No monolith
(Rawle Lucas is a Guyanese-born Certified Public Accountant and Assistant Vice President of the Lending Services Division.
Mr. Lucas has agreed to serve as a columnist with the Stabroek Business and will be contributing articles on economic, financial and development matters.)
By Rawle Lucas
Some are big and some are small. Some are foreign-owned and some are locally-owned. Some have sophisticated capital structures and some have unsophisticated capital structures. Some operate in buildings and some operate on the streets. Some work the rivers and sea and some work the land and air. Some produce goods and some produce services. Though general in nature, the preceding profile describes the private sector in Guyana. Through the national competitiveness program, the government of Guyana has targeted the private sector for assistance to improve its competitiveness.
As a collection of private businesses of different ownership, size and purpose, the private sector is hardly a monolithic group that can be treated with a similar or common dosage of assistance to fix its competitive ills. For example, small or micro businesses would need more financial and managerial help than larger and more widely owned entities like the commercial banks. Also, sectors like agriculture confront a different set of challenges compared to sectors like manufacturing and mining. Improving competitiveness is further complicated in cases where the private business is a monopoly such as the New Guyana Pharmaceutical Corporation (GPC). By definition, monopolies exclude competition and it would be a contradiction to be giving help to monopolies that would end up stifling competition.
Competition usually leads to efficiency in production, lower prices and the availability of a wider range of high quality goods and services. However, the competitive environment in Guyana is highly imperfect and most businesses are unprepared to compete in both the local and foreign markets. Many of their difficulties can be traced to inadequate infrastructure such as unreliable electricity generation, improper roads and bridges, improper drainage, inadequate and unsuitable transport and storage facilities, inadequately trained human resources and an unreliable judicial system. The national competitiveness program proposes to resolve some of those issues as a means of helping the private sector.
While necessary, it is not clear that the private sector could rely on the administration to deliver on its promises. For five years now the private sector has been waiting on the administration to establish the Public Procurement Commission mandated by the Constitution, and expected with the passage of the Procurement Act of 2003. In addition, two years have elapsed since the Competition and Fair Trading Act came into being and the Competition Commission called for therein has not been established.
These two entities which are supposed to foster and protect competition find most of its issues going to Cabinet and the Office of the President for resolution. Instead of becoming more competitive, the private sector has found itself submerged in a sea of political control. It is not being served well by institutions like the Privatization Unit and Go-Invest that are caught up in unhelpful and distracting controversy.
Consequently, the private sector needs to recognize that there is a limit to what it should and could expect from the administration in the implementation of the national competitiveness program.
Self Evaluation
For its own sake, the private sector should be looking inwards to focus on the range of strategic and organizational issues restraining its capacity to deliver the variety and quality of goods and services needed to compete effectively. It should be doing this self-evaluation and course correction, if necessary, with or without the national competitiveness program.
The businesses that are likely to survive competition are those which are willing and ready to embrace change, and to face that challenge openly and objectively.
There is a myriad of issues that the private sector should be examining to compete more effectively and to earn maximum profits. The issues include improved productivity, organizational reform, market research and analysis, product development and product testing. While they all matter, my attention is drawn to the issue of productivity. Every business needs to take a look at its resources and determine if those resources could give it a sustainable competitive advantage. Smaller or even micro businesses also need to look at their organizational form and determine if changing it would help improve their competitive edge.
Productivity and Competition
Notwithstanding their differences, all entrepreneurs know that a key to being competitive is being efficient. Entrepreneurs also know that efficiency is determined by the quality of human resources and by how well those resources and the assets of the business are combined and managed. Judging from recent comments by Mr. Gerry Gouveia, Chairman of the Private Sector Commission, the private sector understands that it needs to attract and retain good quality staff and to employ efficient production processes to reach higher productivity levels. Getting to that point is what is urgently needed in my view.
Nowhere is that need more obvious than in the manufacturing sector that appears to have the worst productivity level of all the sectors of the economy.
Based on 2002 sectoral employment data found on the web site of the Private Sector Commission, output per worker in the manufacturing sector was estimated at $21,000. Undoubtedly, there are individual businesses in the manufacturing sector that outperform the average, but taken as a whole, the sector has serious problems.
Like manufacturing, construction with $27,000 per worker, transport and communication with $31,000 per worker and agriculture with $32,000 per worker also appear to be underperforming. There might have been improvements in productivity since 2002, but in the absence of current data, everyone should be in awe at this level of under performance.
In contrast, the finance sector yielded about $94,000 per worker while the public utilities yielded about $90,000 per worker and the mining sector generated $64,000 per worker at that time. The two highly performing sectors shared something in common. For the most part, they invested heavily in the repeated training of their workers.
Training
While more detailed studies are required, it is reasonable to surmise that the manufacturing, construction, transport and agriculture sectors are relying heavily on untrained and unskilled workers. Their mediocre performance drags the overall economy down making it unrealistic for workers, especially in the offending sectors, to expect higher incomes. Every available resource should be used to help bring skill levels up to desired standards. This necessity makes the failure of the administration to fund the training programs of the Critchlow Labour College all the more regrettable.
For Guyana to realize its full potential, the manufacturing, construction, transport and agriculture sectors would have to become much more robust and dynamic. Substantial investment is needed to upgrade the human resources in these sectors. Similar attention should be paid to the human resource needs of emerging industries such as tourism.
Given the benefits that in-house training is yielding for the finance and public utilities sectors and the limitations of national institutions of learning, some incentive should be offered to businesses that invest in acceptable levels of training for their staff.
Further, the private sector should explore getting some of the in-house courses offered by businesses accepted by the University of Guyana towards relevant degree or diploma courses if that is not being done. This move would save the private sector time and money that could be invested in developing more efficient production processes and better products for both the domestic and export markets.
