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DRAFT April 19, 1996

I. Basic Features of the Sector

II. Policies of the Sector
A. Past Evolution of Policies

III. Description of the Principal Issues and Constraints Facing the Sector
A. Introduction
B. International Environment
C. The Macro-economic Environment
D. Public Sector Issues
E. Private Sector
F. Interface Between Public Sector and Private Sector

IV. Sectoral Objectives
A. National Goals
B. Sectoral Objectives to Contribute to National Goals
C. Requirements for Attaining the Objectives
D. Actions and Sectoral Policies Necessary to Achieve Outputs
E. Underlying Requirements for the Success of the Actions and Policies

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I. Basic Features of the Sector

Guyana has frequently been touted as the potential "bread basket" of the English-speaking Caribbean. This is mainly due to vast land area (approximately 216,000 km2), suitable climatic conditions, abundance of natural water resources, adequate topographic and pedographic characteristics, and the opportunity for the development of large-scale agricultural production systems.

Agricultural activity in Guyana is concentrated on the coastal plains, which represents less than 10 percent of the country's total land area. The coast, which is at a level of 0.5m to 1.0m below sea level at high tide, is protected from the intrusion of saline water by mangroves, dikes, sluices and concrete walls, known collectively as sea defences. With the extensive drainage, irrigation and flood control network, the sea defences serve to make the coast habitable and cultivable. Without this hydraulic system, cultivation and settlement would have to be located much farther inland. The coast comprises mainly fertile sand reefs and clays, very much suited to sugar and rice cultivation and to some extent to other crops. In contrast to the coast, soils of the interior are basically fragile sandy clay types but support some amount of agricultural activity directed towards the production of "other crops" and livestock. The main agricultural activity of the interior regions is that of cattle production in the intermediate and Rupununi savannahs.

Agriculture is the single most important sector of Guyana's economy, both in terms of foreign exchange generation and the number of persons employed. In 1995, agriculture and fisheries contributed about 38 percent of GDP, and about 43 percent of foreign exchange earnings. Forestry contributed an additional 3.4 percent to GDP.

Sugar production, through its contribution to GDP and foreign exchange earnings, is by far the most important agricultural subsector. The value of products produced in the sugar industry in 1995 contributed 19.9 percent of GDP. In the same year, sugar cane alone accounted for 36.2 percent of GDP in agriculture (including fisheries but excluding forestry), and sugar milling represented 52.5 percent of GDP in manufacturing. The combination of sugar and rice milling accounted for two-thirds of manufacturing GDP. Sugar exports for 1995 earned US $135.0 million. At the field level rice production, which has grown even more rapidly, contributed 11.6 percent of GDP in 1995. In that year, export earnings from rice were valued at US $77.4 million or 15.6 percent of the value of total merchandise exports. The other contributors to agricultural GDP included fishery, 16.2 percent; non-traditional crops (those crops other than rice and sugar), 12.6 percent; and livestock, 4.5 percent. Non-traditional crops' contribution to export earnings in that year remained relatively small (less than US $2.5 million) in spite of the significant increase in types and quantity of produce exports. Although livestock products have export potential, they have not yet contributed to export earnings, primarily due to zoo-sanitary barriers that currently preclude their import in other countries.

Regarding the market opportunities for traditional crops, sugar and rice, conditions are currently favourable. Both crops enjoy access to protected markets in Europe, and in the case of sugar, also USA, where the exports are not subject to the full tariff barriers, and therefore secure prices far greater than prevailing world market prices. In addition, exports to countries within CARICOM do not attract the Common External Tariff, which gives Guyana's exports an advantage over those imported from the world market. However, as explained in Chapters 26 and 33, the preferential prices for rice could fall sharply after the year 2000 and they could weaken substantially for sugar in the coming years. The economic survival after 2000 of many producers of those two crops is likely to depend on the attainment of substantial yield increases, as well as improvements in post-harvest management and processing and better international transportation.

The important role of the agricultural sector can also be seen from the fact that approximately 70 percent of Guyana's population lives in rural households, and is primarily dependent on income generated from agriculture and related activities. A recent survey (IICA/IFAD, 1994) of four rural coastal communities revealed that about 68 percent of the households in these rural communities live below the poverty line. Survey data revealed that poverty is more pronounced among the small-farming sector.

The predominance of small farms characterizes land distribution in the agricultural sector, partly as a result of past policies which restricted farm size and partly because of subdivisions that have occurred among families due to inheritance, etc. Data from the Rural Farm Household Survey (1978) reproduced in Table 25-1 shows that some 75 percent of farm households can be classified as 'small' (that is, less than 15 acres in size), and that they control or farm some 23 percent of the available land. While large farms (those over 15 acres) account for only 25 percent of farm households and yet control 77 percent of the land.

