Pandohie's prescription

Pandohie's prescription

JMEA president gives his outlook on manufacturing, exports in 2021


Wednesday, January 27, 2021

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EDITOR'S NOTE - The following article is written by the president of the Jamaica Manufacturers and Exporters Association, Richard Pandohie.

THE local and global situation continues to be uncertain, however, unlike most of 2020, there are now approved vaccines and the expectation is that Jamaica's major trading partners will have most of their high-risk population vaccinated by September 2021.

This should see the beginning of a return to normalcy in the world and this will lead to a positive impact on Jamaica's economy, especially the tourism sector.

For the first nine months of 2021, the projection for the manufacturing and export industry continues to be negative due to the following:

- Further fallout in the tourism sector as the USA, UK and Canada tighten their enforcement for travellers;

- Supply chain disruptions which may result in many companies struggling to get raw material.;

- Negative cashflow impact as customers take longer to pay and far more cash gets tied up in raw material to mitigate against supply risk.

- Continued local enforcement — primarily the curfews which will continue to suppress major domestic activities in sectors such as entertainment, hospitality and small retail operations. We believe the curfews are going to continue for most of the year, as it appears to be part of the crime-suppression tool.

For the very impactful petroleum sub-industry, reduced aviation activities will continue to lead the factors contributing to the massive downturn in fuel sales. Additionally, Guyana's entry as significant petroleum supplier will reduce Petrojam's export.

The continued closure of JISCO has also weighed negatively on the manufacturing outlook.

However, it is not all negative as it relates to industry.

There has been increase in the exports of foods, primarily driven by increased demand for healthier, more natural products.

Our agro-processors are seeing a major uplift, with several having to increase production and hire more staff to keep up with increased export demand.

There has been an increase in the chemicals sub-industry also as several companies diversified their manufacturing to produce more chemicals such as sanitising gel and bleach, which are required in the COVID-19 battle locally and overseas. However as good as these exports are, they cannot offset the reduced production of mineral fuels and crude materials.

Massive increases in shipping costs out of Asia, especially China, could lead to a more competitive price position of local production vis--vis imported finished goods, thus allowing us to gain a greater share of the market in Jamaica and perhaps the Caribbean.

We project that schools will reopen in September, which will be an important boost for our industry — especially in the food, beverage, chemical and textile subsectors.

It has been tremendously disappointing that, as a country, we have done very little during the pandemic to diversify the economic base and strengthen the productive sector. We have been like a boat on the ocean without an engine, hoping that favourable winds take us to a good destination.

We have lost valuable time, but it is not too late to:

* Have public-private sector partnership to drive innovation through tax credits, especially for innovations that utilise local products;

*Implement low-interest funding to facilitate investment in digitisation in oorder to encourage higher productivity;

*Utilise the agro-processing pillar, one of our biggest opportunities for gross domestic product (GDP) growth but the current strategies seem to be a recycling of the same ideas as opposed to a paradigm shift.

*Reduce obstacles to allow for micro and small businesses to export their products, and to reduce the export processing customs administration fee (CAF) for products sold through e-commerce below US$3,500;

*Grant marketing and promotional tax credit up to a maximum of US$30,000 to penetrate and promote Jamaican brands in the global village; to be done in conjunction with Jampro.

* Put an end to the delay to in implementing the GOJ Procurement Offset and Set-Aside regulations.

- Cease delaying Jamaica becoming a signatory to the Madrid Protocol, which will enhance the protection of Jamaican brands in the global market.

If we pick a few high-impact things and focus on execution, we will be able to come out of this with a better chance of a sharp recovery. By the last quarter (Oct-Dec) we anticipate that widescale global vaccination programmes plus our own vaccination programme in Jamaica will result in us beginning to see a return to normalcy, and therefore it is anticipated that we will move from a negative to a positive outlook. Overall, for the year the anticipated growth in the manufacturing and export sub-sector should be a decline of 4-6 per cent.

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