Budget Debate 2013

Hits: 3172 | Published Date: 25 Mar, 2013

| Speech delivered at: 40th Sitting - Tenth Parliament

| Speech Delivered by : Dr. Ashni K. Singh, MP

Minister of Finance [Dr. Singh]: Mr. Speaker, I rise to move the motion for the approval of the estimates of the Public Sector and the Budget for the financial year 2013. In so doing I wish to indicate that pursuant to Article 171, paragraph 2, of the Constitution, the Cabinet has recommended that the National Assembly proceed upon this motion.
Like its predecessors, Budget 2013 provides us with the customary opportunity to renew medium term objectives and goals, review accomplishments and outcomes over the past year and outline plans and programmes for the ensuing year. Coming as it does, however, as the second budget of this Tenth Parliament of Guyana, Budget 2013 also provides us with an opportunity for reflection on and insight into the first full year of the prevailing parliamentary configuration.
In the latter regard, it might be recalled that I anticipated one year ago, at the time of Budget 2012, that the current dispensation is fraught with formidable challenges and will test our respective resolve in this Hon. House to make sound decisions that can withstand the scrutiny of time. On that occasion I urged the prevailing of rational and metocratic considerations, the identification of sensible and practical solutions, the avoidance of short term choices to compromise long term imperatives, the defence of that which is fair and just and the most steadfast adherence to serving the national interest at all time.
With the benefit of one year’s experience since, those words seem even more prescient than I would have dared to think. The past fourteen months have rendered a veritable plethora of examples of parliamentary action, occasioned on the behest of the Opposition’s one seat majority that consumed valuable legislative time and effort in futile, unproductive and oftentimes counterproductive pursuits.
Whether it be attempts to cut essential budgetary allocations or denied an elected Member the right to speak, the moving of motions or passing of Bills that defied reason or collide with our Constitution or perhaps ultimately attempts to amend the very Constitution by the slender most of simple majorities with no attempt to consultation much less consensus, the courts of law and the courts of public opinion have both been condign in their judgement.
Having said that, the past few months, did also provide some, albeit, rare examples of good sense prevailing over the din of political rhetoric, a glimpse of which emerged most recently towards the end of our last sitting. One can only hope that this would increasingly be the norm going forward, that we would witness more mature and responsible deliberations and that more productive legislative output will emerge from the considerable time we spend together here.
Every sitting of this House provides us with individual and collective opportunities to make a constructive contribution to the national good and the people of Guyana expect that we do just that. With this constantly in mind, the People Progressive Party Civic Government remains firmly focused on building a better Guyana for all Guyanese and firmly committed to working as closely as possible with all likeminded stakeholders, both within and beyond the hallowed halls of this Honourable House in pursuit of that objective.
We continue to value our ongoing stakeholder engagements and we continue to receive from these engagements important inputs into our policy making deliberations. I urge once again that even after the most vigorous of debates, this House learns to speak more frequently with one voice, inspired only by that which is good for Guyana.
Bolstered by our unswerving commitment to task, our Government ensured the preservation of a policy environment that remained conducive to economic growth and social development throughout 2012. The result was a seventh consecutive year of real growth in our economy and associated strong macroeconomic performance, continued diversification of the productive sector, substantial progress and catalytic of infrastructural projects, further strengthening of our social services and visible improvements in our regulatory and institutional environment.
Looking ahead to 2013 and beyond, our Government’s policy agenda continues to be aimed at building a Guyana that is truly a land of opportunity and prosperity for all and we will remain undaunted and unfazed in our quest to realise this vision. To this end we will continue to be guided by the seven perquisites outlined last year, namely: a strong democracy, reliable and efficient institutions of state, long term macroeconomic stability, economic diversification and growth, expanded physical infrastructure, high quality social services, and environmental responsibility and sustainability. Budget 2013 reflects these priorities.
As we pursue this mission, we must be neither complacent nor mistaken about the global context in which we operate and the resultant vulnerability of our circumstances. Our economy continues to be exposed to an external environment that has been, to put it mildly, extremely unhelpful in recent years, and the global economy shows very few signs of near term dramatic improvement. We are beset by the reality of climate change and increasingly volatile and extreme weather. The geography of our country and dispersion of our population combine to elevate the cost of accessing our natural resources and delivering services to our people.
On their own, these challenges immeasurably complicate the task of economic management in a country such as ours. Even as we devise a path to confront and overcome these complications over which we have limited control, it behoves us all to establish and defend the manmade and home grown conditions that best conduce to sustained growth and development. We have an unshakeable obligation to harness those factors that are more within our collective sphere of influence, and mobilise and align them to best serve the interest of the long term wellbeing and prosperity of our country. This is a responsibility that is shared and must be borne by every single one of us, in this House and beyond, if we are to realise our espoused aspirations.
Recognising the challenges of our time as we do, recommitting ourselves to ensure that they prove no impediments to progress, and calling on all others to join us in the steady march to further develop our country, Budget 2013 is presented under the theme, Overcoming Challenges Together, Accelerating Gains for Guyana.
Global Economic Developments
I will now review Global Economic Developments. As I have just indicated, prevailing global economic conditions continue to be extremely unhelpful to small economies such as ours. Growth in global output has been persistently lethargic, with implications for both investor appetite for risk and consumer demand for our goods and services. Commodity prices continue to be unpredictable, with implications for our exporters and importers, and our producers and consumers alike. As a result, sustained recovery remains elusive in the Caribbean.
The global economy grew by 3.2% in 2012, driven largely by the 5.1% achieved by emerging and developing economies compared to the much slower 1.3% in the advanced economies. Amongst the former, China continued to lead with growth of 7.8%, while growth in India slowed somewhat to 4.5%. Amongst the latter, the Euro area and the United Kingdom both recorded negative growth of 0.4 % and 0.2% respectively, offset by modest growth of 2.3% and 2% in the United States and Japan respectively.
Global growth is projected at 3.5% in 2013, underlying which is 5.5% projected growth in emerging and developing economies and 1.4% in advanced economies, with a growth profile across countries much the same as in last year. In particular, the Euro area is anticipated to post a second consecutive year of contraction reflecting lingering uncertainty about the pace of recovery and the need for greater adjustment effort in the periphery. Much of global performance will also be influenced by developments in the United States, in particular in relation to the pace of fiscal consolidation which, if excessive, could prove harmful to US and global growth prospects.
