What does it mean to have a logistics centred economy in Jamaica?
What is a logistics centred economy?
In brief, a logistics centred economy is one based on logistics.
That is to say an economy based on the efficient and effective movement of goods, services, people, money and data from point A to point B, while of course ValuStacking — creating, adding and capturing value — along the way.
To have a logistics centred economy is to ValuStack.
Jamaica’s Logistics Centred Economy — a Framework
It is important to note that while it is called a Logistics Centred Economy, it is not only about the logistics industry.
The logistics industry, be it shipping, to picking and packing to packaging and labelling, is the glue that keeps various interrelated networks connected. The Global Logistics Hub Initiative is, therefore, best understood as a platform to network Jamaica into global trade — a connected trade and business hub.
This means leveraging what we have as a country and a people to enable and empower us to ValuStack — create, add and capture value.
During the Covid-19 pandemic, we have witnessed this, in a more public setting in various forms as businesses were forced to pivot in order to survive.
This has ranged from grocery delivery apps to telemedicine to farm to home fresh food delivery services, to online live entertainment to new markets for Jamaican manufactured goods being exploited, by way of example:
- Toilet paper to the USA
- Milk to Trinidad and Tobago
- Bleach to the Cayman Islands
- Seasoning to Costa Rica
- Juices to Trinidad and Tobago
These, of course, are not perfect solutions to all of Jamaica’s social and economic woes however they do serve as great examples of the power of a logistics centred economy.
What does this mean for Jamaica?
Never discourage anyone who continually makes progress no matter how slow.
Plato
I suppose the more pointed question is what does it mean for Jamaicans?
Or more precisely put: what does a logistics centred economy mean for Jamaicans?
It represents possibility.
It represents hope for the future.
It represents a pathway for much sought after growth and development.
It represents, in my view, a blueprint of how to build a resilient and sustainable economy in the 21st Century, especially for a Small Island Developing State (SID).
I have long maintained that:
However, it also means staying the course and pushing ahead even in the face of overwhelming obstacles, such as Covid-19. Building a logistics centred economy is a long term initiative which will have many twists and turns but we must stay the course.
As I have said in another post (COVID -19 and Jamaica as a logistics centred economy — Part I) :
The continued development of Jamaica into a logistics centred economy and Logistics Hub presents to my mind an opportunity first to cushion, along with other fiscal, monetary and commercial strategies, the economic fallout from COVID-19.
Secondly, to paraphrase world-renowned economist Richard Baldwin, economic stimulus packages being implemented should act as shields to protect the economy from the medium to long term impact of COVID-19. Thirdly, to set the foundations for a restructured Jamaican economy that will thrive in a post-COVID world.
However, above all else, we must continue to implement, implement, implement!
What implementation?
Cynics, critics and even well-meaning people would charge, ‘what implementation? There is none!’
To that, I would respond: ‘on the contrary.’
Before I list out some solid evidence let me share a story with you that I shared before — Covid -19 and Jamaica as a logistics centred economy Part II: A story of how not connecting the dots could cost you— that illustrates why I have a contrary viewpoint:
I recall a conversation with a young lady in Montego Bay at the Diaspora Conference 2015 where I mentioned that the North-South Highway, which was then under construction, was part of the Logistics Hub.
I was treated with a polite but firm ‘No! I don’t think so, the idea of the highway is old and what does it have to do with the port?’
I said ‘yes, it is not new, but it will add efficiencies to the movement of goods, services and people between the north and south of the island.’Her retort, ‘yes I hear you and all that might be true but what does that have to do with the logistics hub?’
My response, ‘Everything!’
Before I could say anything further, I got another polite, ‘I don’t think so.’
And back and forth we went. The point is I just could not convince her.
It is not that there is lack of implementation, what there is a lack of ‘connecting the dots.’
There is at times admittedly slow implementation but certainly not a lack of it.
Don’t believe me?
Well here is a short and random list of accomplishments under the Logistics Hub Initiative (LHI) that you may or may not be aware of and if you were aware of them you may not have connected the dots and associated it to the LHI.
The list contains a mixture of public and private initiatives and for ease of reference I have provided weblinks and its significance in building out Jamaica’s logistics centred economy:
- Kingston Container Terminal divestment and modernization — The Kingston Container Terminal was divested to French shipping company CMA CGM under a 30-year lease concession. The company operates the port as Kingston Freeport Terminal Limited (KFTL) and has modernized the port in phases investing approx. USD $456 million.
