High costs of sea freight an obstruction to economic development – Pres Ali

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President Dr Irfaan Ali at the ACMF Anchor Awards 2022 in Florida on Friday

…calls for urgent action to address inefficiencies within transport sector at ACMF Anchor Awards 2022

President Dr Irfaan Ali on Friday zeroed in on the realities of soaring freight costs within the Region and its burden on developing states, and as such, called for urgent action to address the inefficiencies within the transport sector.

He made this call at the American-Caribbean Maritime Foundation (ACMF) Anchor Awards 2022 in Fort Lauderdale, Florida, where he was the guest speaker.

During his address, the Guyanese Head of State acknowledged the ineptitudes in transport and how it is affecting the Region while outlining that expeditious movement cannot be achieved without intervention.

“Unless we can increase the productive capacity and we can improve the system of production, and use our geographic location to ignite a reversal in the chain of goods and supply, we will not be able to have this expeditious movement or changes in terms of efficiency within the Region,” Dr Ali stated.

He related that Guyana has been making strides to re-engineer the supply systems and develop infrastructure, as he lobbied for more investments in shipping logistics.

“Shipping and logistics, the industry itself has a very long life in the Region. This, of course, is critically linked to human resource development. It is not training people to be exported. It is not training people whose skills will not be required in the future. It is training in a developmental context.”

Today, more than 100,000 commercial shipping vessels navigate the oceans, moving more than 80 per cent of internationally-traded goods. This is seven per cent of the value of global trade.

Statistics show that trade in goods has more than quadrupled over the past five years, while it is estimated that the volume of cargo has increased from 2.5 trillion tonnes in 1970 to 11 trillion tonnes in 2019 – two-thirds of this trade occurring in developing countries.

Ali, however, underscored that the pandemic inflicted a range of challenges on the global economy with global output shrinking by 3.1 per cent in 2020. This slowdown in economic activity, lockdowns, and restrictions forced onto countries has led to a decline in maritime trade by 3.8 per cent and 422 million tonnes.

Moreover, shipping costs skyrocketed sevenfold in some instances, leading to a spike in prices and higher inflation.

“The high cost of sea freight stands as an obstruction to economic development. The high cost of sea freight is contributing to rising prices in commodities and inputs from both manufacturing and the agriculture sector. It is increasing import costs and making the Region’s export less competitive. Developed economies can better absorb price increases but not so much, as poor developing states. Our region’s Small Island Developing States, with a high dependence on imports, increased shipping costs add to their burden,” he noted.

He called for action and solutions immediately to turn around the sector, given the long-term consequences attached to current operations. According to Ali, the shipping industry has an important part in the recovery from COVID-19 devastation and the supply chain crisis. He added that better freight rates will support a better recovery.

“This requires us to collectively come to the table and find answers faster. Otherwise, we will be hurting our economies severely in the long-term and the social tensions within our societies is going to escalate,” the Head of State positioned.

Maritime responsibility

On the other end, the upkeep of maritime responsibility and ensuring that the Caribbean waters are kept safe from accidents were also put forward.

“The Caribbean Sea must be kept safe from conflict and environmental damage. The Heads of State in the Caribbean Community, since 1999, express great concern for the movement of nuclear and toxic waste through the Caribbean. This is a good time to reaffirm the position that the Region’s maritime space be protected from the risks of marine accidents,” the Guyanese President told the gathering.

According to the World Bank, the blue economy is the “sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of the ocean ecosystem.”

The President said in order to capitalise on the blue economy, modernisation of the economy is necessary.

“The maritime sector in the Caribbean must be modernised in order to help the Region seize the opportunity inherent to global trade and the exploitation of the blue economy. Enhancing the Region’s human resources is an integral element of that modernisation.”