Opportunities for Micro, Small and Medium Enterprises (MSMEs) in a logistics centered economy

This is an article published in the Jamaica Business Development Corporation‘s (JDBC)Business Dialog Aug – Oct 2015 issue, please click here to see the full publication.

 

Opportunities for Micro, Small and Medium Enterprises (MSMEs) in a logistics centered economy

The logistics centered economy is a complex concept. However, it is essentially about creating sustainable economic growth by removing the obstacles to economic development. This is being achieved through policies directed at creating a business friendly environment, increasing our connectivity through the use of technology and increased transportation links. In fact it is through this process of reform, which includes businesses finding new and innovative ways to create value that the opportunities lay for Micro, Small and Medium Enterprises (MSME). The MSME sector has been the primary target of many of these reforms not just because they form the majority of businesses in Jamaica, but mainly because as the Minister of Industry, Investment and Commerce, Anthony Hylton has consistently said:

when you solve the fundamental problems facing the MSME sector you invariably improve the overall economy.

Minister Hylton engaging small business owner at the launch of the Mobile Business Clinic in Montego Bay
Minister Hylton engaging small business owner at the launch of the Mobile Business Clinic in Montego Bay

The Logistics centered economy is not simply an internal response to Jamaica’s economic challenges; it is also an opportunity to respond to those challenges by taking advantage of trends in the global economy. These trends   have seen manufacturing becoming more global, specialized, fragmented and services dependent. This in turn has resulted in certain sectors critical to trade, including logistics, shipping, aviation, finance, and information communication technology being concentrated in strategic locations – logistics hubs.

So what are the opportunities for the MSMEs?

Opportunities abound for the MSMEs in a logistics centered economy, moreover, many of these opportunities do not lie in the distant future but are here and now.   The issue however is, how best to illustrate these opportunities. The telling of stories is a good medium.

The Mobile Business Clinic has criss-crossed the island providing a platform for many fruitful and insightful exchanges at a grassroots level about the logistics centered economy. One of our all-time favorite came in Savannah-la-mar, where we met a restaurant owner who had come to the Clinic to take advantage of the business advisory services being offered by the Jamaica Business Development Corporation (JBDC).

This lady was excited to learn that her restaurant, even though not an export oriented business, was very much a part of the logistics centered economy.  Her business had in fact benefited from the ease of doing business resulting from the Companies Office of Jamaica’s (COJ) ‘Super Form’ which consolidated the many forms needed to register her business into one and reduced the time, and money  needed to interact with various government agencies to just one, the COJ. More importantly, she was excited to learn of a possible new way of expanding her business by revisiting the idea of deliveries which she had earlier tried but later discontinued.  She embraced the idea that she could further expand her growing and lucrative made to order – in logistics speak, fulfilment – part of her business by using the existing transport infrastructure she had running right outside her restaurant. Rather than invest a lot of time and money in setting up and operating a delivery system she could use her cell phone and the connections she had with the taxi drivers to work out a delivery system.

The second story is about a farmer who lives in Linstead and decided to tap into the lucrative, US $400 million ornamental fish export market. This farmer in his operation may benefit from the North/South highway increasing the speed and durability of his fish to get to the airport for export. He would have also benefited from the removal of export licenses by the Trade Board on ornamental fish and the expanded market access from the air service agreements with countries like Singapore and Turkey.

The final story is about Kington Wharves (KWL) and their US$100 million investment to upgrade and expand their port facilities and to build its Total Logistics Center (TLC).  KWL provides the clearest example to date of how MSMEs will benefit from the establishment of Special Economic Zones (SEZ). While KWL has targeted large global companies for its TLC it has incorporated Jamaican MSMEs in its plans by creating backward linkages to the local economy.  One example of this is the creation of a specialized area for the food vendors who operated just outside of the gates of the various properties it bought and consolidated for its investment and who would otherwise have lost their livelihoods. What KWL has done in its transition from Free Zone to SEZ is to create the first SEZ ‘goods and services providers’ as outlined in the draft SEZ policy. Moreover, these and other goods and services providers will further benefit from the removal of the GCT disincentive that was charged on their goods and services making them even more competitive to imports.

These examples illustrate, among other things, that the logistics centered economy while based on logistics, isn’t only about logistics. In fact it would be more accurate to say that what we are truly talking about is a logistics, value added, production, warehousing, and distribution economy. But I am sure you would all agree that doesn’t roll of the tongue as well as logistics centered economy. What they also show is that opportunities are here and now; and ready to be seized.

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