COVID -19 and Jamaica as a logistics centred economy — Part I
“Never discourage anyone who continually makes progress no matter how slow.” — Plato
The coronavirus has brought into sharp focus on Jamaica’s continued transformation as a logistics centred economy.
Nowhere is this more evident than the recent explosion of delivery services and apps, particularly in the food sector. This is a clear demonstration of Jamaican entrepreneurial zeal and technical know-how coming together to meet an unmet demand as we are forced to observe social distancing.
This is logistics and logistics matters, Jamaica.
Let me be upfront and blunt about what is in this article. This article is about two things, first and foremost, it is about exploring ideas around a COVID-19 economic and commercial resilience framework that will enable the Jamaican economy and businesses to weather the COVID storm and come out better than ever, well at least that’s the hope.
Secondly, it is about positively adding to the public discourse surrounding Jamaica’s logistics hub initiative and its implementation.
It is my firm belief that the Logistics Hub Initiative is Jamaica’s response to building a resilient and sustainable nation in the Fourth Industrial Revolution. I believe this even more now with the COVID-19 crisis.
COVID-19 devasting economic impact
COVID- 19 is having and will have a devasting impact on the Jamaican economy. It is as Finance Minister Clarke said in his statement in Parliament closing the recent budget debates, “Jamaica is in for a massive negative economic shock, which has already begun.” He went further stating that “we can expect a sharp rise in layoffs in the short term. We are likely to see a decline in quarterly GDP for the quarter ending March 2020 and we can certainly expect a sharp contraction in GDP in the first quarter ending June 2020 over the first quarter of the prior year, ending June 2019.”
Minister Clarke is not alone in his grim prognosis. We have regional and international economic governance institutions like the International Monetary Fund (IMF) saying that the world is already in recession and the United Nations Conference on Trade and Development (UNCTAD) predicting a global economic slowdown. UNCTAD “envisage a slowdown in the global economy to under 2% for this year, and that will probably cost in the order of $1 trillion, according to Richard Kozul-Wright, Director, Division on Globalization and Development Strategies at UNCTAD.
The Organisation for Economic Cooperation and Development (OECD) for its part predicts a cut to global GDP growth to 2.4 %.
The World Trade Organization(WTO) is expecting global trade to fall by 13% and 32% in 2020. The International Labour Organization (ILO) estimates that the COVID-19 crisis could wipe out 6.7% of working hours globally in the second quarter of 2020. That is equivalent to 195 million full-time workers. And finally, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) predicts GDP for the Latin American and the Caribbean to fall by at least 1.8%.
Grim indeed!
Global supply chains
There is no doubt that global supply chains have been disrupted, cracked, broken, whichever adjective you want to use.
As such, many may question the efficacy of a growth strategy based in large part on global trade. Fair enough.
However, it is this very disruption, as you will come to see, that presents some unique opportunities for Jamaica and Jamaican businesses. But more on that later.
This article is at its core about how Jamaican business can reposition themselves, stay relevant and top of mind during the crisis and be ready for post-COVID commerce. This exploration in many ways is a documentation of pre-COVID actions and investments by the Government of Jamaica, the private sector and individuals.
A logistics centred economy: Cushion, Shield, Restructure to thrive
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.
Is this too ambitious for Jamaica?
I would say ambitious, yes but achievable. Now is the time for bold moves, as talk and half measures will not get us there.
Open secrets
Let me let you in on one of the biggest open secrets in Jamaica: the logistics hub initiative is alive and well and people are making money from it.
And I don’t mean Goat Island.
Let me be absolutely clear, Goat Island is not and was never the logistics hub.
So where exactly is the logistics hub then?
Here is another open secret, the logistics hub and I don’t mean to sound like Morpheus from the popular movie from the early 2000’s, the Matrix, ‘it is all around you.’ And did I mention people are making money from it.
The logistics hub is and always was about Jamaica as a whole.
Yes, it is about the ports and airport but much more. It is about our business environment, trade facilitation, infrastructure, investment facilitation, the way we do and structure our businesses in manufacturing, agriculture, tourism, BPO, entertainment etc.