Evidence from the Rural Farm Household Survey (RFHS) also suggests that in Guyana the large farmers tend to underutilise their land to a greater extent than small farmers, i.e., some 32 percent of the land farmed by large farmers is idle compared with 10.5 percent of land farmed by small farmers (RFHS Table 102). The level of utilisation depends on a variety of factors, and economic returns play an important part, as do restrictions on land tenure.

Table 25-1

Farm Size Distribution

Farm Size


Number of Farm





Cumulative percentage

<= 2.50





2.50 - 4.99





5.00 - 9.99





10.00 - 14.99





15.00 - 24.99





25.00 - 49.99





50.00 and over








Source: RFHS Table 102

Although the performance of individual small farmers may seem insignificant, both in terms of the quality and quantity of products produced, the aggregate performance of the smallholder sector contributes significantly to the agricultural sector in Guyana. It has been recognised that if the agricultural sector is to function as a catalyst for economic growth and development, and as the basis for the alleviation of poverty in Guyana, the small farmer must be targeted as a key player in the development process. This in no way diminishes the importance of large-scale agricultural production to Guyana's economy.

Sugar cane is cultivated on 20 percent of the agricultural land, and apart from a few independent small farmers the Guyana Sugar Corporation (GUYSUCO) undertakes all sugar cane production on eight estates. Large rice producers, although few, account for more than 60 percent of the rice produced. However, a review of the list of more than sixty non-traditional crops exported in 1993 and 1994 shows that all but copra are produced by small farmers. Therefore, it is the small farmer who must be given centre stage, in the context of the need to diversify agricultural production, provide a more equitable base for income distribution, and alleviate rural poverty.

The argument could also be made that most large producers are specialised in sugarcane, rice and to some extent livestock and coconut production. Given their size of operations and better education, they have relatively easier access to information, credit, equipment, transportation, markets and technical assistance, in effect all the services required for efficient production and marketing. Small farmers, usually, receive either no service at all, or services of poor quality at high cost. Consequently, as a group, small farmers are not equipped to compete in the increasingly more competitive regional and world markets.

This situation brings out the need for the agricultural sector to develop an institutional and policy framework that would make agricultural services more efficient, encourage productivity increases, improve post-harvest handling and processing, improve access to land for small farmers, and respond to the needs of rural communities.

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II. Policies of the Sector

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A. Past Evolution of Policies

During the 1980s, the agricultural sector experienced continuous decline, along with the rest of the economy. In 1981-1990, agricultural GDP fell by an average of 3 percent per annum, the worst year being 1990 (see Table 25- 2). In that year, the only subsector to show positive growth was "other crops" (those crops other than sugar and rice) but this could not compensate for the declines in other subsectors, being mainly produced for the small domestic market.

Table 25-2

Agricultural GDP Growth Rates ( percent)










Total GDP










Agriculture GDP






























Other crops






























The economic model pursued by Government for much of the 1970s and 1980s was based on concepts of socialist ownership. The economy's major productive sectors were increasingly controlled either through Government investment or through price controls and foreign exchange rationing. By 1988, Government controlled more than 80 percent of registered imports and exports and 80 percent of total investment as well. These interventions created serious distortions in resource allocation and contributed to the development of black markets, speculative hoarding and an overall decline in production. Agriculture, being the country's most important sector, was no exception to this trend. The sugar industry was nationalised in 1976, Government monopolies were established for the importation and distribution of agricultural inputs, and restrictive trade and pricing practices affected most of the sector's key commodities, i.e., sugar, rice, edible oil and milk.

Direct investments, however, were not the only venue through which Government affected the sector's incentive structure. The most important policy that affected the sector was Government's reluctance to devalue the currency as domestic and external macroeconomic imbalances grew larger. This led to an appreciation of the real exchange rate that altered the country's relative price structure to the detriment of exportables (e.g., sugar and rice). This was magnified by the existence of dual exchange rate regimes that resulted in an implicit export tax since most private imports (including inputs) were financed at the parallel exchange rate while export revenues had to be converted into domestic currency at the official exchange rate.

The agricultural sector's performance was also severely affected by the Government's increasing inability to provide needed public goods and services. As real wages in the public sector dropped, so did the standard of services provided by the public sector. This was compounded by the reluctance of the Government to promote private sector involvement in agricultural service provision, and the neglect of measures to increase cost recovery in the sector. Crucially, the shortage of skilled staff prevented the Government from developing new systems for increasing the efficiency of service delivery, and instead the under-funded and outdated provision of services by the public sector continued with ever-declining effectiveness.

This was most noticeable in the deterioration of the country's infrastructure, in particular, drainage and irrigation works, sea defences, roads and other transportation infrastructure. The responsibility for maintenance of such infrastructure was in the hands of regional and central authorities who had insufficient resources for the necessary work. Where cost recovery mechanisms were in place, such as for drainage and irrigation, rates were set well below realistic levels, leading to the failure of the agencies to provide adequate maintenance services, which in turn led to the reluctance of farmers to pay the rates, further reducing the already depleted resources.

