Chinese Initiative a Game Changer for Jamaica’s Logistics Hub

To date, I have written three articles about different aspects of Jamaica’s Logistics Hub. This makes my fourth. Frequent readers of the Caribbean Journal may only be aware of three, counting this one. The first, “The Logistics Hub Project and Jamaica’s Development” explained the opportunity the logistics hub presents for Jamaica’s development. The second “What History means for the Jamaica Logistics Hub” illustrated Jamaica’s established strength in such maritime endeavours. By now, some may have already realised that these articles were not arbitrary, but part of what is known as a SWOT analysis: SWOT being an acronym for Strength, Weakness, Opportunity and Threat.

The third article “Preparing for Competition – Strategic Facility Planning for Small and Medium-Sized Businesses” is posted on my blog, and uses the logistics hub as an example in assessing threats: the threat in this instance being the Panama Logistics Hub. So, the astute will now realise I have to date not touched on the hub’s weakness, at least not directly, nor had I intended of do so at this time. But, recent events have prompted me to conclude this series, even though details of the initiative have yet to be made public. Recent pronunciations particularly by public officials have shown a glaring ignorance of the precarious nature of this project, and acting on such ignorance could jeopardize the initiative.

Following my first article, Sheldon Rose – Supply-Chain and International Logistics Professional – pointed out a number of these weaknesses to me. I had mentioned that the logistics hub initiative would be constructed across four of Jamaica’s south-coast parishes. Sheldon pointed out that legally these nodes could not be separate from each other: legislative changes are required to facilitate the transportation of in-bond goods between the respective nodes of the hub, especially without the direct supervision of the customs department. Equipment for transhipment ports have to be custom-built and take years to fabricate. Provision needs to be made for handling hazardous materials, including oil-spills. Also, the hub would significantly impact the bio-diversity of its surroundings, so hydrological and environmental studies were needed to analyze the environmental impact.

The Logistics Hub involves the parishes of Kingston, St. Thomas, Clarendon and St. Catherine.  Starting next year, the Kingston Harbour is to be dredged, and additional berths installed west of the existing piers at the Port of Kingston to accommodate the super-sized vessels that will start coming through the expanded Panama Canal in 2015. Next, a bunkering and commodity transhipment port will be built in St. Thomas; and a dry-dock port, along with cargo and passenger airport built in Clarendon.  However, an industrial park – the Caymanas Economic Zone (CEZ) - is also proposed to be built in St. Catherine in the initial stage: only 200 acres being allocated for the park in the first instance but intended to be expanded to 1,000 acres after subsequent developments.

The expansion of the Port of Kingston later incorporated Fort Augusta, in St. Catherine. Minister Anthony Hylton had initially pitched the merger of the port expansion and CEZ to China Harbour Engineering Company (CHEC).  But, Prime Minister Portia Simpson later disclosed in her contribution to the 2013 budget debate that lands at Fort Augusta were insufficient for CHEC plans. Then, Ronald Mason’s article in the Sunday Gleaner of 18 August 2013 titled “Environment vs. Job, Economic Development” made mention of a US $1.5 billion investment by the Chinese into a development of which Liu Qitao – president of the CHEC parent company, China Communication Construction Company (CCCC) - referred to as the Portland Bight Industrial Park.

The location in question, the Great and Little Goat Islands, are located off the coast of St. Catherine. They are the second and third largest islands in the Jamaican archipelago: being 600 and 300 acres respectively in area. Peter Espeut explains in his Gleaner article “Selling our Birthright”, dated 23 August 2013, that the Goat Islands are connected to each other and to the mainland by mangrove wetlands. The mainland itself is “fringed with hundreds of acres of mangroves” and forms the Galleon Harbour with the Goat Islands.  This area has been declared a fish and game sanctuary by the government: being “one of the most fecund fish nurseries” in Jamaica, and a “habitat to thousands of birds”.

