Roadblocks to exportWednesday, September 15, 2021
John Mahfood, president of the Jamaica Manufacturers' and Exporters' Association (JMEA), is indicating that based on research done by that body, Jamaican producers engaged in export remain challenged by several changes.
These changes range from access to foreign exchange, increases in the cost of shipping, additional export duties and an overall reduction in productivity since the onset of the novel coronavirus pandemic.
There are also challenges with packaging materials, difficulties in airfreight and shipping by sea, plus disruptions in port operations.
Small and medium-sized businesses targeting Caricom markets are especially challenged by these factors. Data shared from the Statistical Institute of Jamaica (Statin) indicate that exports to the island's top ten trading Caricom partners slipped by 15 per cent or approximately $12 billion in 2020.
The agency's latest trade bulletin said there was improvement in the first quarter of 2021. But there is still a way to go to reach 2019 levels. The island's largest export markets in the trading bloc are Trinidad and Tobago, Suriname, Guyana and Barbados.
In 2020 exports from Jamaica to Trinidad and Tobago were comparatively lower with $13.47 billion in exports compared to $24.72 billion exported to this nation in 2019.
The same trend was seen for Suriname ($2 billion in exports in 2020 vs $6.7 billion in 2019), for Guyana ($7.53 billion in 2020 vs $19.41 billion in exports in 2019 ) and Barbados ( $ 12.9 billion in exports 2019 vs $4 billion in 2020).
Total exports to the Caricom region for January to April 2021 were valued at US$28 million, an increase of seven per cent when compared to the US$26.1 million recorded for the comparable 2020 period.
This was primarily due to increased exports of “Mineral Fuels'' and “Beverages & Tobacco”. Export earnings from “Mineral Fuels” amounted to US$6.8 million, up from the US$3.2 million earned for the similar 2020 period.
Exports of “Beverages & Tobacco '' were valued at US$5.6 million, when compared to the US$5.3 million recorded in the comparable 2020 period.
Mahfood, outlined that difficulties encountered with Caricom markets and other export markets since COVID-19 include the challenge faced by exporters in “the issue of acquiring sufficient foreign exchange to engage with the payments for distributors.”
The availability of US dollars has been affected by contractions which occurred in tourism, with the Jamaican dollar moving from a low of $135: US1 to a high of $156: US$1 since March 2020.
Companies are also having difficulties finding the additional funds to import raw materials into Jamaica. \For example, to import finished goods in Jamaica, there is a 20 per cent GCT/sales tax and 20 per cent import duty on the total cost of goods plus increased freight.
Mahfood noted that while GCT is 15 per cent, an additional five per cent is collected at the port and the manufacturer has to claim back for it. Therefore, more money is needed for excess duties plus sales tax/GCT. In addition, the JMEA notes, there is also duty on the increased freight costs. Therefore, companies have difficulty in shipping their raw materials. Meanwhile shipping costs have increased significantly, also affecting input costs.
Increase in shipping costs
Mahfood said imports from the Far East remain “a problem for our manufacturers. A lot of Jamaican companies are importing their raw materials for production from Singapore, Malaysia and Thailand. This cost of which has doubled over the last year from $2,000 or less for a 20ft container to $11,000-$12,000. This affected the production as access to these inputs is limited.”
Additionally, the JMEA head noted that the cost of shipping solutions within Caricom is quite exorbitant and acts as a deterrent to MSMEs whose finances are already experiencing losses in income due to “a lack of productivity and output from the lockdowns and other exogenous threats.”
He said also, “ When there is a significant disruption in the chain supply within a company's export strategy this translates to reduced output in the bid to maintain or even expand Caricom demand.”
Disruption in port operations
COVID-19 negatively impacted international and regional port operations. Consequently, there are delays in the movement of goods which limit the access of manufacturers to key ingredients/raw materials for production.
This will affect production and sales. More specifically this disruption has been perpetuated by the disruption of port operations. The disruptions have been triggered by outbreaks as well as protocols for COVID-19 management.
Difficulties in air freight
Especially for the Caricom region, there are limited airline spaces as air lift capacity for cargo has been reduced, Mahfood outlined. “There are reductions in air shipment out of Jamaica. With the closure of the Trinidadian borders due to the COVID-19 pandemic, Caribbean Airlines significantly reduced cargo capacity which has been limiting exports from Jamaica.”
Difficulties in shipping by sea
Shipping by sea poses a challenge to smaller businesses in the region that cannot fill a container. Mahfood noted, “Consolidation of agricultural produce presents a problem as there is the fear of contamination from one company's goods to another. This is also compounded by the aforementioned disruption in port operations.
Mahfood also indicated that agro-businesses, like most, had to restructure their operations as well as staffing in response to the pandemic.
“The JMEA Productive Sector COVID-19 Impact Survey found that 20 per cent experienced challenges with workforce compliance and absenteeism. Some members expressed that it has been difficult to have a large percentage of their workforce working from home, especially production workers.
“In addition, staff face difficulty travelling to and from work within the curfew hours, while some workers simply are not able to attend work as often because their children take part in online school.”
“A much larger issue is getting 100 per cent compliance from staff with respect to the COVID-19 office/plant protocols - social distancing, mask-wearing - and further maintaining this in their personal lives. With the COVID-19 protocols in place, businesses also reported having to constantly monitor the health of their staff and send them home where necessary.
“Overall, the spread of the COVID-19 and the measures instituted to contain its spread have caused members to experience a reduction in their staff. Conclusively, the reduction in staff as well as maintaining COVID protocols have resulted in decreased productivity and output which have also put a dent in export capacity,” Mahfood said.
Shortage of packaging materials
The JMEA head said there continues to be a shortage of carton boxes for packaging in Jamaica.
“As a result, manufacturers/exporters are not able to meet the demands of the market. Manufacturers speak 0f a global shortage in packaging materials and the demand for these essentials have increased over the COVID-19 period. Therefore, it requires companies to order in advance. However, this is further compounded by the fact that many international ports have experienced a disruption in their operations that have caused a ripple effect on the turnaround time for packaging exports. Consequently, this affects the levels of productivity and output which impedes Jamaica's export to Caricom and other markets,“ Mahfood said.
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