Caribbean islands face significant competitive disadvantages in trade because of a variety of factors — including the size and nature of their economies and their geographic location, which necessitates a reliance on maritime and air transport for most of their import and export needs, with 90 percent of goods being transported by sea.
At the same time, maritime transport and insurance costs in the Caribbean are 30 percent higher than the world average. These costs are the result of a unique set of interrelated challenges, including but not limited to outdated and inefficient port infrastructure, lack of flexibility in working hours, labor-intensive operations, and high customs and excise taxes.
Short-sea shipping (SSS) networks
Multiple transshipments increase the cost of imported intermediate and final goods, further dampening the region’s competitiveness. Given this, can strengthened networks for short sea shipping (SSS) — the movement of cargo by sea without crossing an ocean — be a mechanism by which the region can create more competitive and reliable transport options?
To answer this question, the IDB has commissioned an examination of SSS networks in the Caribbean to determine the suitability and sustainability of possible investment options. The study (Short Sea Shipping Network and Finance Model for the Caribbean) analyzes existing transport and trade infrastructure, as well as regulatory frameworks. The authors, CPCS Transcom, undertook careful scenario analyses to offer valuable insights into ways to improve and strengthen regional SSS networks. Findings include:
- Interisland trade volumes in the Eastern and Southern Caribbean are not sufficient in and of themselves to justify a customized SSS service. Implementation would be contingent on the will and ability of countries to provide subsidies. Northern Caribbean countries (e.g., Jamaica, The Bahamas) are already well-connected to global trade routes.
- The directionality of shipping services remains a problem, as all liner services travel north-south, delivering loaded containers and picking up (mostly) cargo on the way south.
- From the shipping liners’ perspective, current service levels and directionality are in line with the region’s needs.
- Low cargo throughput means that significant infrastructure and equipment upgrades may not generate the financial returns required for the investment.
In the absence of financial feasibility of a dedicated SSS network and resources for infrastructure investment, the authors make the following recommendations for further investigation and/or implementation:
- Reversing the direction of cargo flows (i.e., south-to-north) could be profitable for shipping lines.
- Reducing port handling charges for intraregional less-than-container-load containers could yield benefits and implementing this is within the control of Caribbean service ports, which are publicly operated.
- Strong policy support is required to promote SSS — active engagement within CARICOM and with the Secretariat is essential.
- Focusing on trade and transport facilitation (e.g., port community systems, customs modernization, and robust electronic single windows for trade) could improve efficiencies and reduce the time and cost of moving goods within the region.