Let's not put too many spokes in hub

By Peter Espeut

Since Independence, we have struggled to achieve sustained economic growth, while almost all the countries around us have done so. And we have failed to put our finger on precisely why, maybe because the answer is too painful.

Without addressing the fundamental problems with Jamaican society and economy, a coalition is building to put all the nation's eggs in one basket - the logistics hub. Could it be that the factors which have denied growth to the Jamaican economy since Independence will deny us the economic benefits of the proposed logistics hub?

Don't get me wrong: The logistics hub is a very good idea once we can agree where to put it. As international trade increases, and as margins become thinner, there is concern to become more cost-efficient. Manufacturing often takes place far from markets, and as more and more people do their purchasing on the Internet, the speed and cost of delivery become a major issue.

Logistics hubs drive down supply-chain costs by providing ware-housing and quick distribution, often through air freight forwarding. The development of logistics hubs seems to be the next step in globalisation.

Jamaica is an excellent location for a logistics hub. Just a few hours sailing from the western end of the Panama Canal, from Jamaica, seaports in north, south and central America, Western Europe and West Africa are easy to reach; and so are airports in the USA, Canada, Latin America and the Caribbean.

central location

With Jamaica as a logistics hub, producers in the Eastern Hemisphere could ship huge quantities of goods to warehouses in Jamaica, enabling carriers to use the largest conveyances, thus reducing distribution costs.

Using Jamaica as a hub, mega-ship cargos can be redirected using smaller vessels to many different ports. Once a buyer orders on the Internet, the item - always stocked in Jamaican warehouses - can quickly be flown to its destination by courier.

The larger the warehouses, the better the distribution service that can be offered. Low freight rates and high service levels will attract more companies to rent space in the logistics hub.

Jamaica is a very good location for a logistics hub. We have the port - the seventh largest natural harbour in the world - and we have the airport on the Palisadoes strip - right on the harbour. What is needed to complete the logistics complex is warehousing space, and the Caymanas area - inland from Kingston Harbour - is certainly large enough.

This warehousing and distribution hub would employ thousands of Jamaicans - at the seaport, the airport, and in the warehouses; and in the IT operations and call centres which would take the orders from buyers. Caymanas is strategically located between the large population centres of Kingston and Spanish Town, also centres of high unemployment.

Where it becomes complicated is when you say: Why ship the goods manufactured in the east to warehouses in Jamaica? Why not just manufacture them in Jamaica, and then sell them to markets in the Americas, Europe and Africa? The advanced stage of the logistics hub is to try to attract foreign corporations to establish manufacturing enterprises in the logistics hub, feeding into a ready-made distribution network.

importance of production

We used to manufacture shoes in Jamaica; and toothpaste, and clothes, and underwear, and baseballs, and so many other commodities. Where are these factories now? High labour costs, high energy costs, low productivity, pilferage and theft, among other things, drove them away to cheaper and more secure production centres. It is those places that will be shipping their output to the logistics hub to be distributed.

Manufacturers in the hub would address the high energy costs by building seriously polluting and environmentally damaging coal-fired power plants.

And the only strategy that can bring down labour costs is the same strategy used by many of the companies which operated in the Kingston Free Zone: import workers from China and Korea and the Philippines. This cuts out problems with low productivity ('one Chiney can do five s'maddy wuk'), with troublesome labour unions, and much of the pilferage. Make no mistake, the manufacturing part of the logistics hub cannot work otherwise.

And then they will need somewhere safe to house the foreign workers - preferably surrounded by a moat.

The warehousing and distribution part of the hub can work under local management and with local labour. Let's run with that!

Peter Espeut is a sociologist and development scientist. Email feedback to columns@gleanerjm.com.