February 19, 2014 in Business

Jamaica wants to be global shipping hub

David Mcfadden Associated Press
 
Associated Press photo

A fishing boat rests on a sandy beach of uninhabited Little Goat Island, Jamaica, last month. The island is one of two outlying cays fringed by mangroves located less than a mile off the southern Jamaican town of Old Harbor, and could be affected by a planned port expansion.
(Full-size photo)

OLD HARBOR, Jamaica – This hardscrabble harbor town on Jamaica’s southern coast seems an unlikely contender in an emerging regional competition over the shipping routes that carry global trade.

But as Jamaica joins a rush to lure the bigger, deeper-drafting ships expected to cross an expanded Panama Canal by mid-2015, political leaders and civic boosters see the Old Harbor area as a cornerstone of what they envision as a transformative, dream development for the Caribbean island.

Jamaica aims to become a global logistical hub when mammoth “post-Panamax” ships start carrying a growing share of cargo, much of it from China. So far, construction hasn’t started, but blueprints call for an expansion of the island’s existing container terminal, airports and roads while a Chinese engineering company develops a $1.5 billion transshipment port on a couple of mangrove-fringed islands just off Old Harbor.

“The proposed transformation of Jamaica into a world-class logistics center is unquestionably the most ambitious and far-reaching project on which this nation has been engaged since we became an independent state over 50 years ago,” said Francis Kennedy, president of the Jamaica Chamber of Commerce.

All over the Caribbean, the Panama Canal expansion, despite its recent delays, has caused no shortage of countries to think big. With Brazilian financing, Cuba recently started developing a new port it hopes can play a major role in global logistic chains. Ports in places like the Bahamas, Colombia and Miami are also busily strengthening infrastructure.

In Jamaica, technical studies to evaluate the dredging of Kingston Harbor to 15.5 meters were recently completed and bidders have been pre-qualified. Kingston’s busy container terminal is expected to be privatized and turned over to an international operator soon. And the government has been busily meeting with investors from China, the U.S., Germany and other nations.

The plans have excited many in this country of 2.7 million people known mostly for its beaches, reggae music and dominant Olympic sprinters. Industry Minister Anthony Hylton said it’s such a high-stakes competition that he is “up at nights, frequently in the wee hours of the morning, cognizant of the fact that the future of our economy depends on us getting this initiative right.”

Yet it’s far from clear whether debt-shackled Jamaica can realize its ambitious goals, despite its strategic location by busy sea lanes between North, Central and South American markets. Jamaica has had one of the world’s slowest-growing economies over the past four decades and a four-year loan package with the International Monetary Fund is propping up the island.

Those economic woes severely limit Jamaica’s ability to invest in the project, which is estimated to cost as much as $15 billion. That means the private sector would need to provide almost all of the financing.

Damien King, head of the economics department at Jamaica’s campus of the University of the West Indies, said the plans are worth pursuing but transforming Jamaica into a logistics center would require a huge level of public sector organization and management.

“It is far from obvious that the Jamaican government can muster that even with throwing a disproportionate share of its capacity at the problem,” King said.

At the same time, a skirmish has been brewing between the government and the conservation lobby over the proposed port to be developed by state-run China Harbor Engineering Co. on the uninhabited Goat Islands in a swath of Portland Bight, the island’s biggest protected area. Environmentalists argue the port would have a devastating impact on a coastal zone that was shielded in 1999 to safeguard reefs, mangroves and fish nurseries.

To fuel the hoped-for revival, the government plans to cluster global companies into as many as 16 special economic zones and pitch incentive schemes comparable to those offered in logistic centers like Dubai and Singapore. One of Jamaica’s main goals is to persuade companies to outsource parts of their production there and bring the country into the global supply chain.

Officials also hope that warehousing and manufacturing operations will add value to partly finished products shipped from China that are destined for North America and elsewhere.

“Stockpiling goods in Jamaica will mean that it will take a day or two to be delivered as opposed to weeks when ordered directly from China,” said Eric Deans, chairman of a task force to advance the hub plans.

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