CHAIRMAN of the logistics hub task force subcommittee on education, Dr Fritz Pinnock has dismissed the idea that when the expansion of the Panama Canal is complete, it may still not see the volumes of cargo that it did before the 2008 global economic meltdown.

This would have implications for Jamaica if it becomes the world’s fourth logistics point and the level of trans-shipment traffic that the Government expects the economy to benefit from when the Canal is widened. Massive expansion work is now underway to complete a third lane in the Canal by next April, so that it can accommodate the new generation Panamax vessels.

Dr Pinnock told the Jamaica Observer that he fully expects an increase in trans-shipment activities through the Canal once the third lane is finished. In fact, he said, a further boom can be expected when the proposed Nicaraguan Canal is created.

Although chief executive officer of the Panama Canal Authority Jorge Quijano has himself said that trade has declined since 2007, when about 12.6 million containers passed through the Canal, to 11.6 million containers in 2014, Dr Pinnock has chalked this occurrence up to “a realignment of trade” to other routes because of the limitations of the Canal in its current state.

He firmly believes that the notion ‘If you build it, they will come’ still holds, where shipping is concerned. “Shipping operates in a global space and it takes years to build infrastructure… the shift away from the Panama Canal now is not a decline in traffic, but a shift to the other competing routes, temporarily. As soon as the Canal expands, a lot of that cargo, and more, is going to come back to this trade route,” he asserted.

While work on the the US$5.2-billion expansion races ahead, the mega vessels are routed to the US via Egypt’s Suez Canal, and by rail from the United States (US) west to east coast. These routes, while they have no container size limitations, are longer and more expensive. But they have taken some of the traffic away from the Panama Canal for now, until the third lane is ready, Pinnock said.

He pointed out that as globalisation saw a shift in trans-shipment, from North to South, to the East, to the West, the primary shortcut to the US became the preferred route, and Jamaica too had benefited as a

trans-shipment point. Then came 2008, when the recession rocked the US and the rest of the world.

“When the recession came, it meant that shipping lines were forced to look into their costs… The ships have been getting larger, because of economies of scale. Right now, because of the size of the ships, they have to seek alternate routes, because they cannot come through the Canal. The third lane will be three times larger than the existing lanes,” he outlined. The world’s largest container ship as of January 2015 — the MSC Oscar — now carries up to 19224 TEUs (twenty-foot equivalent units).

Painting Jamaica and the Government’s logistics initiative into this bigger picture, Dr Pinnock explained that as the global economic turmoil forced shipping lines to cut back on trans-shipment costs, it has also resulted in a demand for transformation of infrastructure and the supporting systems.

“The shipping lines are calling for a new type of port infrastructure. The traditional role of ports — to receive cargo, to store them, and deliver them — in this (Jamaican) context is now a cost to shipping lines, because nine out of every 10 containers coming out of Jamaica goes out empty. Our exports are services. That’s the reality. Only 10 per cent

of the cargo that passes through our ports is

for domestic consumption. The rest is trans-shipment,” Dr Pinnock said.

He likened the situation to a taxi transporting passengers at full capacity to Portmore via the toll road, but returning to Kingston with only one passenger, and having to pay a toll back and forth out of the fares. “You have to pay and extensive “toll” to carry the containers, but you also have to pay an expensive toll to carry them back out empty,” he reasoned.

Therefore, Dr Pinnock said: “The shipping lines have been putting the pressure on the ports, saying if you want us to come, you have to give us a new type of economic structure. So there is a call now for ports to transform from trans-shipment ports

to becoming part of the

value chain”.

“We have divested the port of Kingston to the third largest shipping line in the world — CMA CGM — which is a good move, but that alone cannot transform the economy. Handling empty and full containers do not add value to the economy. The real opportunity for Jamaica is to create a new type of port infrastructure,” he said.

Dr Pinnock, who is also executive director of the Caribbean Maritime Institute, which has been carrying out extensive education and training in logistics to beef up human capital, said shippers now want ports with vast amounts of adjoining lands in order to accommodate the value chain businesses. He said Jamaica’s port does not currently have this type of space, which is why the Portland Bight/Goat Islands was placed on the table for development by the Chinese.

“In the Goat Islands context, what China Harbour had put forward is a mega plan to transform the economy. They have asked for 6,000 acres,” he said, noting that in fact, ZPMC, which makes 70 per cent of the world’s cranes, had made commitments to CHEC from which Jamaica could benefit. “When (ZPMC) assembles a big crane, you can’t carry more than two on a ship; what they thought was, why not send the parts of the crane near to their market. This is where Jamaica’s opportunity lies,” Dr Pinnock elaborated.

Citing other opportunities for Jamaica to cash in on, he pointed to the employment that would be created through value-added operations, such as product assembly and detailing for large US retail chains. He stressed that this is where small and medium-sized businesses would blossom.

At the same time, Dr Pinnock said that both the proposed Nicaraguan Canal and the widened Panama Canal support the island’s opportunities in logistics.

“We have no benefit from cargo that is now moving to the west coast of the US by the Suez Canal, but anything that comes through the Panama Canal, or the future Nicaraguan Canal, it is within our reach…we can attract the traffic passing through,” he said.

Further expounding on the opportunities which the Government expects to flow into its concept of a logistics centred economy, he pointed out that with the geopolitical shift the world is experiencing, countries such as China have a vested interest in the development of new global gateways.

It comes as no surprise, then, that China Harbour Engineering (CHEC), which is now a fixture in the Jamaican infrastructural development landscape, earlier this year announced that it is prepared to finance the creation of a fourth lane for the Panama Canal. The Panama Canal Authority says this could cost upwards of US$17 billion.

A fourth lane would allow the Canal to accommodate even bigger ships, which can carry 20,000 TEUs.

“It is in their (China’s) interest to see to a further expansion of the Panama Canal, because the third lane, is not big enough…the Chinese cargo destined for the South American market, they don’t like to send it through the US because it becomes more cumbersome for them. The current two access (routes) restricts the volume of goods going to South America, so it is in the interest of China to now create an expanded shortcut, which can be the Panama Canal, and or the newly proposed Nicaraguan Canal. I personally believe both will happen,” Dr Pinnock stated.

Some Jamaicans have expressed scepticism, even hostility in some instances, towards what is seen as the “selling out” of Jamaica, to China, but Dr Pinnock holds no such sentiments.

“A rising tide floats all ships. China is now a global force. When the Spanish hotels moved into Jamaica, 100 per cent of the workers were Spanish. Today, 95 per cent of them are Jamaicans, because of knowledge transfer. Global capital has no nationality. We have to see investment as investment. It has no colour, it has no nationality,” he said.

Dr Pinnock said that tangible changes are already happening in the economy, but acknowledged that the average Jamaican may not easily make the connection between the logistics hub and other developments.

He said also that significant headway has been made to put in place legislation to get the infrastructure development going for logistics, while the CMI has trained over 35,000 people in understanding logistics.

“Companies have been investing… Kingston Wharves have spent $2 billion to transform their facility. Lots of companies are now setting up in Jamaica. It’s changing, but the change that we require will not come overnight. It’s not a project. It’s not a place. It’s a whole shift in our process. The context is that we have to think of a larger pie, and a smaller slice from which we get more,” the CMI

head stated.