August 4, 1996 DRAFT
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The rice industry, producing Guyana's second major crop, is a significant source of income, employment and foreign exchange for the country. When the Government began to dismantle its pricing and institutional structure in the late 1980s, allowing market competitiveness to guide the sector, dramatic improvements occurred. Nevertheless, several constraints still hinder the further development of the rice sector and must be addressed.
The institutional framework of the rice industry does not promote its sound functioning. For example, the privatisation of the industry has not been complemented by standardised marketing operations by the private sector, leaving the reputation of Guyana as a rice exporter at risk from inconsistent quality, unrealistic contract agreements, and inefficient marketing. There is also a lack of analysis and planning for the expansion of the industry, largely because public institutions still struggle with many research and extension services which the private sector could provide much more efficiently. Other institutional weaknesses include the financial unsustainability of the Guyana Rice Development Board (GRDB) due to its dependence on export taxes that decrease the competitiveness of Guyana's rice industry, and inadequate linkages with international and other domestic support institutions.
The rice sector may also find itself in a precarious position if and when the preferential markets provided by the Lome IV Convention are lost or reduced considerably. High prices have led to a false sense of security in the rice sector and have limited incentives for increasing competitiveness in the world market, making the industry highly vulnerable to adverse developments in the markets. Since the exported rice is cargo rice, there is little being done to advance the processing capability within Guyana. This has resulted in a inadequately served domestic market characterised by variable supplies and fluctuating prices. Furthermore, exporting costs are unreasonably high due to insufficient export facilities and high handling and transport costs.
Milling activities, like every industry in Guyana, suffer from inconsistent electricity and frequent blackouts which contribute to post harvest losses and seriously damage the milling equipment. Although there has been some private investment in the milling sector, it is insufficient to abate these difficulties. Field productivity has been limited as well. Rice producers are offered restricted access to credit due to the reluctance of the commercial banks to supply financial opportunities to the rural sector, especially in view of the lack of land titles that would serve as collateral. The constraints to the transfer of lands, the small size of holdings, and the lack of security of tenure have hindered the producers' ability to take advantage of the temporary preferential market. Finally, the deteriorated drainage and irrigation network is a constraint to production that is beyond the rehabilitative capabilities of small producers.
Environmental issues must also be carefully considered. The increasing production of rice is creating an environment of decreasing genetic bio-diversity, leaving the country vulnerable to risks associated with genetic erosion. Unfortunately, this situation is occurring in the face of no appreciable environmental legislation, enforcement, or monitoring.
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Efforts to strengthen the institutional framework for the rice sector centre around the GRDB, beginning with strengthening its capacity to regulate contractual procedures, payment mechanisms, and rice quality, and to enforce penalties for offenders. Once regulations are clearly in place and contract forms are standardised, review of every new contract will be unnecessary and spot checks to ensure compliance can be introduced instead. For instances when such checks result in disputes, a mechanism for arbitration must be established. The capacity of the GRDB to carry out forward-looking analyses should also be strengthened. Amendments to the Rice Factories Act revising regulations for mill licensing, already proposed by the GRDB, should be approved, and plans to expand agricultural land should involve the rice sector as represented by the GRDB.
The provision of services, a second critical constraint to the development of the sector, must be rationalised, taking into account the relative merits of different public and private agencies and institutions. The role of the GRDB should shift from general provider to provider of services that the private sector is unable or unwilling to perform. Concomitantly, new alternatives for financing the GRDB, such as land taxes, D&I rates, and mill licensing fees, should be explored, recognising that the RPA and the GRMEDA are important players in the rice sector and will need to be strengthened and assured financial support as well. Finally, the GRDB should play a pivotal role in linking the Guyanese rice industry to international and domestic institutions, in an effort to improve the productivity of the industry. Domestic linkages will require engaging the primary institutions in major sectoral issues such as the conflict between rice growers and cattle farmers, infrastructure and resource needs, and environmental issues. Both the establishment of an Agricultural Development Board and the strengthening of the Planning Division of the Ministry of Agriculture are presented as alternatives to achieving this.
As noted earlier, Guyana enjoys preferential markets for its exported rice. If the rice industry is to remain strong in the world market, the benefits from the preferential treatment must be reinvested back into the sector to improve its competitiveness. Efforts should also be made to cater to the CARICOM market, as Guyana will likely become its primary supplier in years to come. Infrastructural improvements such as the rehabilitation of the wharf facilities, the creation of a deep water harbour (see also Chapter 38), and the dredging of water channels will also be crucial to the long term sustainability of the sector. Diversification must be sought within the rice sector and the agricultural sector as a whole. Funds from export taxes, and possibly from raising rice levy B, should be set aside for the development of the "other agriculture" sub-sector, and GRMEDA should research alternative uses for rice. None of these changes will be meaningful, however, unless Guyana can guarantee the quality of its rice exports, either through the issuance and enforcement of quality control regulations, or the improving of grading services.
Two alternative recommendations for domestic market policy are presented as well. The first is to supply the domestic market with home-grown rice, which would require the development of storage facilities. The second alternative is to import rice for domestic needs. While it might seem counter-intuitive, this policy has several advantages. Consumers will benefit because prices on the world market are typically lower than domestic markets, and producers and millers stand to gain by rice importation because of the considerable cost involved in diverting rice intended for export onto the domestic market.
Increasing productivity and promoting technology development are critical components of a strong rice sector policy and requires a comprehensive strategy approach. The first step is to improve access to credit for both millers and producers by exploring alternatives for increasing the flow of loans and overcoming the collateral constraint, including group lending, loans to millers for on-lending to producers, and conversion of existing leaseholds to long-term transferable leases. Millers and producers with outstanding debts to GAIBANK should also be encouraged to look to other banks to take up their liabilities and reschedule them. Until a viable rental market for farm machinery is developed, emphasis should be placed on reducing the importation of machinery for which no spare parts are available and efforts made to educate farmers on types of machinery and the repair services available for them. Research based on market demands and the experiences of farmers should concentrate on increasing productivity, decreasing variability of yields, increasing pest resistance, and developing the characteristics demanded by the export and domestic markets. Finally, extension services must be expanded and improved to reach more people, promote business management training, and keep the flow of information between farmers, extension workers, and researches as open as possible. Other major concerns, such as land issues and drainage and irrigation, which are critical to the productivity of the rice sector, are addressed in depth in other Chapters (Chapters 29 and 40, respectively).
Environmental concerns are addressed, in part, by the Pesticides and Toxic Chemical Control Bill, coming before Parliament shortly, which provides for regulation of the importation, sale, and use of pesticides and toxic chemicals. Additionally, extension workers must be trained in environmentally sustainable cropping activities for padi production. and NGOs should be encouraged to become involved in sustainable agriculture as well. Finally, an Environmental Protection Act, which creates an Environmental Protection Agency with powers to establish a regulatory regime for pollution control, should provide the framework for action in this area.
It is believed that non-traditional crops, being labor intensive and yielding high net foreign exchange, represent significant unrealised potential for Guyana. The overall objective of the sector, therefore, is to increase the rate of growth of its output which will increase rural incomes, employment and foreign exchange earnings, and reduce rural poverty.
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The broad constraints facing the development of other agriculture reflect those found in all the agricultural sub-sectors. Restricted access to land, compounded by inefficient leasing systems and an insufficient infrastructure to service these lands, severely inhibits entrepreneurial potential. Extension services and research and development work, under the jurisdictions of the Ministry of Agriculture (MOA), semi-autonomous State agencies, and regional and international agencies, suffers from limited funding, staff shortages, and insufficient collaboration and coordination. Marketing in this sector suffers from several different factors such as inadequate transportation infrastructure, unreliable power and potable water supplies, ineffective market intelligence services and restricted knowledge of market trends, and uncertain product standards. Obviously, it is very difficult for farmers in this sector to secure credit and prospective investors face numerous conditionalities and unattractive terms for financing. Finally, despite the important place agriculture holds in the Guyanese economy, it is not reflected in the priorities of in the educational curriculum or in the availability of adult training.
The sector does face specific issues and constraints as well. Due to high production risk and unassured markets, the use of technically sound agronomic methods in crop production is not always pursued. The germplasm supply, the responsibility of the MOA, can not meet the current demand. The inadequate monitoring of ports is another serious issue, as it places the country's agriculture at risk. As for livestock production, inadequate nutritional programs have resulted in sub-optimal livestock classes, and the veterinary services of the MOA are poorly supported and limited by a lack of transportation infrastructure. Financial constraints and lack of facilities have inhibited progress in animal breeding, and there is no monitoring of the breeding experimentation conducted by farmers in the field.