Services vital to the prosperity of the agricultural sector have also declined. The main research organisation is the National Agricultural Research Institute (NARI). Formed in 1985, NARI took over research for all subsectors other than sugar, from the Ministry of Agriculture, while extension services remained a function of the Ministry. Over recent years the research and extension services provided NARI and the Ministry of Agriculture have deteriorated significantly. Faced with budgetary restrictions on running costs as well as poor public service salaries, the extension service has become a shadow of its former self. Both its coverage and its skill level are now extremely low and it is questionable whether it can be rehabilitated with the present administrative structure.

A cross-cutting factor that affected all agricultural activities negatively was the land tenure policy. Short-term leases, granted through procedures that were not fully transparent, created uncertainty of land tenure that discouraged agricultural investments and severely hampered the possibilities of obtaining bank financing for the sector. In a similar vein, the restrictions on rental contracts for freehold land created a situation in which many landowners preferred to leave their land idle rather than incur the risks and low returns entailed by renting it out.

At the same time, rates for leaseholds were so low that the national treasury was deprived of an important potential source of revenue and speculation was encouraged in the form of unauthorised subleasing at market rates.

Another contributing factor to the present situation was the well intentioned but flawed policy of regionalisation (decentralisation). This system, which was introduced in the early 1980s and lasted until 1993, placed much of the provision of agricultural services and responsibility for infrastructure under the administrative control of the regional administrations with technical supervision from the Ministry of Agriculture. Apart from the fact that the regional Governments also faced severe budget restrictions and thus could not improve the working conditions of the service, the extension personnel become demoralised as a result of not being a part of a national system through which to project their career paths.

In 1988 and 1989, under the auspices of the "Economic Recovery Programme," the Government launched a major structural adjustment programme. This required a reversal of the previous set of policies, and placed the emphasis on development led by the private sector and a reduced role of the State. Those measures that particularly brightened the prospects for agriculture were:

(i) the elimination of most price controls allowing prices to find their market level;

(ii) the establishment of a floating exchange rate for the Guyanese dollar and a free cambio market for foreign exchange;

(iii) the reduction and simplification of the structure of external tariffs with the introduction of the CARICOM Common External Tariff;

(iv) the elimination of most import prohibitions and restrictions, and the reduction of import licensing requirements; and

(v) the launching of a major programme of privatisation of public assets, including all rice mills bar one, and the introduction of private sector management of the sugar sector.

The response of the agricultural sector to the Economic Recovery Programme was initially poor with a decline in output in all subsectors apart from "other crops" in 1990, though unfavourable weather certainly contributed to this performance. As illustrated in Table 25-2, from 1991 on the sector responded very strongly to the new policy framework. In the five years through 1995, the sector's GDP expanded by phenomenal 11.5 percent per year in real terms.(1)

Sugar and rice led the takeoff, and rice and livestock have supplied the main impetus in the last three years.

Nevertheless, further measures targeted specifically at the agricultural sector need to be implemented to ensure sustained growth. International financial agencies have shown a keen interest in providing loan and grant funds for the development of the agricultural sector. The most important of these is a programme currently being prepared by the Government for financing by the Inter-American Development Bank (IDB).

Under the Agricultural Sector Loan, Government has taken actions on key agricultural policies, in order to meet basic objectives of consolidation of commodity trade liberalisation and extending the benefits of the adjustment process to key agricultural markets. Specifically, the programme focussed on:

(i) adjusting the legal-institutional framework and trade regime for the rice industry;

(ii) centralising policy and decentralising/divesting operations in agricultural water resources; and

(iii) developing agricultural land markets.

1. Trade and Pricing Policy in Rice

The Guyana Rice Development Board has been created, with a mandate to regulate and promote the rice industry, including the provision of research and extension services for the industry. This replaces the Rice Export Board that had multiple roles as regulator, trader and quality inspector, and the Guyana Rice Milling and Marketing Authority.

Rice levy B, charged on all rice exports, and the Guyana Rice Development Board commission, which is also charged on all rice exports and finances the activities of the Board, have both been changed into specific per metric tonne taxes, replacing the previous tax regimes that tended to penalise higher quality rice exports. Furthermore, licensing requirements for rice exporters under the 1974 Trade Order have been removed.

2. Agricultural Water Resource Policy

The Drainage and Irrigation Board centralises the responsibility for management and administration of the D&I system into a single, national entity. To support the Board, a policy directive has been issued by the Government that emphasises the need for an increased role of local communities in the management of secondary D&I systems.

3. Development of Agricultural Land Markets

The Registry of Deeds and the Commission of Lands and Surveys will be granted semi-autonomous status and further strengthened. This measure was taken in response to the inability of these institutions to perform their mandates adequately, due to the lack of technical staff and administrative resources, their inability to generate and retain resources, and the inadequacy of their facilities and equipment.