Construction is proposed to commence in 2014. The 100 m high hill on the Great Goat Island is to be “pushed into the sea to cover the wetlands” and create a huge peninsula on which the logistics centre will be built. A further 2,000 acres of land on the mainland is also to be developed, and the seabed dredged to accommodate the super-sized vessels: thus removing coral reefs and shoals in the process. This Chinese initiative consolidates the industrial park and port facilities, so in-bond goods initially will not have to be transported outside the area. As a matter of fact, this new port is now closer to the prospective cargo airport than was previously envisioned; but, having a toll highway to presently connect the various nodes of the Logistics Hub is not satisfactory. Rather than focus only on the ecological concerns though, it should also be appreciated that this Chinese initiative offers the logistics hub benefits it never had, including increased size, and should not be taken glibly, especially in the context of Panama’s offerings.

Panama also has ambitions to be the fourth global logistical hub, and it is far advanced in this regard. The Panama Pacifico Project, which has a duration of forty years, has allocated 3,500 acres of land for its industrial park. Panama’s Colon Free Trade Zone (CFTZ) has been operational since 1947 and now comprises three major ports and an airport, all linked by highway and railway: not to mention the 154 companies that already reside in this logistics park. Panama has two different organizations managing its ports and has made provision for a third: the operator of Singapore’s Logistics Hub. The Goat Islands alone is no match for this. The original hub initiative alone is no match for this. They complement each other. If not the Goat Islands, what alternate green field site does Jamaica have to offer the Chinese?

But, let me not leave my readers despondent: thinking the initiative is a lost cause. It is good that Jamaica realise that Panama’s Logistics Hub is a threat to its becoming the fourth global logistics hub, but it should also be realised that the Nicaraguan Canal is also a threat to the Panama Canal. Jamaica’s strength is in its central geographical location and it is the only hub that can consolidate freight for both canals, as well as tranship freight from either of these canals.  The Chinese initiative cannot be easily dispensed with. It is critical for the success of Jamaica’s logistics aspirations. Jamaica is off to a late start, it cannot afford to drop the baton now. It must decide whether it wants to enter the arena of global trade or be ever satisfied with its meagre tourism, bauxite, and remittance earnings.

Leadership for Vision 2030 Jamaica

One line of the Jamaican National Anthem reads: “Give us vision lest we perish”.  Vision 2030 Jamaica provides a national development plan for making “Jamaica, the place of choice to live, work, raise families, and do business”.  

Michael Porter, of the Institute of Strategy and Competitiveness, Harvard Business School, states that competitive advantage of nations accrues from distinguishing itself from competing nations and developing on differences in history, infrastructure, institutions, culture and factors involved in the ways people live and do business.

Porter’s framework for achieving this strategic advantage requires government to play a purely facilitatory role.  But, Dr. Densil Williams, co-author of Competitiveness of Small Nations: What Matters? disagrees: stating that government needs to play a pivotal role in small developing nations, like Jamaica.  

This needs to be clarified if Jamaica is to achieve its Vision 2030 objectives: especially since “transformational leadership” is one of the guiding principles on which Vision 2030 is based.  I would recommend that the government seek the path of partnership, which happens to be another of Vision 2030’s guiding principles: partnership internationally, regionally, and locally: as well as inter-ministerial collaboration.

Jamaica needs these guiding principles in operation right now to achieve Vision 2030.  As an illustration, I will now refer to Jamaica’s proposed logistics hub, which promises to be the logistics hub of the Latin America and Caribbean [LAC] Region, as well as the U.S. Gulf and East Coasts.  When complete, it will be the fourth global transhipment logistics hub: the others being located in Singapore, Dubai, and Rotterdam.  

Dr. Williams’ book presents the performances of Singapore, Jamaica, Barbados, Trinidad and Tobago as recorded in “The Global Competitiveness Report” over the last five (5) years and he concurs that Jamaica seems to have a competitive advantage in port infrastructure.  An ideal location midway between North and South America, in close proximity to the Panama Canal contributes to this advantage.  

The Panama Canal will be widened by 2015 to accommodate wider ships and Jamaica hopes to capitalise on this by expanding its port facility and affiliated infrastructure spread over four south coast parishes: namely Kingston, St. Catherine, Clarendon and St. Thomas. 

An IDB (2010) study on the productivity of the LAC region concluded that “ports and airports are grossly inefficient.  Dr. Williams’ book also points out weaknesses in Jamaica’s current port infrastructure that needs to be addressed by the Ministry of Industry, Investment, and Commerce [MIIC] and the Port Authority.  

