JG - Scrap metal business and the art of war
Scrap metal business and the art of war
published: Sunday November 18, 2007
Just when we thought it was over, another round has begun. Last Thursday, a bunch of workers and dealers in the scrap metal business blocked a part of the Spanish Town Road close to the Riverton landfill in St. Andrew. It was an act of protest. The new regulation which disallows the loading of scrap metal into containers at the Riverton site has not gone down well with the people in the industry.
In recent times, the scrap metal industry has drawn a great deal of attention. Not so much because of the spectacular growth it has exhibited, but because there are indications that the cost to the society is greater than the benefit being derived from it. Manhole covers have been vanishing by the hundreds; safety rails on bridges sometimes disappear overnight; and, the theft of copper cables from Cable and Wireless (Jamaica) cost the company some $51 million to replace over a one- year period.
Minister of Industry, Investment and Commerce Karl Samuda has moved swiftly to deal with the problem. And, indeed, this is admirable. It makes absolutely no sense for perfectly functioning components of the country's infrastructure to be dismantled and exported, only to be recycled and imported at a higher cost a couple weeks later. Yet, there is a sense that the approach to the problem is not one fully thought out, but instead, a series of reactions. Issues of this sort ought to be rigorously examined, all the consequences weighed and the possible effects on the stakeholders calculated. This certainly is a case of Mr. Samuda reacting to a situation, which in turn, evokes a response, which then leads to another reaction.
On October 31, the scarp metal trade was banned. Then 12 days later, the ban was lifted, with dealers being required to register with Jamaica Trade and Invest in order to do business. Now, there is a protest and the Government is being pressured to review its position with respect to the policy on the Riverton site. One vociferous protester pledged that "as long as it stop (scrap metal trade) in Riverton and Calloloo Mews ... we are not going to stop demonstrate until everybody yard or house is filled with garbage." It is clear that this issue needs to be addressed comprehensively and strategically.
Scrap metal is big business these days. Last year, Jamaica exported US$99.6 million worth of scrap metal, approximately US$13 million more than the export earnings from sugar. What is also fascinating is the phenomenal growth the industry has been chalking up.
In 2006, export earnings were more than seven times the earnings in the previous year. In the U.S.A., the scrap metal industry is now a 145 million-ton annual business with export earnings of US$15.7 billion.
The demand for scrap metal has been fuelled by China's annual growth rate of 10 per cent for the last decade. Tons of metal are needed to build China's skyscrapers, to expand its telecommunications networks, and to feed its hungry factories. This has placed enormous upward pressure on the price of metals, and the value for scrap has soared to unprecedented levels.
Apart from the favourable impact the scrap metal industry has had on Jamaica's balance of trade, the industry has diverted tons of material from landfills and provided bread for many people, particularly the poorest of the poor. It is also evident that the industry, over the past year or two, has cleared away much metallic junk that has been around for years, if not decades. But, the boom in the local industry is unsustainable. The growth rate in the business is much faster than the rate at which Jamaicans can put out junk.
So, the country is actually approaching the point where metallic junk is becoming scarce. It should, therefore, come as no surprise that metals that are part of telecommunications networks and functioning infrastructure are increasingly being found in scrap metal containers. Scarcity in the absence of rules can be the devil personified - the meek scavengers can become dangerous predators if they are hungry. The scrap metal industry, if unchecked, can create havoc. Night flights were cancelled for some time in Guyana during the 1980s after scrap metal crooks stole 1,200 metres of copper wire from the runway at the international airport. And wherever the scrap metal business flourishes, there are stories about the feats of scrap metal thieves.
In this context, the new requirement for the registration of dealers and exporters is appropriate. It should have the desired effect if containers for export are properly checked and the penalties are adequate. Unlike the ban, it provides export and provides employment for Jamaicans, while holding exporters accountable.
Mr. Samuda is action oriented and gallant. His heart is in the right place. He is at war and he knows it. The greater good of the whole should never be compromised by the good of a section of the society. But the approach is nonetheless piecemeal. The ancient Chinese master, Sun Tzu, in addressing the art of war, advised victorious warriors to win first and then go to war, and defeated warriors to go first and then seek to win.
Cedric Wilson is an economics consultant who specialises in market regulations. Send your comments to: firstname.lastname@example.org.