For this edition, Mr. Stephen Daal, owner of Interport logistics, shares us his views on opportunities for Aruba in the world of logistics.
What is the worldwide container movement and logistical trend?
Stephen Daal (SD): Logistics is a new term. We used to call it shipping but nowadays it is a more complicated business we call logistics. In Europe it is very much advanced, even compared to USA. That trend is not yet present in Aruba. Logistics is everything between producing a product until it reaches the consumer, shipping, whether by air or sea, brokerage, warehousing, distribution and much more. It is a very broad concept.
I find it a very interesting topic. Over the years I have adapted my business more towards the whole concept of logistics instead of just shipping and forwarding. My company is now a partner of a US-based company that does everything that has to do with logistics, bearing the same name Interport Logistics.
Companies in Aruba are becoming more aware of how logistics can help improve their services. Each year I evaluate with my clients what can be improved for the coming year, so we are always raising the bar. Next year, one of my clients will have the possibility of a hand held device that checks product availability in a warehouse or for shipping. This way when a customer wants a specific item not available in store, it can be ordered and purchased immediately, and at the same time, my client can order more of the same item to replenish his stock.
This may not always be feasible for smaller stores. But Aruba has done logistics for many years. It used to be the Free Zone. That was pure logistics, in the big form. Now, due to structural changes, it has been diminished. Yet, logistics is everywhere.
The flow of goods that comes to Aruba has been stagnating over the past years. Aruba has been importing less than previous years. When your imports are decreasing, it means your economy is not really growing. It can become a problem when constantly additional costs are added which will lead to price increase, and as a result the consumer will purchase less.
If the consumer does not buy the product, the manufacturer does not have to make the product and the whole logistics chain in between becomes unnecessary. This decrease in purchasing is a worldwide trend. Large companies are merging or acquiring smaller companies to keep their market share and to be sustainable. It is all about survival.
How does Aruba fit in this international movement of containers?
I don’t mean to be negative but it is important to say this. The Aruban government went to Brazil and other countries to promote Aruba as a hub, but when we are one of the highest tax paying countries in the world, it makes Aruba an unattractive destination.
Does Aruba have what it takes to become a logistical hub?
I am skeptical about the idea to make Aruba a transshipment hub and use Aruba as a hub between Europe and the Americas. Take a look at how incredibly well developed Panama is in logistics. Take a look at Cartagena in Colombia, where millions have been invested making it one of the most efficient ports in the region.
These transshipment ports are so well organized that ships do not need to unload their cargo, have it deposited in warehouses and afterwards loaded in a different ship. Large cranes move containers from one ship to another, and then both ships are on their way, in a matter of hours. It all goes so fast. In comparison, Aruba is not time or cost effective.
But let’s say we can pull it off by introducing a zero tariff and everybody jumps on board. Keep in mind that the other islands in the Caribbean are doing the same and we have to compete with them. To do transshipment, will take a lot of investment, and years before we can get there.
Another important factor is that the government has to make our taxes and import duties more attractive. It is too complicated and too expensive. Give incentives to foreign companies to establish in Aruba and local companies alike. Governments have the tendencies to give incentives to foreign investors but not to local companies. They keep the unattractive high tariffs. It is not fair.
Supply chains are moving beyond Asia and more towards Latin America, especially Mexico. What would be feasible business opportunities for Aruba in this scenario?
SD: There are opportunities but it is not just moving the container port and improving Free Zone services. It’s the whole package. Being nr. 2 on top of the list of countries with highest tax rates does not contribute to that; no matter how beautiful you say it.
We shouldn’t forget that just like Aruba, other countries want to attract more business too and maybe, they are more lenient is terms of how to make their tax regime more attractive to foreign investors. Also, logistically seen, we have the disadvantage of being at the lower end of the Caribbean belt. We have to be creative to see how else we can do it and what we can offer to make it attractive and feasible.
What would we have to invest in to achieve this?
SD: To attract entrepreneurs you need to make it interesting, otherwise they won’t come. We have to be efficient. If someone wants to establish a Limited Liability Company (LLC (VBA)), in Aruba and wishes to open a bank account, he will soon realize it is very difficult and time consuming. Even for me, as a local business man. And no one is trying to solve it either. I agree that we need rules and regulations but it cannot be in such a way that it stops businesses.