Land rentals have been increased to reflect market rates more accurately. Previously, land rates were so low that collection was not worthwhile. This led to the development of a subleasing market, with and without Government approval. The price distortion resulted in land misallocation and underutilisation while allowing for large margins of profit for absentee leaseholders and land speculators, with almost zero revenue being returned to Government to finance land management and other Government programmes. Besides the initial adjustment of rentals, an action plan has been agreed upon to develop the processes to move rentals still closer to market values.

In addition, plans have been formulated to improve land-tenure security, rent collection and the transfer of leaseholds into freeholds, and to iron out the legislative barriers restricting the operation of land markets.

These policy reforms will continue the process of agricultural reform. However, it is recognised that the sector still face many additional constraints. These are discussed in the following section.

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III. Description of the Principal Issues and Constraints Facing the Sector

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A. Introduction

It is clear that, on balance, Guyana's structural adjustment and trade liberalisation policies have had a favourable effect on the economy in general and on the agricultural sector in particular. Moreover, these policies, implemented hesitantly at first, have become established parts of the mind-set of most policy makers, the private sector and the general public. While it is true that the policies have been imposed on the country as conditions for external assistance, there is also a growing realisation on the part of the general population that private initiative, and not the State, is the real source of economic development. To be sure, there have been some voices of opposition to the new policy framework, particularly from trade unions representing public sector workers. Others have opposed the divestment of State assets, the "harshness" of the policy conditionalities in their initial stage, particularly on the poor, and have sought to propose alternatives with a "more human face." Even then, there has been an acceptance of the basic private sector orientation of the current policy thrust, and now that employment is increasing it is clear that many poor households also are beneficiaries of the new policies.

As to the agricultural sector itself, the reforms have sent out positive signals that have been responded to in a decisive manner by most sub-sectors. Very significant output and productivity increases have taken place as a result of the reforms. These have been most noticeable in the export oriented industries of sugar and rice. However, even in the less organised domestic and non-traditional export sub-sectors, there is evidence that producers are better able to take advantage of the new environment since they themselves are also beneficiaries of the new environment, particularly as for access to inputs and trends in real prices of their outputs.

The maintenance of a macro-economic environment that is conducive to growth can therefore be viewed as crucial to the future expansion and prosperity of the agricultural sector. Indeed, there still remains considerable scope for improving the macro-environment to facilitate the agricultural sector further. The proper role of Government is to provide an enabling or facilitating environment for private initiative, and allowing the development of the sector to be market-led, while carefully targeting any interventions to ensure the development is consistent with broad national goals.

In addition to aggregate growth trends, there is much concrete evidence that the private sector has responded positively to the reforms put in place by the Government. The elimination of price, input and foreign exchange controls has increased the role of the market in allocating resources and has facilitated the access to inputs. However, the private sector is still hampered by restrictive legislation and a tax system and trade regime that combine to produce a disincentive to investment. In addition, the poor state of the infrastructure and service provision by the public sector also acts as a major impediment to the future expansion of the role of the private sector.

For its own part, Government has clearly placed top priority on the rehabilitation of rural infrastructure - drainage and irrigation, sea defences, roads - in addition to other social infrastructure, water rural schools, health clinics, etc., all of which serve to improve the attractiveness of agriculture and rural life in general. Possibly the single greatest challenge now facing Government is its ability to provide much needed public goods. The reforms have seriously reduced Government's capacity due to the sharp reduction in real wages in the public sector. On the one hand, Government must find ways of rationalising its services such that it receives better value for money. This has implications for the size of the public service - a difficult issue for any Government. It is clear, however, that there must be moves towards greater cost recovery and revenue collection if Government's capabilities are to be in any way enhanced. At the macro level, much has been done in terms of revenue collection at the borders although the same cannot be said of corporate and personal income tax collection. At the sectoral level, there are several areas in which revenues could be substantially increased or where services could be divested to users. In the case of rentals for Government-owned land, current levels are still too low. There are effectively no taxes on privately held agricultural land. On the issue of drainage and irrigation maintenance, it has been pointed out that the inappropriate level of rates and the insufficient enforcement of rates collection are major contributors to the dilapidated nature of much of the infrastructure.

Besides rural infrastructure, the shortage of human capital in the public sector also shows up as inadequate research and extension, weak provision of market information and other services, almost nonexistent policy analysis programmes and poor provision of animal and plant health services. The issues of research, extension and marketing are of particular importance and some method must be found of ensuring their sustainability. Crucially, the shortage of skilled personnel has severely limited the sector's ability to design and implement policies necessary for the rationalisation of publicly provided services. Service provision needs to be reformed to reflect the recent structural adjustments that place the private sector at the forefront of the development process.

The reforms put in place since the late 1980s have opened the sector to the world economy and Guyana has to move quickly to be able to compete in global markets. The significance of the growing regional and international demand for these products cannot be overemphasised, especially with respect to the small size of the domestic market. Despite high production costs relative to world prices, Guyanese agricultural produce can currently compete on protected markets. However, the worldwide trend towards market liberalisation means that Guyana is unlikely to continue receiving the same preferential access to protected markets in the medium to long term. This highlights the need for greater efforts to be placed on market analysis and research, in order to identify markets and determine the nature of the demand, and to increase the competitiveness of Guyana's agricultural sector from a world market point of view. This latter aim can be achieved by productivity increases at the field level, improvements in post-harvest handling, and more efficient agro-processing.