The Logistics Hub spans the length and breadth of Jamaica and includes all the economic and social strata of Jamaica from the onion framer in St. Elizabeth, to the mechanic in Clarendon, to the small hotel in Westmoreland, to the BPO worker in St. James, to the food processor in St. Thomas, to the bar owner-operator in St. Mary to any of the large manufacturers or service providers in Kingston and St. Andrew.
Here is yet another open secret, the last one I promise, the Logistics Hub is not only about the logistics industry. That is to say, the business of managing the flow of goods, people, services, data and money from their point of origin to the point of consumption in order to meet the requirements of customers. Nor is it just about the transportation element of the logistics industry. And here again, people are making money from this open secret.
Singapore comparison
Whenever we speak about the logistics hub, 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 now into a trade and business hub.
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.
Jamaica generally accepts that Singapore is a logistics hub, but if you were to go to Singapore and ask them ‘show me your logistics hub?’ I am sure you would be met by a few quizzical stares and shrug of shoulders and even a ruefully answer, with tongue firmly in cheek, ‘so you want to see the whole country?’
What the Singaporeans understand is that their port, airport, roads, public transportation infrastructure and equipment, etc are only part of what makes them a successful logistics hub. They know that the picture is not complete without warehouses, factories, office buildings, special economic zones (SEZ), water, energy, etc.
The Singaporeans would go even further by speaking about their laws, namely the rule of law that provides businesses with commercial certainty, its skilled workforce but more importantly, its skills training infrastructure, its ability to tap into both natural resources and export markets through a network of economic engagement agreements with other nations namely trade agreements, air service agreements, mutual recognition of standards, bi-lateral investment treaties, double taxation, etc.
What the Singaporeans also know is that their logistics hub was not just implemented solely by their government or one or two agencies within the government. 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?
Yes, government provides leadership, the policy and legislative framework, the business, investment and trade environment, major infrastructure, a skills development framework, etc. However, working alongside the government hand-in-hand is their private sector, local and foreign, civil society and individuals making the necessary investments.
Lack of implementation?
Unfortunately, it is far too widespread of a belief that the logistics hub is yet another nine-day wonder or worse that this is yet another Government ‘project’ which is big on talk but short on implementation.
I fully understand the criticism.
However, I do not agree with it. I do not agree because of the transformation I have witnessed in Jamaica since 2012. The Logistics Hub is a growth and economic policy and strategy that has been embraced by both major political parties and across administrations.
What I will agree with though is criticism about the pace of implementation and the public relations and communications to sensitize the public. In that respect, there is a fair argument that both the implementation and sensitization are both slow and far from adequate.
Implementation — a random list
There are many successful stories about Jamaica’s transformation into a logistics centred economy.
Here is a random list: the container terminal being divested, dredging of the Kingston harbour, the Special Economic Zone Act and the creation of the Jamaica Special Economic Zone Authority,
the Norman Manley International divestment, the runway expansion of Sangster International, radar improvements, a double taxation treaty with Italy, the North-South highway completion, the cooperation agreement with Panama, the Trade Information Portal, the Port Community System, the buildout of a near port logistics centre by the Port Authority of Jamaica in Kingston,
the foreign exchange platform of the Bank of Jamaica (BOJ), the expansion of BPO in SEZs, the buildout of Knutsford Express hub in Draxhall, St Ann, the over 400 roads repaired in 2019, the start of the South coast road improvement project, the implementation of the Asycuda Customs management system, the impressive expansion of training by Heart Trust/NTA,
Kingston Wharves SEZ Total Logistics Centre and Global Auto Logistics Centre, the signing and ratification of the WTO’s Trade Facilitation Agreement, online registration and incorporation of businesses, Lydford Logistics SEZ doing food logistics/distribution and argo-processing,
the phytosanitary agreement with China to facilitate the shipment of live lobsters, Seprod entering into manufacturing as a service with Nestle which saw the return of the much loved Betty Milk being locally manufactured, etc.
While this list is impressive, I think such a list does not do justice to the transformation being witnessed. As is, it is just a random list off the top of my head and doesn’t tell a story or as we like to say at the Jamaica Special Economic Zone Authority (JSEZA) connect the dots.
Stay tuned for Part II as we will do just that.
