Guyana is stuck in a “sugar and rice” mindset
…Fifty years and no major development in Guyana’s manufacturing industry—Dr. Thomas Singh.
By Jeanna Pearson
Fifty years have passed since Guyana became an independent state but there has been no significant development in the country’s manufacturing industry, Economist Dr. Thomas Singh said in a recent interview with the Kaieteur News.
Thomas Singh
Professor Singh stated that he believes that Guyana has grown comfortable with producing sugar and rice alone on a large scale, while there are other areas of manufacturing to invest in. He stated that so far the production of sugar and rice and the manufacturing of beverages—particularly alcohol by Banks DIH and the Demerara Distillers Limited—have dominated the manufacturing industry.
“But what is happening to manufacturing of glass products? Where are the factories?” he questioned, adding, “It seems that companies like Banks and DDL are at ease with making only rum and pastries.”
Dr. Singh asserted that prior to a “socialist experiment” under the Burnham administration, the economy was up and coming; foreigners were settling in the country top seek employment; and Guyana was the chief envy of the Caribbean market.
“There was a well regulated market economy. Guyana was doing rather well relative to the rest of the Caribbean. People were migrating from the Islands to come to Guyana to work…and this might have been one of the reasons to nationalize companies, but the socialist experiment was really a failure in Guyana.
“It brought collapse, the standard of living fell and there was a steep increase of Guyanese migrating,” he explained.
He stated that Guyana was known for exporting cotton, rice, sugar, timber, gold, diamonds, bauxite and even confectionaries.
The country’s infrastructure was developed and its education sector was thriving because of an efficient public/private schooling system orchestrated to meet the demand for a literate and skilled labour force.
Further, the establishment of a self-governing administration in 1962 led to development of Guyana’s first industrial estate at Ruimveldt. After independence, manufacture accounted in 1972 for 5.9 percent of GDP.
However, shortly after this period, Dr. Singh said, the market economy was quashed and the government began experimenting with a socialist theory where the government controlled everything, including the manufacturing sector.
Consumers were no longer the focus as it relates to manufacturing. Importation of many goods was restricted, giving rise to the black market and eventually the fall of the once thriving economy.
In spite of all this, Guyana managed to preserve its natural resources, and its human capital, Dr. Singh said. The country remained rich in exploitable resources. On the other hand, he said, the country remained poor while the rest of the world progressed.
He said that for decades the industry had limited itself to the processing of rice and sugar; bauxite; gold and diamond; and food and beverage but there is no evidence to show viable growth.
He said there has been no growth of the value-added, export-oriented industry, where Guyana moves beyond manufacturing these few products to large scale manufacturing of clothing, forest products, and technology and glass products.
“It is not as though we do not have human capital. The people are there. But the problem is trust—trust in each other. The problem is proper education, standard of living, corruption and high electricity rates,” he indicated.
Currently, Guyana’s manufacturing industry contributes about 10 per cent toward the country’s gross domestic product (GDP), providing employment for a meagre 12 per cent of Guyana’s population.
Singh purported that a basis for the seemingly stunted economic growth is dismantling of the market economy in the 70s. “Socialist-centrally planned economy is generally difficult to manage,” he said, indicating that when a country depends on a market system to say what needs to be produced, the economy grows.
“The people know the market better than the government. The government wouldn’t know what the market’s demand is. They would need information and information is costly,” he noted.
He said that this factor caused the government to produce things people did not want and to produce them at high cost. “Coupled with that, the government had a macro-economic problem which was expected in losses.
The government’s losses became the country’s loss and their debt became the country’s debt and things spiralled downward. A lot of corruption that emerged in that period; we ran short of foreign exchange,” he explained.
The new economic policy, which favoured the import-substitution model, witnessed state control of the “commanding heights” of the economy in terms of public ownership of the operating entities in the production and distribution of both essential and non-essential services.
According to the National Development Strategy, the policy was accomplished via an extensive nationalisation programme, which focused on foreign investment and later on domestic investment.
There was deficient management of the public sector enterprises (PSEs) and tax policies that worked unremittingly against the manufacturing sector as the economy became subject to harsh supply management measures.
There were tax policies which recommended control of foreign exchange, which would soon become scarce. This contributed to a significant decline of the GDP for a period of eight years.
According to the National Development Strategy it became obvious that the “core of the problem was rooted in a mixture of incorrect policies administered by the political directorate as well as too tight a stranglehold of the Government on economic activities”.
Thus, he stated that by the time Guyana introduced the economic recovery programme, the rest of the Caribbean was already ahead of it. “If Guyana did not experiment with the socialist experiment, the country would have progressed with other countries. Our trajectory of progress would have been much higher but instead the economy took a nose dive.
“However, the country should not be satisfied with where they are now. We should stop comparing ourselves with other Caribbean countries because we took a fall while other countries just kept on progressing,” he continued.
Additionally, he said the economy was stunted further by corruption. He said when the country’s resources were raped by foreign investors—allowed by the former government—it not only destroyed economic trust but it snuffed out the opportunity a viable manufacturing industry.
However, he mentioned that the mischief that occurred in the previous administration [the PPP/C government] will continue to rear its head in Guyana’s newly elected government since corruption does not lie with a political party but with governments.
Singh indicated that the degree of interpersonal trust in a society is crucial for the development. Therefore, he stated that no one wants to work together in an unlevelled playing field, so investors would not want to invest in manufacturing products.
Nevertheless, there is some hope for potential growth in the industry. Guyana has competitive labour cost, in which it has one of the lowest manufacturing wage rates in the Caribbean and Central America; there availability of human capital; and the country’s is in close proximity to the US market.