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Development of land and infrastructure are obvious priorities for the non-traditional agriculture sector. The Lands and Surveys Department must be strengthened in order to improve surveying capability, provide more efficient services to farmers, and coordinate with other land management agencies. As stated in Chapter 29, leases must be longer and transferable to better serve as collateral, and institutional impediments to land rental need to be removed. Participatory programs should also be developed for the operation and maintenance of drainage and irrigation schemes.
Chapter 28, The Institutional Framework for Agriculture, articulates many of the general recommendations for the agriculture sector regarding research and extension activities. Some specific recommendation for this sub-sector, however, include concentrating research on selected commodities and certain geographic zones based on marketability and production potential. Private sector involvement in agricultural extension should be pursued, and overall participation in the sector should be encouraged, through workshops for farmers, the creation of a computerised information centre, and the reintroduction of the National Science Research Council. Furthermore, rural development centres and agricultural cooperatives, aimed at attracting labour to the sub-sector and improving the economic welfare of its members, should be actively supported by Government. These centres and cooperatives can assist farmers in preparing proposals to credit agencies, which are generally unsensitised to rural farmers' financial requirements. Relevant agencies must also establish a clearly defined and comprehensive policy to help investors learn about taxation, duties, concessions, land acquisition and financing.
A weak marketing structure will continue to constrain the development of other agriculture if some basic recommendations are not implemented. An advisory services agency that informs farmers of market opportunities, assists in finding inputs and obtaining access to markets, and directs farmers' concerns to relevant agencies is greatly needed. Government must ensure reliable electricity and potable water supplies to rural districts, train more individuals in post-harvesting technology, and consider the concept of marketing centres, possibly managed by the private sector. A framework that guarantees conformity to international standards for chemical- and disease-free food must be established by the Bureau of Standards and the Analyst's Department, along with the private sector and consumer-based agencies, if Guyana is to participate in the world market.
Agriculture is generally poorly perceived in Guyanese society. One way to remedy this is to promote agriculture as technically feasible and financially viable in the school curriculums. It has been suggested that agriculture be introduced as a core subject beginning in primary school, helping to remove its stigma at the higher levels. Greater efforts must also be made to attract quality students to tertiary training institutions. Learning institutions must be better equipped and practical agricultural training must be emphasised, including continuing education for through residential courses, radio programmes and newsletters.
The MOA should focus on developing agronomic programmes for crop varieties that have assured markets, taking into consideration their applicability to existing farming conditions and the varying economic resources of farmers. The Government must also commit itself to self-sufficiency in germplasm supply and tap its potential for cost-recovery. Plant protection and quarantine services must also be improved in order to better protect the country's agriculture, beginning with a survey to identify the main pests and diseases affecting local crops and used to educate farmers on incidence, locations, and control methods. Plant quarantine laws should need to be revised to give greater authority to officers and to require more surveillance points along the borders.
Livestock nutrition and health are also important considerations for the sub-sector. The development of energy-based and protein feeds production should be pursued, along with efforts to improve the productivity of saline and acid soils to ensure adequate pasturage. The Guyana Stock Feed needs to be given more autonomy to react quickly to market conditions, or else it should be privatised. A survey of the health status of all livestock in Guyana needs to be undertaken, and the Veterinary Laboratory at Mon Repos should provide, for a fee, all the services needed for disease surveillance, laboratory diagnostics, and disease eradication programs. Proper abattoir facilities, a functional diagnostic laboratory, and well-equipped field veterinarians are required if Guyana is to ensure clearance for beef export and any necessary actions must be taken to institute them. The Government must improve the emoluments to veterinary staff and provide transportation facilities to allow them to do their job. While cost-recovery mechanisms can be introduced to abate the costs, the MOA is ultimately responsible for the core funding. Government is also responsible for including an Animal Breeding Unit in the livestock development programme, which can become self-sustaining through the sale of breeding stock, charges for artificial insemination, and donor-financed projects.
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Institutional obstacles to the development of the agriculture sector in the Central Government and national institutions include overall constraints, specific constraints to the National Agricultural Research Institute (NARI) research programme, and problems in the delivery of tertiary-level training. The Ministry of Agriculture (MOA), the primary governmental and general support institution, is responsible for the bulk of the policy planning and institutional coordination of the sector. Unfortunately, the MOA struggles with budgetary constraints, limited staff, and a centrist orientation that has weakened its capacity for policy review, undermined linkages between institutions and within the MOA, and perpetuated the irrational division between public and private sector roles. Insufficient infrastructure and the MOA's limited interaction with its clients has also raised the complaint that it does not effectively service the needs of rural farmers. The problems faced by both NARI and the tertiary-level training institutions reflect very similar problems: poor institutional linkages, insufficient facilities and infrastructure, poor policy direction with little capacity for review, and limited staff and financial resources.
The problems with Central Government and its agencies are especially serious considering the second major institutional constraint to the agricultural sector, namely the steadily decreasing influence and power afforded Neighborhood Democratic Councils (NDC) and non-governmental or community organisations. Local level institutions have a limited role in the mobilisation and disposition of resources and, under current legal and administrative arrangements, they cannot function effectively as providers of service at the local level. The result is an inability of local communities to initiate their own development initiatives, and an insufficient participation of local government in designing agricultural programmes.
Producer organisations are an important facet of the institutional structure of the agricultural sector that represent producer interests and provide services that individual producers, particularly small farmers, could not effectively supply themselves. Unfortunately, producer organisations are constrained by weak support from the public sector, unclear legislation regarding organisational registration and structure, and limited financial and human resources and management training. The potential advantage of producer organisations for small farmers is more pronounced considering the limited agricultural and rural lending of commercial banks. Lending rules, even within the GNCB, effectively exclude 80 percent of Guyana's farm households from access to institutional and commercial credit. Small farmers, therefore, have neither strong organisations to supply necessary services for production, nor the ability to secure loans necessary to finance the services themselves.
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After intensifying the process of policy review for key sectors and formulating policies aimed at provision of basic public goods to disadvantaged communities, the MOA should produce a plan for the future direction of agricultural support services. The plan should prioritise government functions, articulate its relationships with the private sector and communities, suggest a cost management matrix, and provide measures for the development of the small farm sector. Specific suggestions for financially supporting the development of the small farm sector include targeting a proportion of the preferential gains from rice and sugar exports, introducing higher rentals of State land and taxes on freehold land, and initiating a system of charges for larger farms for extension services, thereby targeting the subsidy implicit in those services on smaller farms. A Small Farmer Support Fund should be created to oversee the management of funds raised through these actions.
A second policy focus is the integration of agricultural support services under a single institution which will coordinate the relevant agencies and organisations and operate under a development orientation that emphasises the empowerment of communities. The organisation could also, when asked, engage in income generating activities for the commercial private sector and for communities. A similar coordinating body will be necessary to support the MOA by bringing together all agriculture-related agencies, key groups, and communities to adopt a multi-disciplinary approach to planning. This organisation should be sufficiently funded, perhaps from a portion of revenue from land rental or taxation, in order to retain qualified staff.
In adopting the policy of community empowerment, Government should grant NDCs greater scope in the determination of resource use and should support rather than control the local government system. An important step will be to make regional government more representative, possibly through allowing the NDCs to elect representatives to the Regional Democratic Council (RDC). A regulatory body, outside central government, will be necessary to oversee these activities. Financing local government institutions is also critical, and it is recommended that 5 percent of the national budget be earmarked for the NDCs. Programmes to provide technical training in legal issues, management, finance, budgeting and resource mobilisation will be necessary for the sound functioning of a more powerful local government system.
Efforts to strengthen the producer organisations should focus on drafting new legislation that gives agricultural cooperatives a commercial basis and guarantees members legal ownership of a defined share of the net profits. Sensitisation programs on the advantages of cooperative enterprises and the benefits of the above legal provisions should be undertaken to promote membership.
Financial institutions need to be reformed as well. Government should consider offering incentives to locating bank branches in rural areas, and banks should institute group guarantees of the Grameen Bank type in the rural areas. Consideration should also be given to creating a linked set of rural credit unions. Banks should be encouraged to link credit and savings services so that loan amounts will be determined on the basis of the client's savings performance. Finally, the Government and Bank of Guyana are encouraged to reexamine the current monetary policy to determine whether it is having the unintended effect of reducing incentive for banks to seek out business in the private sector, particularly agriculture.
The principal objectives of the agricultural land policy sector are twofold: (i) pursuing the national objective of rapid growth through improving the efficiency with which land resources are utilized in production, and (ii) supporting poverty alleviation by increasing access to land for the landless or rural farmers with limited acreage.
