By David Rabkin, Contributor 
Rabkin
MY WIFE was out of town this past weekend. We've only been married six months, so the minute she was out the door I slipped easily into my old bachelor ways. Well, some of them, anyhow. On Saturday I woke up, put on some old gym clothes and turned on the TV to find sports. I began with a little golf (Tiger Woods was not at the top of his game, but he was still alive in the tournament), took in an interview with Kobe Bryant (being from Magic Johnson's home state of Michigan I am a major Lakers fan); and eased into a particularly good NCAA tourney game. I can't remember who was playing, but one of the teams was wearing red. I think I even caught a fishing show.
I interrupted this fiesta with a (very) brief workout of my own, a couple of vigorous bouts of playing with the new puppy, and a trip to the shopping centre to pick up a pair of action movies and some unhealthy food with lots of onions.
By the time the sky was completely dark I was in the pole position. Dinner was spread out on the coffee table like a fast food banquet, my cushion on the couch was warm and indented in all the right places, the puppy was asleep on my feet, and movie number one was in the VCR. At just that moment the lights went out. The TV flicked off with a pop, the room went dark and the fan stopped spinning. Hoping it was a blown fuse somewhere, I looked out the window only to find the entire neighbourhood dark. Seeing no reason to let a meal go to waste I searched out a flashlight and munched away, staring at the now dead TV. As I sat in the dark, eating and sweating, I tried to remember what I used to do in the United States when the lights went off in the middle of a perfectly good evening. For the life of me, I couldn't remember how I coped with this experience in the past. Finally I realised why: the lights never went off on me in the United States.
When I say 'never' I don't mean it in the sense of "I never get sick". I mean 'never' in the sense of not once, hasn't happened in 30 years, forget about it 'never'. Sure, there are major storms that knock the power out once every few years and there are scheduled maintenance times in the middle of the night a little less frequently than that. But the power literally never ever goes out in the middle of a perfectly good evening. Particularly not in the middle of a 'your wife is away, the fast food's getting cold, you haven't even finished your beer, movie is rewound' evening.
While this situation is clearly frustrating, it may not be obvious why I have chosen to write about it. I write about it because it is representative of a fundamentally weak platform for businesses. A faulty and expensive power grid is one of four major problems Jamaican businesses face in their attempt to deliver low-cost goods to the world. Jamaica's electricity costs, by one local professor's calculation, rise above 13 U.S. cents per hour, while Mexico's hover just above 5. In the U.S., power is so reliable that when California experienced blackouts last year it was global news. In Canada, with seemingly endless miles of rushing rivers, hydroelectricity makes power so cheap it almost feels free.
Another major barrier Jamaican firms face is security. This has been the topic of a great many discussions. Suffice it to say that the cost of doing business in Jamaica increases each time a shot is fired or a product stolen off a shelf. The success of the local security industry is a testament to the very real tax that each firm faces when they open their doors for business. This tax affects every firm at every level in the system and adds up to a premium price on each exported product.
In no particular order, problem number three is economies of scale. Low cost producers around the world depend either on vast tracts of usable land or huge enterprises with billion dollar capital investments in plants and technology. Whether producing computer chips or growing tomatoes, achieving at least a minimum scale is required to compete on price in any industry.
Finally, labour productivity is poor. Although the dollar wage of the average Jamaican worker is competitive with neighbours such as the Dominican Republic or El Salvador, the productivity per worker is particularly low. One international business owner, with operations in both Jamaica and Trinidad, told me that he regularly hires two Jamaican workers for a job that requires one Trinidadian.
So, even if they buy backup generators and manage to keep their lights on, how can Jamaican firms compete on cost? They can't.
These four major barriers, along with numerous minor ones, make it impossible for a Jamaican firm to profitably sell anything at the lowest international price. Further, despite all of our best efforts at rectifying these challenges, they are so great that it is highly unlikely that any of us will live to see a Jamaican firm successfully compete on price.
It is well worth the effort, of course, to try to improve electricity costs, perhaps by bringing in liquid natural gas (LNG), or to reduce the security "tax" by reducing crime. These things will make firms more profitable, not to mention improving all of our lives, but Jamaica is so far behind in the efficiency competition that firms must find a different way.
The good news is that there is another way to win in the marketplace. It involves innovation, unique product offerings, and global brands. It includes high-priced sauces, music television shows, and US$500 a night hotel rooms. This is a fight Jamaican firms can win. In the latest Global Competitiveness Report Jamaica was ranked 14th highest in the world in brand recognition. What's more, this ranking was absolute, not on a per capita basis. That tells me that no firm from Jamaica ever has to compete on price. This country has the brand equivalent of Saudi Arabia's oil fields, and in the long run it is much better to have brands than oil.
There are riches to be had for the firms that focus on selling specialty products to the world's most sophisticated consumers. Those firms that add value to already world famous raw materials and spend money on marketing campaigns can earn a living and then some. So please stop talking about competing on price. This is a competition Jamaica will lose every time. Besides, it's distracting me from my candle-lit magazine and my fries are getting cold.
David Rabkin is Project Director of the Jamaica Cluster Competitiveness Project, sponsored by the Jamaica Exporters Association. Mr. Rabkin is a Vice-President in the Boston-based advisory firm, ontheFRONTIER. He can be reached at: drabkin@onthefrontier.com
