Part I
A few readers (I suspect primarily students) have asked me, when presenting my reform proposals, to also undertake two brief tasks, namely: 1) sum up my views as to whether the Sugar Modernization Project (SSMP) ever made sense from its inception; and 2) offer a few observations on a number of the other proposals for reforming the sugar industry that have surfaced during the years of the PPP/C administration. I shall attempt these tasks in today’s column, principally as a lead-in to the presentation of my own suggestions for the reform of the sugar industry.
Operational efficiencies
As regards the first task I should, in order to be fair, state that the SSMP was never intended as a stand-alone project confined to Skeldon or indeed the wider Skeldon-Berbice area. As originally formulated, it was premised on the attainment of seven major operational efficiencies in the industry and at GuySuCo. These were: 1) economies of scale and scope in GuySuCo’s management and administration of the industry; 2) a significant enhancement of the industry’s ability to harness skills and expertise both locally and elsewhere; 3) ensure a marked advance in the industry’s ability to rationalize the use of the technical skills, which it had at its disposal; 4) secure economies in formal and informal training; 5) lead to better focused research and development (R&D); 6) result in a significant lowering of unit financial costs, and, last, but not least; 7) yield marketing economies, especially overseas (even though at the time the state carried a significant portion of those costs because of its signature to the European Union (EU) – African Caribbean Pacific (ACP) Sugar Protocol framework, which was in force then).
While the listing above is not intended to be exhaustive, as matters have turned out nonetheless, these potential gains have not appeared or have been completely eroded today. This is mainly due to GuySuCo’s weak management, poor decision-making and the pressures it has had to contend with from excessive “outside political leadership” of the corporation, by the PPP/C government since 1992. I believe that complicit management carries much of the blame for the persistence of the last item.
Other reform proposals
Turning to the second task: other sugar reform proposals already circulated; I had in previous columns on sugar directed attention to four of these. In what follows I shall offer brief comments only on these four proposals.
Closing down the industry – I
Several Caricom analysts, particularly those residing in the island territories of the Caribbean, have called for the immediate curtailment of sugar production not only in Guyana, but indeed throughout Caricom. I am presuming here that this call is meant to be interpreted as one for the orderly closure of regional sugar industries. While I am sure the intention here is to stop the bleeding at GuySuCo in particular, and Caricom treasuries more generally, in my opinion the abrupt termination of sugar production in Guyana would cause great dislocation if strong efforts are not simultaneously directed at productively utilizing the released assets from GuySuCo. For this reason I do not find it a particularly sensible way forward, although I appreciate the concerns that give rise to it.
Privatization – II
A second proposal out there and perhaps the most widely canvassed of all is to put GuySuCo up for privatization. The main weakness of this proposal, in my view, is that it makes no effort to steer the future direction of the agricultural assets controlled by GuySuCo. As a stand-alone proposal this unfortunately ignores the local political-social-industry context and therefore the very large social costs required to transition the labour force in sugar to other jobs, as it is released from GuySuCo.
Another foreign management contract – III
A third reform proposal, which is not fazed by past experiences is the renewed call for the government to re-engage an external-based management group (other than Booker-Tate) to run all, or selected areas of GuySuCo. The selected area most often cited is Skeldon. Two external firms, one with the contract for the Sugar Packaging Plant at Enmore (Indian) and the other for the Skeldon factory (Chinese) have been on several occasions publicly suggested. However, the painful experiences Guyana has had with the Booker-Tate management contract are too recent, in my view, for the public (including sugar workers and their unions) to support a policy that has appeared to fail so badly, particularly as legal issues related to the termination of the management contract with Booker-Tate are still before the courts.
Devaluation – IV
Finally there is the call to devalue the Guyana dollar to help the sugar industry. If the Guyana dollar were to be devalued (and depending on the size of the devaluation) this would infuse substantial Guyana-dollar income into GuySuCo (and indeed all other export industries). This policy proposal is not as esoteric as it might first appear to the general public. Throughout the continuous devaluation of the Guyana dollar from 39.5 Guyana dollars to one dollar US in 1990, to the current rate of about 204 Guyana dollars to one US dollar, devaluation has played an immense part in supporting sugar and helping GuySuCo’s earnings in Guyana dollars.
My main concerns with this proposal however, are two-fold. First, it could lead to major macroeconomic disruptions (including inflation) as important prices (and the cost-of-living) will be severely impacted by a significant devaluation of the Guyanese dollar. Second, such a policy would shift relative prices against the non-trading domestic sector, which would be inadvisable at this time of severe global economic and financial difficulties.
Next week I shall conclude with a short outline of my own sugar reform proposal.