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Constraints to the agricultural land policy sector fall under two general categories: the access, efficiency and tenure security of land markets, and the need to improve land utilization in land use planning.
Types and terms of leases are the main issue in land markets. Currently, there are no clear criteria for approval or denial of leasing applications for land, and the procedure is extremely inefficient. Many of the leases granted are provisional, awaiting surveys before final determination and rendering the land useless as collateral for production financing. State leases have the further disadvantages of short duration (25 years or less) , non-transferability, and the inability to sublease. These stipulations limit the lessees' ability to utilise the land to its maximum capacity and act as a disincentive for investment. The quality of the management of State land is hindered by the undervalued rents which rob the state of much needed revenues and assist those that least need it, namely large land holders. This problem is perpetuated by the lack of a data base for lease management, making revenue collection difficult and generally adding to the inefficiency of the leasing process. The effect of this deficiency can be seen in the number of unregularised occupants who either occupy the land before approval is granted, or who inherit or have a lease transferred without the necessary documentation, as well as the increasing numbers of squatters on State land.
The Registrar of Deeds is responsible for the registration of all transactions involving freehold land, including commercial affairs, which has proven too big a burden for the office. A manual system of data handling, financial constraints, and inadequate staffing all contribute to the problems and inefficiencies at the Deed Registry. Freehold land also experiences wasteful underutilisation in many instances, partly due to insufficient incentives for agriculture production and poor drainage and irrigation systems in many areas. The complications in trying to rent unutilised freehold land further exacerbates the problem and results in prime land remaining idle. Many squatters and sublessees are desirous of obtaining title to freehold land, but there is insufficient data available to inform them of existing avenues for such action and for making informed decisions.
These constraints to land markets affect and are affected by problems in land use planning. Several institutions act as authorities, planners, or advisors in the utilisation of land for forestry, mining, housing, and agriculture. Their overlapping legal mandates and the lack of a coordinating mechanisms between them results in conflict between land users and an absence of an overall policy on land use. A lack of data on title and tenure conditions, soil type, indigenous settlements, social and physical infrastructure and population, due in part to limited funding and human resources, further exacerbates coordination difficulties. The lack of a clear strategy for the opening of new agricultural land puts an even greater demand on that which currently exists, and the absence of environmental regulation on the occupation and utilisation of land puts this resource in serious jeopardy.
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Improvements to the land market must begin with changes in leasing practices. Selection criteria should be clearly established. Both the land selection committee and the regional committee should be comprised of elected members; regional committees need not review applications, but rather review the functioning of the district committee regarding the selection process. Efforts must also be made to expedite the approval of leases. For plots that are already surveyed, a time limit of 20 days for review of the application by the district council and 20 days by the Land and Surveys Department should be set and, if not met, the application should be approved by default. Surveying should be the responsibility of the land selection committee, and the existing backlog of surveys for both leasehold and freehold lands should be completed as soon as possible by the Land and Surveys Department or contracted out to private firms.
A standard agricultural lease should be formulated with provisions for 99 or 999 year limits, transferability after 5 years, the ability to use leased lands as collateral or to sublet leased land without the approval of the lessor, and the option to convert to freehold after 10 to 15 years beneficial leasehold. If these changes are to have the maximum beneficial effect, annually adjusted land lease rates will also have to be introduced based on a simple system with a few aggregate categories of land. This will require an initial three-fold increase from the current rates, and special provisions will have to be made for the rural poor. The revenue generated by the new rate levels should be re-invested back into improved land administration and agricultural development. A network database, the responsibility of a separate unit within the L&SD, will be required to maintain the current status of each lease to serve as a base for billing and the collection of rates. L&SD should also undertake an inventory of occupancy in order to identify unregularised occupants and squatters in order to either regularise their occupancy or remove them from the land. In order to accomplish these tasks more efficiently, the L&SD should strengthen its regional offices.
Issues surrounding freehold land require immediate attention as well. In order to speed the process of property registry, land transactions should be separated from those involving name changes with separate Registrars for both. It may also speed procedures if transactions are grouped by subject, and if the registry updated its data to a new computerised system. The Deeds Registry, if made a semi-autonomous body, could implement realistic charges for services and use the revenue to, among other things, offer better wages and benefits packages to its personnel.
Beyond these preliminary administrative changes, the two principal policy measures to promote better utilisation of freehold agricultural lands are: the elimination of unnecessary restrictions on land rental practices, and the institution of a rural land tax, which will act as a disincentive to underutilising land. The land tax should be levied on a per acre basis and taxes should not be placed on improvements to the land. This will require the repealing of the Acreage Tax Act of 1933 and the drafting of a new act that applies the tax on all freehold land. In cases where land still remains idle for a designated period of time, the State should repossess it to offer for sale or lease. Landowners must also be guaranteed the ability to charge appropriate rental rates and have absolute security of property recovery after the termination of the rental contract. Government will have to take action regarding unregularised occupants and squatters of freehold land, again either by regularising their tenure and taxing them or by removing them from the land.
As stated in Chapter 22, the policy adopted by the NDS is to survey and mark on land on maps all Amerindian community boundaries. Community policing groups are encouraged to support regional authorities to deter illegal occupancy of reservation lands. Given the wealth of resources found on Amerindian land holdings, development plans to be carried out as part of the National Land Use Plan should give special priority to benefiting the indigenous population. In cases of foreign investment interest, the proceedings should be treated as a transaction between landlord (indigenous community) and tenant (investor), subject to general Government investment policies.
The strategy for attaining improved land utilisation begins with improved institutional coordination and communication, eliminating administrative overlap and instituting a centralized communications network, with the L&SD acting as the final clearing house regarding land use. A computerized national land information data base will be established, to which all related agencies will have access. Before this can happen a great deal of research, some of which will be contracted out to institutions and specialists, will be necessary to collect the relevant data. As a result of this data collection, a National Land Use Plan can be designed to define sustainable land use practices, targeting areas in need of reforestation or suitable for long term agricultural development. And of course, this information will be available to farmers and investors in order for them to make informed investment decisions.
The Forestry industry represents vast economic potential for Guyana. It has, however, suffered from years of lack of adequate supervision and monitoring and frequently shortsighted harvesting practices that have sharply reduced the availability of one or two key species in large tracts of forest. At the same time, much of the domestic forest industry is undercapitalised and uses technologies of production that are out of date. A number of constraints must be addressed if the sector is to achieve its three broad objectives of increasing the economic benefits derived from the forests and other natural resources, improving the sustainability of the sector, and spreading the benefits of forest-based development to Guyana's rural areas.
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The lack of full articulation of Guyana's land use and forestry policies, and inconsistencies among some of them, has often led to a subordination of sound technical criteria in the decision-making concerning the country's forests. The Guyana Forest Commission (GFC) has had difficulty playing both a development and a service role due to its lack of administrative continuity, insufficient staffing, and insecure funding. Traditionally, forest concessions have cut to order, selectively extracting a few marketable species in an ad-hoc manner. While this "forest mining" was acceptable when the species were plentiful and accessible, it is not ultimately sustainable. The fast growing number of chainsaw milling operations also pose a threat to sustainable forest management. Unfortunately, switching to large exploitation permits for sustainable forest management concessions will require an initial large infusion of capital, as will developing markets for lesser known species. Both the GFC and most of the present timber leaseholders lack the capacity to fully implement sustainable management in the field. Moreover, the GFC does not have the funding and experienced staff to fulfill its broad legal mandate that covers protected areas, forest products manufacturing and marketing, product development, research, and training.
Government intervention in marketing, combined with the issuance of short-term permits that discourage sustainable practices and allow for unpredictable decisions by the GFC, has created a climate of instability in the forest sector which has stunted private investment and has acted as a disincentive for firms to pursue infrastructural or technological development. The lack of transportation, communications, energy, basic social services, and health care in the interior further inhibits private investment, as it is very costly for firms to move their operations inland. Furthermore, it is very difficult to raise equity or loan capital in the current system of short leases, lack of land titles for mill facilities and the traditional family ownership structures, which translates into a large accumulated shortfall of investments in equipment and personnel. Finally, the lack of a coherent national training program has perpetuated the perception that the forestry industry does not offer attractive career opportunities.
