Is Guyana’s manufacturing sector dying? Pt. 6…IDB approached to develop Industrial Policy for next two decades

Aug 21, 2016 News

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– CDB to provide data on feasibility of reestablishing financial development bank – Finance Minister

By Kiana Wilburg

It is unanimously agreed that Guyana’s manufacturing sector needs to be re-positioned and re-tooled if

it is to make a bigger contribution to the Gross Domestic Product (GDP).
According to Finance Minister, Winston Jordan, Government is prepared to play its role in helping the sector make greater strides.
In an interview with this newspaper recently, the economist sought to tackle a number of the complaints and challenges facing the sector as well as how the Government intends to attend to them.
HIGH ELECTRICTY COSTS
Addressing the complaint of high electricity costs by local manufacturers, the economist said that it was indeed a legitimate constraint. He however, reminded that the Government had made conscious efforts to alleviate the situation, including providing fiscal concessions on the acquisition of generators and increasing the rebate granted by the Guyana Power and Light Company from 10 percent to 15 percent, with effect from April 1, 2016.
Jordan said that the Government has also completed an energy matrix, with assistance from the IDB, and will be pursuing cheaper and cleaner energy through the provision of hydropower.
The Finance Minister said, too, that since the Government assumed office, there have been two reductions to the electricity costs for consumers. With this in mind he said, “Do these two reductions count for nothing in the eyes of the manufacturing sector?”
BINDING AGREEMENTS
Some members of the manufacturing sector have advocated over the week that the Government should move swiftly to implement some barriers, so as to provide a level of protectionism against foreign products which benefit from a far more enabling environment and fiscal regime.
Minister Jordan made it clear, however, that this is just not possible. He said that there are certain agreements which fall under the World Trade Organization (WTO) partnership and the Common External Tariff (CET) arrangement which Guyana has signed on to, which speak to non-discriminatory treatment in the application of tariffs on imports and domestic production.
He said that very little can be done in terms of a level of protectionism through that mechanism.
By way of a specific example, he made direct reference to the discriminatory application of the environmental tax on imported bottles.
A bottling company successfully prosecuted its case before the Caribbean Court of Justice (CCJ), costing the Government in excess of $1.5 billion. Other bottling companies have since approached the CCJ for similar judgments. The Finance Minister stressed, however, that there are other measures which can and will be considered by the administration.
Furthermore, the Minister also made it clear that he understands the complaint by some manufacturers that access to cheap financing is difficult. He agrees that this needs to be improved, but reminded that institutions, such as Guyana Cooperative Agricultural and Industrial Development Bank (GAIBANK), which were established to make available this type of financing to the manufacturing and other sectors, were closed by the PPP/C government.
Jordan said that his Government is presently pursuing technical assistance from the Caribbean Development Bank to assess the feasibility of re-establishing a financial development institution.
GOVERNMENT’S PLAN
The Finance Minister was also asked to respond to a comment by a letter writer who specifically challenged him for Government’s plan and policy to reinvigorate the sector.
Jordan in response stressed that it is necessary to first acknowledge that the PPP/C government never had a plan or policies to propel the sector from the 10 to 12 percent share of GDP that it seems to be trapped in for years.
“And most of that share continues to be contributed by rice and sugar; the sector, otherwise, remains largely undiversified,” the economist added. In fact, he emphasized that the sector has actually retrogressed from the 1970s to now.
Jordan noted as well that he met with some members of the Private Sector Commission and the manufacturing sector earlier last week and views were exchanged on the embarrassment felt after facing the troubling reality that certain “ridiculous products” are being imported.
GOVERNMENT’S VISION
With regard to Government’s vision for the sector, Jordan made it clear that Guyana needs to attain higher levels of sustained economic growth in the medium term, to significantly impact prevailing unemployment and poverty.
In order to facilitate investment and higher economic growth in the productive sectors of the economy, he said that the Government has set itself the goal of accelerating the process of diversifying and transforming the economy over the medium term, away from its dependence on primary products, by expanding production of higher value-added goods and services.
The Finance Minister said that this process will be undertaken within the context of good governance and human safety in a green economy, taking account of the impacts of climate change and linking centres of economic development in the hinterland with those on the coastland.
Jordan said that government is, therefore, seeking to develop a policy framework for its priorities in relation to creating the climate that can attract and retain local and foreign direct investment (FDI) into the manufacturing and other sectors.
The economist said that an improved investment climate is viewed as a key component of fostering high levels of economic growth and reducing poverty.
Jordan asserted that high levels of economic growth can be attained on the basis of export expansion through economic diversification of world class higher value–added production that are linked to Guyana’s natural resource base.
In this regard, he said that the development of a world class jewellery industry, for example, could be achieved from the processing of raw gold, diamonds, precious and semi-precious stones. Jordan said that such an industry would require the engagement of global leaders and international experts to assist domestic stakeholders in shaping the industry, local and FDI investment in product design and production, promotion and marketing, specialised equipment and training among other factors.
An industry of this nature, he said, can produce high end value-added products for the export market, creating significant foreign exchange earnings and job opportunities.
The Finance Minister said that a similar approach to the development of manufacturing industries and industry clusters, producing value-added products will be pursued, including, but not limited to: wood products (plywood, furniture) agro-processing (refined and specialty sugars, ethanol, dairy products, corn, coconut, soya-bean products, rice and rice products, fruit juices, jams, jellies, pepper sauces, alcoholic beverages, meat and fish products) minerals (alumina and aluminium products, petroleum and petro-chemical products including fertilisers, ammonia and methanol.
Recognizing this, Jordan revealed that the Government has approached the Inter-American Development Bank (IDB) for technical assistance to develop an Industrial Policy for the next two decades.

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