Creating more competition within the Economy

Jul 18, 2011 Letters

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Dear Editor,
Guyana’s economy registered a growth rate of 3.6 percent last year. This is a relatively high growth rate considering the recent global financial crisis which affected other Caribbean countries.
However, it is important to note that this increase occurred as a result of the increased demand for gold on the world market and the performance of the non-traditional sectors.
The performance of the economy reflects the fact that Guyana has a major competitive advantage in resource endowment, relative to its size. When compared with other Caricom countries, the economy has a range of natural resources which exceeds the rest of Caricom countries combined. Yet, the economy ranks as one of the least competitive within the Western Hemisphere.
The urgency of improving competitiveness lies with the structural problems of some of the major sectors within the economy, such as sugar and bauxite. The growth rate would have been higher had it not been for the dismal performance of these two sectors. In 2010, bauxite production decreased by 27 percent to 1,082,512 tonnes. This figure represents 66 % of the targeted amount for the year and a significant decline from the 2,092,237 tonnes produced in 2008. Sugar output decreased by 5 % to 220,862 tonnes and was 83 % of the targeted amount of 264,000 tonnes for the year.
The bright spot in the economy occurred in the increased production of gold. Gold production increased by approximately 3% to308, 437 ounces. Revenues from gold export increased to US$346.2 million, 23 % higher than the 2009 level. The increase can be attributed to the higher export prices for the commodity.
Export earnings for sugar and decreased by 13% to US$104 million. Bauxite export revenues increased, notwithstanding the decline in production. Revenues rose to US$114.6 million, which is 44 % above the US$79 million recorded in 2009. The situation with bauxite is part of a recent trend for minerals on the world market. Although production has been declining in recent years, prices for these commodities have been rising.
The situation with sugar is entirely different. The elimination of the preferential treatment of Guyana’s sugar is a process which has already started. The writing has been on the wall for decades. The research findings have clearly articulated the view that Guyana’s sugar industry is not competitive. But a major question arises: how do we improve the competitiveness of the sugar industry? The answer is to focus on areas that we have control over.
Guyana has limited ability to control international market prices for sugar or the demand for sugar on the world market. However, we do have some measure of control over other serious impediments to increasing the competitiveness of the industry. One such area is industrial disputes. Industrial disputes are chronic within the industry. It continues to be a major impediment to increasing both production and productivity of sugar. In 2010, there were 249 strikes which occurred without proper notice to management. A total of 96,790 man hours were lost. On a weekly basis, the strike costs almost $lB. These are things which both union and management have control over, and which have a direct impact on the competitiveness of the sector.
Another area which management has direct control over has to do with increasing the acreage under cultivation. GuySuco’s turnaround plan is premised on expanding the acreage under cultivation and increasing the time it takes for the cane to be transported from the fields to the factory. The corporation has not reported any gains in these two critical areas for making the industry more competitive. The elusiveness of these objectives are reflected in last year’s production, which declined by 5.5% to 220,862 tonnes. The continuing dependence on sugar which provides stability to many families makes it imperative that the sector becomes more competitive.
Attempts to diversify the industry and add value to the raw sugar is ongoing and are steps in the right direction. However, the diversification program may be inhibited by practices which are not conducive to business. An investor who may be interested in adding value to some of our agricultural products may be discouraged. The investor may be required to go to several locations to register a business and may take an average of 30 days, according to a recent study financed by the World Bank. There are eight separate steps which must be followed in order for an investor to start a corporation. These procedures may take an average of 30 days to complete. Compared with Jamaica only six related activities are required and they will take an average of eight days to complete. Guyana may emulate either Jamaica or New Zealand where it may take only one day. New Zealand has a one step process and lasts an average of one day.
An investor may find this economy more competitive if an environment is created that is more conducive to business. Such an environment entails the development of an automated system for business registration. An online registration process which is computerized and the steps to registering a business are completed online. The taxes to Government are paid online; thereby increasing revenues to the public treasury. Such an environment would increase foreign investment and make the economy more competitive. A more competitive environment would increase the number of investors in the sugar industry and enhance the diversification of the agricultural sector in general.
Winston Felix

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