Commodity prices remained broadly stable but continued to mirror the uncertainty of the global outlook. Oil prices peaked in March at US$118 per barrel, and then declined later to end 2012 at US$101 per barrel, 3% lower than at the end of 2011. The world market price for gold remained strong and increased by 6.2% to US$1,669 per ounce. Aluminum prices fluctuated somewhat during the year but ended at US$2,087 per tonne, 3.1% higher than at the end of 2011. Prices for food commodities generally ended 2012 higher than one year ago, but with divergent trends across individual commodities, for example, the world market price for rice and sugar declined by 2.6% and 18% respectively, while that for wheat increased by 29.3%
On regional developments, growth in Latin America and the Caribbean amounted to 3% in 2012 and is projected at 3.6% in 2013, with Brazil projected to pick up from 1% last year to 3.5% this year. Closer home, growth in the Caribbean sub-region continued to be listless, with 1.1% in 2012 and a projection of 2% for 2013. Much like the global economy in recent years, economic performance in the sub-region has been dichotomous. Whereas the sub-region’s commodity-based economies particularly the oil and mineral exporters have generally fared well in the prevailing global climate, the service-based economies such as the tourism dependent ones have lagged behind. This distinction reiterates the need for accelerated diversification in, and more effective integration across, all the economies of the Caribbean.
Domestic Macroeconomic Developments
A. Real Gross Domestic Product
Turning to Domestic Macroeconomic Developments; Real Gross Domestic Product. The performance of the Guyanese economy continues to vindicate our efforts over the years to diversify our productive base and reduce our exposure to external and other shocks. It is to our collective credit, policymakers, entrepreneurs, and households alike, that our country’s overall economic performance is no longer hostage to the fortunes of two or three dominant industries. Today, new and emerging sectors are creating jobs, generating incomes, and producing value added output, while the traditional industries maintain a significant presence on our productive landscape. Together, they make for a resilient economy, and more persistent growth into the long term.
Against this background, I am pleased to report that real Gross Domestic Product (GDP) grew by 4.8% in 2012, a seventh consecutive year of positive growth. It is significant to note that, when the sugar sector is excluded, non-sugar GDP grew by 6% reflecting the even more rapid expansion being achieved in the rest of the economy.
B. Sectoral Performance
The sugar industry delivered total production of 218,070 tonnes in 2012; a contraction of 7.8%. Industrial relations disruptions and inclement weather patterns continued to plague the industry during the first half of the year and, even though a dry-weather spell aided the industry during the second crop the first crop contraction of 33.4% could not be compensated for by the second crop growth of 13.3%.
In striking contrast, the rice industry continued to exceed expectations in 2012 and recorded another year of outstanding performance with total production growing by 5% to 422,057 tonnes; the highest tonnage produced in any one year in the industry’s entire history. The sustained strong performance of the industry reflects the benefits of investments made in supportive infrastructure as well as efforts made to strengthen forward and backward industry linkages, from preparation through to manufacturing to marketing. Continued favourable market prices and improved drainage and irrigation in the rice-growing areas also serve to boost production capacity and auger well for the industry’s future.
In non-traditional agriculture, the production of other crops grew by 5.3%, benefiting from improved weather conditions in the second half of the year coupled with easier domestic and export market access. Livestock production increase by 14.4%, driven primarily by heightened demand, especially in mining communities. The fisheries industry grew by 15.5% with an expanded trawling fleet in operation. The forestry industry recorded a 4.3% decline with total production of 369,645 cubic meters. The Guyana Forestry Commission is working with operators to encourage optimal utilisation of forests and to widen the range of species harvested as a means of expanding production levels.
The mining and quarrying industry returned 14.8% growth over 2011. Declared gold production of 438,645 ounces was the highest recorded in the entire history of the gold industry, excluding Omai production and was 20.8% higher than in 2011. The Bauxite Industry recorded growth in value added at 12.5% with production of 2,213,972 tonnes; the highest rate of increase achieved in the production of cement-grade bauxite. Production of diamond and stone recorded declines of 22.2% and 10.8%, respectively; while sand production recorded a 76.5% increase which, when taken together, resulted in the other mining subsector recording an overall decline of 14.6%
Manufacturing output grew by 2.4% reflecting mixed performances with some products recording increased output, such as beverages.
Value added output in the services sector increase significantly with many industries achieving positive growth. Wholesale and retail trade grew by 6.7%, consistent with increase imports of consumption, intermediate and capital goods. Information and communication grew by 4.2%, reflecting growth in demand. Electricity and water output grew by 5.7%, transport and storage by 18.9%, finance and insurance grew by 13.8 %, rental of dwellings by 4.5 % and other services by 4%. An 11 % decline was recorded in the construction sector as a result of slower than anticipated start up in some public sector construction projects, although private sector construction activity expanded. Public administration, education, and health grew by 1.4 %, 2.2% and 3.1 % respectively, reflecting Government’s ongoing investment in the social sector.
C. Balance of Payments
The balance of payments at the end of 2012 reflected a surplus of US$12.4 million, compared to a deficit of US$15 million in 2011. This outturn is mainly the result of improvement in the capital account due to higher foreign direct investment.
Reflecting underlying growth in production and export volumes, and aided by favourable price movements, export earnings expanded by 23.6% to US$1.5 billion. Export receipts from sugar grew by 7.1 % to US$132.1 million, primarily due to favourable contract prices, which increased by 15.1 % and outweighed a 6.9% reduction in volume. Rice export receipts grew by 13.3% to US$196.2 million, underlying which were a 9.4% increase in volume and a 3.5% increase in prices. Gold exports amounted to US$716.9 million, a 38.7% increase over 2011, with the industry benefitting from a 6% favourable price movement and a 30.8 % increase in export volume. Bauxite exports increased by 13.1% to US$150.8 million with volumes increasing by 22.8% to offset a 7.8% decline in export prices. Timber exports totaled US$39 million, a marginal decline of 0.1%, primarily associated with lower production and efforts to further strengthen forest monitoring and enforcement within the sector.
Total imports expanded by 11.7% to US$2 billion within which was an 8% increase in the value of fuel and lubricants imported. Other imports increased by 13.5%, with non-fuel intermediate goods increasing by 12.8%, capital goods by 16.1% led by increases in imports of heavy equipment for industry, and consumption goods increased by 11.7%.