Then there is the lack of efficiency in government departments. They did well in promoting the island as a business destination but you have to think about the whole chain. It has to flow smoothly from A to B, and it includes government services as well, customs, taxes, permits. The Customs Department, a very big link in the logistics chain, recently switched to the ASYCUDA program, which means they will be more efficient. That’s good. Now I hope the mentality will be as efficient as well.
Let me give you an example of how inefficient it can be. During last year’s social dialogue, it was agreed through a beneficial policy that when hotels invest in new furniture, they will receive an import tax incentive, and so most hotels made the investment but paid the high rate because there is nothing about the implementation of the new tax incentive. To make it worse, all the hotels are still waiting to be reimbursed.
So it is nice to make policies and then have it approved by the parliament but it cannot remain there. It has to be implemented well otherwise the flow will get stuck. Government has to realize that the more efficient they make the flow, the more they will get out of every florin received. Complicated and inefficient flows are expensive.
The Chamber suggests letting one large company do its transshipment in Aruba. Would that be a good idea?
SD: A partner is always a good idea but everything needs to be in place. If there are no incentives and if the whole chain does not flow efficiently, why should any big company move to the island? Plan it well. That is how it was done with the Valero Refinery.
The moment you take politics out of the equation, automatically the chain will start flowing, including money. Just look at our airport. It has partnered up with Schiphol and it works fantastically. I think our port needs a big partner as well.
Do we have the infrastructure to do the transshipment?
We will soon have the beltway and the new highway from Oranjestad to San Nicolas. The container port will soon move to Barcadera. Both new roads will need the proper connection with the container port to allow the flow of goods. The construction of the new container port will take approximately three years, and by then the new beltway and high way will be in place.
Can shipping and logistics become a sustainable industry in Aruba?
It is important for Aruba to ease some of its policies to facilitate entrepreneurs and make it more attractive to do business. I am talking about the tax department, Customs, the Central Bank of Aruba & FATF.
For example, the FATF requirements are so high that the banks had to come with new compliance departments which are a new link in the logistics chain. Only, they failed to make it fit in the chain. And the moment things get stuck it is because there is an error in communication, understanding, implementation, etc.
The missing flow can be because of regulations or humans. In the end we will get less for each florin. The problem is that no one is in charge to make the chain efficiently. From point A thru B the flow must go smoothly and in my opinion organizations such as the Aruba Chamber and Aruba Trade and Industry Association (ATIA) must demand to achieve more efficiency.
Don’t make rules too complicated because it will defeat the purpose. Organizations must look for efficiency, low cost, high productivity and sustainability. For it all to succeed, it is very important that all parties involved have the willingness to do things together.
Are there risks involved for Aruba as a tourism destination when large containerships move in and around our waters?
Nowadays not so much. Modern ships are clean and security is at a high level. Our port has raised its security level constantly over the past years. I don’t think there is any risk to our tourism but I am in favor of moving the container port out of Oranjestad.
How would you do it?
As mentioned before, I think partnering up would be a good idea. Be open-minded and willing to work together. That is what I did with my company. I sold some of my company’s shares to my partner in USA because they are a big logistics company in USA and the resources of information that I get in return is so great, it gives my company a chance to grow in different ways. It creates new opportunities that by myself would not have been possible.
Is there anything else you would like to add?
I believe the organizations that represent commerce in Aruba, should become a little more aggressive in order to achieve the willingness and openness to function correctly. This will help the way we do business in Aruba. It will help the local businesses and the ones who want to come and establish on our island. I would like to see organizations, like the Chamber and ATIA working more often together, because this is how we will get the shares of information. Common goals, no personal agendas. Together we are stronger and that is how we will accomplish things. Commerce is the trend setter; it is the economy of any country. Its representatives need to speak a little bit louder every time, be more determent to achieve more, for things to go smoothly and what can or cannot be accepted. Stay on the path of efficiency, open-mindedness and willingness.