- Dredging of the Kingston harbour— In Phase 1 the channel was deepened, turning circle and quays to allow access by 14.2 m draft vessels, improved capacity of the port from 2.8 million 20-foot equivalent units (TEU) to 3.2 million TEU. In Phase 2 the draft was increased to allow access by 15.5 m draft vessels.
- Special Economic Zone Act and the creation of the Jamaica Special Economic Zone Authority — Special Economic Zones (SEZ), a geographically designated area where fiscal and other incentives are used to attract investment to a country are expanding globally. There are over 5,400 SEZs in over 147 countries including Jamaica. After the mammoth task undertaken in 2019 by the Special Economic Zone Authority (JSEZA), of transitioning Jamaica’s free zones over to SEZ there are now about 168 companies operating within 10 parishes with SEZ status as either Developers or Occupants.
- Norman Manley International divestment— divested to Mexican airport group, Grupo Aeroportuario del Pacifico (GAP) under a 25 year concession Norman Manley International Airport in October 2018 was undergoing a USD$60 million upgrade within the first 36 months of GAP taking up operations. The overall modernisation plan that is expected to cost over USD$100 million.
- The runway expansion of Sangster International — The project which started in December 2019 at a cost of US$70 million continued during the Covid pandemic. The expansion is aimed at facilitating the establishment of safety areas at either end of the runway.
- Radar improvements — the Jamaica Civil Aviation Authority (JCAA) invested US$17 million (J$2 billion) upgrading to the Kingston Air Traffic Control Centre (KATCC) which included installation of a new state-of-the-art voice communication control system; cutting-edge, system-wide air traffic management automation surveillance system; and a new global positioning system (GPS).
- The double taxation treaty with Italy— signed in January 2018 the treaty improves the attractiveness of Jamaica as an investment destination for Italian investors.
- The North-South highway completion— This investment by the Government has spurred or supported a variety of private-sector initiatives that are contributing to the transformation of our economy into a logistics centred one.
- The buildout of Knutsford Express hub in Draxhall, St Ann — The new Drax Hall location will also function as a logistics hub for Knutsford.
- The cooperation agreement with Panama— Aprox. 6% of global trade passes through the Panama Canal accounting connecting over 144 routes, reaching 1,700 ports in 160 countries. This includes Jamaica. Having a cooperation agreement on education, maritime development, and tourism, among other areas, is only a natural fit for both nations.
- The Trade Information Portal— The portal places export and import-related regulatory information on a single platform. This improves both the ease of business and trade in Jamaica. More than 7,000 persons from 98 countries have used the JTIP as reported in December 2019.
- The buildout of a near port logistics centre by the Port Authority of Jamaica in Kingston — Adjacent to the Kingston Freeport Terminal Limited (KFTL) the Kingston Logistics Park (KLP) is a special economic zone and is being positioned by the PAJ as logistics and value-added industrial park.
- The Port Community System — A Port Community System is an electronic platform which connects the multiple systems operated by a variety of organisations that make up a seaport, airport or inland port community. Jamaica’s Port Community System, “JamaicaPCS”, enables intelligent, secure and reliable exchange of information, connecting public and private stakeholders in order to improve the competitive position of Jamaica’s sea and airports.
- The over 400 roads repaired in 2019— It goes without saying that roads are important to economic development. Nevertheless, roads by themselves do not induce sustainable growth. However, roads that facilitate the movement of goods, services and or people more efficiently not only introduce cost savings but new opportunities for earnings. And these are the conditions that many of the over 400 roads that were resurfaced and rehabilitated in 2019 offer Jamaica.
- Kingston Wharves SEZ Total Logistics Centre and Global Auto Logistics Centre — Both helped KWL recorded profit above $2 billion for its financial year ending December 2019 for the first time.
- The start of the South coast road improvement project — is part of the Government’s strategic development plan to harness growth along Jamaica’s e southern coast. The highway will connect Negril, Westmoreland to Port Antonio, Portland. The Government plans to spend $12.91 billion during fiscal year 2020/21 on the project.
- The implementation of the Asycuda Customs management system — has assisted Jamaica to improve its trade efficiency. According to the World Bank Jamaica has reduced the time to complete the documentary requirements for exports by 24% and for imports by 28%.
