Making Jamaica's logistic hub a reality

Making Jamaica's logistic hub a reality

Wednesday, April 09, 2014

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THE Jamaican Government has declared that a viable logistics hub can become a game-changer for the national economy, facilitating businesses and creating much needed employment.

Minister of Industry and Commerce Anthony Hylton has continuously trumpeted the benefits a logistics hub will bring to Jamaica and JAMPRO has taken on Tastey Blackman as its new manager of logistics and emerging markets.

Only last month, the government signed a framework agreement with China Harbour Engineering Company (CHEC) for the development of a trans-shipment hub in the Portland Bight.

The proposed trans-shipment hub, which is part of the logistics hub initiative, is expected to create 2,000 jobs during the construction phase, and 10,000 jobs when the project is fully implemented

"After all the required studies are carried out, including the environmental impact assessment, this project will be going ahead.

"If we can find a project which provides productive employment for our citizens... and at the same time restricts any damage, then we have a win-win situation," said Minister of Transport, Dr. Omar Davies.

US$15 billion endeavour

The World Bank's International Finance Corporation says it will take around US$15 billion of financing for Jamaica to establish a world-class logistics hub, practically its entire GDP. Therefore it will have to rely on Private /Public Sector Partnerships (PPP) if the logistics hub is to become a reality as it will prove too much of an ask for Jamaica's private sector.

The 90-year-old Panama Canal is undergoing a US$5 billion expansion, which is due for completion in 2015. Jamaica will have to study closely how Panama goes about executing the canal expansion if the logistics hub is to become a reality.

Speaking at an EXIM Bank Logistics Hub Discussion Forum at the Knutsford Court Hotel, the Jamaica Chamber of Commerce president, Francis Kennedy, gave a fulsome account of the task facing Jamaica and the realities that it presently operates within.

Lack of infrastructure

He said that Jamaica does not have at this time the physical infrastructure to become an international logistics hub as is the case with Singapore and Dubai.

"We do not have a by-pass road from the Norman Manley Airport through downtown Kingston to St Catherine and Clarendon Plains. Currently, Port Royal Street and Harbour Street are collapsing due to over 100-year clay sewerage and waste water drains.

"In the Kingston and Montego Bay Metropolitan areas we have minimal good/first-class available office space. There are limited hotel rooms available in Kingston and we are at over 90 per cent capacity.

"Jamaica's public transportation is primitive. There is enormous traffic congestion in both metropolitan Kingston and Montego Bay. It takes employees some two plus hours to go to and from work each way," said Kennedy.

Public/private partnerships

The President of the JCC believes that there has to be a partnership between the business community and the public sector because neither side has all the resources that are required to succeed in isolation.

At the EXIM Bank Forum, Kennedy said in the future, Jamaican businesses and investors will have to become more receptive to public-private partnerships in such areas as infrastructure — that is, not only as contractors but as co-owners.

"If, for instance, a modern air cargo facility is to be built at Vernamfield, why shouldn't it be privately developed? If new corridors have to be built to link a commercial zone in St Catherine to a port facility in Kingston Harbour, why couldn't they be private sector owned and operated as toll routes? Or for that matter put into place build-lease-operate public-private partnerships?

"To my mind, the extent that the business and investment community will benefit from the initiative is directly related to what it puts into the process,'' said Kennedy.

He pointed to the importance of putting in place the legislative and regulatory framework to underpin the types of activities that are envisaged — whether it be for the creation of an international finance centre, a modern tax regime, or the establishment of commercial zones to replace free zones.

"This, I can say with confidence, is one area that has seen an unprecedented public sector/private sector partnership, which I believe should be a model for the type of joint approach that will stand us in good stead as we tackle the myriad other problems that face us.

"We do have issues with the pace with which a number of these things are being done, and there is a long agenda of things that still remain to be done in this area — but I think there is no question that the degree of collaboration that we have so far enjoyed has been outstanding,'' said Kennedy.

A master plan

The Jamaica Chamber of Commerce had proposed to the government and the World Bank in January 2013, that there is a need
for the preparation and implementation of a 20-year master development plan for the following areas:

1. Kingston Harbour shoreline — Port Royal to Kingston to Hellshire

2. Transportation systems for Kingston and Montego Bay

3. Caymanas logistics hubs

4. Montego Bay and Falmouth

The World Bank has agreed to this and has allocated grant funding to undertake the above master development plans.

Special economic zones

Kennedy, who has garnered a reputation as one of the leading luminaries of Jamaica's private sector has taken a more holistic view of the viability of Jamaica acting as a viable logistic hub. Not for him are trite sound bites that induce a feel-good sensibility that creates a false impression.

He declared that if the hub is to succeed then Jamaica will have to establish special economic zones.

The WTO has mandated that all current free zones have to be closed down by the end of 2015. Singapore, Dubai, Rotterdam and Panama have established special economic zones. There are many differences between a free zone and special economic zone. The main one is that the operator of a free zone has to be the owner of both the import and export of cargo. Not so in a special economic zone — there can be several owners of both inbound and outbound cargoes.

The Ministry of Industry, Investment and Commerce has established a joint private/public sector working group, under the chair of Patricia Francis to develop terms of reference and draft legislation for special economic zones with a mandated completion date of May 31, 2014.

Skilled workforce

A prerequisite of a logistics hub is that a country has a skilled workforce. Singapore, Dubai, Rotterdam, Panama readily spring to mind. So what of Jamaica?

To what extent are Jamaicans adequately trained and internationally certified to carry out the types of jobs that are anticipated will come into being?

According to Kennedy an honest answer will have to be at this point, no!

"But is the responsibility to change this situation totally the public sector's? What investments is the private sector making to ensure that their own workforce is certified according to stringent international standards?" said the former Grace Kennedy senior executive.

International trade agreements

Kennedy declared that he is not convinced that the business community is paying much attention to strategically looking at the types of trade agreements that should be prioritised given the markets anticipated to be targeted.

In the JCC's view, the timelines for Jamaica to have its first multi-use logistics park should be as follows:

1. Caymanas 200-acre logistics park — open and operational July 1, 2016

2. Commerce construction Caymanas 200-acre logistics park — 2nd quarter 2015

3. Negotiate and finalise agreements with international/Jamaican investors — 4th quarter 2014 to 2nd quarter 2015.

"Taking into account that the expansion of the Panama Canal is now scheduled to be completed by December 2015, Jamaica should identify what industries we should be targeting to have our first special economic zone opened and be operational during the first half of 2016,'' said Kennedy.

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