GUYANA – As geopolitical conflict and climate change continue to adversely impact the global shipping landscape, several recommendations have been advanced that could form part of a strategy, Guyana and other CARICOM member states should examine to combat the negative impact of rising freight costs as well as disruptions to the supply chain.
The recommendations emerged from the analysis of the current global shipping crisis undertaken Thursday evening at a forum held at the Georgetown Club entitled ‘Impact of the Global Shipping Crisis on the Supply Chain to Guyana’ which was hosted by the World Trade Centre Georgetown (WTCG).
Consolidating Container Loads
Among the recommendations were that importers and exporters should seek to examine consolidating their less than container loads; greater planning and forecasting be employed in the procurement of imported goods especially raw material used by local manufacturers; intensified efforts on the part of government and the private sector to promote import replacement thus relying on more commodities produced locally and in the region; and greater utilization of insurance coverage to protect lost or damaged cargo.
Attacks on Ships in the Red Sea
The crisis in global shipping has been occasioned by continuing attacks on ships passing through the Red Sea which have pushed ocean freight rates higher, triggering inflation and delays in the supply of goods and material. To avoid strikes by Houthi militants based in Yemen, carriers have already diverted more than $200 billion in trade over the past several weeks away from the crucial Middle East trade route, which, along with the Suez Canal, connects the Mediterranean Sea to the Indian Ocean.
Another challenge to the shipping industry is the negative impact of climate change on water levels in the Panama Canal which has resulted in additional surcharges being applied to ships transiting the canal.
Focusing on the impact of the crisis on exports from Guyana in his welcome remarks, Executive Chairman of the World Trade Center Georgetown (WTCG) Komal Samaroo, who is also Chairman of the Demerara Distillers Limited Group of Companies said “It is my considered opinion, that given the small population of Guyana on the one hand, and its abundance of resources on the other hand such as land and minerals, combined with competitively priced energy in the future, this country will have to access international markets to realise the economies of scale in its productive sector. Accessing and developing international markets are much more complicated than doing business on the domestic market. Apart from different regulations in each market and the working capital requirements required to finance exports, logistics and the risks associated therewith have in recent times become major issues.”
Samaroo explained that when the WTCG becomes fully functional later this year it will facilitate regular sessions discussing and brainstorming on all aspects of international trade that can benefit businesses in Guyana. “We will also network with the other 320 WTC’s around the world to build contacts and business partnerships while learning about their markets. We will also be providing trade support services as presently done by other WTC’s which have all undertaken to help us build these capabilities.
The impact of the current crisis was brought sharply into focus by the moderator of the event Ms. Keranga Seales-Greene, Managing Director of New Horizons Logistics who in her remarks said that “this is not about future impact, it is happening now. I am a small business owner in the logistics sector and over the past three months the number of containers my business has handled out of China has reduced significantly while the cost of the few we handled have gone up”, she lamented.
Situation in the Panama Canal
Allan Newark, Country Manager of Kestrel Shipping, speaking on behalf of the Guyana Shipping Association, pointed out that the supply chain to Guyana was most affected by the current situation in the Panama Canal where drought conditions have been severely restricting the number of vessels transiting the canal. He said the Panama Canal authorities have enforced a drastic reduction in the draft, causing a reduction of more than half of the daily number of ships transiting the canal, long queues, ships rerouted, and shipping companies paying up to four times what their ships normally pay to cross the canal.
While there are plans to add a fourth lake to the canal in the future, Newark said that there is need for local businesses to engage in meticulous procurement planning to cushion the negative impact of the Panama Canal situation and the current wars in Ukraine and Gaza. Newark was optimistic that ongoing construction of new reservoirs and transit scheduling adjustments in the Panama Canal are key steps toward ensuring the sustainability and reliability of this crucial global trade route.
“Why should there be prolonged shortages of any products or raw material in Guyana when with careful planning this can be avoided,” Newark asked while pointing to the need for local companies to identify their needs in a timely manner and seek where possible to consolidate their shipments.
Maritime Insurance specialist Eion Oudkerk in his presentation pointed to the need for greater use of insurance to cover possible loss or damage to cargo and for closer examination of the categories of insurance to provide affordability of coverage to small and medium size enterprises importing and exporting product. “There is also a responsibility on the part of the shippers to ensure that their cargo is properly packaged especially given the threats to vessels posed by attacks on the Red Sea,“ he said.
Noting that modern technology may lead to unmanned vessels in the future thereby reducing the loss of life, Oudkerk stressed that cargo will always remain under threat once there continues to be geopolitical conflict and wars, some of which seem to have no end. “Insurance is key to ensuring that severe losses can be recovered, and business enterprises are not put out of business or forced to increase the cost of products to the end user,” Oudkerk said.
Suitability of Rivers and Ports
Former Guyana Vice President and Minister of Foreign Affairs Carl Greenidge pointed to the need for a number of issues to be addressed locally including the suitability of rivers and ports to handle large vessels and improved efficiencies in the handling of maritime and related administration. “We have got to look not only at the desilting of the Demerara River but at the structural integrity of some of our ports…these two issues present real challenges to cost effectiveness and reliability. Perhaps we need to examine the feasibility of constructing a port just offshore of our coast,” Greenidge suggested.
Right of Transit Passage
Neville Bissember Jr., Senior Lecturer in the Law Faculty at the University of Guyana outlined several international legal instruments governing the safe passage of ships including one such instrument which clearly states that all ships and aircraft enjoy the right of transit passage and should not be impeded except in circumstances provided for. He said the current attacks on ships plying the Red Sea could be regarded as acts of terrorism.