July 2013 Volume 10

The Logistics Hub initiative (LHI): The challenges and opportunities it presents

Trevor A Campbell
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Perhaps the most visible evidence indicating that some members of the island’s political directorate have begun to fully recognize, and appreciate, where the future of the global economy is heading, is the ongoing concerted attempt to position Jamaica as one of the four globally recognized logistics hubs that will be closely tied to the expansion of the Panama Canal, a project which is expected to be completed in 2015.     

The Logistics Hub initiative (LHI)--as it is now called--is being spearheaded by the Honourable Anthony Hylton, the Minister of Industry, Investment and Commerce.  It is considered to be one of the centerpieces of the current government’s economic development strategy, which if successfully executed could have a transformative effect on all aspects of the society.

A concise summary of the project

Dr. Eric Deans--the chairperson of the LHI Task Force that the Minister has assembled to coordinate the various project-related activities-- has provided a very concise and useful summary of the role of logistics in modern industry and how Jamaica intends to use this project to deepen its integration into the evolving global economy:

“Logistics is an integral function for every business organization. Most firms need logistics services, which they can either produce in-house or outsource to so-called third party logistics providers (3PL). Third party logistics providers assume responsibility for the entire transport chain and offer efficient and complete logistics services, involving the use of information and communications technology (ICT) and multimodal transport operations. The ultimate aim of Jamaica’s logistics hub initiative is to cluster global third party logistics providers (3PLs) along with some of the largest global businesses in industrial clusters.   These industry clusters will operate from several purposely designed special economic zones, logistics parks and industrial zones spread across the country. Businesses that will be attracted include:

Distributors, wholesalers, retailers
Shipping lines
Air cargo companies
Third and fourth party logistics providers
Logistics support services

The services provided by logistics companies include: management of customs procedures, setting up of assembly and manufacturing plants; consolidation; warehousing; information logistics services; and transportation with a selection of carriers and negotiation of tariffs. Some value-added services include management of warranty support programmes, return and repair as well as global logistics services.

Logistics service providers offer quick turnaround taking advantage of near shore regional distribution nodes. The logistics clusters will generate substantial cargo flows of raw materials, intermediate and finished goods and utilize supporting multimodal infrastructure. Businesses in Jamaica will integrate into global trade corridors, to and from production houses in the Asia/Pacific and other regions, to serve a 800 million market in the Americas; a market that is growing in affluence. Industries that will be located in the logistics hub include petrochemical, food processing, biomedical, pharmaceutical, electronic, shipping, aviation, chemical, automotive etc. The Logistics Hub will nurture a universe of commercial, technical and industrial services needed by the various stakeholders:

Maintenance, repair, and overhaul of aircraft;
Ship repair and dry docking
Value-added service providers (e.g., labeling, packing and assembly)
Traders, accountant, lawyers, bankers
Technical, legal, financial
Real estate developers

The Logistics Hub Initiative will generate industrial inputs and outputs from free zones, special economic zones, industrial parks, logistics parks, and technology parks and other industrial infrastructure. The world’s leading carriers, operating from world class transportation infrastructure, namely, ports and airports will provide sea-sea, sea-air and air-air connectivity to global markets.”

The wide range of economic activities (identified by Dr. Dean)--which would be spawned by the establishment of a logistics hub on the island--opens up numerous possibilities for the emergence of medium to small enterprises,  particularly as service providers to the major entities (the globally-oriented investors).  In other words, the LHI provides the framework for developing stronger professional partnerships between individuals and groups in the diaspora, and their counterparts on the island.  It is only through this sort of systematic interaction that the economic, social and educational institutions  on  the island, can be transformed, which would then allow larger sections of the population to more fully participate in the global supply chain which dominates the process of production and distribution of all categories of  goods and services (commodities) within the modern capitalist economy.

Situating the LHI project in the context of economic globalisation

In April of 2012, this author was invited by the Ministry of Industry, Investment and Commerce (MIIC) to present a five hours long seminar at the Ministry’s annual retreat on the far-reaching spatial and organizational changes that are occurring within the contemporary capitalist economy, and the implications for the future of Jamaica-based industries.   Participants at this event included Minister Hylton, along with his advisors, senior staff members of the MIIC, as well as the directors of the various agencies that fall under the Ministry’s portfolio.  The seminar, titled “Towards a Deeper Understanding of Economic Globalisation and the Complex Operational Dynamics of the Globally Integrated Enterprise:  Challenges and Opportunities,” provided the structure for a discussion of the following six topics:

(1) Towards an understanding of the basic principles of development and social change and the ways in which societies are organized around the development and the use of tools to produce the necessities of life: The process of adaptation and adoption.

(2) The meaning and significance of economic globalisation.

(3) The global logistics/transportation system: Circulating commodities efficiently in an increasingly integrated global economy.

(4) Developing the country’s productive forces under the conditions of globalization and the scientific and technological revolution.

(5) Dealing with the issues of labour productivity, sustaining quality standards in a globally competitive world.

(6) Reconfiguring urban spaces to facilitate the development and integration of the arts and sciences on the basis of the ongoing digital revolution.

A concluding note

Any realistic discussion of both the short-term and the long-term prospects and challenges related to the development of a logistics hub in Jamaica must keep in mind the nature of the capitalist economy.  This economy is characterized by periodic crises, a phenomenon which is manifested in the over-production of commodities, a decline in the rate of profit, and layoff of workers.  The response by the owners of capital involves a restructuring of businesses and, indeed, entire industries.  This entails the destruction of large blocs of capital including the physical and social infrastructures that serve them.  This is the basis upon which new technologies are then introduced, in an attempt to reverse the declining rate of profit.  In other words,  there is no guarantee that what is now being conceived, and will likely be implemented in the next couple of years,  will be able to withstand the unrelenting nature of technical innovations as capitalists respond to competition and economic crises. 

So how do we remain flexible or viable, in light of the above considerations? We have no other choice but to keep abreast, on a daily basis, of all of the developments that are taking place in modern industry and adapt accordingly!  It is only on this basis that the leadership, in all sectors of the society, will be able to meet the challenges ahead. 

Trevor A Campbell (the original TC) is a political economist and strategic planner.  He was at the college from 1958-1963.  He was opening batsman for the 1960 team, which won the Colts cup, as well as the 1962 Sunlight and Spaulding Cup championship team.  He can be reached at tcampbell@eee.org.

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