Achieving the Jamaica Logistics Hub Initiative through planning

Anthony Hylton

Sunday, February 04, 2018

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Two events of recent times confirm, for me, the viability of the vision first articulated in the Jamaica Logistics Hub Initiative (JLHI), ie Jamaica being transformed into the gateway connecting the Americas to the world.

The first was the public unveiling of the 'Jamaica Logistics Hub Initiative: Market Analysis and Master Plan' at The University of the West Indies, Regional Headquarters, on November 16, 2017. The event, coming some two years after the market analysis and master plan was commissioned in 2014 with funding from the World Bank, marks a watershed moment for Jamaica. The plan confirms the viability of the strategy to develop Jamaica as a fast-growing economy capable of delivering fiscal solvency and producing sustained growth in employment by becoming the hub of trading activities in the hemisphere representing a 800-million person consumer market.

The second is the recent launch of Kingston Wharves Limited's (KWL) Total Logistics Facility at the port of Kingston. It represents the Jamaican private sector's enlightened response to the opportunities provided by the special economic zone (SEZ), which is a key element of the JLHI and the main vehicle for attracting private investor interests in this transformational process.

The two events, in combination, confirm for me the catalytic nature of the initiative and the fact that with a fixity of purpose and seamless implementation of the master plan, we can indeed create our Singapore in the Caribbean, right here in Jamaica. It is within our capability; indeed, it is within our grasp. The 449 pages of rich data, analysis, strategies, and recommendations can be summarised in the following manner:

The Jamaica Logistics Hub Initiative: Market Analysis and Master Plan was carried out by world renowned consultants, Nathan Associates and Berger ABAM under a contract won by competitive tender. The plan makes clear that if the strategy is built only around Jamaica's geo-strategic position in the Americas it will not realise the coveted position of being the hub as other regional competitors are planning and acting to seize that advantage.

Projects in the JHLI pipeline

An assessment of the policies, plans, infrastructural programmes, and reform efforts undertaken in the previous Administration, and continued in the current Administration, has led the consultants on the master plan to conclude that it is clear from the analysis that Jamaica is already in the process of implementation.

A review was done of Jamaica's logistics infrastructure, including assessment of performance of Jamaica's ports and roads and rail linkages in order to generate logistics scores for each, composed of time, cost, and variability factors. The review also took account of Jamaica's other logistics assets, including warehouses, IT and telecommunications facilities, as well as utility infrastructure, and recognised that while information was available for publicly funded projects, similar information is not available for several privately funded projects, such as warehouse developments and industrial parks.

Significantly, Jamaica's Logistics Performance Index (LPI) took a quantum leap in 2014 from 124th position to 70th position out of 160 countries ranked. This was due in large part to the number of policy, legislative, and administrative reforms undertaken together with port and road-related development projects.

Some of the pipeline projects classified as strategic to be implemented within a five-year time horizon, as a matter of priority, are as follows:

• Kingston Container Terminal (KCT) concession-related improvements;

• KWL dredging, rehabilitation, expansion and equipment investment;

• German Ship Repair Jamaica Limited dry dock project;

• construction of Caymanas SEZ facilities;

• Port Authority of Jamaica's 80-hectare Port-Centric Logistics Park development with private sector;

• conversion of the railway right of way from SEZ to KCT to Customs-controlled dedicated truck-way;

• conversion of the Caribbean Maritime Institute to a maritime university;

• provision of logistics services training at the HEART Trust/NTA;

• construction of the KWL Total Logistics Facility;

• JP Cold Storage Facility infrastructure investment;

• Norman Manley International Airport privatisation, including modifications to the capital structure;

• improvement to the north coast highway (A1: Ocho Rios to Montego Bay);

• North-South link of the Highway 2000 Project;

• investment in the south coast highway, including Harbour View to Port Antonio; and

• expansion of air cargo warehouses and cold storage facilities in Sangster International Airport.

The master plan analysis also took account of developments in the energy sector, where amendments to the All-Island Electric Licence in the enacted Electricity Act allows for SEZ developers, large-scale industrial users, or SEZ occupants to benefit from a strategic “economic development tariff” that would make wholesale electricity rate regionally competitive.

Account was also taken of the introduction of liquefied natural gas (LNG) and the consequential economic and environmental benefits that it would confer on the logistics sector. First in making possible the wide-scale development in cold chain logistics, whereby the shelf-life of agriculture products could be extended, thus improving the yields for farmers and exporters to distant markets. Also, the increased use of LNG as alternative fuel for the new class of fuel-efficient and environmentally-friendly vessels will redound to Jamaica's short- to long-term benefit.

Competitiveness benchmarks

Jamaica's competitiveness was assessed against eight regional countries in four categories: infrastructure, business environment, human capital, and technology. Based on the analysis which indicates that Jamaica's competitive position currently is in the lower quarter of competitiveness, the conclusion however is that the opportunity and likelihood of Jamaica improving its position in the short to medium term was very good assuming improvements in all components.

Ongoing logistics asset developments in port expansion and warehousing developments, together with improvements in both maritime and air connectivity, makes it highly likely that Jamaica will continue to improve its competitiveness regionally and on the LPI.

Of particular concern for the analysts is the existing situation at the Customs agency which requires urgent action to modernise and to make more efficient and cost-effective the use of Customs, which is a prerequisite for global competitiveness.

Industry analysis

Based on analyses derived from a SWOT analysis of Jamaica's investment trends, as well as survey results from local and international investors, key industry sectors and subsectors, along with industry clusters, are recommended for prioritisation by the JLHI.

