There is nothing magical about privatisation

Dear Editor,

There are a lot of discussions in the media regarding the privitization of sugar which is now projected in some quarters as the only remedy to pull the sugar industry out of the doldrums.

Talks involving the current APNU+AFC administration and private investors are already underway regarding the privatization of Skeldon Estate, even though key stakeholders including the sugar unions are kept in the dark regarding the status of the privatization talks.

The issue of privatization is both philopsophical and economic. There is a lot of controversy surrounding the issue due to different conceptions by those who are business-oriented and those who are more ideologically inclined.

The private sector wants to see a marginal role for the state. Their philosophy is fundamentally less government in business and more business in government. On the one hand, they do not want government to interfere. Everything must be left to free competition and market forces. On the other hand, they want the state to provide the unprofitable infrastructure facilities such as roads, sea defences and drainage and irrigation among others.

Others see a greater role of the state in development to attain balanced development and social justice. Dr Jagan had described this approach way back in the early 1990s as “development with a human face.”

Here in Guyana, during the colonial era, foreign political, economic, institutional and cultural domination resulted in a deformed economy characterized by a one crop, one mineral economy. The two major industries, sugar and bauxite which generated nearly three-quarters of the national income, were foreign owned and controlled. Foreign domination and control led to highly skewed and lop-sided development with consequential high levels of poverty and unemployment.

It was not until the PPP came into office that some attempts were made to involve the state in a more meaningful way in the development processes. The first entity to be nationalized was the Guyana Electricity Corporation (GEC) during the early 1960s. This resulted in highly improved services and a robust rural electrification programme. Moreover, from a loss-making entity, the GEC became a profitable venture due largely to efficient management and a new democratic Board.

The same was true for the rice industry, which under the colonial administration was under the  monopoly control of the Rice Marketing Board in terms of the purchasing and export of rice. The farmers’ organization, the Rice Producers’ Association (RPA), was denied representation on the Board. During the PPP regime of 1957-1964, the RPA was given majority control (13 out of 16 members) of the Rice Marketing Board. There was a flourishing of the rice industry which grew at an average annual rate of 10%.

Under the PNC regime, the state-owned corporations, including bauxite, collapsed. The rice industry which had prospered under the PPP government was wrecked. Half of the land cultivated by small farmers was abandoned and a large number found their way to Suriname and elsewhere due to undemocratic practices and poor agricultural policies. Majority control of the RMB by the Rice Producers Association was scrapped, a reduction from 13 to 2. The Guyana Electricity Corporation which was profitable under the PPP regime, became unable to provide an adequate public service.

The point is that privatisation is not the only or the preferred solution to declining levels of production and profitability of state entities, large or small. Good, efficient and democratic management is key to the success of any organization. The Guyana Oil Company, for example, remained a state company which at the very least is not dependent on government subsidies to keep it going.

The sugar industry, despite its many challenges, can be rehabilitated with good and democratic management. There is nothing magical about privatization especially when the social costs of the industry are factored into the equation.

Yours faithfully,

Hydar Ally

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