Net current transfers increased by 1.1% to US$419.2 million, due to higher receipts of worker remittances which increased by 13.9% to US$469.3 million. Net payment of services amounted to US$232.1 million compared to US$145.4 million due to a US$94.7 million increase in non factor services mainly as a result of higher cost for transport and freight and increased payments for business services.
Notwithstanding the growth in imports, the significant expansion of export earnings helped to ensure that the current account deficit widened only marginally from US$372.2 million to US$394.8 million.
On the capital account, a surplus of US$428.5 million was achieved compared to US$373.2 million in 2011. This was driven by significant growth in foreign direct investment (FDI), mainly in the mining and quarrying, and transport and telecommunications sectors, resulting in total FDI increasing by 19% to US$293.7 million in 2012.
As a result of these developments, the Bank of Guyana ended the year with total external reserves of US$862.2 million, the highest end of year position ever in our country’s history, and equivalent to 4 months of imports.
D. Monetary Developments
In 2012, net domestic credit by the banking system expanded by 10.6% to $103.4 billion. Underlying this was continued strong growth in private sector credit by 20% to $161.5 billion at the end of 2012, with a 106.6% increase in credit to rice milling, a 51.5% increase in the mining and quarrying sector, a 28.4% increase in other manufacturing, a 26.5% increase in other services, a 17.8% increase in agriculture, a 17.2% increase in the personal sector, and a 13.6% increase in the lending for real estate category. The sustained growth in lending to the private sector, along with the price and exchange rate stability observed and on which I will report shortly, combine to confirm the appropriateness of our monetary policy stance.
E. Prices and Income
a. Inflation Rate
Government expended every effort on several fronts during the year to contain inflationary pressures and protect price stability. These efforts included excise tax adjustments to mute the pass through of imported fuel price volatility, support to the Guyana Power and Light Incorporated (GPL) to avoid tariff increases, and continued investments towards the expansion of food production to ensure supply adequacy and price affordability. Altogether, these served to return an inflation rate of 3.5% at the end of 2012, well within acceptable norms.
b. Interest Rate
The growth in private sector credit already reported on was aided by a notable reduction in the cost of borrowing in the banking system. During 2012, the weighted average lending rate of the commercial banks declined by 60 basis points to 11.08%. In addition, the small savings rate declined by 30 basis points to 1.69%, and the 91-day treasury bill rate declined by 90 basis points to 1.45%.
c. Exchange Rate
Transactions on the domestic foreign exchange market grew by 12% to US$6.8 billion. Much of this growth was driven by increases in the value of trade transactions, remittances, and investment inflows. Key exchange rates remained stable throughout the year and at the end of the year the Guyana Dollar was being traded against the US Dollar at $204.5 compared to $203.75 a year ago.
d. Developments in Wages
At a time when fiscal constraints are forcing many countries even in our immediate Region to freeze public sector wages, our Government has made it a priority to ensure that our public sector employees benefit from steady increases in their wages and salaries every year. Last year was no exception, and Government granted a 5% across the board increase to all public servants and members of the disciplined services with effect from January, 2012. A one month basic salary tax free incentive was also paid in December, 2012, to members of the disciplined services. Furthermore, in keeping with the Memorandum of Understanding entered into between Government and the Guyana Teachers Union for the years from 2011 to 2015, a 5% increase in salaries was granted to teachers in the public education system with effect from January, 2012. Government continues to regard such multiyear agreements as the preferred mechanism for ensuring predictable salary increases going forward, and will endeavour to conclude similar agreements with the representatives of other public sector employees.
F. Fiscal Position
             a. Non-Financial Public Sector
The non-financial public sector recorded a fiscal deficit of $26 billion or 4.5% of GDP, broadly level with the 2011 deficit of 4.4%.
b. Central Government
Consistent with the expansion in economic activity, Central Government revenue (net of GRIF inflows) grew by 7% to $129.4 billion in 2012. Tax revenue collections, which represented 91.5% of total current revenue collections (net of GRIF inflows), amounted to $118.3 billion, a 6.2% increase over 2011. Internal revenue collections increased by 2.9% to $48.6 billion in 2012. Underlying this, were an increase of 6.1% to $19.6 billion in corporation tax, and an increase of 20.8% to $3.4 billion in income tax paid by self employed persons. In contrast, personal income tax under the Pay As You Earn (PAYE) system declined by 4.1% to $16.2 billion as a result of the increase in the income tax threshold granted last year. Reflecting the growth in trade already reported on, customs and trade tax collections increased by 15.7% to $12.9 billion, primarily attributed to a 17.2% increase in import duties to $11.6 billion. Value Added Tax (VAT) and excise tax collections increased by 7.2% to $56.8 billion with increased VAT collections from imports and domestic supplies, and increased excise tax collected on all categories of taxable goods except fuel. In the latter case, collections declined by 27.8% to $6.6 billion as a result of the lowering of the applicable rate during the course of the year. Nontax revenue collections recorded an increase of 16.3% to $11.1 billion, primarily on account of higher transfer of profits from Bank of Guyana.
Non-interest current expenditure amounted to $108.4 billion, an increase of 17.1% over 2011. This increase was attributed to an 11% increase in wages and salaries, 1.4% increase in other goods and services, and 43.2% increase in transfer payments. Wages and salaries increased primarily due to the across the board increase granted, along with new recruitment mainly in health and education. The 43.2% increase in transfer payments was due to the operating subventions granted to GPL and the Guyana Sugar Corporation Incorporated (GUYSUCO) along with the increase granted to old age pensioners. Capital expenditure increased by 12.6% to $56.4 billion due to the advancement of several key development projects.
c. Public Enterprises
Aided by the subventions just referred to, public enterprises were able to return a surplus of $1.6 billion compared to a deficit of $6.6 billion in 2011. In the case of GUYSUCO, the subsidy supported the company in meeting its operating cash flow requirements while, in GPL’s case, the company was similarly helped to meet its financing requirements without implementing an increase in electricity tariffs. Both companies continue to face severe cash flow constraints.
G. Debt Management
Having expended immeasurable effort to return our country to debt sustainability, our Government has been extremely judicious in striking an appropriate balance between new borrowing to finance pending development needs on the one hand and ensuring that debt sustainability remains uncompromised on the other.