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Forest fees are long overdue for adjustment. It is recommended that an initial doubling or tripling of fees be introduced, with the goal of increasing real revenues per acre of forest concession five-fold by the year 2000. Three main provisions must complement the institution of the new fee structure: (i) institution of an investment credit that can offset as much as thirty percent of the forest fees for investment in wood processing industries (ii) depositing of twenty percent of forest fees collected for logging on Amerindian land in the Amerindian Development Fund (see Chapter 22), and (iii) simplifiction of forest fees to a single rate per cubic meter of wood extracted, plus an acreage fee. Over time, royalties will be applied to all commercially-usable standing timber in a concession until one hundred percent coverage is reached, at which time the royalty will be merged with the acreage fee. Smaller operations can be given a longer adjustment period to comply with the full level of the fees.
Equally basic and urgent is the need for the Government, through the GFC, to develop a policy framework for concessions that will make the process more transparent, protect the rights of the investors, and enable the enforcement of their obligations. The policy will address the location and size of the new forest management concessions, the length of tenure, and questions of transferability. The concept of forest management must also be broadened to include non-timber products. This will require the development of a concession framework for the sustainable use of forests for non-timber products and nature tourism. In addition, a clear policy on log export must be established that will improve the marketing capabilities of the forest sector so that a wider range of species may be harvested. Under this policy, the "forest management development" surcharges on log exports will be phased out over a ten-year period, and starting immediately Government will not have licensing control over exports of logs or any other wood products. A capital lending program, established in the GNCB, which could lend to the sector at non-subsidised rates under longer terms would also strengthen the economic viability of the sector. Finally, as the forest sector has become more successful in attracting foreign investment, attention should now be turned to encouraging labor-intensive wood processing industries. Fiscal incentives should only be offered to integrated developments that include such operations, with eligibility dependent on a verifiable production plan that will generate at least 25 person years of employment per thousand m3 of wood extracted annually.
Institutionally, the first order of business is to complete the removal of GFC from participation in the commercial marketing of forest products and focus its attention toward the sustainable management of production forests leases to private concessionaires. GFC will be given administrative autonomy, empowered to receive revenues that result from debt for nature swaps (rather than receiving leasing revenues which compromise its role a guardian of the forests), and its Board members will be appointed for longer terms. A new organisation will need to be created to fill the void created by the removal of the GFC from marketing and products development. An institute whose board composed of representatives from both the public and private sectors should be formed for this purpose, assuming responsibility for education, research and development, training, market and business development, and technical services to industries. Finally, government must take steps to coordinate two key projects involved in zoning of the forested interior lands for alternative uses: the Natural Resources Management Project, financed by the German Technical Assistance Agency, and the National Protected Areas project, jointly funded by the World Bank and the IDB.
Supervision of both small logger operations and bio-prospecting must be instituted. The former will require policies and programs that monitor, tax and channel their activities. The sheer number of small loggers permits will make the assistance of the NGO sector critical, and GFC insistence that chainsaw operators form cooperatives before being able to bid for concessions will allow for easier monitoring. As for bio-prospecting, the property rights laws of Guyana must be clarified in regard to biodiversity and conditions set for foreign activity in this area.
Within the overall national objective of rapid economic growth with widely distributed benefits, the fishery sector has three main objectives. The first is to ensure that the nutritional, social, and economic benefits from current fishery operations are maintained and improved. Second, special priority should be given to improving the incomes of artisanal fishermen, particularly through better integration of their production activities with processing and marketing. Finally, fishing efforts should be commensurate with the sustainable productive capacity of the resources through the introduction of more environmentally sound practices.
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The keys to development of any fishery are adequate capitalisation and technology, long-term sustainability of fishing operations, and an adequate regulatory framework for ensuring sustainability. In the case of artisanal fisherman, special attention also has to be paid to the storage and marketing system in order to provide adequate returns to their harvesting efforts.
Under current practices, however, some major commercial stocks in inshore areas are being exploited near or above maximum sustainable yields. The use of inappropriate fishing gear also threatens the sustainablity of fish populations, as excessive by-catch results in the destruction of juvenile stocks. At the same time, the sector lacks the capital and technology to exploit resources on the continental slope, and instead foreign fishing boats are capitalising on them. Cold-storage facilities are virtually non-existent for artisanal fishermen. Another sub-sector that is very much underexploited at present is aquaculture, where the potential returns in incomes, employment are foreign exchange are quite high.
Conservation and management measures in inshore areas are therefore an obvious priority to a healthy fisheries sector, and Guyana's current fisheries management system is not sufficient to promote a sustainable pattern of development.. There is a lack of enforcement of regulations, no stock assessment, a weak extension system, and limited data on the fisheries and fishers. Not surprisingly, these problems are an outgrowth of the severe resource constraints experienced in the Department of Fisheries and the Guyana Coast Guard.
Another area of concern, which has become a bottleneck to the development of artisanal fishery, is the inadequacy of facilities for processing and cold storage (particularly in the rural areas) and the existing deficiencies in quality assurance. Exporting potential in the sector is weakened by the inconsistent quality of post-harvest infrastructures and a lack of product diversity. Cooperatives should be developed and supported more fully as a means of providing some of these services. Equally important are the environmental concerns facing the sector. Damage to inland waterways from the expansion of mining and forestry and the destruction of mangrove habitat has reduced the breeding and harvesting opportunities for that sub-sector.
The aquaculture sector is not being developed in relation to its potential, and there is no policy for its long-term development. One major problem is the lack of access to freehold land or secure leases of a reasonably long duration. Investment in the sector has been limited, largely because there are no policies to alleviate the relatively high initial capital cost and the uncertainty of return. The Department of Fisheries does not have the resources to provide adequate infrastructure to facilitate research and development or extension services, nor does it have the necessary qualified personnel to undertake such activities.
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The industrial fishery needs to orient its efforts more toward deep water finfish. Both marine prawn and seabob are currently being harvested beyond sustainable levels, and both must be stabilised if Guyana is to benefit from them in the future. Expansion of aquaculture activities in shrimp production may be an important way to sustainably manage shrimp populations, and maximise their export potential. In the meantime, shrimp populations must be protected by limiting trawler operations to water deeper than 18 fathoms and regulating mesh size and gear for all types of vessels.
Artisanal fisheries also must face the problem of declining fish populations due to overexploitation. Fishing cooperatives should become actively involved in the education of artisanal fisherman on sustainable management issues. Specifically, the effects of net size should be discussed, minimum mesh sizes should be established and enforced, and the use of such nets should be restricted to certain areas on a rotating basis. In addition, rotating closed seasons should be developed in close consultation with coastal fishing communities. The quality of their product must also be improved in order for the artisanal fishermen to command higher prices and penetrate wider export markets. Quality improvements are best attained by increasing the capacity for production of ice and installing cold storage facilities in the fishports. Better training for crews and processors on the proper handling of fish would also help, perhaps through a certificate program in fisheries management and quality assurance at the University of Guyana.
Inland fisheries, particularly those of Amerindian communities, need to address very basic issues in respect to processing, sustainable harvesting and protection of habitats from degradation. NGOs and rural women's networks are good means through which to educate hinterland communities about salting and smoking preservation techniques, as well as the need to eliminate the use of explosives and poisons in fish harvesting. Several studies should be carried out to assess the inland fish resources and habitat, particular problems and prospects facing Amerindian involvement, and to recommend means to control or mitigate the impact of mining on inland fish habitats. Research should also be conducted on the breeding of ornamental fish as a possible focus for inland fishing communities.
Integrated systems for monitoring, surveillance and control in the fishery zone must be established, both to protect the artisanal and industrial fishermen and to enforce the new regulations for the sector. The Coast Guard, with its experienced and qualified staff, should undertake marine and shore-based surveillance and enforcement operations, and support should be given for the provision of the staff and equipment needed for these services. A Fisheries Surveillance and Enforcement Coordinating Committee will be established to plan, supervise and evaluate these operations, coordinate the development of required legislation and regulations, and oversee the budget.
Improving marketing and processing will be the best way to tap the sector's development potential. As mentioned earlier, investment in ice-making capacity and cold storage facilities at fishports are two particularly effective means to this end. The creation of a national export quality control system with effective inspection and enforcement capabilities would be another positive step. Access to freehold land for cottage processing facilities will be improved, and procedures for approvals and licensing of processing plants will be simplified and expedited. Market intelligence services for the fishing industry will be expanded, particularly for ornamental fish, and procedures for export will be improved.
Aquaculture is the sub-sector of fisheries with the greatest potential for expansion of production, creation of employment, and generation of foreign exchange earnings. Promoting the fulfillment of these prospects begins with the drafting of a comprehensive sub-sectoral policy that deals with rights to land and foreshore resources, defines the role of the State and private sector, establishes regulations governing quality control and management of the environment, and encourages joint ventures involving overseas and national firms. Suitable areas for aquaculture activity will be identified, and the land will be held in freehold or 99-year transferable leases. Two National Aquaculture Research Stations, one for freshwater and one for brackish water, will be established, with system intensification, water quality, and fish disease as their research priorities. Guyana will seek to join the Commission for Inland Fisheries of Latin America and the Caribbean, which will allow it to benefit from the experiences of other countries .