He states that it takes twice as long to export a shipment from Jamaica compared to Singapore; and it costs four (4) times more.  Bear in mind that Singapore is the reputed leader in port infrastructure since 2003, and its scale of operations is significantly larger.  But, this indicates partnership with international expertise should be explored to correct these weaknesses: be it inter-governmental or with the foreign private sector.

To MIIC’s credit, it has recognised that the logistics hub will generate 10,000 jobs and has formed a human resource working group with stakeholders the Ministry of Education in its logistics task force;  this group being headed by Dr. Fritz Pinnock – Executive Director of the Caribbean Maritime Institute.  

Speaking at the recently concluded stakeholders-consultation at the Shipping Association of Jamaica, the MIIC Minister Hon. Anthony Hylton emphasized that Seventy percent (70%) of employees at the Dubai logistics hub are foreigners, but “we want to train our people to fill the jobs and vacancies that are here”.  However, two (2) years is not enough time to train the amount of people needed.  Even though this is an example of inter-ministerial collaboration, regional and international assistance is required.

The previously mentioned IDB study pointed out that the poor performance of LAC ports and airports was partly to blame on inadequate physical infrastructure but, more importantly, on support activities involving the movement of cargo and inefficiencies due to inadequate regulations, lack of competition for services, and deficient operation procedures and information systems.  

Furthermore, Dr. Williams states that “high transportation cost for moving goods in Caribbean countries has been cited as one of the major drivers of low levels of productivity”.  This begs the intervention of the Ministry of Transport and Works.  Jamaica also has no railway network, and this could be helpful in connecting the four parishes over which the logistics hub is spread.  Possibly partnership with regional concerns could also prove beneficial here.

Dr. Williams also notes that “Jamaica is highly uncompetitive in the supply of electricity”.  This needs to be addressed by the Ministry of Science, Technology, Energy and Mining, electricity providers, and the Port Authority themselves.  No single ministry can accomplish all that is required and, with limited resources available, partnerships with other governments and the private sector is inevitable.  The World Bank Group has already endorsed the establishment of the logistics hub and has “pledged to help find funding”.  

The MIIC Minister has also been to Europe, Asia and Panama to promote the logistics hub, as well as the Jamaican Chamber of Commerce.  Nevertheless, Porter instructs that everything is important for competitiveness, and Dr. Williams states that countries with a colonial past that have achieved high levels of productivity have adopted not only their political, but also their legal and economic institutions to the reality of their environments.  So, much more remains to be done.


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Singapore: Lesson to Jamaica
Chinese Initiative a Game Changer for Jamaica’s Logistics Hub
Preparing for Competition – Strategic Facility Planning for SMEs
Could Jamaica's Past Foretell Its Future?

Could Jamaica's Past Foretell Its Future?

In my Op-Ed "The Logistics Hub Project and Jamaica's Development", I indicated that Jamaica's Logistics Hub initiative intends to make use of the island's strategic geographic location to attract larger ships that will be able to ply the Panama Canal from 2015 onwards.  No doubt there are skeptics that question Jamaica's ambition to build the fourth global transshipment logistics hub.  However, energy use in Jamaica's shipping/aviation sector has increased 268% in the four years prior to the global recession in 2008.  This has fallen 59% in the following four years, but will no doubt rise again as the global economy recovers.

However, reports indicate that Jamaica's larger neighbours to the north, Cuba and the Dominican Republic, are also preparing for these larger ships.  So, what competitive advantage does Jamaica have by comparison?  Michael Porter, of the Institute of Strategy and Competitiveness, Harvard Business School, states that the competitive advantage of a nation accrues from it distinguishing itself from competing nations and developing on differences in history, infrastructure, institutions, culture and factors involved in the ways people live and do business.  Here, we will look at history as a source of Jamaica's strategic advantage.