It was determined that the commodities of most interest to investors located in the JLHI are those with the highest trade flow volumes and values identified through this analysis (eg, electric, water, spare and soil heaters; TV receivers, parts and accessories for motor vehicles) as well as intermediate products that maybe imported to Jamaica for value-added activities (eg, assembly of automobiles and motorcycles) and subsequently exported to the US and Latin American markets as finished products.

On this basis, the master plan identifies the key industries most suited to take advantage of Jamaica's strategic position and capitalise on its comparative advantage namely:

• agro-processing industry

• pharmaceutical industry

• parts and accessories for motor vehicles

• electrical products

• medical devices

• refrigerators, freezers and other home appliances

• ICT and business process outsourcing (BPO)

• logistics and distribution

• aluminium industry

Also, three primary industry clusters which should be prioritised when assigning space for industrial development in the JLHI were identified, namely: light manufacturing, BPO, and transportation and logistics.

Caymanas Special Economic Zone

This particular project was the subject of much debate and controversy, resulting from a difference of opinion between my predecessor at the Ministry of Industry, Investment & Commerce and myself. The disagreement centred on the fact that the lands located on the north side of the Caymanas Estate were earmarked to provide lands for industrial and residential uses to proposed individual lot owners without appreciating the strategic value of these lands as part of a broader vision such as the JLHI.

Significantly, the JLHI master plan concludes that the Caymanas SEZ represents the following value proposition and potential as: a modern and sustainable port-centric facility at the heart of the global logistics hub, with benefits including up to 524 hectares of greenfield land for industrial and other development; direct access to KCT; modern, state-of-the-art and environmentally-friendly facilities suitable for light manufacturing and logistics industries; access to skilled and scalable labour; and state-of-the-art residential, commercial and recreational facilities.

Land-use master plan

It is to be appreciated that the most suitable lands to support the JLHI are not always available. Therefore, the planning process for development of the logistics hub must involve the identification and sequestration of the best available lands well before it is needed, and certainly within the 20-year time horizon set for the total build-out of the JLHI.

The first five years will focus on near-port logistics facilities and other strategically located infrastructure as determined by the industry analysis, which itself is based on both demand-and-supply driven developments. Spatial planning is utilised to determine the physical layout of key infrastructures and their distribution nationally. Part II of the analysis provides important details of land usage and the citation of strategic infrastructure, inclusive of size of land required for key facilities. In the final analysis, a total of some 3,900 hectares of land spread throughout Jamaica in both urban and rural areas have been identified as strategic locations for the planned development of the JLHI, including SEZs.

Gap Analysis: Where are we now?

The master plan identifies the structural and non-structural requirements that must be addressed in order to successfully implement the JLHI. Structural and non-structural gaps were identified according to the following categories:

• existing ordinances and planning controls

• legal, policy, and regulatory

• maritime infrastructure

• aviation infrastructure

• industrial infrastructure

• utilities infrastructure

• road and rail infrastructure

• education and skills preparation

Existing shortcomings are identified for each category and recommendations are made to mitigate the gaps. For structural gaps, land requirements and order-of-magnitude cost estimates for development are identified in accordance with the noted land-use master plan. The gap analysis further identifies externalities that may undermine the success of the JLHI and sound a cautionary note.

Chief among the caution given and recommendations made is the need for changing Jamaica's development planning framework, due largely to the differences in coordination of the planning processes across different levels of government and agencies which is not efficient.

The Nathan team proposes two key interventions for closing the existing gaps in the planning development framework. First, leveraging private contributions for land acquisition, resettlement; and second, the creation of a one stop shop to streamline the development application approval process.

Development strategy

Importantly, the study outlines the development strategy that Jamaica must pursue in order to achieve the JLHI vision and fulfil the country's role in growing its economy and contributing to fiscal stability. The development strategy consists of seven enablers, 65 associated goals, and 105 action items. The strategic enablers include:

1. improving institutional effectiveness;

2. ensuring supportive policies and legislative and regulatory frameworks;

3. enhancing workforce capacity;

4. developing efficient and productive infrastructure;

5. providing efficient transport logistics systems;

6. facilitating sustainable financing; and

7. promoting the JLHI.

The broad development strategy outlined in the JLHI involves a 'whole of government' approach, with most ministries having important roles to play in policy formulation as well as project implementation. The plan confirms, that while Jamaica already has some of the key infrastructure assets needed to successfully build-out the JHLI, much more work needs to be done in both the hard infrastructure (ports, roads, rails, warehouses, factories, etc) and soft infrastructure (sector policies around education and training, Customs reform, etc) as well as several legislative and regulatory reform measures to improve the ease and speed of doing business.

Implementation of strategy

The nature and complexity of the comprehensive development strategy (inclusive of the SEZs) require direct oversight for the successful implementation of the enablers that will allow Jamaica to realise its value proposition. The consultants, in accordance with global best practices, recommend that the strategy will benefit from direct supervision from the Office of the Prime Minister.

I concur.

Ultimately, the master plan concludes that: “The promise of the development strategy is that it focuses on providing logistics services and assets while aligning and strengthening finances, people, systems, policies, processes, and administration. Strategy success also relies on an organisational culture committed to collaboration and innovation in all its activities. Through commitment to the development strategy, Jamaica will realise its highest potential as a global logistics hub for Jamaica and beyond.”

G Anthony Hylton is a Member of Parliament and Opposition spokesman on national development, physical planning and the National Housing Trust. Send comments to the Observer or

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