- Lydford Logistics SEZ doing food logistics/distribution and argo-processing — Lydford Logistics, operating as a Special Economic Zone, this 180,000sq. ft. facility provides services in third party logistics, farming and agricultural coordination, juice manufacturing, cannabis processing for pharmaceutical use, and a state of the art baking facility serving the island’s hotel, tourism, and food service infrastructure.
- The impressive expansion of training by Heart Trust/NTA — In the financial year 2016–17, HEART Trust/NTA trained 74,000 people. In fiscal year 2019/20 it trained approx. 152,000 people, an increase of 105 per cent in a three-year period.
- The Jamaica Single Window for Trade (SWIFT) — It will allow importers and exporters to lodge documents electronically and facilitate the exchange of information between government agencies and traders. It creates a single platform unifying the functions of various government entities involved in trade thereby saving time and reducing the cost of trade in Jamaica.
- Seprod entering into manufacturing as a service with Nestle — which saw the return of the much loved Betty Milk being locally manufactured. And showed how new business models and collaboration with local Jamaican partners can participate in global value chains.
- The signing and ratification of the WTO’s Trade Facilitation Agreement — According to the Organisation for Economic Co-operation and Development (OECD) trade facilitation improvements can reduce trade costs by up to 13% for middle-income countries such as Jamaica.
- The sanitary agreement with China to facilitate the shipment of live lobsters — The agreement outlines the sanitary and hygienic conditions necessary to facilitate such export and the responsibilities of the local competent authority/veterinary services division in coordination with the General Administration of Customs of the People’s Republic of China (GACC). The importance of quality standards in international trade cannot be overstated. Quality standards are the key to tapping export markets and developing market access, turning that access into market presence.
- New Fortress LNG terminal — The terminal is part of larger plans to position Jamaica as an LNG hub within a global logistics and trade hub. Additionally, it has opened opportunities for further economic diversification and investment in food-processing industries, cold logistics, pharmaceuticals, manufacturing of chemicals, and plastics. However, the biggest thing to watch is in the possibility of a Datacentre by New Fortress. Data centres are critical infrastructure in cloud computing were depending on its size and configuration tech companies like Google, Apple, Microsoft, etc. perform or receive services ranging from data storage, infrastructure as a service, data as a service, data analytics, etc.
- The TransJamaica Highway divestment and listing on the stock exchange — The TransJamaica Highway IPO, expected to be the largest in the history of the JSE, gives ordinary Jamaicans an opportunity to build long term wealth through owning a piece of Jamaica’s logistics infrastructure. Jamaicans by investing will now personally own part of our logistics hub and individually be part of the transformation of our economy into a logistics centred one.
- The Ferry economic cluster build-out —A cluster is emerging in the Ferry, St. Andrew area, that most people have not fully recognized the power of, at least not yet. The 94-acre Kingston 876 commercial complex is being built-out by the Cascade Group Jamaica and includes the $60 million headquarters for Tropical Battery, the current build-out of Outsourcing Company Limited (CEAC) 100,000 square feet BPO focused SEZ and the already built 7,000-square-metre Nestlé Jamaica distribution hub.
And there are so many more.
Lessons from Singapore
The major lesson from Singapore is that it is possible.
Whenever we speak about Jamaica transforming into a logistics centred economy, it is inevitable that there will be a comparison with Singapore. This is for more than one reason which we won’t get into here other than saying that it is well known that the Logistics Hub Initiative was in part an adoption and adaption of what Singapore did in transforming itself into a logistics hub and later into a trade and business hub.
Singapore’s journey From Third World to First, literally written by their founding Prime Minister Lee Kuan Yew, is now the stuff of legends.
However, what is less known or understood is that Singapore’s journey is a story 40 to 50 years old and some would argue even longer. Over this period, it has been a journey of successes and failures, starts and stops and adjustments.
This too has been the story of Jamaica’s journey.
What the Singaporeans understand is their logistics centred economic development was not just a story solely of government implementation. Nor do they view economic transformation initiatives as simply a series of unrelated infrastructure projects. Rather the Singaporeans, take a whole-of-government, whole-of-society, ecosystem (interconnection) approach to initiatives aimed at restructuring and repositioning their economy.
The Singaporeans thus far have managed to remain one or a few steps ahead and remain future-ready now.
Why not Jamaica? It is possible.
