Caribbean Cement Company – Dealing with globalisation

The recent announcement of job layoffs at Caribbean Cement Company is another cause of concern for the government.  It highlights the fact that we are still feeling the effects of the worldwide recession.  The management of the company has highlighted the down turn in the local construction sector and the importation of cement into the local market as contributors to the redundancies.  It is this second factor which I want to look at more closely.

The matter of whether or not to allow cement into the country is part of a bigger issue, that of globilisation.  The problem for small countries like Jamaica is how to compete with other countries that are much larger than us.  Small countries start off with an inherent disadvantage that of economies of scale i.e. as the production level increases the average cost of production decreases.  A country like Mexico producing cement for a population of more than 100 million persons will always have a lower average cost than Jamaica with its population of 3 million.  In addition the size of the reserves of the materials used to make cement are larger for countries bigger than Jamaica.

Even if no cement were to be imported into the island Caribbean Cement Company would still have a problem as there is not enough local demand to meet its production capacity.  This highlights an additional problem of globalisation whereby it is not sufficient to rely on local demand but one has to think of selling globally in order to be able to survive.  This means that local companies who already lose on size issues now also have to compete with other costs such as electricity, labour and security.  Small countries will always find it difficult to compete on these issues and will increasingly be found to be uncompetitive.

So, what is the answer?  In this age of globilisation smaller countries will have to look at products in which they will have a competitive advantage.  This will mean identifying products which are unique to us or in which we have a distinct advantage.  For example, Jamaica has a unique product in its jerk seasoning and its reggae music which even though others have try to copy they find it difficult to produce a high quality product.  An example of a distinct advantage would be our tourism product to the extent that we have sunshine all year while many countries have cold seasons for 6 months out of the year.

The challenge for smaller countries is whether we can find enough of these products in order to be able to achieve a reasonable level of economic growth.  The focus must be to spend more money on research and development with a view to creating new products which can be patented for sale in the global market.  I have a suggestion for them, how about an animal feed made from a grass or a tuber instead of from a grain?