Most accounts of English activity in the Caribbean between the 16^th and 17^th centuries mention privateers and pirates.  In referring to the privateering trade, Sir Thomas Modyford - Governor of Jamaica - is recorded as saying "More frugall, more prudentiall, more hopeful in laying a good foundation ... for the great increase of His Majesties dominions in these parts".  This statement inspired an essay by Nuala Zahedieh entitled "A Frugal, Prudential, and Hopeful Trade: Privateering in Jamaica, 1655 - 1689", reprinted in the book West Indian Business History: Enterprise and Entrepreneurship.

Rather than looking at the "glamour and excitement" of privateering, Zahedieh emphasizes the business aspects of the trade.  He states that: "Given Jamaica's strategic location ... and the island's capture, it is not surprising that the first settlers, many from the conquering army, enthusiastically took to plunder".  The primary target was the Spanish Empire "... and the prominence of privateering in early English Jamaica derived first and foremost from the island's geographic location in the heart of the Spanish Indies convenient for the major ports and straddling the principal trade routes".

According to the website of the Jamaica National Heritage Trust, Port Royal was first used by Tainos as a fishing camp when only a sand spit.  The Spanish used it for cleaning, refitting and caulking their ships.  But, the English realized its "strategic importance" and fortified it.  Records of business life in Port Royal during the 1660's clearly indicate the importance of privateering.  In fact, the privateers "spent much of their money in Port Royal, which had the most convenient harbour, best supplies and best market for prize goods in the Caribbean". 

The modus operandi of the privateers was to commandeer ships with cargo with minimal confrontation.  But, land expeditions were more profitable.  Between 1655 to 1671, privateers sacked 18 cities, 4 towns and over 35 villages.  These expeditions are testimony to the island's strategic geographic location.  In fact, records indicate that the very nations mentioned earlier were targets of such expeditions.  Chrostopher Myngs raided Cuba in 1662; smaller towns in Hispaniola and Cuba were repeatedly plundered; and, Sir Henry Morgan captured Panama in 1671.  In the 1680's, privateers even crossed Panama's isthmus to the Pacific Ocean, and "caused havoc up and down" its coast.

"Whilst the returns to those serving aboard the privateers was often relatively paltry, men in the port made great gains.  Not only investors and creditors benefitted.  The influx of men with money were so great that repercussions rippled right through the Port Royal economy".  In 1668, Sir Modyford explained that the exploits of the privateers created "excellent opportunities" to any with money in Port Royal: opportunities for profit far greater than existed in England at that time. "We often ... double nay treble our money without any hazard".

Port Royal was destroyed by an earthquake in 1692, by which time it had become an important economic centre.  In the following century, the merchants moved across the harbour to settle in Kingston, the present capital of Jamaica.  Though Port Royal would again become a famed British naval station, today it has reverted to a quiet fishing village overlooking the bustling port of Kingston. If history were to repeat itself, could the port of Kingston lay "a good foundation ... for great increase" for Jamaica?

Could Kingston become that important economic centre Port Royal had become?  On the face of it, the sad response is no.  But, on closer inspection Kingston, probably by serendipity, seems to be preparing for such an eventuality.  According to the article "Hylton to Press Ahead With Offshore Centre", appearing in the Gleaner dated 17 February 2012, Don Wehby - then Minister without portfolio in Jamaica's Ministry of Finance - "identified the Kingston Waterfront as the intended base of the International Financial Services Centre".  An act was passed in February 2011 to create this new statutory body; the board has been appointed and is presently serving a two year term, ending on 26 February 2014.

In addition, the Planning Institute of Jamaica [PIOJ] has published a document titled "A Growth-Inducement Strategy for Jamaica in the Short and Medium Term", dated December 2011.  It lists three development projects planned for Kingston: Downtown Kingston  Redevelopment, West Kingston Commercial Lifestyles Centre, and the logistics infrastructure.  Commenting on the "Kingston Lifestyles' market brand", PIOJ states that it "would be based on a strategic clustering of the economic, cultural, historical, social and geographical assets, and business opportunities, that competitively advantages downtown Kingston as a commercial zone".  It would therefore seem that, if these projects proceed as planned, the only question that needs be asked is if history will indeed repeat itself.

Related Articles:

Singapore: Lesson to Jamaica

Chinese Initiative a Game Changer for Jamaica’s Logistics Hub

Preparing for Competition – Strategic Facility Planning for SMEs