The case for a logistics hub

Andel Bailey, Guest Columnist

The benefits that Jamaica can obtain from having a global logistics hub are not fully appreciated by many persons, and that is one of the reasons why there is not a greater support for establishing one.

A practical definition of a global logistics hub is that it is a centre that coordinates the distribution of goods and services from global suppliers to global users, ensuring that the right quantity and right quality is supplied to the right place, at the right time, at the right price, and with the right information.

There are only three global logistics hubs established in the world: Dubai, Rotterdam, and Singapore. They have made significant contributions to the economy of these places, as can be seen from their high rate of employment and increasing revenue.

The following are four ways in which Jamaica can benefit from having a global logistics hub.

1. Many persons will be employed directly and indirectly in the coordination of the activities of the hub. This will have a positive effect on our economy.

2. The large number of ships and crew coming to Jamaica will have the need for services such as fuel, food, water, souvenirs and other items. This will boost the production of those items that can be supplied locally.

3. With the expansion of the Panama Canal, larger ships will now be able to travel through it, in order to carry goods to our region. For example, if a megaliner is coming from the Far East with goods for 12 countries in this region, it would not be practical for it to go to all 12 countries; furthermore, some of these countries may not have the required port facilities for the large ship to dock and offload the containers. So these containers would be off-loaded at a central trans-shipment point, and smaller ships would then transport them to the required destinations. Jamaica is seeking to develop this central hub.

4. In order to improve efficiency and reduce costs, a large company will always seek to obtain the items it requires from the places where they can be most efficiently manufactured, and transported to where they are needed. Consequently, a company wishing to manufacture products such as motor cars, refrigerators, or wheelbarrows, may find that it is better to have the parts manufactured in different countries and have them transported to a central point to be assembled. Furthermore, because of the large number of planes and ships that come to the hub it will be easy for the finished products to be exported to countries where they are needed. Jamaica wants to be this global centre for assembling, finishing, packaging goods, and then exporting these items to other countries.

MORE PROFITABLE

It can be seen that a country does not need a large manufacturing base to benefit from a logistics hub, but by assembling, packaging and adding any other value to items, it can benefit much more than by trying to manufacture items for export. For example, if a country earns one dollar from assembling each of one million items, it is far more profitable than manufacturing 100 of these products and earning $1,000 from each.

It should also be noted that involvement in assembling products will be a stimulus for Jamaicans to manufacture some of the items required, for when persons and companies realise what items are needed, they would manufacture and supply some of these items, and being located at the hub, they would have a distinct advantage in that their transportation cost to the assemble point would be less.

The data from the Statistical Institute of Jamaica show that Jamaica has a national debt of approximately $2 trillion. If this debt is divided among the 1.1 million employed persons in Jamaica, including domestic helpers, farmers, teachers, doctors, ministers, and barbers, it can be seen that each of these persons will have a debt of approximately $1.8 million. If the debt is divided among all the 2.75 million persons living in Jamaica, each will have a debt of more than $700,000. All these debts mentioned does not include the interest payment that is also required.

The website of the Ministry of Finance shows that Jamaica's external debt, when converted to local currency, is approximately $900 billion, at an interest rate of approximately four per cent. The local debt is $1.1 billion, at an interest rate of approximately seven per cent. The weighted average interest rate on this $2 trillion debt is 5.6 per cent. This means that the annual interest payment is $112 billion. This interest increases by $13 million per hour. This means that if a person goes to sleep for six hours, when he/she awakes, the Jamaican debt would have increased by $78 million. It will not be possible for Jamaicans to sleep with this massive debt on our backs.

There is no activity conducted in Jamaica that can properly service this debt. Jamaica urgently needs a new source of revenue.

PROVIDE OPPORTUNITIES

A logistics hub will not automatically generate revenue, but it will provide opportunities for persons to generate revenue for themselves, their children and for the country. The logistics hub is definitely the most attractive venture that we can undertake at this time, for it offers the greatest possibility of increased employment and income generation.

The establishment of a global logistics hub in Jamaica should be regarded as a national venture for all to support, and not an enterprise for a party, or a section of the society. If Jamaica is able to establish a global logistics hub, the number of persons living below the poverty line can be significantly reduced, for there will be increased employment at all levels, and greater wealth-creating opportunities.

The Government, which is responsible for national leadership, should ensure that the development of a logistics hub is not regarded as partisan matter, and becomes an endeavour that divides us. It should be promoted as a national project that unites us. In developing a logistics hub, there will be some unwanted consequences. It will be our responsibility to minimise these unwanted results while we maximise the positive benefits that can be derived. Other countries have done it, and so can we.

This is a once-in a-lifetime opportunity to establish an enterprise that will be of benefit to us now and in the future. Jamaica is in deep waters, far from the shore. The death burden of the massive debt around our necks will drag us down into unfathomable depths. To survive, we have to swim together, or we may sink, one by one. May God give us the strength to do what is right.

Andel Bailey, PhD, is chair of NCU's Mathematics and Engineering Department. Email feedback to columns@gleanerjm.com and abailey@ncu.edu.jm.