Statistics show that hundreds of millions of dollars are spent each year on the importation of agricultural products to CARICOM member countries. Guyana presently has a very small share of this market. Obtaining a greater market share can therefore be regarded as both an opportunity and a challenge for Guyana to widen its agricultural production base and to enhance the efficiency and competitiveness of targeted commodities. Current export statistics reveal that "other crop" producers have already begun to take up the challenge. In 1994, total non-traditional exports doubled, with 64 percent of the total going to the regional markets (Trinidad, Barbados, and Antigua). Indications are that there is a growing regional market for copra and selected fruits, vegetables, root crops and beef.

To take advantage of these opportunities requires not only the redefinition of the role of the public sector and the continuation of the reform process to create a suitable environment to facilitate the operation of the private sector. Other constraints to further growth include the shortage of skilled personnel to serve in the private sector, and the continued difficulty of obtaining credit to make needy investments to ensure the long-run increase of productivity and value added in the sector. Currently, many small farmers, and resource-poor processors and input suppliers, have great difficulty in accessing credit from the commercial financial sector, due to the general risk-averse nature of the financial sector and the difficulty of providing adequate collateral. The issue of collateral is partly a problem of the continued Government ownership of resources. Commercial banks are reluctant to accept leases as collateral unless they are for a sufficiently long period. Government therefore needs to improve the mechanisms for transferring leasehold land to freehold and improve the conditions of the leaseholds themselves, as detailed in Chapter 29. Other productive resources are also in the hands of the Government. Drainage and irrigation systems are the responsibility of regional and central agencies though the farmers are now better positioned to assess the needs for the operation and maintenance of the systems.

It is important, moreover, to break the cycle of dependency that results from the public provision of services which communities or other groups can provide for themselves. In addition, worldwide experience has shown that, where users of infrastructure and other facilities are given full responsibility for their upkeep, they often invest much more than is the case when the same facilities are under public management.

Another challenge is that of ensuring that development projects are implemented in a sustainable manner. This applies to all types of projects, ranging from major infrastructure projects to community-oriented ones. The active participation of all stakeholders must be encouraged and this must become an ongoing part of public policy. This cannot be done unless there is a conscious parallel effort to promote authentic community organisation.

The view was expressed above that there is need for a radical overhaul of the research and extension system, particularly in respect of "other crops" and livestock. The small farmer and his or her community should be the main focus and the provision of services should be seen in the context of enabling the members of such communities to develop their own support systems. An emphasis on the resource-poor is not an argument for neglecting the needs of large scale operators. The fact is, however, that the support systems available to well-endowed enterprises are not available to small scale operators. Increasingly in the rice industry, for example, small operators are at risk of being marginalised and the role of Government should be to assist them in making the necessary adjustments either within or outside the industry. If Governmental institutions are to play a meaningful role they must first begin to understand the environment in which producers operate and tailor their programmes to actual needs.

Building on the foregoing considerations, it is possible to identify several different sets of issues impinging on the agricultural sector.

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B. International Environment

Most of the agricultural produce of Guyana is exported, and this proportion necessarily will increase in coming years if the sector is to fulfill its aspirations for expansion, given the relatively small size of the domestic market. Therefore, the sector is export oriented, and as such, needs to be fully aware of the dynamic nature of the global market and to be able to respond to the needs of these markets. This is particularly pertinent in the current circumstances in which Guyana enjoys access to protected markets for the vast majority of its exports, but the durability of those protected markets is questionable.

1. Access to Protected Markets

Most of the agricultural exports from Guyana enter protected markets, either within the CARICOM region (protected by the CET), or through preferential access to the protected markets of the European Community and USA. However, in future years it is likely that the protection in these markets that derives from the tariff and pricing policies will be lowered, or possibly eliminated altogether, and the agricultural sector will need to confront a far more competitive global market. There may be some offsetting positive developments with increases in world prices of agricultural commodities if the general move towards trade liberalisation reduces the large subsidies currently being paid to producers in protected markets. In addition, the world waits to see what developments will take place in the world's largest agricultural consumer, China. The pressure on land in China is such that its current strive for self-sufficiency, especially in grains, seems unsustainable, and China may have to depend more heavily on the world market, which could increase prices on the world market, especially for rice. Nevertheless, the consensus among international experts is that real prices of most agricultural commodities are not likely to rise in the next five years, and some will drop.

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C. The Macro-economic Environment

The agricultural sector cannot be viewed independently from the economy at large. Strong linkages exist between the macro level economy and the sector level, and decisions taken at the macro level impact significantly upon the agricultural sector. Any strategy proposed for the development of the agricultural sector needs to be set in an appropriate macro-economic environment. Reforms made under the Economic Recovery Programme have given a tremendous boost to agriculture. These need to be maintained to prove the Government's commitment to such policies. Furthermore, additional reforms are necessary to facilitate the operation of agricultural markets further and encourage increased investment in the sector.

