Rawle Lucas is a Guyanese-born Certified Public Accountant and Assistant Vice President of the Lending Services Division. Mr Lucas has agreed to serve as a columnist with the Stabroek Business and will be
contributing articles on economic, financial and development matters.
By Rawle Lucas
Budget Projections
In projecting a 10 per cent growth in income for 2008, the administration placed high hopes in the robust performance of several sectors of the Guyanese economy. The rosy outlook that accompanied the 2008 budget projections was reserved for sectors like distribution, mining, and transportation and communications.
These three sectors were projected to expand their output by about 5, 6 and 8 per cent respectively and there was good reason to feel bullish about them. For one, the three sectors together accounted for a substantial portion of the income, 30 per cent, earned in Guyana last year. In addition, the output of the mining sector, for example, grew by about 22 per cent and that of the transport and communication sector expanded by about 13 per cent and helped to raise expectations about their likely performance in 2008. So far, they have not disappointed.
Manufacturing Sector
The outlook for the manufacturing sector, which was forecast to grow by 3 per cent in 2008, was less optimistic. While output remained virtually stagnant last year, income was reported to have grown by 15 per cent. This mismatch between output and income suggests that the manufacturing sector relied on higher prices, rather than higher production, to increase its income. As appears to be a habit with this sector, the modest forecast in output seems in danger of being missed on account of an already weak performance delivered during the first half of 2008.
According to the Bank of Guyana, manufacturing output fell by 3 per cent between January and June of this year, and was not expected to recover on account of higher prices for raw materials and other inputs used by various enterprises that operate in that sector. Since the publication of the Half-Year Report of the Bank of Guyana, the global economic outlook has worsened and could put more stress on the manufacturing sector than was anticipated at the time of the 2008 budget projection.
Under-performance
The early indication of under performance by the manufacturing sector raises the spectre again of a sector incapable of asserting itself in the Guyana economy and unable to support national efforts at diversification and competitiveness. According to the evidence, the manufacturing sector is unable to move to the next level where it could truly serve as the fulcrum around which any attempt by Guyana at economic diversification could revolve. For example, with its share of the Guyana economy averaging 3 per cent over the last 10 years, the manufacturing sector is still finding it difficult to break through the many restraining barriers and secure a place at the centre of the economic diversification efforts of the country.
Makeup of Sector
Those persons at the Bank of Guyana who are responsible for putting together the information on the performance of the economy tell us that the manufacturing sector encompasses the activities of timber and saw milling, rice milling, textile and clothing, sugar molasses and electricity generation. Add the disclosures of the Guyana Statistical Bureau and we see that the sector also includes entities that produce beverages such as rum, malta, shandy, aerated (soft) drinks, beer and stout.
Manufacturing also includes the production of foods like margarine, fish, shrimp, prawns, poultry, eggs, edible oil, biscuits, flour and cereal. Over and above the food products, the manufacturing sector also produces paint, footwear, soap, detergents and pharmaceutical products.
But many Guyanese are wondering why they do not hear or read in public reports about other products like jewellery, curry powder, bread, pepper sauce, furniture and concrete blocks, all of which emerge also from a production process and are significant to domestic consumption.
Significance to Guyanese
Putting aside the limited characterization of the sector, it is plain to see that manufacturing intersects with most other sectors and in particular with the agriculture, and construction and engineering sectors. These two sectors are playing significant roles in the Guyanese economy and domestic policy should underscore the linkage between them and manufacturing. Not only does manufacturing help with the roof over the head of Guyanese, it contributes to the availability of the food that they eat. The activities of the manufacturing sector are also pertinent to the personal care, hygiene, living conditions and healthcare of Guyanese. In essence, the output of the sector is fundamental to the wellbeing and quality of social and economic life of Guyanese.
It is hard to believe that, as diverse as it is, the manufacturing sector is struggling to assume a more dominant and catalytic role in the economic diversification of the Guyana economy. The reticence being displayed by this sector has been going on for a long time now, as evidenced by its inability to expand output by any notable measure over the last 10 years, and to raise its profile as a major income earner in the economy. This has been happening even with the availability of guaranteed markets, tax incentives and export preferences.
Challenges
The foregoing is a perspective that policy makers and industry actors ought to keep in mind as they think about the contribution that the manufacturing sector could make to the lives of Guyanese, profit margins of companies and to the economic diversification of the country as a whole. It represents a reasonable basis for broadening the policy discussion about the type of support that could be given to the manufacturing sector to deepen its impact on the Guyanese economy.
A big push is needed from policy makers and industry advocates to battle the loss of market share, uncontrollable import costs, inadequate skills and insufficient supplies that seem to perennially plague manufacturing in Guyana. These are the reasons often given for the failure of the sector to do better and apparently they are at work again this year. Indeed, the cost of fuel and inputs used in the manufacturing process increased over 54 per cent between June last year and June of this year.
But the historical behaviour of the industry suggests that something else is behind the failure of the manufacturing sector to break free and become a more dominant player in the Guyana economy. An issue that should be foremost in the minds of policy makers and industry advocates is that of productivity. The sector has been under performing and needs to address its productivity problem as a matter of priority in order to keep costs low and prevent erosion of market share from competition. Otherwise, the manufacturing sector would continue to languish in a state of inertia.
