Jamaica is a logistics hub, it just doesn’t know it yet
I am always on the lookout for positive news on the trade and investment front that impact Jamaica. And the UNCTAD’s Review of Maritime Transportation 2022 is spot on:
Some hub countries increased vessel capacity. Panama increased its deployed capacity by 0.9% and Jamaica by 13.5% as they gained from the capacity redeployment to the United States.
This tidbit of good news is interesting for its dual implications:
- It appears to support a wider trend of the reconfiguration of global supply and value chains.
- Jamaica is not only well positioned geographically but infrastructurally and economically to benefit from this reconfiguration
After reading that Jamaica was up 13.5% in vessel capacity, I had an instant thought, but I dear not say it, well at least not out loud. But as hard as tried I could not shake it and I just had to say it out loud, even with all the implications, and maybe even because of them.
Ok, I will be bold and say it:
Jamaica is a logistics hub!
Unfortunately, Jamaica is a logistics hub, it just doesn’t know it yet. The key word here is yet.
Yet.
This situation reminds me of the famous quote by author William Gibson, “the future is already here, it is just not evenly distributed.”
Jamaica’s logistics hub is here, it is just not evenly distributed.
I have said it before, on more than one occasion, I firmly believe that Jamaica’s Global Logistics Hub Initiative is Jamaica’s response for building a competitive, resilient and sustainable nation in the era of the Fourth Industrial Revolution.
As contradictory as it may seem to this belief, I also believe that Jamaica is a logistics hub, it just doesn’t know it yet.
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 creating other opportunities. Here are some examples of what I mean, all of which are in 2022 alone:
- Hart to develop US$8m cement distribution centre in MoBay
- Expansion coming for port of Kingston
- Jamaica and TT Sign MoU to Strengthen Trade Ties
- Caribbean’s first electric vehicle repair certification programme launched
- Tank-Weld selling trucks to Trinidad, Guyana
- Highway project still on track for 2023 deadline
- Mailpac to partner with VirtualMart for grocery delivery
- More BPO Offices Open In Portmore
- Wisynco’s Cuba push
- PAC Kingston Airport Limited Commended
- Custom brokers set to capitalise on burgeoning logistics economy
Like I said, Jamaica is a logistics hub, it just don’t know it yet.
A more comprehensive and historical list of #hubactive activities can be found here:
Jamaica’s Logistics Hub — a working definition
This random selection of 11 #hubactive activities boils down to three essential things:
- Connectivity
- Flows
- Management of connectivity and flows
These three things not only underpins Jamaica’s logistics hub it also is at the heart of the Fourth Industrial Resolution.
Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, explains the Fourth Industrial Revolution in the following way:
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
The Logistics Hub in essence is the physical and technological means to organize connectivity, flows and Management of connectivity and flow. Specifically, the movement, distribution or production of various flows (material, human, financial, data, etc.) in the economy and connect those flows to the global economy. In the Jamaican context this is achieved through the use of one or more (in combination) of the following parts of Jamaica’s Global Logistics Hub:
Maritime + Aviation + Production/Distribution + Data/ICT + International Financial Services + Internal Logistics = Jamaica’s Global Logistics Hub
The reconfiguration of global supply and value chains
While there has been much talk of de-globalization, the world has never been more connected.
Global value chains have been built on these flows, creating a more prosperous world. However, in light of the pandemic, Russia’s invasion of Ukraine, and years of rising tensions between the United States and China, some have speculated that the world is already deglobalizing. New MGI analysis finds a more nuanced reality. The world remains deeply interconnected, and flows have proved remarkably resilient during the most recent turbulence.
However, what we are witnessing is a reconfiguration of global trade and commerce. This reconfiguration is being driven by knowledge intensive industries characterized by flows of data, services, intellectual property, and students.
Growth in global flows is now being driven by intangibles, services, and talent. They have picked up the baton from goods trade, whose growth as a share of the global economy stabilized around 2008 after 30 years of rapid expansion. Flows of services, international students, and intellectual property grew about twice as fast as goods flows in 2010–19. Within services, flows of knowledge-intensive services — including professional services, government services, IT services, and telecommunications — are growing the fastest. Data flows grew at nearly 50 percent annually.
The author Tom Friedman in his book, Thank You for being late: An Optimist’s Guide to Thriving in the Age of Accelerations, was right:
[T]his isn’t complicated: the most educated people who plug into the most flows and enjoy the best governance and infrastructure win. — Thomas Friedman
Simple!
The rise of ‘intangibles’ side of trade to surpass goods trade is not new. In fact, in Globalization in Transition: The Future of Trade and Value Chains, McKinsey, identified that:
“In 2017, gross trade in services totaled $5.1 trillion, a figure dwarfed by the $17.3 trillion global goods trade. But trade in services has grown more than 60 percent faster than goods trade over the past decade.”
The Covid-19 pandemic just further accelerated this change.
While the traditional drivers of globalization, the ‘tangibles’ of manufactured goods, natural resources, and capital have been now surpassed by intangibles they have by no means faded into irrelevance. Far from it. In fact, it is best to view tangibles as supporting and being supported by the intangibles.
As such the tangibles are also undergoing their own global reconfiguration.
In in a paper published in 2020 — Risk, reliance, Rebalancing in global value chains — it was estimated that between 2020 and 2025:
16 to 26% of exports, worth $2.9 trillion to $4.6 trillion in 2018, could be in play — whether that involves reverting to domestic production, nearshoring, or new rounds of offshoring to new locations.
However, the paper goes on further to sound a cautionary note that “it should be noted that this is not a forecast: it is a rough estimate of how much global trade could relocate in the next five years, not an assertion that it will actually move.” Cautionary note or not the potential of between USD $2.9 — $4.6 trillion shifting in the global trading system over a 5 year period should arouse more than just a passing curiosity in Jamaican manufacturing and policy makers alike.
Let me quantify that a bit just to place it in context and zoom in on the opportunity for Jamaica.
The chart below (Figure 1) is taken from a piece I did in May of 2022 as part of the Jamaica Manufactures and Exporters celebration of National Exporters Month. The piece, The emerging opportunities for Jamaican manufacturing from the ‘new normal’ can be found here (page 52–53).
Figure 1, which is based on the data from the Risk, reliance, Rebalancing in global value chains study sets out the total global export value, along with the value of the possible potential export relocation and lastly the value to Jamaican manufacturing if we captured 0.01%. Three industries were focused on, Food & Beverage (Agro-processing), Furniture and Pharmaceuticals that Jamaica has good prospects in, according to the National Five-Year Manufacturing Strategy.
If Jamaica focused on capturing just paltry one one-hundredth of the possible potential export relocation for all three of industries that would translate to USD$ 240,000,000 — $390,690,000 being added to our exports. Using a conversion rate of 155 to 1 that would translate to J$37,200,000,000 — $61,519,500,000. By any measure that would be a sizable dent in the Manufacturing Strategy target of J$81 billion.
Jamaica positioned to benefit from this reconfiguration
What Jamaica, the Logistics Hub, is offering to local businesses (large and small), multinationals and the global trading system is a node of resilience.
Jamaica is a nearshore location in the 1- billion person Americas market for both manufacturing and services that adds further redundancy, stability, responsiveness to supply chains by acting as a platform to connect various production and services networks.
Stay tune for Part II where I will go further down the rabbit hole and explain that Jamaica is not only well positioned to take advantage of the reconfigurations taking place on global trade but has already responded and taken advantage.
Jamaica is a logistics hub, it just doesn’t know it yet!
The views expressed in this article are those of the author and do not necessarily reflect those of the Government of Jamaica.
*This article was originally published on my LinkedIn.
