Caribbean Cement Company's Rockfort Plant in Kingston. Carib Cement, owned by Trinidad Cement Limited, is fighting for the reimposition of the 15 per cent duty on competing cement imports to Jamaica. - File
As Group chief executive officer of one of the few pan Caribbean companies operating in Jamaica, I continue to be distressed by the ill-informed discussions about CARICOM and Trinidad that are going on at present.
Misinformation is being piled on misinformation and this is then being passed on for fact, and I think that we need to really stop and examine a lot of the what is being said.
I have noticed that there is a growing tendency to blame Jamaica's current financial woes on Trinidad and the so-called 'dominance of Trinidad' in the Jamaican economy.
Even a cursory examination of the facts would reveal that this is not so. The Jamaican economy is driven by two main sectors: the hospitality sector and bauxite. Trinidadian firms neither own nor dominate any of these sectors.
Trinidadian firms are present in a minor way in manufacturing, the distributive sector, and financial services.
Trinidadian products are highly visible on supermarket shelves in Jamaica replacing products from all parts of the world including Jamaica. As far as I know, no Trinidadian company is 'dumping' products into Jamaica.
If that were the case, then why haven't Jamaican companies taken up cases against these unfair practices with the Anti-Dumping and Subsidies Commission (ADSC) or with the Council for Trade and Economic Development (COTED) to stop this practice?
Jamaicans buy products from the rest of CARICOM because they get value for money!
Failure to use market
Jamaica has been a part of the integration process since its inception, not out of any 'idealistic images of unity and cooperation', but because successive governments understand that a market of five million people has greater economic potential for Jamaica than a market of three million people.
What has happened is that Jamaica has consistently failed to take advantage of this market, preferring to focus on the United States and other first-world economies.
Jamaican businesses purchase products from Trinidad, not out of love for CARICOM, but because the products are of high quality and good price.
Jamaica must not adopt what I call a 'victim syndrome' as far as CARICOM is concerned.
The market is there for the taking and if Jamaican products are not widespread, then Jamaica must look internally to see what it is doing wrong.
Myths
As someone operating in Jamaica, I have a few ideas which I will share later on in this paper. First, let me deal with a few of the myths.
The greatest myth surrounds the issue of the price of electricity and natural gas in Trinidad and Tobago and its benefit to manufacturing.
Trinidad's natural gas is part of its petroleum sector and is being exploited for the benefit of the twin island republic.
This natural resource was developed using the taxpayers dollars and its benefits are passed on to the people via a series of mechanisms.
One such mechanism is low cost electricity and gasolene. This benefit is enjoyed by all citizens and not only the commercial sector to be used as a 'trade weapon'.
This is a common practice all over the world where natural resources are used for the benefit of citizens and is very common in so called 'petroleum economies'.
Even where countries have made considerable investments in hydroelectric power, the low cost of electricity generated by this method - which by the way is cheaper than electricity generated by gas - is passed on to citizens.
Trinidadians get electricity at a low cost but pay for it in other areas.
It's simply a redistribution of the money as the Government then has to use tax payers money to subsidise investment in power generation or 'pays' the opportunity cost of not being able to sell the gas at a better price.
The gas issue
A parallel to this is the Jamaican Government's annual subsidy to Air Jamaica to provide affordable travel for its citizens, but this also 'subsidises' airlift into Jamaica for the benefit of its hotel sector. Is this an unfair trading subsidy against hotel operators in the rest of CARICOM?
Jamaica has argued that as a part of CARICOM, they should benefit from cheap natural gas, yet somehow feel that the prices paid must not reflect the cost of getting the gas to Jamaica.
Gas is cheap in Trinidad because of proximity to source.
The further you move away from the source, the more it will cost, because gas pricing is all about transport - either via pipeline or in some other form (CNG or LNG).
There is a lot of emotion about LNG, but most Jamaicans don't appreciate that this is a very expensive option that was not grounded in sound economics. Using LNG to generate power will not result in electricity cost of US$0.03 per kWh.
Jamaica needs to move away from oil-based to coal-based electrical generation. Electricity prices globally vary from US$0.02 in oil-rich states such as Venezuela to as high as US$0.43 in Denmark.
In first-world countries like the US and Germany, electricity costs are US$0.09 and US$0.13, respectively.
Jamaica does not need to get to US$0.03 before it can be competitive because electricity as a cost in light manufacturing is normally small and can be mitigated with technology.
I say all of this to reject that argument that the price of electricity or natural gas in Trinidad is the reason why Trinidadian products are dominating the region. Trinidadian manufacturers have benefitted from their own entrepreneurial spirit, Government incentives and fierce resolve to capture markets and remain competitive.
Conversely, while Jamaican manufacturers have suffered from anti-producer government policy - high interest rates, the seduction of 'dumped' imports - they have also underinvested and have been undermined by years of what I call a 'borrow and buy' mentality, which has seen Jamaica cede sector after sector of its manufacturing to imports from all over the world, not only Trinidad.
To illustrate my point, let me use the example of potable water.
Many Jamaicans may not know that Trinidad is short of potable water.
Freshwater wells and impounding reservoirs can only supply 50 per cent of the country's long-term needs (400 imgd).
Trinidad has to turn to desalination, which is the most expensive form of obtaining fresh water.
Trading lobby
Now Jamaica is the "land of wood and water" and has no shortage of supply.
What if Trinidad - within CARICOMs' National Treatment clause - was to say that Jamaica must provide water to Trinidad at the same cost it provides it to its citizens?
Would the GOJ be prepared to ensure that Jamaican water was provided to the citizens of Port-of-Spain at the same price as citizens of Kingston? You see my point.
Jamaica needs to decide if it wants to be a manufacturer and if it does, it needs to muffle the 'trading lobby' and put in the infrastructure to encourage manufacturing and a return to a more balanced economy.
It needs to stop blaming external parties and look inward for the solution to its problems.
The recent issue with patties is a typical example. Here we have Trinidad and Barbados enforcing normal phyto-sanitary standards on food imports - in this case patties - and Jamaican blowing it out of proportion and complaining about trade barriers.
We are in an era of SARS, 'salmonella', Bird-Flu, Swine Flu, et cetera, that demand greater vigilance at the borders.
Even the Minister of Agriculture, Christopher Tufton, warned Jamaicans about the unacceptably low standard of the nation's abattoirs (Jamaica Observer June 7, 2009 'Watch that meat!').
This is some of the meat being used to make patties. Yet when countries importing the patties want to ensure that proper public-health standards are in place, Jamaica calls it unfair.
Clarke, my advice, to you is as follows:
1. Stop the 'self-pity' game and encourage Jamaican entrepreneurs to get to work on generating wealth from within Jamaica.
2. Try to get the Jamaican Government to shift way from 'borrow and buy' to 'make and sell'. Jamaica's annual trade deficit with the rest of the world is the root of Jamaica's economic problems. This is also the reason for the high public debt.
3. Try to get the GOJ to shift to coal-fired power stations and forget LNG. This will cut the cost of electricity by 50 per cent and get Jamaica to around US$0.12 per kWh.
4. Ask yourself the question: why would a company like TCL invest US$177 million to upgrade Carib Cement's plant rather than building a new plant in Trinidad where electricity and gas is cheap? What do these companies know that seems to elude you and the Jamaican manufacturing sector?
5. Reflect on the fact that when I went to Jamaica as a student in 1976, one Jamaican dollar was equal to one US dollar. Thirty-three years later, the Jamaican economy has not lived up to its potential.
Going back to 'splendid isolation' is not the answer.
business@gleanerjm.com