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Export diversification
We are sure that all Guyanese are aware that if we were to increase the volume of our exports, living standards in our country would be increased immeasurably.
Even at the most mundane level we know that obtaining more foreign exchange gives us the wherewithal to purchase so many items that are only available from abroad.
Economists are in complete agreement with that intuitive evaluation of the value of exports to a country’s development and see it as a powerful tool for the creation of jobs, securing a better balance of payment position, raising the overall income level, and securing economic growth.
So if there is universal agreement that exports are positive for our well being, how is it that we are not doing better? The bottom line is that our efforts have been stymied by both demand and supply side shortcomings.
The former can be seen from the very limited number of countries to which we ship our goods (narrow export market base) and the latter from the not unrelated problem of being able to ship an even narrower range of products ( narrow export product portfolio).
It is not healthy for our country’s financial health to have only eggs to sell and then to place them into only one basket. Only five products – sugar, rice, bauxite, gold and timber – make up the overwhelming bulk of our exports and has been the case for so long that they are known by all as our “traditional” exports.
While timber in the last few markets have opened up some new markets in India and China – our goods still mainly head to Caricom, the EU and the USA. For a host of reasons, we have to engage in a concert program of export diversification if we are ever to drag ourselves out of our economic quagmire.
Export diversification can act as a buffer against the wide world price fluctuations that are endemic especially in the primary products that we ship. A country with a restricted export base and only a few products will almost inevitably experience a drop in the overall value of its exports, since the spread is not great enough to reliably offer price raises to offset decreases.
However, if a country exports a large number of products, none of which has a major share in its total export earnings, reduction in international market price of a few export items will not affect the monetary value of its exports.
We have witnessed the traumatic effect of the fluctuations in the price of rice that has wreaked havoc in that industry. The unilateral 36% price cut in sugar by the EU has also forced our country to scramble madly to make adjustments in our production repertoire. Bauxite is right now plunging downwards.
The Ministry of Agriculture has launched an admirable program to diversify the agriculture sector and while there has been some progress, the results are somewhat disappointing in light of the resources and effort expended.
One major factor has been the reluctance of the farming community to diversify significantly into “other crops”, which might be related to the absolute failure of the private sector to become involved in the marketing of our products in foreign markets.
Marketing and farming are two distinct activities and to expect our local farmers to complete the loop is asking too much. Entrepreneurs have to seize the opportunities, for instance, to market so many of our local products in the Guyanese enclaves found in North America. What is the Ministry of Trade doing in this area?
The stubborn refusal of our “manufacturing sector” to move beyond producing beverages is a national disgrace. We have called before for an industrial policy in which the government will have to play a very aggressive role, mainly because of the “manufacturers” refusal to identify and produce some products that may be within our comparative advantage.
The government should tie its incentive regime (tax holidays, duty-free machinery etc) to the volume of export generated by firms.
There needs to be an effort by the Ministry responsibility for Industries, comparable to the one by the Ministry of Agriculture, to diversify away from sweet-drinks “manufacture” into world class manufactured products.
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