At the end of 2012, Guyana’s total external debt stock stood at US$1.4 billion, which represented an increase of 12.7% over the previous year, large on account of the financed component of oil shipments under the Petrocaribe arrangement with Venezuela.
Total external debt service in 2012 amounted to US$42.5 million or 6.4% more than in 2011, comprising principal repayments of US$29.4 million and interest payments of US$13.1 million.
Towards the end of 2012 Guyana signed our first debt compensation agreement with Venezuela which reduced the Petrocaribe debt owed to that country by US$100.8 million, equivalent to the value of rice and paddy shipped from December, 2009 to July, 2011.
Government expects to conclude imminently a second debt compensation agreement which will reduce the Petrocaribe debt to Venezuela by a further US$186 million, equivalent to the value of rice and paddy shipped from July, 2011 to January, 2013. Also in 2012, Guyana finalised bilateral debt relief negotiations with the Russian Federation to write off 100% of the outstanding debt owed to that country totaling US$0.3 million, and the relevant bilateral debt cancellation agreement was signed in January 2013.
Sectoral Developments and the Agenda for 2013
A. The Medium Term Outlook
As we embark on the exercise of considering the National Budget for 2013 we must remind ourselves of the Guyana we are seeking to build. It is a Guyana that is modern and prosperous, whose economy is strong and resilient, whose institutions inspire confidence and provide protection, and whose citizens are motivated and accomplished. It is a Guyana that is physically integrated with its neighbours in South America and economically integrated with its neighbours in the Caribbean Sea. It is a Guyana whose comprehensive infrastructure network allows easy access to our resources and to move our goods and our people. It is a Guyana where all citizens have access to high quality education, healthcare, and other social services, and where the Millennium Development Goals are met. It is a Guyana whose traditional industries like sugar, rice, and bauxite can compete on the world market, just as well as whose new and emerging sectors like tourism, telecommunications, and business process outsourcing can compete. It is a Guyana where every single man, woman and child has access to, and competence in, information and communication technology. It is a Guyana where investors want to bring their business and where qualified persons want to work. It is a Guyana where every young person can find rewarding productive employment and where every elderly person can retire in comfort. The attainment of such a Guyana is not beyond our grasp. On the contrary, it is well within our reach. Every programme, every project, every activity, every initiative contained in Budget 2013 takes us one block closer to building this Guyana.
B. Low Carbon Development Strategy
Aligning responsible forest stewardship with accelerated economic development continues to be the paradigm overarching our policy framework. On this subject, Guyana’s leadership and advocacy at the multilateral level continue, including within the Coalition of Rainforest Nations and more recently at the Doha Conference of Parties where Guyana was instrumental in effecting a road map for a Reducing Emissions from Deforestation and Forest Degradation (REDD+) mechanism.
Under our visionary Low Carbon Development Strategy (LCDS), at the end of 2012 Guyana fulfilled all the requirements for a third tranche of performance-based payments to the tune of US$45 million. This brings to a total of US$115 million, the amounts Guyana has earned under our partnership with Norway. This partnership, given the funds received and committed thus far, represents the second largest interim REDD+ arrangement in the world which is testimony to our Government’s commitment to good forest governance and stewardship and which vindicates the LCDS.
In 2012, funds began flowing from the Guyana REDD+ Investment Fund Trust Fund, the GRIF Trust Fund, as it is popularly known, to implement projects identified under the LCDS. Monies have been disbursed from the GRIF for the US$7 million Institutional Strengthening Project which will support the Guyana Forestry Commission, the Office of Climate Change and the Project Management Office, and for the US$6 million Amerindian Development Fund project which provides financing to support the socio-economic development of Amerindian communities and villages through the implementation of their Community Development Plans (CDPs). In addition, the US$5 million Micro and Small Enterprise (MSE) Development project has now been approved for implementation. Other projects to be funded under the GRIF include, most prominently, the flagship Amaila Falls Hydropower Project (AFHP) on which more is said later. Government continues to work with our counterparts in Norway and with our other development partners to accelerate the flow of funds to Guyana to implement projects and programmes identified in the LCDS.
In 2013, Guyana will continue to work strategically with the leadership of the Coalition of Rainforest Nations to ensure that an international mechanism for rainforest mitigation is brought to the next Conference of Parties for approval and that more ambitious emission reduction targets are agreed by industrialised countries. Other LCDS projects, including the Amerindian Land Titling Project and a climate adaptation project, will be brought before the GRIF Steering Committee for approval and will begin implementation later this year. Government will also launch an addendum to the LCDS which will include a second wave of projects.
Still under the GRIF, sums totaling US$17.6 million are allocated in 2013 for the Institutional Strengthening, Amerindian Development Fund, Amerindian Land Titling, Micro and Small Enterprise Development, and other projects. In addition, a sum of US$80 million is provided to fund Guyana’s equity contribution to Amalia Falls Hydro Project (AFHP).
C. Transforming the Economy
a. Modernising the Traditional Sectors
While the traditional sectors might no longer be the lifeline of our economy given the substantial progress made in diversifying the productive base, they remain important to our overall economic performance, generating valuable export receipts and providing thousands of jobs. Ensuring their viability and profitability therefore remain policy priorities for this Government.
i. Sugar
The sugar industry has been beset by issues associated with managerial capacity, unpredictable weather and labour supply constraints, to name but a few. Consequently, annual production levels have been less than acceptable. On the upside, the external outlook for sugar remains positive given Guyana’s comparative advantage as a producer within CARICOM, the existence of a captive market protected by the Common External Tariff, continued market access with the recent extension of the EU Sugar Regime to 2020, and the fact that Demerara remains a marque with considerable universal goodwill, even if not yet legally enforceable.
Over the last few years, initiatives in field and factory operations have been undertaken to counter the labour shortages and the reduced opportunity days arising from changing rainfall patterns. Mechanical harvesting has been accelerated and there are ongoing investments in drainage works and land conversion to mechanically friendly fields. Private cane farmers have been encouraged to take on a greater share in supply of canes to supplement GUYSUCO’s production. Meanwhile the issues at Skeldon factory, a key and critical facility for overall improvement of the industry’s performance, are being addressed holistically and several modifications and adjustments have been completed to deliver higher levels of output and efficiencies.
