As any Caribbean business knows, it’s a long journey from product to market for the region’s producers. And one of the biggest barriers to growth is logistics. From sourcing materials and manufacturing to transporting goods to market, for many SMEs, the entire process is costly, riddled with inefficiencies and ultimately damaging to their competitiveness.
A tough trading environment
Logistics costs, as a percentage of GDP in Latin America and the Caribbean, are between 50 and 100 per cent higher than in the Organisation for Economic Co-operation and Development (OECD) countries, according to the Inter-American Development Bank (IDB).
This is partly due to the Caribbean’s unique geography. Trade routes can be difficult to maintain for isolated islands which don’t have the luxury of well-established and well-travelled land transportation networks. The islands are also especially vulnerable to weather events and natural disasters. Depending on their severity, hurricanes can mean days or weeks of lost business and irreparable damage to vital infrastructure.
But there’s also the human factor. Wastage, corruption, time-consuming customs processes which focus on collecting revenue rather than facilitating trade, skills gaps and lack of productivity have all taken their toll on the business environment. This, coupled with deficits in the necessary infrastructure, paints a bleak picture of Caribbean trade going forward.
Freight capacity
As a region of small islands and small economies, the Caribbean is heavily dependent on maritime and air connectivity to maintain its trading links. The IDB estimates that 90 per cent of goods are transported in and out of the region by sea and yet maritime transport costs are 30 per cent higher than the world average.
Why? One of the most crucial issues holding back freight is the lack of adequate port infrastructure. In many island shipping hubs, where cruise ships battle cargo vessels for limited space, the capacity simply isn’t there. As shipping containers grow bigger and bigger, ports around the Caribbean have been dredging their harbours to keep up, putting ever-more pressure on the accompanying facilities.
Saint Lucia’s two ports, at Vieux Fort and Castries, are government-owned and managed by Saint Lucia Air and Sea Ports Authority (SLASPA). Cargo operations at Port Castries, where most shipping activity occurs, averaged around 41,000 tons a month for the first quarter of 2019, while container traffic ranged from 2,547 units to 3,257 units per month.
Port Castries was ranked “most efficient” of the OECS nations by the Caribbean Development Bank (CDB) in 2016, thanks to high scores in categories such as quality of infrastructure, availability of equipment and implementation of IT systems. According to the CDB, the top three performers in the region in terms of port efficiency are the Bahamas, Trinidad and Tobago and Suriname while the least efficient are Grenada, Dominica and Guyana.
The CDB predicts low growth for Saint Lucia’s port, however, estimating a 29 per cent increase in business by 2025 compared to 71 per cent growth for Suriname, and suggests that a lack of autonomy due to government control is hampering operations at Castries.
Efforts to upgrade Saint Lucia’s ports have been in the works for at least a decade. In his 2019 Budget address, the Prime Minister said redevelopment at both Castries and Vieux Fort is set to take place “in the medium-term” following discussions with international partners, perhaps signalling a move towards greater private sector participation. He acknowledged that the island’s seaports were suffering from “poor physical condition, limited capacity and poor connectivity”.
Global connections
In a globalised world with increasingly complex supply chains, connectivity is key to a streamlined logistics network. Technology has transformed the ways in which businesses, markets and governments connect and the logistics sector is no different. From streamlining supply chain management to tracking materials and co-ordinating distribution, performance and productivity can soar with an effective and integrated ICT platform.
An online customs system is key if logistics hurdles are to be overcome. The Bahamas has proved forward-thinking in this area, and is currently modernising its customs department to create an online portal through which buyers, suppliers and brokers can easily navigate the system, check their paperwork and pay their bills through a 24-hour service available on their mobile devices.
Up to date Terminal Operation Systems are also necessary, giving operators the ability to track the movement and storage of cargo around a port to maximise the use of machinery, labour and other assets. The last piece of the puzzle for a functioning port is an electronic portal through which information can be securely exchanged with both domestic and international partners.
In Saint Lucia, SLASPA has adopted an advanced cargo management system whereby cargo owners can book a berth or track cargo through the SLASPA website. One of the defining characteristics of technology is that it is constantly evolving. As trans-shipment becomes more sophisticated the world over, Caribbean ports must not just keep up with current standards, but also have one eye on the future.
Advances in technology are just one of several disruptive trends expected to shape logistics in the coming years. The World Economic Forum has identified eight “megatrends likely to drive the future of logistics”: logistics skills shortages, restructuring global value chains, supply risk and recovery, digital transformation, sustainability, e-commerce, logistic infrastructure and collaborative business models.
An enabling environment that supports progress in all these areas involves adequate training, modernised regulation and increased co-operation and co-ordination between the public and private sectors. The cost of lagging behind is potentially devastating to small island economies where SMEs make up the majority of economic activity and participation in both regional and global trade is paramount.
As noted by Caroline Freund, Director of Macroeconomics, Trade & Investment Global Practice at the World Bank Group: “Logistics are the backbone of global trade. As supply chains become more globally dispersed, the quality of a country’s logistics services can determine whether or not it can participate in the global economy.”