Like most of the public sector, the Department of Fisheries suffers from a great many vacancies in key positions and an undertrained, underqualified staff. To overcome this obstacle, the Department of Fisheries will be reorganized and reinstituted as an autonomous Guyana National Fisheries Commission, which will be institutionally parallel to the Guyana Forestry Commission, and supervised by a Fisheries Advisory Board. Finally, the Central Government will undertake to increase funding for the fisheries management institution ten-fold by the year 2000, which actually only represents a net outlay of less than one-eighth of the governmental revenues generated by the sector.
Public sector holdings in fisheries have proven extremely problematic, and the decision was made to divest those holdings. Some assets of Guyana Fisheries Limited were leased to Marine Food Product Limited, which has not been meeting its payments for some time. If an agreement can not be reached soon, the assets will be put up for auction. The State's shares in the Guyana Libya Fishing Company will be put up for auction as well, with the State assuming the existing international debt. If no buyer is found the company will be liquidated. Finally, if the current renters of the Houston Complex do not agree to a rent increase to absorb some of the cost of the required rehabilitation, the asset will also be put up for sale.
Despite the decline of the bauxite industry, mineral development has the potential to once again become an engine for economic growth in Guyana. In the broadest sense, the objective of the national policy for mining is to firmly cement its foundations for continued growth so that the sector may play its role as a principal catalyst for the economy.
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The mining sector is hampered by several constraints that effect all its subsectors, as well as specific problems, particularly within the bauxite subsector. Among the general constraints, lack of access to investment capital is paramount. Similar to the agricultural and forestry sectors, access to capital is linked to the form of land tenure, and miners can not generally access investment capital on the basis of their present category of mining rights. Foreign direct investment is often deterred by the high cost of transportation and lack of essential services in the hinterland, as well as insufficient geomorphological data to guide sound investment decisions. Considering the shortages of suitable geologists, engineers and drillers, finding a way to supply the necessary exploration data is a major concern.
The bauxite industry plays an important role in Guyana, lending its problems a specific urgency. BERMINE, primarily a producer of metallurgic bauxite (MAZ), is handicapped by shrinking market opportunity and sales, due in part to low iron content, and limitations on the size barges it can use on the river. LINMINE, which produces mainly refractory grade bauxite (RASC), suffers from its high costs of production, the downward trend in the usage of refractories in steel production, the fact that its position in the market is weakened by Chinese and Brazilian competition, and variable quality and unreliable supply as perceived by customers. The most fundamental issue facing LINMINE, however, is that its cost of production far exceeds the price received for its product, resulting in an annual net loss that has been funded by the Treasury, although the net transfers from Central Government have been reduced sharply. Aroaima (ABC) has an equity base of US$4.0 million, yet the Company has loans of US$59.6 million and has not been able to pay any dividends to date due to the conditions of the long term loans that prohibit dividend payment until financial rations are met. Furthermore, ABC has been unable to enter other markets because of its inability to ship economically-sized lots out of Guyana. The dredging of the Demerara River has also not occurred, making transport even more difficult and inefficient.
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The potential of the mining sector should not be doubted, but before that potential is realised difficult challenges will have to be met and issues will have to be dealt with adequately. The first step is the drafting of a mining policy that embraces a fiscal regime, marketing arrangements, policies on technology, security of titles, training, and the environment, an approach to social issues in mining communities, and programmes for the bauxite industry and for the development of infrastructure related to mining. The regime must secure satisfactory financial returns in exchange for conceding the extraction of exhaustible resources while taking into account considerations of international competitiveness.
Guyana, as a mineral-rich country interested in expanding the mineral sector with foreign involvement and anxious to reap substantial benefits while assuring technical and economic efficiency in the exploitation of the nation's mineral wealth, needs a sound fiscal regime. The first requirement is that the regime be absolutely standard when it goes into effect. If Guyana is to become increasingly internationally competitive, however, adjustments must first be made to the existing regime. Currently, the Government's total share of pre-tax profits from a mining enterprise (arising from corporate taxes, royalties and dividends) is about 53 percent. To be positioned closer to the middle of the international range, this share should drop to about 40 percent. It should be kept in mind that reduction in rates in an effort to be more competitive are likely to be compensated by increases in the tax base through expanded mining activity. The reduction in the aggregate rate should not come from 35 percent corporate income tax, which is equal to the standard corporate rate, but rather reduction in the royalty rates and free equity provision. The current royalty rate of 5 percent is at the very top of the international scale and should be brought in line to 2 percent over a period of 2 years, with an additional half percent to be paid to the Amerindian Development Fund (see Chapter 22) for exploitations on Amerindian lands. Fifty percent of the royalty should be deductible from income tax payments, which would provide an incentive to declare profits. The withholding tax on repatriated dividends will be fixed at 6.25 percent and the corporate income tax rate at 35 percent with a reasonable deduction for exploration expenses. Finally, export duties need to be eliminated.
The reason royalties were originally introduced was the difficulty in obtaining accurate, or any, tax declarations from independent miners. However, adopting measures to strengthen income tax enforcement is preferable to maintaining a royalty rate that discourages investment and encourages evasion. Current land rental policies must also be reconsidered. A great deal of land is being held for speculative purposes, meaning it remains idle while others might be able to put it to use. A commission should be convened to determine new, higher land rentals and to develop a sliding scale which steeply raises those rents the longer the claim is held without working it. Another element of the fiscal policy are two provisions designed to mitigate the deleterious environmental impacts of mining. The first is a special tax applied to the purchase and annual operation of missile dredges, the proceeds of which will be deposited in a special fund for rehabilitation of river banks. Second, an income tax reduction to 25 percent will be offered to any company that sets up a regional gold processing mill, receives ore from independent miners, and uses technologies to minimise the environmental impact of the processing. Finally, in order to have the most widespread benefit from a depletable resource, the fiscal policy framework should include a provision by which up to half the royalty income from mining will be allocated to a Fund for Guyana's Development that will be invested in long-term instruments and whose interest earnings will be allocated to projects concerning infrastructure, the environment, poverty alleviation, housing and health care, according to special regulations formulated for the utilisation of the Fund. It is vital that this new fiscal regime not only be standard, but that it be legislated
The Guyana Gold Board has enjoyed a monopoly in mineral marketing and, as noted above, has charged substantial royalties that have inhibited the growth of the sector. It has therefore been decided that the Gold Board should be replaced with a system of licensed and bonded gold buyers who will be responsible for remitting royalties to the Government. Buyers must invoice all purchases and sales of gold and will be carefully supervised by the GGMC. The GGMC also needs to commission a national mineral resource inventory, continue to explore state of the art mining and milling technologies, and construct a modern integrated laboratory for assays, metallurgical analysis, geochemical tests, and environmental analysis of mining wastes. GGMC collaboration with the Ministry of Health and the Ministry of Education will also be necessary to carry out surveys of needs in those fields in the mining communities. In the case of health, it is already known that a massive programme of malaria control in the hinterland is urgently needed (see Chapter 19). These activities all require strengthening the capacity of the GGMC which, as in other sectors, will require giving priority to Public Service salaries and conditions of work. For this reason, it is recommended that a temporary reduction in income taxes for both expatriates and returning Guyanese be introduced. Finally, to clarify the lines of authority in the mining sector, the GNRA should be eliminated and the institutional strengthening process should be focused on the GGMC and GFC.
Although mining titles are adequately addressed in the Mining Act of 1989, confusion still arises in practice and there appears to be too great a discretionary element in awarding those titles. The Act should therefore be changed to provide a tighter set of regulations in this area and to redefine the operating rules for applying them. Relatedly, concerns over the uses to which a concession may be put should be clarified. In the case of different minerals being found in a concession, the same mining contract continues to apply if the minerals occur in association with each other. If they occur separately and require a different mining operation on the same land, a new contract must be drawn up. In the event that the concessionaire wishes to transfer all or part of the concession to a non-mining use he or she must negotiate a price with the new concessionaire and pay a transfer fee to the GGMC (this is parallel to the policy adopted for the forestry sector for forestry concessions being transferred for mining uses; see Chapter 30).