As GUYSUCO continues to grapple with the challenges of returning to its production potential and profitability, it has to recognise and confront its managerial, industrial, technical, marketing and financial realities. Thus, an updated Strategic Plan 2013-2016 is currently being prepared. The plan will support the mechanisation and field conversion drive and focus particularly on critical areas.
A strong and committed management response is necessary to deliver the anticipated output from investments. Industry customs and practices of the past must now give way to modern, innovative and creative tools and techniques to deal with managing a complex organisation in the process of change. GUYSUCO will have to reengineer its management and human relations functions accordingly. Promoting a harmonious industrial relations climate is an absolute priority and will require accommodation on all sides. Management and union will need to put aside the attitudinal and non-productive confrontations in their negotiations. Industrial relations practices are expected to become more interactive and congenial. Whereas, GUYSUCO’s lands are capable of producing in excess of 400,000 tonnes of sugar, field interventions to address the weather and labour constraints can only be successful with the requisite agronomic inputs. Agricultural operations must capitalise on the relative advantages of each estate, ensure daily field supervision and return the fields to the former levels of productivity. Focus will therefore be needed in determining the right balance of mechanisation, field conversion, drainage and irrigation, transport infrastructure and plant breeding within the full spectrum of agricultural related interventions.
The factory improvement programme will aim at producing sugars to meet the growing market requirements for higher quality, both in bulk and direct consumption with increased efficiencies at all seven factories. A specific element of the plan will be to have the new packaging plant at Enmore operating at full capacity.
GUYSUCO is projected to spend $3.1 billion in 2013 to advance implementation of critical recapitalisation aspects of this plan.
ii. Rice
Our rice industry is well on its way to achieving and sustaining production of greater than 450,000 tonnes annually while moving towards new and more premium varieties. The excellent performance of the industry in recent years is a vindication of the substantial investments made in drainage and irrigation infrastructure coupled with the institutional capabilities accumulated in research and training for the benefit of the industry.
Higher market prices have enabled financing for recapitalisation in the industry, and the last three years have witnessed over $8 billion of private capital invested by millers to upgrade their mills and improve efficiency using new and modern technologies. As a result of our Government’s efforts to ensure a favourable business climate, a major investment of over US$4 million has been made in the first phase of a large scale project in Region 9, with 120 acres already cultivated and 2,000 acres to be cultivated by the end of 2013. This Santa Fe project aims to have 10,000 acres of rice cultivated by 2015 and will expand exports in the sector with markets already identified in Brazil. The favourable business climate put in place by Government also resulted in the milling operations of one of the larger but chronic defaulting millers being acquired by a foreign investor, with the anticipated consequence that much of the problems previously experienced with untimely payment by millers to farmers should be alleviated.
In the area of research, following the successful pilot cultivation of Guyana’s first line of aromatic rice last year, testing will commence across the country during 2013 with the expectation that at least 20 to 25 farmers will undertake the first commercial production of this rice. This will contribute to reduced imports of similar types of rice.
iii. Bauxite
This Government has worked hard to attract credible international investors to the local bauxite industry and to ensure they maintain their operations even in the most hostile of external conditions. At a time when bauxite plants around the world and even in our Region have been closing operations, the domestic bauxite industry continued producing. In Guyana, the fortunes of the two major bauxite companies continue to be mixed. Bosai’s operations continue to be supported by strong calcined bauxite prices of over US$400 per tonne, while BCGI’s operations continue to be challenged by costs that exceed prevailing market prices. Increasing production and investment are nevertheless expected to continue, with Bosai planning to expand its product mix to include the production of metallurgical bauxite, while BCGI recently completed a US$20 million investment in mobile equipment.
Further increases in production are projected in 2013 and beyond by both Bosai and BCGI, with the continued substantial investments being made by both companies. In 2013, Bosai’s projected investments continue to target increasing volume. The company will continue to operate in the Dacoura and East Montgomery mines. BCGI will continue to invest in opening up its new mine at Kurubuka and making its operations more efficient, with production expected to commence in 2014 from this new location. BCGI’s operations continue to be less than cash positive, necessitating financial support from its parent company for continued investment and to cover operating deficits. While higher levels of production supported by these investments are expected to lower average operating costs, it is recognised that Guyana’s production costs for metallurgical bauxite are generally in the higher tier due to overburden, high logistical costs, and the high price of fuel for mobile equipment, drying and transportation operations. A third bauxite company, First Bauxite Incorporated, is slated to start construction of a US$120 million calcined operation in late 2013 at Bonasika. Government will continue to support the bauxite industry recognising that for each company, the cost structure and the market prices are quite different.
iv. Gold
The gold mining sector has been playing an increasingly important role in the domestic economy, with production reaching unprecedented levels. The growth of the industry has resulted in significant job creation and multiplier economic activity in mining communities and indeed throughout the country. Increased investment in the sector has resulted in innovative technology being utilised and, for the first time, a local miner is engaged in hardrock mining while more land dredges and water pumps are being utilised to effect more efficient recovery and production.
The industry is also one of the principal destinations for inward FDI, with several large scale investments in the sector. Guyana Goldfields Incorporated and ETK/Sandspring Resources Limited are both expected to commence commercial production by 2015. Together, these investments will generate 550 jobs during the development phases and another 400 jobs during mining operations. Other large scale investments by Sacre-Coeur Minerals Limited and Eagle Mountain Gold Corporation are underway and are anticipated to commence operations in 2014. The demonstrated level of investor confidence and anticipated continued high price levels for gold on the world market augur extremely well for the sector.
b.       New and Emerging Sectors
i. Information and Communication Technology
Information and communication technology (ICT) continues to be one of the principal means through which our Government’s agenda for modernisation and transformation is being pursued. Government’s commitment to the sector is driven by the recognition of how much ICT can contribute to economic diversification, creation of new and emerging job opportunities, improving competitiveness of existing and new businesses, and empowering citizens. Recognising the abundant benefits of ICT to be accrued to the citizenry of Guyana, our Government’s commitment is to bring ICT access and competence within the reach of every single Guyanese person and to promote the ICT sector as a primary employer in its own right.
To this end, in keeping with our undertaking to put in place a legislative framework that would facilitate and support a liberalised sector, Government tabled in this Honourable House a new Telecommunications Bill and amendments to the Public Utilities Commission
Act in 2012. We are also currently engaged in discussions with the major companies in the telecommunications industry on the proposed legislative framework which, once enacted, will see transition to full competition.
