Re-igniting the manufacturing sector in Jamaica

The importance of the manufacturing sector to the Jamaican economy has for too long remained under stated. The question remains, is it too late to re-ignite this valuable contributor to gross domestic product? Chairman and CEO of regional conglomerate GraceKennedy, Douglas Orane sought to answer this question on Monday as one of the presenters at the Caribbean-Canada Emerging Leaders Dialogue (CCELD) roundtable discussion on the Jamaican economy. The event was sponsored by Scotiabank Jamaica and was held at its training centre at Arcadia Boulevard, Kingston. The aim of CCELD is to be bring together thought leaders from business, government labour, and broader society from across the Caribbean and Canada to share and learn from one another, strengthen ties between the region and the country and develop cross-cultural leadership skills.

The importance of the manufacturing sector to the Jamaican economy has for too long remained under stated. The question remains, is it too late to re-ignite this valuable contributor to gross domestic product? Chairman and CEO of regional conglomerate GraceKennedy, Douglas Orane sought to answer this question on Monday as one of the presenters at the Caribbean-Canada Emerging Leaders Dialogue (CCELD) roundtable discussion on the Jamaican economy. The event was sponsored by Scotiabank Jamaica and was held at its training centre at Arcadia Boulevard, Kingston. The aim of CCELD is to be bring together thought leaders from business, government labour, and broader society from across the Caribbean and Canada to share and learn from one another, strengthen ties between the region and the country and develop cross-cultural leadership skills.

Orane announced that back in 1965 he was fortunate enough to win a scolarship from the Sugar Manufacturing Association of Jamaica to study engineering at Glasgow University in Scotland.

"In that year, Jamaica produced over 500,000 tons of sugar from 18 sugar factories. Last year, 2010 Jamaica produced 121,000 tons of sugar from 6 sugar factories. The clear picture that emerges is that we have lost a lot of ground in this particular sector, which is the most traditional one in local manufacturing. The critical question to ask is "how do we renew our manufacturing industries as the old ones inevitably decline with time?"

Orane declared that manufacturing has been the foundation of Jamaica's strength as a trading nation in both the past and present and that building a robust sector has been a critical ingredient in all economies that have reached a highly developed status.

He underscored the importance of manufacturing to the Jamaican econmy by pointing out that in 1990, manufacturing contributed 21.3 per cent of GDP but sadly by 2010 this had fallen to 8.6 per cent but yet still more than the tourism and agricultural sectors.

"Manufacturing yields on average, 74,000 jobs - about the same as tourism, and this is mainly in small and medium sized businesses. The sector contributes much greater taxation revenues through GCT, income taxes, and other contributions to national revenue than does tourism and agriculture, which have much greater tax concessions. The contribution of taxes from manufacturing is approximately J$13.5 billion compared to J$2 billion from tourism and J$600 million from agriculture. Notwithstanding its strong contribution to the local economy, the sector faces many challenges. So the question is how to be successful in manufacturing in Jamaica?"said Orane.

He went on to suggest that the first critical step is to make the correct selection of markets. This means, is one going to be focused on the local market, i.e. an import substitution model or is one going to be export driven?

The way he sees it, if the approach is to go the import substitution route, then one has to choose products that offer high barriers to entry. Examples are products that have a short shelf life such as baked goods, fresh juices and fresh produce where it would be difficult for a competitor overseas to ship into this market and sell within tight "best before" dates.

Turning his attention to exports, Orane said: "If one chooses the export driven route, we have to look at sources of competitive advantage, and ask the question: What diffrentiates us from the rest of the world? The increasing importance of brand Jamaica and the high recognition and regard for our music and culture are among the best areas on which to focus.

"This is in fact where our own company GraceKennedy has concentrated for several years, and this strategy is proving succesful. Just to give an example, Grace owned brands are now found in 62 countries around the world. This has taken us a generation to achieve and we believe that we are on the right track, but it is a slow process of building product by product, country by country."

The chairman and CEO of Grace Kennedy is of the view that being able to execute effectively is all dependent on people and here Grace Kennedy has found that getting skilled and trainable labour is not a challenge. The real challenge he sees is finding excellent management for the manufacturing sector.

"We have addressed this issue at Grace Kennedy by instituting a programme of selecting, grooming and coaching our future leaders in manufacturing and this has worked well for us. What I would like to see is a greater collaboration between educators and the business community in order to develop the type of individuals who would run factories e.g. general managers, chief financial officers, production managers, maintenance engineers. I would like to suggest the reinstatement of the old apprenticeship system, which was very effective in its day. I am an engineer by training and I went through this process early in life. Having benefited from apprenticeship, I endorse it wholeheartedly," said Orane.

In order to catalyse the re-establishment of the apprenticeship system, he would recommend a system of tax credits where young engineers and technologists can be trained on the job and the cost be offset by tax credits.