The difficulties facing the bauxite industry are well known. Quite simply, it costs the Treasury far more to run LINMINE than can hope to be made under current circumstances, when servicing on LINMINE's debt and the costs of its ancillary facilities are taken into account. The two main issues facing the industry are therefore what to do with LINMINE and how to assist the relocation of the labour force to more productive employment. The sensible choice seems to be to put LINMINE up for public auction by 1998 and announce a date after which the operation will be shut down (with generous dispositions to the labour force) if there is no buyer. The auction should similar to the procedure proposed for GEC in which the principal shareholding is awarded to an investor that offers the best rehabilitation and operation plans. Given the weak position of LINMINE and the nation interest in salvaging it, Treasury should be prepared to forgo all taxes for the first five years, and Government will have to pay benefits to workers who are no longer needed by the new employer. Since BERMINE is the more viable of the State assets in bauxite mining, finding a strategic investor could prove easier and extremely beneficial, and priority should be given to putting the majority of its shares up for public auction by 1997.
The sugar industry has a long and distinguished history in Guyana and has played a critical role in its economy for a great many years. For this sector, the main objective of the Strategy is to increase the competitiveness of the industry by reducing its production costs and streamlining its facilities.
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Although the sugar industry experienced a decline in the 1980s, its recovery in the current decade has been impressive. The doubling of output levels in the last six years and improvements in quality indicators have been further bolstered by the recent expansion of Guyana's preferential markets through the European Union's Special Preferential Sugar (SPS) Agreement. While the recent growth is definite cause for optimism, some key issues that threaten the sugar industry's long term sustainability must be addressed.
The preferential prices received abroad and the SPS quota have masked the financial problems facing the sector. The operating losses in the less efficient estates are approximately equivalent to US$1200 per man-year of employment. This figure can be expected to rise within the next few years, particularly as preferential treatment begins to wan, in the sense that real prices received will decline, and the temporary part of SPS quotas is reduced. Considerable external borrowing and investment finance will have to be secured in order to improve the efficiency of the sector so that it will be able to survive after preferential treatment is reduced substantially. Part of the financial difficulty facing the industry arises from the fact that GUYSUCO provides so many social services, from hospitals to a welfare fund, that add to the cost of production.
The need for a thoroughgoing review of the industry's cost structure is one of the most daunting challenges facing the sector. The two determining aspects of the present price structure for farmers' canes, established in the National Cane Farming Committee Act #29 of 1975, are the method by which the conversion factor from cane to sugar is derived and the proportionate distribution of the net income from this sugar between the farmer and the processor. Currently in Guyana, growers receive a very high share (70 percent) of the proceeds, a practice which places additional strains on the finances of the industry.
The reduction of labour turnout on some Demerara estates due to emergence of new economic activity and increasing labour competition further undermines the viability of the industry as labour rates are driven even higher. The issue of water availability must also be resolved, particularly in Berbice where cane production is more economical, and the drainage capacities in Demerara need to be increased.
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Due to the cost-price squeeze that the industry is beginning to experience, highlighted by the fact that three of the estates are incurring substantial losses in spite of strongly preferential prices received in Europe, basic policies must be established to improve the sector's competitiveness. In addition, the programme of improvement of the technical aspects of the operations in field and factory must be continued. It is imperative that action be taken promptly, before the industry is forced to turn to the Ministry of Finance for subsidies to sustain it. In terms of markets and prices, while Guyana will continue to lobby for maintenance of preferential markets, the country must take proactive steps in policy reform to strengthen the industry's ability to withstand changes in the international market. The exchange rate must be sustained at a real equilibrium level, avoiding an overvaluation that has proven devastating for the sugar sector in other countries (Chapter 12). Since production for CARICOM results in substantial losses per ton for the industry, consideration should be given to reducing sales in this market until the industry is successful in lowering its prices or real prices in the Caribbean increase.
In an effort to reduce GUYSUCO's ancillary costs, arrangements should be made to recover costs from the users of the Lama and Boerasire Conservancies. An agreement should be reached with the Government that the industry will be reimbursed for its social services, and that by 2005 a programme will be in place to transfer those responsibilities out of GUYSUCO's ambit of responsibility. The practice of selling former cane-growing land at below-market prices to low income families should continue, however, with Government reimbursing the industry for the costs of such practice. GUYSUCO's dairy complex should also be sold at auction.
The thrust of the new policies is the reduction of production costs. If the industry is to survive in the new century, it must reduce its current production cost per ton of US$421 to a level of about US$330 by the year 2000 and US$300 by 2003. A two most vital components of the strategy of cost reduction are investing in the modernisation of the industry and the reduction of recurrent production costs. The principal avenues that will be pursued to achieve this goal include revising the National Cane Farming Act in order to bring the relation between the price of cane and the price of sugar into conformity with international standards, exercise wage restraint until the sector achieves international competitiveness, and the phased and gradual programme for the closure of inefficient estates over the next few years. Another key aspect to the strategy is to involve the private sector more deeply in its financing and management, transforming it into an industry in which ownership is shared with the labour force, the general Guyanese public and strategic investors.
Guyana can no longer carry the financial losses of the estates whose cost of production is greater than the prices in the domestic market, the world market, the U.S. quota market and the CARICOM market. GUYSUCO's 1996 Operating Budget forecasts losses in each of the four Demerara estates, and the losses represent 39 percent of the value of the profits earned by the Berbice estates. In fact, GUYSUCO's profits could have been about US$8.2 million higher if three of the Demerara estates were not operating and if there were no sales to the CARICOM market. Operating at a loss not only weakens the sustainability of the industry, it has the additional economic cost of keeping workers from being trained for occupations in which their productivity would meet or exceed their wage. It is imperative that Guyana put its sugar revenues to uses which will enhance the economy's growth prospects, ensure that labour is continuously provided incentives to move into productive occupations, and restructure the sugar sector so that it will be come competitive before preferential prices are reduced.
A programme to transfer the title of sugar lands to the cane workers in the Wales, Uitvlugt and Enmore estates for a nominal fee should be implemented. They will be granted long-term leases or freehold and it will be made clear that they are free to plant any crop they wish, with a guaranteed purchase of cane crop for two years to ease the transition. If by the end of 1997 cycle Wales is not able to reduce its cost of production to US$350 per ton then it should be closed after the 1997 crop. The Uitvlugt and Enmore estates will be evaluated with the aim of making them viable by 2000 or phasing them out. These steps will ensure that the needs are met to downsize the industry so that its sales are profitable, eliminate its least effective components and relocate the labour force to more secure employment in more productive lines of work.
Securing investment finance in the amounts necessary to rehabilitate the sector is a principal strategic concern. In order to achieve this goal, it is recommended that a participatory privatisation of the industry be carried out, giving a directly vested interest to the labour force and the general public as well as a strategic investor. The principles to guide this process include protecting the interests of the Guyanese people by offering them access to the privatisation process, and securing a strategic investor through competitive bidding. By the end of 1997, the four estates of Berbice plus LBI should be divested as one corporation, and the present management will continue to try to improve the productivity of the remaining Demerara estates, divesting at public auction those that succeed and closing those that fail to meet the targets for cost improvements. Finally, long-term rules for the sugar levy will be specified to ensure that the international transfer implied by the sugar quotas in importing countries is passed on in greater measure to the Government of Guyana to promote general economic development.
[NOTE: INSERT SUMMARY OF Chapter 34 HERE]
The broad objective of the labour policies in this Strategy is to reduce unemployment and underemployment and the accompanying poverty by creating greater amounts of productive employment and greater labour flexibility and mobility.
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Unemployment, underemployment and the status of real wages are all critical issues when considering labour and employment policies. Currently in Guyana, unemployment rates are between 10 and 11 percent with significant variations by age and gender geographical location. Underemployment can be divided into two categories: visible underemployment in which people are not employed for an established number of hours per week, and invisible underemployment in which people are employed in jobs that require a skill level below their qualifications. There are no statistics to show which form of underemployment is more prevalent in Guyana, but both underutilise the country's labour assets and limit the possibility of workers to increase their standard of living.
Contributing to the problem is the decline in real wages over the past decade, particularly in the public sector. The highest paid worker in the private sector earns over seven times more than the highest paid worker in the public sector. Moreover, in 1992, self-employed urban workers in the informal sector earned 16.7 percent more than workers in the urban formal sector and 37.6 percent more than the national average, although there is still no policy framework to encourage such activity. The Government labour force has been shrinking, largely because the formal private sector, informal employment and emigration offer better opportunities. Unfortunately, this reduction of Government's workforce has translated into a chronic lack of upper and middle-level skilled and managerial personnel while the lower ranks are over-staffed. Government has attempted to overcome the problem by creating semi-autonomous agencies, but this has only created anomalies in the Government structure and further weakened its management and ability to fulfill key functions.