Also in 2012, a total of $1.9 billion was invested by Government on acquiring and installing critical ICT infrastructure, specifically, over 580 kilometres of fibre optic cable from Lethem to Georgetown with 5 repeater stations along the route, constructing and commissioning the e-Government datacentre which is now being tested, and procuring the equipment and software for 54 Long Term Evolution-Advanced (LTE-A) sites which is the latest in 4G wireless technology.
In 2013, over $2 billion is budgeted to advance this work, including provision for the construction of 54 LTE-A towers to be strategically placed in the most densely populated areas from Moleson Creek to Charity, Linden and Lethem. Once completed, e-Government services and content will be delivered to the major population centres using this network.
In order to ensure that the most vulnerable communities and individuals benefit from access to ICT, amounts totalling $1.6 billion were spent in 2012 under the One Laptop Per Family (OLPF) programme to procure over 28,000 laptops, resulting in a total of 56,000 laptops being purchased under this programme. To date, 26,832 laptops have been distributed, and 18,714 persons have been trained, including 4,596 first time computer users.
In 2013, further amounts totalling $2.5 billion have been allocated to continue this programme, including to purchase a further 34,000 laptops for rolling out distribution more widely. Of this total, an amount of $500 million is earmarked for the implementation of the programme in the hinterland, which will see computer banks and supportive power supply installed in every Amerindian village.
In addition, Government will work closely with current and potential investors in the business process outsourcing sector to encourage and facilitate establishment and expansion of their operations, diversify their geographical spread, and promote closer alignment between the basic prerequisite skills held by their potential recruits with the input requirements of this buoyant sector.
The result of all these initiatives will be a computer literate population, a more competent and competitive workforce, and accelerated investments in the ICT sector as a source of rapid job creation in Guyana.
ii. Oil
Petroleum exploration continued apace in 2012. Although, the drilling of exploration wells offshore in the prospecting areas licensed to Repsol was terminated out of caution, there were encouraging indications of petroleum. A test well was drilled by CGX Resources Incorporated to the total planned depth, but the outcome was not as favourable as anticipated. The acquisition of new marine 3D seismic data by CGG Veritas within the prospecting area licensed to Esso/Shell commenced in November 2012 and new petroleum prospecting licences and or renewals were issued for further work in several locations including the Takutu Basin, the deepwater Stabroek Block, and the Corentyne Block. Repsol is also in pursuit of continuing activity on the block referred to as the Georgetown Block and the transitioning to a new licence and agreement were at a very advanced stage at the end of 2012. In addition to these developments, work was sustained in the Berbice River at Grand Canal where wharf and terminal facilities were being constructed for use in petroleum operations logistics.
In 2013, exploration operations are expected to continue with 3D seismic surveys by Esso, Repsol and CGX. Several new licences are expected to be issued as companies transition from dated tenure arrangements so that that their operational focus would be maintained. Recognising the potential for Guyana to move from exploration through discovery to production within the foreseeable future, Government is actively considering the requisite policy and institutional frameworks that need to be in place. Such frameworks will include addressing environmental considerations, contract management and administration, sustainable management of oil revenues, and enhancing competitiveness in non-oil sectors in order to avoid Dutch disease effects.
iii. Agricultural diversification
Government attaches high priority to promoting new and non-traditional agricultural products, developing infrastructure, adopting new and emerging technologies, and providing our farmers with financial and technical support. Government remains committed to creating a conducive environment to reinforce Guyana’s position as the Caribbean leader in agricultural production, with a view to developing the sector in an efficient and sustainable manner, especially given the vicissitudes of climate change.
In 2012, over $1 billion was spent to advance efforts towards the diversification and modernisation of the sector. In the area of rural enterprises and agriculture development, 40 producer groups completed business plans for their respective ventures, and an initial tranche of $62 million was made available to a private sector micro-credit partner to support the implementation of those plans that qualified for financing. In the fisheries sector, emphasis was placed for the first time on developing large-scale, commercial, export-oriented tilapia farms. In livestock, work continued on diversification in an effort to improve the genetic pool of cattle and thus enhance the quality of meat for domestic and international markets. In terms of infrastructural improvements, the genetic bank and the artificial insemination laboratory were completed, rehabilitation works were undertaken at the breeding station at Mon Repos, and construction works were completed at the quarantine checkpoints at St. Ignatius and Mabura.
In 2013, $1.9 billion has been allocated to this sector. In order to ensure that an adequate regulatory framework is established to guide and support the advancement of the sector, several legislative initiatives will continue to be undertaken during this year. These include work on new regulations for fisheries, traceability of both crops and livestock, and animal welfare, all necessary in order to fulfil international trade requirements. Furthermore, since the design was completed early this year for the 5,500 acres of uncultivated land in the Aurora area, works will commence to clear the land, in preparation for livestock rearing, and production of rice, citrus and other vegetables. In the fishery sector, emphasis will be placed upon certifying sustainable fishing practices in an effort to qualify for higher export prices. In addition, production for export will commence at the newly established tilapia farms, with a view to significantly increase tilapia production. Support for diversification in the sector will also come from strengthening infrastructure. A Veterinary Diagnostic Laboratory will be constructed at Mon Repos, additional drainage works will be undertaken at Canal Polder, and a hatchery to increase production of ducklings will be established. Finally, efforts will be directed toward building our human resource base in order to benefit from Guyana’s full potential to accelerate agricultural development. During the course of the year, training in aquaculture production will be imparted to 250 persons nationwide, and local specialists will benefit from training in seed technology and germplasm development. In keeping with our drive to promote large scale private investment in agriculture, a landmark private sector investment, to which I have already alluded, has resulted in a 30,000 acre integrated farm, the Santa Fe Farm to which I referred when I was addressing the rice sector. Once Phase 1 of the project is completed, the intention is to expand production beyond cultivation of rice, soya beans and cow peas, and rearing of cattle, sheep and goats, to include permanent fruits and large scale aquaculture. Like the rice, other produce will also be mainly exported to Brazil, where the technology that is being used to develop the farm originated.
