The structure of Guyana’s economy is relatively diverse. It comprises several productive economic sectors namely: the extractive industry which includes gold, diamond, and bauxite mining – while the other productive industries constitute the agriculture, fishing and livestock, forestry, rice, sugar, gold, manufacturing and the services sector, engineering, and construction.
Given this, Guyana is known throughout the region as one of the richest countries in respect of its natural resources. Yet, the country remains highly underdeveloped and is still considered a third world country. It is therefore important to note that the manner in which these resources are managed, inter alia the policies pursued in these regards is what will determine the ‘desired’ economic progress of the country and its people.
Such achievement inevitably calls for strong and visionary leadership at the national level, a competent government and an educated population, having the ability, patriotism and the willpower to conceptualize a carefully crafted national development plan for the long-term economic growth and prosperity of Guyana’s economy. These are only few of the key prerequisites for the accomplishment of these goals. In fact, they are considered to be the underlying pillars for the attainment of economic prosperity of a nation.
The table below highlights a trend analysis over the last ten years, comparing the last two periods spanning five years each, of export earnings from Guyana’s dominant commodities, or rather the country’s traditional sectors, and growth in GDP at market price.
Earnings from major commodities exported in the last ten years:
|GDP at market price: G$ Billions||1,695.2||3,197.6||1,502.4||88.6%|
Source: Bank of Guyana Annual reports.
The purpose of this is to illustrate a basic idea of how the economy progressed during this time; its current state and to lend somewhat of a meaningful insight of the analysis conducted herein. Additionally, it forms a basis from which a varying degree of reasonable assumptions could be discerned – in which the emerging oil and gas sector is likely to impact the development of the economy from 2020 – which is set to mark ‘first oil’ in Guyana, and onwards. In doing so, I first simplify the data (briefly) presented in the tabular format in the following discussions (hereunder).
The data has clearly shown that gold has been the largest contributor of foreign exchange earnings over the last decade, and which increased by over a 100 percent in the last five years: 2012-2016 when compared to the corresponding period spanning 2007-2011. Conversely, sugar has declined by 29 percent, timber by 10.8 percent, bauxite increased marginally by 8.3 percent and rice increased by almost 71 percent for the period under review.
Some analysts including myself have argued before – that the projected oil revenues may come at a time to fill a gap in Guyana’s economy given that the economy in its current state is arguably dwindling. But, nonetheless, from the preceding statistics – you would observe that we have lost revenue from sugar and timber by 29 percent and 11 percent respectively, over the last decade or a total of US$165.5 billion.
Suffice it to say, it would appear that the government is committed to keeping the sugar industry alive and by extension production of sugar. Hence, despite the recent downsizing of the industry amidst a plethora of economic and financial challenges with which the entity itself is plagued with: as long as we (Guyana) do not opt out of sugar completely and we remain hopeful and optimistic that our policymakers are competent enough to turn around the industry, then the losses that might be incurred should not be magnified to the extent of severely hurting the economy and the fiscal management framework with the anticipated oil revenues coming on stream. In other words, the net effect would be positive.
That being said, turning my focus now to the core of today’s theme on – what would be some of the likely impacts that the new oil & gas sector would bring to Guyana – 2020 and onwards: first and foremost, this new sector has caused and will continue to stimulate a lot of excitement for the country – not only the policymakers – both on the government’s and opposition’s side: but also the private sector actors – local businesses and investors and of course a large influx of foreign investors – some are already here and some that have expressed interest.
Interestingly, this level of momentum, opportunism, and optimism by its very nature means that coming down close to 2020 and beyond that, the level of confidence will be significantly boosted – and therefore an imminent upturn in the economy is expected. Of course, this is a good sign because when all is said and done, it is the level of ‘confidence’ in an economy by investors and others alike, that is of vital importance to propel any economy towards a path of strong and sustainable growth and prosperity for all.
Further, this new era that the country is heading into, is the opportune time to ensure at the strategic level, that the cost of energy should be drastically reduced. For too long the local manufacturing sector was inhibited to expand and become more efficient and competitive because of the cost of energy being exorbitantly high in Guyana. In this respect, empirical evidences in economic theory and research support the concept in which industrialization is viewed as the most important engine of economic growth. The special characteristics attributed to the manufacturing sector can be interpreted in many ways: rapid technological changes, economies of scale, and easy integration into global networks (Szirmai 2012; Lavopa and Szirmai 2014).
In addition, empirical confirmation by a number of investigators on the subject found that transformation from agriculture to manufacturing, and further from manufacturing to services is the process to economic development (Clark 1941; Kuznets 1957; Chenery 1979; Fuchs 1980). Within this conceptual framework, it was therefore generally accepted that “since the industrial revolution, no country has become a major economy without becoming an industrial power” (Acharya 2007).
Against these backgrounds, Guyana is poised to experience an economic ‘boom’ as the entire country is busy gearing up for first oil in 2020. It would be such that, though there may not be any significant amount of direct employment for Guyanese by the multinational oil companies such as Exxon, there will be a surge in demand for support goods and services, and thus the creation of indirect employment. Many companies are forging ahead to form strategic partnerships – a mixture of both local and foreign companies.
The essence of all of this, Guyana, both the government and the local private sector ought to work closely together in order to ensure that we exploit all possible means to build institutional capacity, building of skills and requisite competence in all possible respects so as to capitalize on the sea of opportunities that the new sector will bring about.
Finally, the downside to this which policymakers would have to guard against is that, the rate of inflation could grow uncontrollably and the other productive sectors could be neglected amidst all the excitement and emphasis being placed into the oil & gas sector. Such an outcome, we must not allow for it will be to the detriment of the economy.