Another look at logistics
Jamaica can reap significant benefits from the logistics hub initiative

A hard look at the impact of the novel coronavirus pandemic on the global economy has highlighted the vulnerabilities of various industries.

One industry that took a significant hit due to the unprecedented restrictions placed on the movement of people is the tourism industry. This is of grave concern as tourism is our top economic earner and accounts for roughly 30 per cent of our foreign exchange revenue. The long-term effect of this economic fallout is unknown. It, however, has given greater credence to the calls for Jamaica to diversify its economy.

The pandemic has sparked a lot of conversations around another industry – logistics and supply chain. With Jamaica's plans to develop its logistics sector, we find ourselves trying to answer the question: Can logistics be Jamaica's solution for sustainable economic growth?

The Government of Jamaica in 2014 expressed its plans to build a new economy upon the platform of the Jamaica Logistics Hub Initiative. The national thrust resulted in several public forums aimed at clarififying the meaning of logistics, which is simply managing the storage and transportation of resources. The intention is to join Rotterdam, Dubai, and Singapore as the fourth node in the international logistics chain. Ambitious strategy, yes, but it is not a feat that this small island had not accomplished before.

Jamaica's potential of being a logistics hub has been established since the 17th century when Port Royal became the most important English port in the western hemisphere. The potential benefits of implementing a world-class logistics hub in a small island development state (SIDS) can be demonstrated by the great transformation of Singapore. The fledgling nation turned a once underdeveloped country, with limited resources and a gross domestic product (GDP) per capita of less than US$320, into one of the strongest economies of the world, with GDP per capita of approximately US$60,000, overcoming its geographical disadvantage to become a leader in global transhipment.

The global logistics industry is projected to be worth approximately $US12.9 billion in 2027. If Jamaica can position itself to get a reasonable fraction of this worth, the economy will experience more than the one per cent growth it has been experiencing under the current economic climate.

In the years since the initial announcement of efforts to improve the country's position in logistics globally, Jamaica has made significant strides in improving transport and telecommunications infrastructure. Jamaica has benefited from over $1 billion in investments in recent years to improve transportation and logistics infrastructure, characterised by a multimodal transport system that covers all dimensions (road, sea, air, etc) of transportation. The completion of the north-south highway and the current work on the southern coastal highway will improve the efficiency of the local supply chain and encourage further investment. Efforts have also been made to revive rail transportation and the building of Falmouth and Port Royal piers. As the country continues to develop the sector, its ability to effectively tap into the global value chain using logistics as an avenue will be the most lucrative.

To have substantial returns on investment, a comprehensive and effective competitive strategy will need to be developed and implemented. Competitive strategy defines the approach a country or business decides to take to meet the needs of its target market and facilitate market expansion. Jamaica's location and proximity to major shipping ports provides a unique advantage to gaining global dominance in logistics and supply chain. Since the widening of the Panama Canal in 2016 Jamaica has experienced the ripple effects of increased transhipment within the region. To foster differentiation in this market, the country must reorient around its existing advantage and market the entire country as a logistics hub. With an improved and efficient hub, Jamaica can position itself as a globally competitive economy as logistics impacts sustainability, competitiveness, and performance.

Increased global pressure will improve the efficiency and responsiveness of logistical operations, forcing companies to innovate and develop plans as well as implement effective strategies along with support and control measures that will result in an efficient and effective flow of economic transactions at competitive prices.

With the expansion of seaports and airports Jamaica can capitalise on its strategic location to gain competitive advantage and attract investments. This will result in better connectivity and increased access to various markets. It will require a momentous partnership between the public and private sectors. Increased commerce will therefore drive economic growth as the Jamaican Government facilitates both existing and new profitable activities. Significant buy-in will have to come from not only foreign, but local investors. Current businesses will benefit from having access to an $800-billion market, with the establishment of new routes and more competitively priced transhipment rates. New businesses can be formed in service to the growing industry, and this will create jobs, jobs, and more jobs. Improvements in the quality of life experienced by locals, crime reduction, and improvements in our educational and health-care infrastructure can all be positive externalities of this initiative.

Building out an innovative competitive strategy will require an equipped workforce not only in logistics and supply chain management, but also in data analytics, robotics, artificial intelligence, software and app development and so much more. With talks of the coming Fourth Industrial Revolution and against the backdrop of blockchain technology, we need a workforce that is not only knowledgeable, but actually developing and patenting technologies that will give our logistics industry and country a competitive edge. If we strategically align our economy around the logistics hub initiative, our current sectors and potential future sectors can find opportunities for growth and development. Jamaica can once again be the logistics hub of the western hemisphere.

In conclusion, logistics is the future for Jamaica to obtain exponential and sustained economic growth. Logistics is not just a support system for the economy, but should also be considered an important part of Jamaica's strategic ground. Logistics not only provides a platform that drives competitive strategies throughout the industry, but also provides significant macro contributions to the national economy by creating employment and income as well as attracting foreign investment.

— Students of Mona School of Business and Management


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