Nothing that is done, including increasing the salaries of the public sector, will help unless there is significant investment in worker training. Lack of skills continues to hamper the revitalisation of the economy. Fulfilling the growth objectives of this Strategy will require that workers are productive, flexible and of high quality. If the country only has low wages as its primary inducement for investors, then Guyana will only attract firms with low wage and skill jobs, which may not be the best path to true development. Currently, a lack of information on what is needed in terms of skills results in a gap between the skills required from the labour force and the training it receives. The establishment of a labour market information system is an important prerequisite if Guyana is to have an adequate basis for formulating, implementing and evaluating human resource policies and if workers are to have timely access to employment information.
Strikes in reaction to labour disputes have cost Guyana's economy millions of dollars, and there is a need to resolve disputes through improved structures and procedures for bargaining and to move away from industry-wide bargaining. The sustainability of the National Insurance Scheme is a matter of concern. The contributions to the scheme may not be able to support the level of benefits, and an actuarial-based reform is required that will include the establishment of a base for private pension schemes.
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The overall macroeconomic framework of this strategy is designed to accelerate economic growth, a process that will increase both employment and real wages. A policy framework will be maintained that does not lead to an excessively high indirect cost of labour to employers and does not subsidise capital, so that the growth path is as labour-intensive as possible. Specific policies designed with these purposes in mind include the promotion of smaller enterprises and the creation of export processing zones. The promotion of micro, small, and medium-scale enterprises begins with encouraging them to enter the formal sector by having Government ministries and agencies allocate 25 percent of their annual purchases of goods and services to registered enterprises. New industrial sites will allocate space that provide common facilities to micro, small, and medium-scale enterprises to reduce their overhead costs.
Government will establish a small business development department which will coordinate agencies and bodies involved in this sector, work to certify and register businesses, and implement Government policies such as assigning factory space. Government will also amend the Companies Act to eliminate overlap between the personal income tax and corporate taxes, create legislation that provides for the charging of household and not commercial rates for public utilities used by these enterprises, the waiving of costs associated with the transfer of personal property to a business, and the creation of a class of shares that pay dividends but carry no voting powers.
Export processing zones (EPZ) can become a source of growth for the entire country in terms of production, employment, foreign exchange earnings, investment and the transfer of technology. Government will pursue the creation of at least one such EPZ. Since transportation costs must be kept low to ensure the EPZ is internationally competitive, it should be constructed in an area with conditions that are favourable for the construction of a deep water harbour and where it will be accessible to the road from Lethem (see also Chapters 12, 34 and 36).
For Guyana to be competitive in the world economy and satisfy the economic expectations of its population, the country must have a highly flexible and trained labour force. This will require a strong focus on technical and vocational education and training (TVET) guided by the needs of the private sector and partially subsidised by a small tax on industry. The establishment of a tripartite council to oversee worker training workers will be critical to its effectivness. Government's direct involvement in training will be limited to retraining public servants and workers who are displaced because of industrial restructuring, since the private sector and lending organisations such a the Institute for Private Enterprise can deliver the services more efficiently. Government will also shift its public financing away from the providers of training to the demand side of the market, enabling workers to purchase training within a competitive environment of suppliers. One step in this direction would be to reimburse schools for costs incurred in training, depending on the rate at which trainees find jobs after training.
Two alternatives will be considered for increasing salaries in the Central Government: setting public sector salaries at 70 to 80 percent of private sector salaries in corresponding job classifications and increasing real salaries in the Central Government 100 percent over the next five years. The cooperation of the private sector will be required to avoid wage inflation, and the Government will urge them to limit their wage increases over the next three to five years to allow public service wages to catch up. Unions will also be asked to acknowledge the need for and benefit of wage decompression which will facilitate labour mobility. Besides decompressing wages and improving labour market information and TVET, labour mobility also depends on breaking the link between social services and employment and opening land markets.
The Government is actively addressing the issue of public service reform and has formulated a preliminary Public Sector Reform Strategy. In addition to proper remuneration for public service workers, this strategy addresses revenue generation and allocating increases in revenue to the public sector payroll, linking merit-based promotions and salary increases to performance evaluations, reducing the role of the Public Service Commission in personnel management, increasing staff and managerial training, and implementing a standardised management information system in the Ministries of Finance and Public Service Management and the Public Service Commission. (See also Chapter 13.) Government will also establish criteria and implement plans for the creation of semi-autonomous agencies and the involvement of the private sector in some public sector functions.
Government will continue to work closely with unions, as they play a major role in organising workers in a single entity that can bargain with employers and monitor employers' compliance with Government regulations, reduce workplace discrimination and increase workplace productivity. However, precautions must be taken to avoid unions becoming monopolists protecting a minority group of unionised workers at the expense of the unemployed and those in the informal or rural sector.
The Government is in the process of establishing a Labour Market Information System for Guyana to provide job seekers with up-to-date information on opportunities and to establish an adequate statistical basis for formulating, implementing and evaluating policies and programmes for human resources development. To coordinate the handling of labour statistics better, Government will establish an inter-agency committee staffed with a technical secretariat which will be placed in the Statistical Bureau. The State Planning Department will collaborate with the Bureau of Statistics in formulating policies related to employment and manpower, and the Ministry of Labour will maintain responsibility for the regulation and functioning of the labour market. Finally, Government will be formulating a five year action plan, along with the relevant legislation, to establish policies on occupational health and safety
The central challenge of a development strategy is to find the most appropriate ways of combining the power of market forces, as the primary impulses to development, with the role of the State in providing the development framework, monitoring the process, and providing special assistance to target groups and issues. The policies set out in this Chapter aim to ensure that the private sector continues to play a role in the growth of the economy and that it be the major engine of employment creation. These objectives are based on the conviction that only the private sector can play these roles adequately, and that the development of the private sector is critical to the attainment of substantially improved living conditions.
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The principal issues and constraints facing the sector arise from the legacy of two decades of a declining economy and the absence to date of a definitive national policy on private sector development. Currently, Guyana has no comprehensive national private sector policy aimed at stimulating investments, industrial performance and commercial development. In order to design such a policy, several constraints to private sector development must be addressed.
Guyana has historically focused on a the export of a few primary commodities, with little effort made to either promote domestic processing of the goods, which creates important backward and forward linkages with other economic sectors, or diversify, particularly in areas linked to the natural resource endowment in which Guyana has a comparative advantage. The domestic and CARICOM markets are important for small and medium-scale manufacturers, but Guyana must also look toward new markets in order to overcome the problem of scale inefficiency for its new manufacturing efforts. Success in this areas will depend on improvement of the information base in respect to external markets and market niches, as well as the ability to meet international standards and quality. Considering Guyana's obsolete and depreciated plants, the procurement of industrial financial assistance must be made easier, more simplified and less time consuming if Guyana is to rationalise and improve its productive capacities. The development of more efficient manufacturing techniques and quality control is also dependent on a dynamic research and development programme. Of course, maintaining a skilled labour force is critical to growth in the manufacturing sector as well.
Although the tax system has seen improvements in recent years, it still has an irregular pattern of exemptions to consumption taxes and import tariffs. The consumption tax penalises the manufacturer for the final product by being applied to imported raw materials and intermediate goods, and high end income taxes are above the corresponding rate for almost all countries in the region. The process of approval of foreign investments is still time-consuming and there is too large a discretionary element regarding taxes and benefits. The process is biased in favour of primary products and other manufacturing, at the expense of market expansion, and the responsibility for investment promotion has been mixed with investment approval. A clear and simplified investment code should be published and widely distributed. Property rights are also a problem in that entrepreneurs are often unable to acquire the rights that they need to justify investment, and the rules for start-up of companies are too onerous, which effectively discriminates against small firms. Unfortunately, the legal system is badly deteriorated, making contract enforcement and legislative improvement much more difficult.
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Although the private sector is expected to be the main productive force in the economy and the predominant source of employment creation, the Central Government must facilitate the implementation of this Strategy by providing infrastructural support to the sector along with the appropriate policy and legal framework. More resources are required for this process and the State should involve the private sector in developing mechanisms to deal with shortcomings. Government will continue to focus on upgrading the human resources of the economy through education and training, contribute to manufacturing research and development activities, and provide marketing access support abroad. The provision and upgrading of basic social services, especially health, potable water and housing, will also remain the responsibility of Government. Finally, the State should encourage industrialisation by better representing the private sector at the level of international trade and donor agencies, promptly sharing information on the availability of development aid and technical assistance, and strengthening the democratic process by providing the private sector with the opportunity to contribute to national decision-making.
