JMA Online News
Making Jamaica's manufacturing sector a potent economic force
Written by: Jamaica Observer
Date: 2010-06-18
Manufacturers have joined the chorus for lower electricity rates and have complained that high and escalating prices constitute the main impediments to the sector's viability.
With interest rates trending down, investing in government paper is no longer the only option in town and if Jamaica is to have a diverse economy, then the productive sector has to be a potent engine of growth.
For decades now the sector has been characterised by a torpor that has rendered it all but moribund with its contribution to Gross Domestic Product (GDP) declining year-on-year. The question now is, where do Jamaican manufacturers stand today?
Mayberry's Monthly Investor Forum held on Wednesday at the Terra Nova Hotel, St Andrew sought answers to that question from its three guest speakers -- President of the Jamaica Manufacturers Association (JMA) Omar Azan, Permanent Secretary in the Ministry of Industry Reginald Budhan, and the CEO of Jamaican Teas Limited John Mahfood.
Omar Azan's contribution
The president of the JMA underscored the importance of manufacturing to the Jamaican economy by pointing out that it is the largest contributor to GDP of all the goods-producing sector at 8.3 per cent. Last year saw manufacturers exporting goods valued at US$722.9 million and employing 77,700 people: that's more than the tourism sector. He declared that Jamaica has the widest range of manufactured products in the Caribbean which will be showcased at EXPO Jamaica to be held at the National Arena from June 18-20.
Azan took the opportunity to point out the shortcomings of the sector and that 30 years ago it was a major contributor to GDP.
"But whilst the sector is strong in these areas, there are weaknesses in the workplace such as management, marketing, supply chain management, technology application and productivity as well as weaknesses within the overall environment that must be addressed to increase the contribution of the sector to development. Did you know that in the 1980s the manufacturing sector employed over 120,000 persons and contributed 20 per cent to GDP?" he asked.
The JMA president, who is also the CEO of Boss Furniture, went on to add that today Jamaican manufacturers face stiff competition and if Jamaica doesn't put the country and its businesses in order it may well see the disappearance of many industries from the Jamaican manufacturing landscape.
He declared that for years the sector has been stymied by macro-economic uncertainty, the high cost of electricity, crime, bureaucracy, shortage of skills, a complex tax system, a lack of culture and mindset of competitiveness and productivity, a lack of support for locally made products and a crisis of leadership.
Manufacturing has further been challenged by the economic crisis of last year which resulted in a contraction of the local and export markets which has led to cash flow problems.
The Government has a role to play in rehabilitating the sector and this was not lost on Azan.
"Government policy focus has shifted in favour of a service economy which means that the manufacturing sector has given up jobs," he said. "There has to be a recommitment by our policy makers to focus on manufacturing and to strengthen the linkages between our agricultural, tourism and manufacturing sectors. These three sectors complement each other and through greater partnership and commitment we can reduce the trade imbalance, poverty and crime and increase literacy, the numbers of internationally competitive industries, exports and prosperity.
"Whilst we have remained resilient through all these hurdles, we cannot absorb any more increases to the cost of production and living. Jamaica's energy cost is already uncompetitive and an increase to JPS will further erode manufacturers' ability to compete.
"We also maintain that for Caricom to be a true single market economy we cannot have discriminatory pricing of electricity for one country that provides an unfair advantage, whilst eroding the manufacturing base of the rest of Caricom."
For the better part of two years young Azan has been calling for a single digit-interest rate as a means of helping to spur the sector. He notes there have been some positive developments with interest rates trending down and the revaluation of the dollar.
"For the manufacturing sector, lower rates are essential for retooling, expansion and attracting investment. However, a reduction in interest rates will not on its own have this desired impact unless all other factors that impede investment are addressed," said the president of the JMA.
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