… decisive and resolute action is required

By Diane Edwards*

The Caribbean, a vast oceanic region, is home to some 20 relatively small independent states. Its open economies are heavily dependent on foreign trade for survival and growth. Yet, the Region’s vast export potential remains relatively untapped.

Currently, Caribbean countries altogether import about US$6 billion in food products every year with Jamaica’s share valued at about US$1 billion. But despite the Caribbean Community’s (CARICOM) commendable goal to reduce the Region’s food import bill by 25% by 2025, there seems to be insufficient attention to at least one critical factor. Enhancing export competitiveness is hardly possible before improvement of logistics, within and outside the Region, is achieved.

To fully realise its potential as a trading hub, the Caribbean must embrace and adopt a holistic regional approach to cargo logistics and supply chains and, in this setting, positioning itself as a centre for last-mile customization in a comprehensive logistics network.

The Caribbean’s underperformance in extra-regional trade can be attributed to several factors: inadequate port infrastructure (i.e., with the exceptions of Freeport, The Bahamas; Kingston Freeport Terminal, Jamaica; Caucedo, Dominican Republic; and, Point Lisas, Trinidad and Tobago); high port charges; cumbersome customs clearance processes; inefficient internal logistics; and, significant tariff and non-tariff barriers.

Intra-regional trade among Latin American and Caribbean (LAC) countries remains stagnant, at about 20% of total LAC trade, trailing behind most other global regions. According to an IMF report (November 2023) entitled How Latin America Can Use Trade to Boost Growth, if the Caribbean, as a region, could narrow its infrastructure gap with advanced economies, it could achieve a 30% increase in exports and boost gross domestic product (GDP) by 7%.

Public-private partnerships

Addressing this infrastructure gap will require substantial investments beyond what most Caribbean governments can unilaterally afford. Greater emphasis should therefore be placed on incentivising private investment through Public-Private Partnerships (PPPs).

Jamaica and the Dominican Republic provide excellent examples of successful partnerships with CMA CGM (at the Port of Kingston) and DP World (at Caucedo).

CMA CGM has invested approximately US$400 million in port improvements in Kingston thus increasing its annual throughput capacity to 3.6 million TEU containers. And development of advanced logistics capabilities allows port users to store and reconfigure shipments on-site.

Similarly, DP World has invested over US$600 million in Caucedo, doubling that port’s annual capacity, from 1.2 million TEU to 2.5 million TEU annually. And plans are afoot to create a Special Economic Zone, a significant step towards establishing a logistics hub for the Americas.

Caribbean challenge

Yet another significant challenge for Caribbean nations is the one-way flow of commercial goods.

Within the Caribbean sphere of regional commerce, cargo ships normally travel southward fully loaded but return empty going northward. This reality makes it prohibitively expensive for shippers to send cargo to markets in the north. In this regard, the Region is at a severe disadvantage. Caribbean shipping rates are estimated to be three times the normal cost of moving a container across the Pacific.

Infrastructure (or deficiency thereof) is only part of the equation. According to one study1,  25% of delays in transport corridors are due to poor infrastructure while 75% result from poor facilitation.

The World Bank’s Doing Business Report highlights the stark contrast in border compliance times: exporting takes 12 hours in OECD countries, compared to 16 hours in the Dominican Republic, 60 hours in Trinidad, and a staggering 96 hours in Belize. This underscores the need for a comprehensive trade facilitation agenda.

Planning for integrated and sustainable logistics and supply chains must encompass a full range of services that enable goods to be produced in one location and consumed in another. This involves expanding the agenda to include simplification, standardization, and harmonization of documents, payment systems and technical requirements — important steps toward improving trade.

A new term, ‘trade logistics facilitation’, is emerging. It describes this holistic approach, which covers all elements of the logistics chain. As high-cost producers, Caribbean exporters stand to gain significantly by embracing this agenda, reducing bureaucratic red-tape around exporting, improving competitiveness and enhancing logistics efficiency. For example, one Caribbean exporter achieved substantial cost savings by conducting a logistics study. That study recommended the altering of international shipping and internal logistics routes so as to reduce insurance and transportation costs although it meant lengthening shipping times.

Logistics and economic growth

Caribbean planners and businesses must re-evaluate the potential of logistics as a key driver of economic growth. The Region has recorded success in attracting large foreign direct investments in the Tourism sector. However, it has not had similar success in developing the logistics sector. Current taxation structures tend to undermine regional integration and short-sea shipping as governments view port charges as a lucrative revenue source rather than as a national growth enabler.

Additionally, environmental concerns and sustainability must be addressed as a matter of urgency. Marine ecosystems vital for the Tourism sector, are still under threat from shipborne pollutants. Sea Level Rise, due to Climate Change still poses risks to coastal communities and infrastructure such as seaports and marine terminals. In the face of such concerns and sustainability issues, more planning and a nuanced approach become necessary. In this regard, training of specialists and professionals in supply chain and logistics management … people able and willing to advocate for necessary change … becomes an economic as well as a social imperative.

At the recent 4-day UNCTAD Global Supply Chain Forum (May 21 to -24, 2024), in Barbados, panelists, including this writer, made several important recommendations to improve economic growth in the Caribbean region. These included:

  1. Prioritising trade facilitation with a unified system across the Region. It was acknowledged that the prospect of developing a single document to facilitate the movement of goods between (some 20) Caribbean jurisdictions is not yet on the agenda
  2. Developing a region-wide logistics strategy, including public and private investment in shipping hubs, with Kingston and Freeport as the most likely global hubs and Port of Spain as, potentially, regional hub.
  3. Establishment of a shipping “centre of excellence” – to focus on training of logistics workers as a central element of any development plans. (The Mona School of Business and Management, in partnership with the Council of Supply Chain Management Professionals, offers a suite of logistics and supply chain courses aimed at professionalizing the sector.)
  4. Encouragement and facilitation of foreign investment, which could ultimately lower logistics costs. (Public-private partnerships can play a crucial role in this process.)
  5. Increased efforts to standardize rules across the region, reducing the administrative burden on shippers and logistics providers.
  6. Improve logistics efficiencies by way of faster customs clearance, better transport infrastructure (including ports and internal connections), availability of advanced logistics services and the development of local logistics competencies through partnerships with overseas investors.

Unfortunately, the Caribbean region is apparently still some distance away from discussions leading to adoption of this agenda. Notwithstanding, CARICOM’s initiative to reduce the Region’s food import bill by 25% within two years may provide the impetus needed to break the inertia. CARICOM has at least started the process to address regional logistics requirements but ultimate success will require decisive and resolute action from the leadership in the public and private sectors. []

1 Djankov, Simeon, Caroline Freund and Cong S. Pham, “Trading on Time”, January 26, 2006

  • FIRST PUBLISHED: 2024, August 17

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* Diane Edwards is Director, Professional Services, Mona School of Business & Management, University of the West Indies, Jamaica.  diane.edwards@uwimona.edu.jm