1. Monetary Policy

Monetary policy is operated mainly through the sale of treasury bills in auctions, with interest rates being determined by competitive bidding. The volume of treasury bills issued each month is determined by a liquidity forecast for the economy. Although the current system works well in soaking up excess liquidity, the abundance and regular supply of treasury bills create a disincentive for investment in agriculture and other productive sectors:

(i) the returns on treasury bills are so attractive and risk free, that financial institutions have little incentive to explore more risky investments in the productive sectors of the economy; and

(ii) the system maintains interest rates at an artificially high rate, discouraging potential investors from taking bank loans.

2. Exchange Rate

The official exchange rate is determined daily based on rates set by cambio dealers, but it also reflects the factors such as the flow of remittances, which are influenced in part by interest rates. Exchange rate policy might be keeping the official rate stable in nominal terms. As a result, the real effective exchange rate has appreciated significantly since 1991, and so the competitiveness of Guyana's exports has weakened somewhat in recent years. With most of agricultural produce of Guyana being traded, a favourable exchange rate policy needs to be maintained for agriculture exports to remain competitive, above all for rice and sugar to be able to compete on world markets.

3. Fiscal Policy

The narrow tax base constrains Government revenue and has led to a dependency upon trade taxes (both export and import) for raising funds. A positive development in recent years has been the decline of export taxes, thus increasing the competitiveness of Guyana's exports. A major consequence of low Government revenue has been the erosion of real incomes of public service workers. This has led to a large number of vacancies and a general deterioration of the skills base in Government. Inevitably, this has led to a decline in the quality of service provision and to the neglect of essential maintenance to infrastructure. A widening of the tax base and prudent utilisation of funds is required to improve the operations of the public service.

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D. Public Sector Issues

The public sector clearly has a vital role in the development of the agricultural sector. By establishing the policy and legal framework for the operation of the private sector and by providing those goods and services that the private sector cannot or will not provide, the public sector remains of crucial importance to agricultural development. The generation and dissemination of information remains, right now, the most important service that the public sector supplies. Information relates to field and manufacturing technology and to marketing. Furthermore, the public sector has the ultimate responsibility to ensure that the basic physical infrastructure of the country is maintained, and also expanded, as the costs of opening new lands for agriculture may be beyond the reach of the private sector. Besides facilitating the operation of the private sector, the public sector also has the responsibility of protecting the poor during the development process, and enhancing their opportunities for self-betterment.

1. Policy

a. Allocation of Resources Between Subsectors

Policies and public investment programmes have tended to favour the established crops (sugar and rice) and have neglected the development of non-traditional agriculture. Therefore, non-traditional agriculture, which has the potential to provide very lucrative returns and contribute significantly to foreign exchange earnings and savings, remains largely underdeveloped. It should be borne in mind that many non-traditional crops generate more employment per acre, and foreign exchange earnings per acre, than either rice or sugar.

b. Degree of Government intervention

During much of the past two decades, the economy has been characterised by an excessive amount of Government intervention in the productive activities of the agricultural sector that contributed to the decline of the sector. Although the current Government is committed to market-led development, in certain instances Government interventions still may be preventing the optimal utilisation of agricultural resources. Government's primary role is to guide development through appropriate policies, and more direct Government intervention is justified only where private sector involvement may not be practical or may conflict with national goals. A careful balance between public and private ownership of resources needs to be struck. There needs to be an appreciation that:

(i) the private sector may provide certain services more efficiently;

(ii) divesting the ownership of resources may lead to more productive use of resources; and

(iii) encouraging free markets will lead to the transfer of resources to the most efficient and productive uses.

c. Export Policy

Guyana has enormous potential in agriculture and could feasibly become a major exporter of agricultural produce to the Caribbean market and world markets. However, policy has not always prioritised this export potential, and fears about food security have held back the country from developing a strategy to capture the potential gains from trade and exploit Guyana's comparative advantages in the sector fully. Food security for rural families is best attained by policies that increase their income levels, and often the most effective way to achieve that goal is through cultivation of export crops.

2. Legislation and Regulations

Legislation affecting several agricultural subsectors is generally outdated and inadequate for the continued development and regulation of the sector. Also, there is evidence of inconsistency and overlapping of legislation governing the operations of public sector institutions. Examples of where revision of legislation is required include:

- land;

- structure and registration of cooperatives;

- maintenance of drainage and irrigation;

- plant and animal health; and

- pesticide and chemical usage.

Regulations necessary to ensure that minimum standards are met with respect to quality and environmental protection are also lacking, or where they do exist, the monitoring and enforcement mechanisms are absent.

