… in a trap of undiversified development
By Kiana Wilburg
It doesn’t take a PhD in Economics to understand why Guyana’s economy catches a cold
anytime the global economy sneezes or why Guyana’s once major revenue earners are now struggling to even reach their production targets.
A very major part of the problem is the fact that Guyana’s economy has been stuck for 50 years in a trap of undiversified development.
The reasons for Guyana falling into such a cage are many. One of those reasons, has and continues to be, our over-reliance on traditional sectors such as sugar, rice, and timber.
Today, we can look at some of the burning questions that remain when it comes to the sugar sector and moves being made by the Government to charter a new course.
The sugar industry has a profound and rich history in Guyana. In fact, the marriage between this sector and the economy started out on a very sweet note.
Money was flowing from secured preferential markets; production was at impressive levels, it was and still is the largest single employer in the country and the sector played a pivotal role in steadying the growth rate of the economy.
In short, the sugar industry’s importance in a social and economic sense cannot be downplayed.
Looking at the marriage today, one cannot help but notice the bitterness. The preferential markets are no more, production is constantly declining and instead of steadying the economy, it has turned out to be a cancer, a dark hole, an enormous leech on the national purse.
There is no other sector in Guyana’s history that has sucked billions upon billions of dollars every year with nothing to show in return. In fact, the Guyana Sugar Corporation (GuySuCo) is literally being paid by taxpayers to stay in existence, given its alarming cost to produce sugar, and at a loss at that.
But regardless of the stark reality, the People’s Progressive Party (PPP) was unrelenting in its continued support for the sugar sector. And the current administration is on the same path, save and except for its annual cuts to the budgetary allocations for GuySuCo, and the “talk” of closure of the non-performing sugar estates.
It is a worrying state of affairs in which the government of the day has found itself. And the nation is watching to see what will be the way forward.
Will the government make the bold, daring move to close the sugar industry? Will it keep sugar production but on a small scale for domestic consumption? Will it make a transition from sugar to other crops?
Whatever the decision, the government will have to alter the economy’s relationship with sugar production. There is no escaping that reality.
Tiptoeing around the likely social unrest that will result in making those decisions will be no easy feat. But failure to do what is necessary would only inflict more blows on those paying to keep this dying sector alive.
As the nation continues to experience the effects of Guyana’s 50-year reliance on traditional sectors, the Government is now racing against time to implement plans to diversify the economy, with particular emphasis on the agriculture sector.
The most recent development in this regard comes from the Ministry of Finance. Just recently, Minister of Finance Winston Jordan, returned from a trip to the International Fund for Agricultural Development (IFAD) Headquarters, in Rome, Italy, where he spoke at the Signing Ceremony for a Loan to Finance Agricultural Development in Guyana.
There, Minister Jordan told IFAD officials that since acceding to Office, in May 2015, his Government has undertaken an analysis of the factors that are impeding real growth in Guyana. In his presentation which can be found on the website of the Ministry of Finance, Jordan said that the findings of this modest, but in-depth, analysis have led to several observations.
In this regard, the Finance Minister said, “Since Independence in 1966, the Guyanese economy has remained un-diversified. Guyana’s ‘bread and butter sector’, the agricultural sector, also, remained unchanged, with heavy reliance on two primary crops: sugar and rice.”
He continued, “There is a spatial and developmental divide between the coastland and the hinterland of Guyana. The coastland, which is a narrow strip along the Atlantic Ocean, is home to over 90% of Guyana’s population. However, it is vulnerable to the very real threats and gripping terrors that climate change presents.”
Speaking to the same point, Jordan added, “On the other hand, even though the hinterland region of Guyana boasts rich soils, exotic fauna and flora, pristine rainforests, and endless natural resources wealth, including gold, diamond and bauxite, to name a few, the hinterland remains a largely un-inhabited area, with limited business opportunities and underdeveloped infrastructure.”
With respect to another observation, the Finance Minister said that the Private Sector, which is expected to be the engine of growth, has suffered from a lack of adequate, customized and easy access to financing.
He said, “Our Small Business Sector, especially small scale farmers, remain largely underdeveloped with unsophisticated tools, constrained financing and limited focus on traditional crops, sugar and rice.”
Furthermore, the Finance Minister said that growth in the agricultural sector has always been seen as an important element in the plan for reducing poverty, developing financial resilience and providing the good life for all.
Jordan said that some of the strategies through which this can occur are: increasing production and improving the quality of traditional crops; facilitating and supporting efforts to link small farmers to dynamic markets; increasing adaptation to climate change and pursuing a green growth pathway; and deepening ownership and access to land by small farmers and indigenous communities.
The Finance Minister said that it is against this backdrop that the Hinterland Environmentally Sustainable Agricultural Development Project, “Hinterland Project”, was designed.
Jordan said that this US$10.89 million operation is expected to boost the Government’s efforts in diversifying the economy, with special focus on the Agricultural Sector, by shifting small farmers from traditional crops to the farming of non-traditional, in demand crops, with high value added potential. He opined that this, in turn, will open up new markets and new trade agreements for Guyana.
The Finance Minister said that the impending loan will also support Government’s drive to link the Coastland to the Hinterland by opening up new farming communities in the hinterland region, Region Nine, and the higher interior lands of Region One.
Jordan asserted that the creation of these new opportunities within these newly re-invigorated communities will also foster stronger local government and local community participation, thereby promoting growth through added human resources.
In short, the Finance Minister said that this project will support communities and producer groups within communities to identify investment opportunities and manage economic and climate risks. It is expected that some 4,500 households will benefit.
The project will also serve to develop business plans and investment and income generating opportunities as well as increase market access. Some 2,000 households will be targeted.
He said, too, that the programme will facilitate increased access to assets that build community resilience and create an enabling productive environment such as water, energy and ICT.
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