Neutral Language
The Bank of Guyana reported in its half-year report for 2009 that the performance of the manufacturing sector was stable during the first half of the year. I think that the Bank of Guyana was correct to use neutral language in describing the performance of the manufacturing sector during the first half of 2009. However, any attempt to speak differently about this sector of the economy, whether now or in the future, would be a gamble since the manufacturing sector appears to have locked itself in restraints that it does not seem to know how to undo. As in preceding years, some of the high-profile products of the sector, like beverages, paint, garments and pharmaceuticals, have together turned in mixed performances and leave many Guyanese wondering when this sector will start creating sustainable jobs across all industries that pay good wages. A major problem continues to be productivity. However, as will be discussed later, a greater concern could be one of identity crisis.
Budget and Reality
The problems affecting this portion of the economy must have scared the administration as well since it refused to make any bold predictions in its 2009 budget about the performance of the manufacturing sector. Last year, the administration bravely predicted that the manufacturing sector would show a 3 percent increase in output. Instead, it received a 2 percent decline in output from manufacturers. The explanation offered for the divergence between budget and reality in 2008 was the high price of oil and a decline in demand for the goods produced by the sector. Realizing that it was riding a lame horse, the administration tucked its tail between its legs this year and announced that it expected the manufacturing sector to remain flat, and so it has been according to the Bank of Guyana.
At this point in time, that is perhaps the best forecast anyone could and should make about the manufacturing sector in Guyana. With its share of the Guyana economy averaging 3 percent over the last 10 years and apparently incapable of moving beyond that point, the manufacturing sector is still finding it difficult to imbue anyone with confidence. Despite the decline in fuel prices in the current year, the sector does not have much to show for itself in the 2009 half-year assessment of the economy. While pharmaceutical production is up by 25 percent, paint production is down 2.4 percent, garment production is down nearly 50 percent and output of alcoholic beverages is down by 21 percent. Many safety-conscious Guyanese might celebrate the decline in output of alcohol but they should remember that there is probably sufficient inventory around to take care of the elbow-benders.
Identity Crisis
The perennial under performance of the manufacturing sector leads Guyanese to wonder if the sector would ever be able to get to the point where it could serve as the catalyst for diversification and expansion of the Guyana economy. It is legitimate to wonder, once again, if manufacturing would ever break out from its mold of entrapment and become an economic force in the Guyana economy. In my view, it is possible but it would require shedding its identity crisis and changing attitudes towards activities that should qualify for inclusion in measuring the performance of the manufacturing sector. An interesting feature of the many high-profile products that are often listed in the tables of reports from the Statistical Bureau and the Bank of Guyana is that many of them can be characterized as final consumption goods.
Yet, it is known that manufacturing is more than about alcohol, pharmaceuticals, paint or clothes. It is also about creating inputs for use in the agricultural sector. For example, it is about producing food for livestock and then converting that livestock into processed foods like corned beef, salted fish, bacon and ham or other finished goods. It is about producing ingredients like flour for making bread, cakes and pastries. It is about providing consumers with accessories like gold and diamond rings, earrings, brooches and tiepins to go along with the attractive clothes and fancy hairdo. It is about producing sporting equipment for the games and leisure events that appeal to Guyanese and others. It is about converting sand into concrete blocks and glass for use in construction, in households and in the entertainment industry. These are a few examples of the many activities that ought to be part of the manufacturing sector. There is local and foreign demand for these and other products.
Makeover of Sector
By broadening the view of the manufacturing sector, it is possible to see that the manufacturing sector intersects with most other parts of the economy. Widening our perspective on the issue could also result in a significant makeover of the sector. Incentives that have been reserved for the privileged products of rice, sugar and timber, for example, could be extended to products like curry powder, cassareep, pepper sauce, furniture and concrete blocks. With a policy of inclusion, products that are currently deemed insignificant could become prominent parts of the manufacturing sector.
By tackling its identity crisis, the sector might be able to do a better job of forecasting demand and thus better manage a major challenge to its performance. It makes it possible, as a policy matter, to emphasize manufacturing goods that are used as inputs into the production process and not solely as output for final consumption. By adding value to primary and intermediate products, the manufacturing sector could also increase its profit margin and its share of income. Policy measures that are developed along these lines make it possible to expand the dynamism of the sector and help change the dynamics about demand for manufactured goods.
Shared Obligations
The foregoing is a perspective that policy makers and industry actors ought to keep in mind as they grapple with the challenges of the sector. 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.
It also helps to broaden the dialogue about resource use in Guyana and the likely implications of obligations towards climate change on the management of those resources. These shared obligations will have an effect on the efforts to battle the loss of market share, uncontrollable import costs, inadequate skills and insufficient supplies that seem to perennially plague manufacturing in Guyana. Resolving the identity crisis of the sector would go a long way to helping resolve any conflicts and in anticipating any challenges that could arise in the future.