3. Finance

a. Revenue

(i) Taxation of the agricultural sector is primarily achieved through export levies on agricultural produce and import duties on inputs for the sector. Although these taxes are relatively easy to collect and administer, they tend to penalise the more efficient producers and do not increase the incentives for increasing productivity.

(ii) The inappropriate pricing of factors of production such as land and irrigation water have led to users paying below market rates that encourages misuse of resources and depletes Government revenue.

(iii) Low collection of rates/rents, due partly to the resource constraints faced by the public sector, has contributed towards the low level of public revenues.

(iv) Little attention has been given to recovering costs for services provided by the public sector.

b. Expenditure

(i) Insufficient expenditure on public servants' salaries and training has led to staff shortages, lack of motivation and a poor skill base, which has seriously hampered the ability of the public sector to provide agricultural services.

(ii) Vital infrastructures (D&I, roads, market facilities, power) have been allowed to deteriorate because of inadequate investments in maintenance and manpower. Where investments have been made in infrastructure, too much attention has been given to capital works at the expense of recurrent, maintenance expenditures, which has accelerated the deterioration of the infrastructure.

4. Institutional

Agricultural public sector institutions are characterised by:

(i) An over-centralised bureaucracy with limited formal horizontal integration between disciplines. This has led to a general distancing between central decision makers and the agricultural community. Consequently, central decision makers may be poorly informed and their decisions may lead to the misallocation of resources.

(ii) Poor linkages between public sector institutions within the agricultural sector, and between different departments within the Ministry of Agriculture, which have led to uncoordinated provision of services.

(iii) Lack of sufficient communication with clients, which leads to the misallocation of resources. Examples include: curriculum development in agricultural training institutions and inappropriate research agendas.

(iv) Lack of financial autonomy of institutions, with poor cost recovery mechanisms and low retention of charges, which is a constraint to the efficient operation of institutions.

(v) Weak policy analysis and planning capabilities in public sector institutions, leading to an ad-hoc development of the agricultural sector. This problem is compounded by the lack of involvement of communities in the planning process that may lead to a lack of relevance of plans and to disillusionment on the part of the agricultural community.

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E. Private Sector

The private sector includes producers, processors, marketers and providers of inputs and services. Although their response has been very positive in recent years, they are still facing many constraints to their increased involvement in the sector's development. One of the most fundamental of these is the lack of skilled labour in the country. Also, the difficulty of accessing credit from the commercial financial sector restricts the operation of the private sector, a problem exacerbated by the lack of clarity and security in land tenure arrangements.

1. Finance

A major constraint to the functioning of the private sector is the problem of obtaining credit from the formal financial sector.

- Insufficient attempts by commercial banks to explore alternatives to the problems of the lack of collateral available from much of the agricultural community. Examples of possible approaches include group guarantees and evaluating projects on the basis of likely cash flows rather than relying exclusively on collateral. Connected to this is the failure of commercial banks to mobilise sufficient savings.

- Commercial banks tend to be risk averse, to the detriment of small farmers in particular.

- Physical distance between banks and farming communities leads to general inaccessibility and poor information flows between the banks and the borrowing community. The lack of information means that potential borrowers are unaware of the services offered, and the banks have insufficient knowledge of borrowers, and so their risks are heightened.

2. Attitude of Farming Community

Although much of the rural population depends upon agriculture for their living, there is a tendency to treat farming as a part-time, low input occupation and this restricts the gains to be had from agriculture. This lack of sufficiently entrepreneurial attitudes is compounded by the subsidies offered by Government (e.g., low land rentals, low D&I rates) and by the absence of business knowledge in the farming communities.

Also, past policies have given rise to the expectation that Government should provide unlimited support to the sector.

3. Skills

There is a general lack of skills in the private sector. This can only be partly attributed to the failure of extension services. The general decline of the skill base in the economy is also due to the decline in educational standards and the "brain drain." Also, the perception of agriculture is that it is purely manual occupation, with a high degree of drudgery. Therefore, attracting graduates into the sector is difficult.

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F. Interface Between Public Sector and Private Sector

This area is of fundamental importance to the agricultural sector as it is the area where services and information are transmitted to and from the agricultural institutions and their clients. Having stressed the importance of the public sector in the provision of services to the agricultural sector, the means by which these services are transferred is of equal importance. Right now this interface is, at best, limited. The public sector can be characterised as adopting a top-down approach to service provision, in which the centralised agencies prescribe antidotes to the perceived problems of the agricultural community. Inevitably, the isolation of rural communities and their lack of involvement in the design or provision of services, contributes to the ineffectiveness of the public service.

Deepening and improving this interface is vital for the efficient delivery of services to the private sector, and agencies of both local and central governments are involved, as well as the rural communities.

1. Public Sector

a. Local Authorities

Local authorities have been overlooked as agencies for the delivery of agricultural services, although they have the clear advantage of being close to the communities and therefore are better able to identify the needs of the community. Instead, local authorities are weak and have limited control over resources and decision-making powers.

b. Central Government

The over-centralisation of provision of agricultural services means that agricultural field officers are distanced from central decision makers and have little power to contribute to the development of service provision.