In 2013, a sum of $500 million is allocated to fund the establishment of a farmer fertiliser and planting material facility which will ensure access to quality planting materials and other inputs, including fertiliser and enhanced extension services. This intervention will boost and strengthen food production and will target more than 3,000 farmers, and reinvigorate the highly successful Grow More Food campaign.
iv. Tourism
Recognising the unique ecotourism and environmental products that our country has to offer, and acknowledging the potential of the tourism sector as a major driver of job creation and sustainable economic growth, Government continues to invest in increasing capacity in the sector, raising standards, developing market and product niches, and promoting the destination.
The market has responded to Government’s efforts in this regard, with increased private investment in the sector, significant growth in visitor arrival, and higher levels of property occupancy. In 2012, arrivals totalled 176,642, a 12.6 per cent increase over 2011, and the industry recorded average occupancy rates in the vicinity of 75 per cent. Also in 2012, construction commenced on the US$58 million Marriott Hotel and progressed apace. Once completed, this 197-room hotel will be Guyana’s first five-star hotel property and our only major internationally branded hotel, and it will significantly raise industry standards. Guyana also successfully hosted major industry events, including the 13th Caribbean Sustainable Tourism Conference, won several industry awards, and received substantial coverage from mainstream international travel media.
In 2013, Government will continue efforts towards the development of a vibrant tourism industry. Focus will be placed on marketing, product development, and capacity building of industry stakeholders. Work will commence on a 5-year Hinterland Tourism Development Plan from 2013 to 2018, which will focus on tourism opportunities, economic, social and environmental benefits, culture and heritage preservation, investment opportunities and training. Efforts will be heightened to market the destination to film and television producers of the reality and adventure genre with wide viewership and to obtain coverage in strategic niche publications such as sport fishing and birding. Further, institutional capacity to train personnel for the hospitality industry will be expanded, and training programmes delivered to all categories of industry personnel with the aim of raising standards and improving service quality. In addition, efforts will continue to engage international airlines to increase airlift into Guyana.
v. Small Business
Small and medium-sized enterprises (SMEs) are pivotal to creating grassroot economic opportunities, supporting income generating ventures, improving livelihoods, enhancing productivity and stimulating competitiveness. In this regard, and in continued support of the dynamic growth potential of SMEs, Government has provided added stimuli to this sector through several initiatives, including easier access to credit, business advisory and marketing services and systems, and training.
In 2012, the Small Business Bureau (SBB) commenced the development of a policy framework for small businesses and held a number of training workshops and seminars to improve the technical skills of small business owners. In this regard, several owners benefited from sessions dealing with such matters as customer care and service, and standards for the art and craft sector. In addition, 561 small and micro businesses were added to the Bureau’s database bringing the total to 1,805 registered businesses at the end of the year.
In 2013, the Small Business Development Fund will be fully operationalised through the Collateral Guarantee, the Interest Subsidy and the Low Carbon Grant Schemes at a cost of $370 million, thereby increasing small business access to financing. Over 100 training sessions on business management, agro processing, food handling, packaging, labelling, marketing and information technology are scheduled for this year, targeting 1,000 business owners.
Still on small business development, under the Women of Worth (WOW) micro credit facility, $16.4 million was disbursed by our private sector partner to 83 women comprising 61 new borrowers and 22 returning borrowers in 2012. To date, over $180 million has been disbursed as start-up capital to 1,760 single mothers. The beneficiaries engaged in small scale entrepreneurial activity in poultry rearing, garment manufacturing, leather craft, and cosmetology, thereby contributing to improve welfare among single mothers while increasing the number of small businesses in Guyana.
The WOW programme will continue in 2013, with renewed focus, and will be launched in previously unserved or underserved areas, including Region 1, where it is expected that more than 100 applicants will be able to access micro-credit loans. Additionally, the programme will provide training to its beneficiaries in such areas as basic entrepreneurial skills, networking, basic accounting, promotion, and advertising and packaging.
D.        Physical Infrastructure for Transformation
a. Roads and bridges
Government continues to expand, improve, rehabilitate, and maintain our road network with the aim to reduce transportation cost, improve market access, create and upgrade linkages to hinterland communities, improve travelling conditions and road safety and enhance regional and hemispheric connectivity and competitiveness.
In 2012, a total of $9.4 billion was expended on the construction, rehabilitation and maintenance of our country’s land transport network, including primary, secondary and tertiary roads, culverts and bridges countrywide. Amongst these works Government completed reconstruction works on the 35 kilometre Black Bush Polder ring road improving easy access to over 18,000 acres of rice, cattle and cash crops, and 18.8 kilometres of all weather roads to serve the communities of East and West Canje. Works continued on the upgrade, modernisation and expansion of the access road from Timehri Hill to the Cheddi Jagan International Airport (CJIA), the extension of the four-lane highway from Providence to Diamond, the widening of the highway from Better Hope to Golden Grove on the East Coast of Demerara, the construction, reconstruction, rehabilitation, upgrade and maintenance of urban, rural, community and hinterland roads in all regions, including the Mabura Hill to Amaila Falls road, the reconstruction and rehabilitation of 20 critical structures from Belladrum to Rosignol, and the rehabilitation of pontoons and cluster piles for the Demerara Harbour Bridge. Additionally, street lighting was installed from No. 61 to 66 Villages and No. 74 Village on the Corentyne coast.
In 2013, Government will invest $12.6 billion to further improve our roads and bridges network, of this sum $11.2 billion will be spent on roads and $1.4 billion on bridges. Of this amount, $4 billion has been made available for the completion of the four-lane access road to CJIA, the continuation of the East Bank Demerara four-lane highway, the completion of the designs and commencement of works on the Sheriff Street to Mandela Avenue Roadway, the upgrade of the 30.5 kilometre West Coast Demerara Road from Vreed-en-Hoop to Hydronie, and the continuation of the widening of the highway from Better Hope to Golden Grove. Further, Government will complete the designs and commence construction of 14 kilometres of farm to market roads at Parika and Ruby backdams, thus opening up access to over 330 farming households and over 2,000 acres of mixed crop farming. Government will also complete the designs for the extension of the four-lane highway from Diamond to Timehri, the East Bank Berbice Road, and Canals Polder Nos. 1 and 2 roads, and commence preparatory works for a new community roads improvement project. An amount of $6.6 billion is allocated for the construction, rehabilitation, upgrade and maintenance of roads in all the regions, including the Mabura Hill to Amaila Falls road, $650 million for the continued reconstruction and rehabilitation of 20 critical structures from Belladrum to Rosignol, $300 million has been allocated for the rehabilitation of pontoons, buoys, sheaves and shackles, anchor chains and other installations to improve the structural integrity of the Demerara Harbour Bridge, and $35 million for street lighting from Belle Vue to Patentia sections of the Linden highway, the Abary and Canje Bridges, No. 44 to 54 Villages Corentyne and the Moleson Creek stelling approach.