A simplified, more equitable tax regime is badly needed, particularly for consumption tax and import tariffs, if private sector production planning and investment is to be facilitated. The possibility of replacing the consumption tax with a value-added tax (VAT) should be considered. VAT is a tax levied on the value of goods and services at each stage of the production-distribution chain, and can be instrumental in broadening the tax base, reducing the amount of tax evasion, and providing additional revenue to reduce fiscal deficit and promote industrialisation. In considering the adoption of a VAT system, however, special consideration must be given to issues of equity (the distributional impact of the tax on consumers of different income levels) and efficiency (the impact on production, consumption and on resource allocation). A logical way to prepare for the introduction of the VAT is to initiate a programme of allowing tax rebates to traders who sell inputs to registered manufacturers. (See also Chapter 13.)
Export processing zones (EPZs) are also required to promote and facilitate investment. The immediate short term benefits from EPZs are job opportunities and the earnings of foreign exchange, but they also contribute to dynamic gains through linkages to mining, forestry, fisheries and agriculture for export-oriented activities. Government should encourage foreign firms to invest in building an EPZ in Guyana under an agreement to build, operate and transfer. (See also the discussion of EPZs in Chapters 12, 34 and 35.)
The rates of savings and of capital formation urgently need to be accelerated. The rate of savings is most influenced by a stable, clear and growth-oriented economic policy framework, as well as strengthened financial intermediation with sound bank management and attractive real interest rates for depositors. Foreign savings are also vital to the investment process, and improvements must therefore be made in the procedures for reviewing and approving foreign investments. A one-stop investment approval office needs to be created, and efforts at investment promoting should be carried out by a separate entity that includes leading representatives of both the public and private sector. The publication of a clear foreign investment code is necessary to reap the benefits of these actions. Monetary and financial reforms are urgently needed to address the questions of access to credit for investment and production, particularly for small and medium-sized firms, and land tenure tenure laws must be reformed to allow for investors to secure land title (see Chapter 29). Policy also needs to reduce Government borrowing on the domestic market and offer banks a relatively risk-free option (T-bills) to commercial lending. At the same time, it is important to make foreign exchange more freely available and ease the restrictions on access to loans in US dollars.
A central thrust of this National Development Strategy is making Government more efficient in the provision of basic services. One area in particular need of attention is the procedures for registration of new companies which need to be drastically simplified and expedited. Personal and business taxes should be merged for smaller firms, and export licensing should become automatic upon presentation of proof of having paid taxes. Within Government, decision-making needs to be accelerated by delegating more matters to the levels of the responsible officials rather than reviewing them at Cabinet level.
It is essential that the privatisation programme move forward, both to ensure improved management and capitalisation of the concerned enterprises as well as to restore the confidence of the private sector in economic policy. The recommendations put forth in Chapters 32,33 and 39 are therefore strongly supported here.
The broad objective of the tourism policy for Guyana is to further develop the tourist industry in a manner that balances the economic, social and environmental needs of the country to create a sustainable and profitable tourism sector. The central thrust of these policies is a focused and unambiguous strategy of pursuing high quality eco-tourism in controlled numbers that do not exceed scientifically determined carrying capacities of interior sites.
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Guyana posses vast areas of interior that are still pristine, with untouched forests that are so diverse they can show the entire spectrum of a tropical rainforest at its best. The potential for a thriving eco-tourism industry is promising, but several key constraints to the sector's development must first be addressed.
There is a lack of an adequate institutional framework to effectively implement, develop, and sustain the eco-tourism industry. This framework involves laws and behaviour codes for both eco-tourism operators and eco-tourists as well as for monitoring activities. The lack of investment guidelines has led to reluctance on the part of private sector investors to enter the industry, as have high duties and consumption taxes, high interest rates, and the costs of bureaucratic delays in Guyana. The tourism sector is also negatively affected by impediments to investment in the private aircraft industry such as regulations that create unequal competition, the reluctance of international airlines to come to Guyana, and the policies that discriminate against new airline operations.
The desired image of eco-tourism is currently being hampered by the lack of mechanisms to coordinate the allocation of land to various users and the absence of a national parks system with a framework for managing them. There is also a lack of adequate land monitoring and regulating mechanisms, rendering most land use laws unenforceable. The sector currently runs the risk of disappointing visitors due to insufficient lodges, tour sites, trained guides, etc. There is a general lack of infrastructure to support the tourism industry, particularly in relation to airstrip and medical evacuation facilities, the prevalence of malaria, and the deficiencies in the potable water systems.
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The Minister responsible for tourism should be the same Minister responsible for the Environment, with Protected Areas and Amerindian Affairs in a separate Ministry. An autonomous National Tourism Board, composed of no more than nine persons from the Tourism Association of Guyana (TAG) and the Government, needs to be undertaken as a matter of urgency. The Board would replace the Tourism Advisory Board and absorb most of the functions of the Tourism Division of the Ministry of Trade, Tourism, and Industry. Its main responsibilities would be regulation, marketing, research, and product development, and its funding should come from Government with supplemental funds provided by licence fees on the industry and diversification of the hotel room tax. It will be the responsibility of the Board to oversee the implementation of many of the recommendations put forth in here, including setting basic criteria that have to be met by those in the industry before being granted an operating licence. TAG will expand its membership to include all those involved in the sector and in natural resource use, including representatives from the mining and forestry sectors, and will continue to set minimum standards with which all members serving the industry must comply. Certification will be given to those who meet or exceed these standards, and TAG should develop classification and grading schemes for its members that can be based on physically measurable criteria.
Since a large percentage of tourists will be visiting National Parks, careful regulation and lines of responsibility must be established. Criteria such as carrying capacity and guidelines for visitation must be clearly articulated, and severe restrictions and legislation governing the wildlife trade should be put in place. Kaieteur National Park, a premier site for Guyana, must have its boundaries determined and all mining activity in the watershed and gorge below should stop immediately. A closer study of the area should be undertaken to better understand, protect and utilise the Park. International organisations such as the World Wildlife Fund and Conservation International must be invited by Government to conduct additional scientific and environmental studies in the parks in order to gain international approval and attract funds for the parks. Realistic charges will have to be paid by tourists to provide revenue to help cover costs. After the Guyana Rainforest Foundation (Chapter 18) is initiated, linkages between its activities and programmes to support eco-tourism should be explored. In all eco-tourism development, priority must be given to Amerindian involvement and precautions taken not to overwhelm local capacity or drastically increase social stresses. This will require an increase in training and the accessibility of capital as well as stronger partnerships between Amerindian communities, investors, NGOs and Government agencies. An overall code of conduct should be developed between tour operators and the Amerindians that all tourists must follow.
Since tourism is essentially a private sector enterprise, the right conditions to attract private investment must be in place. Basic policies in this area should include a tax holiday on all capital investments in the sector for five to seven years and a waiver on duty and consumption taxes for the import of necessary items until a more uniform tax code is implemented (see Chapters 13 and 36). The Land and Surveys Department must eliminate the existing backlog of land applications and institute mechanisms to ensure faster processing of applications. Mechanisms need to be put in place and criteria need to be set for the building of lodges in and around park areas which include determining the maximum number of lodges allowed, minimum capital investment, lease rates and establishing buffer zones around lodges. A portion of the lease rates will go to the Amerindian communities nearby. Leases should be for 99 years, be freely transferable and be available for use as collateral, and whenever possible lands should be sold to investors in freehold. Banks should have authority to repossess land and property on which an eco-tourism site is built. The new Tourism Board should insist that assessments and reports, financial and otherwise, be prepared by lodge owners in a timely manner and that bank reports be copied to the Ministry responsible for tourism.
Guyana's tourism product needs improvement in several areas. Visitor security must be made a priority both in the main towns and cities and in the more remote areas of the interior. A public awareness campaign should be implemented and better coordination between the Guyana Defence Force, the police force and tour operators will be required. A national search and rescue operation that can deal with all eventualities is required, and tour operators themselves should have CPR and first aid training. Steps should be taken to amend insurance laws to allow the industry access to adequate levels of public liability insurance. The needs of tourists should also be accommodated by ensuring easy access to money through facilities for foreign exchange and travelers checks, eliminating pre-travel visa requirements, and improving the airport facilities including domestic air travel options. Marketing must also be improved with better targeting and wider advertising, which will have to be funded in a joint arrangement between the Government and the industry. As the industry and economy grow this can be done through a mechanism of matching funds, whereby the Government agrees to match funds pledged by TAG at an agreed ratio. An adequate system for collecting information on visitor arrival, activities and feedback is needed to allow the industry to see where it stands with respect to overall trends in the market.