Project conceptualisation, design and implementation have little participation from communities and beneficiaries. No awareness building is done in the communities to enable them to take a more active role in planning and service delivery.

2. Private Sector

Local communities are reluctant to form associations and cooperate. This is compounded by the stigma of cooperatives, which in their present form are associated with the previous political regime.

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IV. Sectoral Objectives

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A. National Goals

The principal goals of this National Development Strategy, as set out in Chapter 2, are the following:

1. Rapid growth of average real incomes.

2. Poverty alleviation/reduction.

3. Satisfaction of basic social and economic needs.

4. Sustainment of a democratic and fully participatory society.

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B. Sectoral Objectives to Contribute to National Goals

In order to contribute to the fulfillment of the national goals, the broad sectoral objectives for the agricultural sector are:

Contribute to the increase of incomes, in particular rural incomes, and the reduction of poverty by:

1. Increasing the revenue derived from agriculture by improving efficiency in resource use, thus increasing productivity in farming and processing, and by tailoring production to the needs of the market, both domestic and international.

2. Targeting the resource-poor for special attention to enhance their opportunities for betterment.

The way in which these objectives are satisfied, through greater community involvement, also will contribute to the satisfaction of the national goal of sustainment of a democratic and fully participatory society.

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C. Requirements for Attaining the Objectives

To be able to stay on the land improve productivity and output, an agricultural producer has three basic requirements that must be satisfied:

1. Adequate incentives, that is, a satisfactory ratio of output prices to input prices.

2. Adequate access to output markets, inputs, and technology. Among other things, this requires sufficient financing for production and an adequate system of research and extension.

3. An adequate resource base: land in conditions of tenure security and operative systems for drainage and irrigation.

This is a fundamental triad of requirements and follows from the basic paradigm of the producer, who needs adequate prices for his or her products; places and means to market the products and acquire inputs and production technology; and the farm itself, in the form of land and water.

Agricultural incentives are largely determined by macroeconomic policy, basically exchange rate policy, trade taxes, and monetary policy. The access condition is satisfied by both private and public agricultural services. The adequacy of the resource base is largely determined by land tenure policies and policies and programmes for funding and maintenance of D&I systems.

In the end, the keys to the continuing growth and prosperity of the sector are productivity increases and improvements in quality. Guyana's agriculture is fundamentally an exporting sector, and both factors are crucial to improving the sector's competitiveness in international markets. Another key orientation for sectoral policies is that of alleviating rural poverty, through improved access to land for the poor, better credit systems, and a research and extension system that emphasises the small farmer.

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D. Actions and Sectoral Policies Necessary to Achieve Outputs

Some basic actions necessary to fulfill these requirements are the following:

1. In general, provide adequate support services and infrastructure for the sector by clearly identifying the sources for financing and rationalising the respective roles of the public and private sectors.

2. Give producers control over resources (increased sense of ownership of resources: security of tenure, divestment of secondary D&I systems, etc.);

3. Reduce restrictions on the operation of markets to allow resources to transfer more easily between users, e.g., land, both leasehold and freehold (see Chapter 29);

4. Improve access to credit by working with the banking system and exploring new approaches to systems for rural credit (Chapter 28);

5. Design and implement systems for the generation of information (research, market intelligence);

6. Increase linkages for information flow from public sector and among private sector;

7. Increased relevance of agricultural training and education;

8. Divest services to private sector where possible; elsewhere improve systems for partial or total cost recovery;

9. Target investment to bring the infrastructure (D&I; transport; laboratory facilities; etc.) into a reasonable condition.

10. Develop maintenance mechanisms, with clear identification of the source of funds and responsibilities for carrying out the work.

More complete and detailed specifications of required actions are found in Chapters 26 through 29 and, for drainage and irrigation, in Chapter 40.

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E. Underlying Requirements for the Success of the Actions and Policies

Individual actions and programmes alone will not be sufficient to continue to carry the agricultural sector forward. They must be coordinated into a coherent policy framework, and they must respect some basic underlying requirements, which are as follows:

1. Increased Participation

Agricultural communities need to be fully integrated into the design and implementation of programmes and policies. Full integration means that programmes are designed with local communities based on the demands of local community, and that the execution, monitoring and evaluation of all activities have full involvement of these communities.

2. Reorientation of Public Sector Institutions

Increasing local participation will require a reorientation of public sector institutions to focus on communities, involving the empowerment of communities and the decentralisation of service provision.

3. Macro-environment

To achieve continuing rapid development in the sector, the reforms already put in place need to be built upon to reduce legislative, institutional and fiscal restrictions to private sector growth, and to respect the requirements mentioned above of growth-oriented policies in respect of exchange rate management, trade and taxation regimes, and monetary policy.

1. 0 This could be an underestimate, as it appears likely that the growth of "other crops" has not been fully captured in the official accounting.

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