Government has commenced technical examination of the options for constructing a new bridge across the Demerara River. It is envisaged that, during 2013, Government will invite expressions of interest for a public private partnership for this project. It is also important to note, that despite the imminent completion of the four-lane highway it is already becoming evident that an alternative East Bank Demerara bypass road is necessary to ease congestion. To this end, Government will commence preparatory works for the design of a parallel secondary road to the East Bank Demerara Highway.
b. Air and river transport
The expansion and modernisation of the air and river transport infrastructure is vital to provide linkages between the coastal areas and remote communities in the hinterland regions to facilitate improved transportation, social integration, communication, the trade of goods and services and further improve our tourism base.
In 2012, amounts totalling $5.4 billion were expended by the sector including to pay a mobilisation advance to commence works on the upgrade, expansion and modernisation of the CJ1A, rehabilitate and maintain over 40 airstrips, procure high frequency radio and security systems for our international airports, and on the docking of vessels and acquisition of spares. The modification of Parika and Supenaam stellings was completed to facilitate the roll-on-roll-off ferry service which became operational in the third quarter this service provided substantial relief for the commuting public of Regions 2 and 3.
In 2013, a total of $5.3 billion has been budgeted for the upgrade, expansion and modernisation of CJIA. Works will commence on the construction of a new terminal building, aprons, air-bridges, taxiways and the extension of the runway by a further 3,500 feet. This project will provide Guyana with the infrastructure to accommodate the widest variety of aircraft type, and become an international travel hub. Additionally, $248 million is allocated for the rehabilitation of airstrips in Matthews Ridge, Imbaimadai and Kamarang and the maintenance of 43 other airstrips in Regions 1, 2, 7, 8 and 9. Further, a sum of $80 million will be spent to procure an Automated Dependent Surveillance Broadcast to bring precision and reliability of satellite based surveillance to our national airspace. Finally, $683 million is budgeted for the docking of several ferry vessels, the acquisition of spares, and the rehabilitation of the Bartica Stelling.
Government remains cognisant of the need to keep our main commercial riverain channels passable by ocean going vessels. In particular, access to the Demerara port by optimally sized vessels is a critical prerequisite to trade activity. Government is engaged, and will continue discussions, with the private sector on options to address the matter of dredging and maintaining the Demerara channel.
c. Sea and river defence
We are in a constant battle to protect and maintain the structural integrity of our sea and river defence structures and to develop sustainable shorezone management systems to contain the ravages of the ever encroaching Atlantic Ocean. Over the years we have suffered frequent intrusion, overtopping and inundation due to aged, porous or weak sea defence structures. As such, Government has continued to make significant investment to protect against flooding of our residential and farming communities.
In 2012, the sum of $2.4 billion was spent to reconstruct, rehabilitate and maintain critical sea defences throughout our coastline. Importantly, during the year,
one 189,273 mangrove seedlings were planted at selected locations which restored some
9.4 kilometre of mangrove forest. Additionally, our first geotextile breakwater structure was completed and made functional.
In 2013, the sum of $1.9 billion is budgeted to ensure the further strengthening of our sea and river defences. Critical works will be done in Regions 2 to 7 in areas such as Johanna Cecelia, Blenheim, La Retraite and Abary. In addition, the mangrove restoration replanting programme will entail a further 115,000 seedlings in areas such as Devonshire Castle, Lima, La Belle Alliance, Richmond, Anna Regina, Kilmarnock and Bush Lot as we continue the implementation of the five-year National Mangrove Management Action Plan.
d. Drainage and Irrigation
Recognising the importance of agriculture to our national development agenda, and conscious of the negative effects of flooding due to climate change, the management and operational efficiency of our drainage and irrigation systems is key and critical to agricultural production and productivity and to maintaining the well-being of our nation.
In 2012, Government expended $7.1 billion on drainage and irrigation systems to continue to develop structures at Hope/Douchfour, procure long arm, excavators and pontoons and construct, rehabilitate and maintain drains, canals and other structures pump stations, sluices, and for the acquisition of fixed and mobile irrigation pumps. Digital surveys and aerial-photos of the coast from the Demerara to Mahaica Rivers, which included a computerised model of the conservancy, were completed and recommendations for improving water flow and drainage within the conservancy were presented. In addition, water level, rainfall and temperature gauges were installed to allow for the monitoring of water levels and rainfall via the internet.
In 2013, a total of $6.5 billion is budgeted for the final payments towards the acquisition of fixed irrigation pumps, the construction and rehabilitation of pump stations in Regions 3, 4, 5 and 6, the completion of the Northern Relief Channel and associated drainage structures, the rehabilitation of intake structures at Ann's Grove, Hope, Annandale and Nancy, the excavation of outfall channels in the regions, the rehabilitation of pontoons and excavators and relief sluices such as those at Maduni and Sarah Johanna. This year would also see the completion of a safety and feasibility analysis of the East Demerara Water Conservancy Dam where the existing earthen dam and structures will be evaluated and recommendations made for necessary improvements. An analysis would be completed for villages along the East Coast of Demerara which are vulnerable to flooding and recommendations presented. Further, a plan for operating the conservancy and a detailed list of works for improving flows and discharge will be completed this year.
e. Energy, Power Generation and Supply
The provision of a reliable and affordable energy supply is the cornerstone of our competitiveness and development policies. To this end, Government is dedicated to creating the enabling energy environment that will serve to catalyse increased production of value added goods and improve the quality of life of our citizens.
In 2012, an amount of $15.9 billion was invested in the electricity sector to procure 3 Wartsila generators with a total capacity of 26 megawatts, install a 1.9 kilometre submarine cable linking Kingston and Vreed-en-Hoop, energise 13.8 kilometres of overhead transmission lines between Vreed-en-Hoop and Edinburgh, complete two new substations at Vreed-en-Hoop and Edinburgh and expand the Kingston substation, replace 11,989 regular meters with prepaid meters, and install 565 Itron meters on new connections.