani, director of Quality Incorporations VII Limited - a panellist at the forum - agreed with Hill about the adverse impact of the international trade regime on Jamaica, but said it was up to manufacturers and the Government to formulate policies that rid the system of its inefficiencies and so position producers to compete more efficiently in the global space.

Azan, however, pushed back more directly at Hill's suggestion, saying consumers can choose not to buy imported products; and that it is up to local suppliers to create quality products that consumers want.

"They won't be on the shelf if people do not want them to buy," said Azan, the CEO of Boss Furniture, referring to imported products.

"Manufacturing has contributed more than both farming and tourism over the years. When everything else was contracting, manufacturing was expanding," he said.

Pengelley, the president of the Jamaica Manufacturers' Association, acknowledged that there are sections of the manufacturing industry struggling to be efficient and therefore find it difficult to compete.

But he also pushed back at Hill, saying that many industries are flourishing, even in the face of the current hardships, and that some even have global dominance.

The tourism sector matches manufacturing in jobs at 74,000, according to the latest labour statistics published by Statin, but agriculture dominates with 191,000 jobs.

But while agriculture is contributing 5.8 per cent to GDP and tourism 6.1 per cent, according to Planning Institute of Jamaica estimates for 2010, manufacture easily outpaced them with contribution of 8.1 per cent.

marcella.scarlett@gleanerjm.com