With the world market price for rice at a 30-year low of US$208 per tonne, millers and exporters say the industry's indebtedness to the banks must be resolved immediately and other steps taken to tackle unfair competition.
This was stressed by president of the Guyana Rice Millers and Exporters Development Association Ltd (GRMEDA), Harri Bhajan Persaud at the 8th Annual General Meeting of the body on Tuesday. Persaud also urged that there be a transition from family-owned and operated enterprises to more "opened-up" businesses.
"Failure to urgently resolve the problem of indebtedness of the industry could have far-reaching consequences. We do not have to be reminded of the enormous difficulties experienced in trying to recapture lost markets," Persaud said.
A rice committee set up by President Bharrat Jagdeo and which included bankers had several weeks ago suggested that the government take over 75 per cent of the industry's $12B debt whilst the bankers would forego all the interest. In return, the banks would have been given a waiver on the taxes on the bad loans provisions to be written back into their books. President Jagdeo did not find favour with this proposal and said he had no intention of bailing out the sector.
Since that proposal, there have been discussions between the government and the Guyana Association of Bankers on a new proposal - outside the ambit of the rice committee. Under this proposal, banks would be willing to forego approximately $5 billion in accrued interest owed by the industry once the government grants a waiver of taxes equivalent to $2.7 billion on the $6 billion in provisions to be written back into their accounts. Bankers would then be willing to renegotiate the $12 billion over a 10-year period at a variable interest rate. Working capital for the industry would also be looked at under this proposal.
Third year
Persaud said the financial crisis in the industry has gone into its third year, with many farmers and millers still heavily indebted to commercial banks and suppliers.
Factors which contributed to this include: the closure of the Other Countries and Territories (OCT) route to the European Union in 1997; the decline in the world market price in 1998-99; the depreciation of the Euro against the US$; adverse weather conditions during El Nino and La Nina; severe floods in early 2000; and high interest rates with short payback periods.
He said the factors coupled with the unavailability of working capital added to the high burden of indebtedness.
"It becomes necessary therefore that the problem of the burden of indebtedness be resolved immediately in order to stem the present decline," he stated.
He recalled that a committee was formed two years ago by the Minister of Agriculture, Reepu Daman Persaud to identify problems of the industry with a view to coming up with proposals to resolve them.
The GRMEDA president declared that this was done and the proposals submitted to the minister but no action was taken.
President Jagdeo then appointed a rice committee to address the problem of indebtedness and make recommendations.
"There continues to be a general feeling of disenchantment by the many farmers and millers at the very slow progress being made so far," he said. "It is hoped that a definitive statement will be made very soon and that it would be to the benefit of all the stakeholders associated with the rice industry in Guyana."
Quality management
Persaud stated there was the need for the introduction of quality management systems in the industry; improving drying, storage, and milling efficiencies; and greater interaction among researchers, produces/processors and traders.
The world market price for rice has reached a 30-year low of US$208 per metric tonne from a high of US$420.
The industry within the last year has already suffered a 20% decline in paddy production and a 27% reduction in export earnings.
Persaud said this trend was likely to continue since a majority of farmers and millers did not have access to working capital.
He reported that the future of Guyana?s rice in Europe did not look promising and it would not continue to enjoy a preferential market.
He said the changes taking place in Europe, such as the Everything-But-Arms (EBA) initiative and the conditionalities associated with the issuing of licences have made the situation difficult.
The CARICOM market, especially in Jamaica, is of major importance to Guyana but this, too, was being affected because rice continued to be imported by that country through the PL 480 programme which was not subjected to the Common External Tariff (CET).
Another major concern for Guyana was the concessions being granted to the US-owned rice mill in Jamaica to import paddy without paying the CET.
Trinidad and Tobago, on the other hand, continued to raise objections based on the non-uniformity of the colour of Guyana's parboiled rice and has been importing from extra-regional sources without paying the CET.
Penetrate markets
Persaud felt that the industry needed to aggressively penetrate markets in the wider Caribbean, Latin America and South America with active support from government.
"My personal view is that there are certain areas [in the local industry] that need attention," the GRMEDA president said. "Firstly, there is a need for a thorough review of the rice milling operation to determine the level of operating efficiency. Secondly, there is a need to review the new paddy lines that were released recently. The feeling among many farmers and millers is that the blast disease problem has been solved only to be replaced by an equally serious disease. Thirdly, though not the least, there is a need to restructure and re-engineer our business to address the challenges taking place globally."
Persaud reported that the first meeting of the ACP/EU Joint Working Party on Rice was held in Brussels in March this year.
An initial meeting was held between representatives of Guyana and Suriname, the two ACP rice producing countries, with the purpose of developing a coordinated position for presentation to the EU.
Several issues that impact upon the competitive position of ACP rice in the EU market were discussed.
These included the EBA initiative; removal of duty on ACP rice; the quota for the OCT route should be in addition to the direct route quota; fast-track the process for the conducting of a diagnostic study of the ACP industry; review existing tranches to coincide with national harvesting seasons; and review the system of security deposits.
Within the framework of the Joint Declaration on Rice attached to the Cotonou Agreement, the following actions had to be conducted: A diagnostic study to identify the constraints affecting the development and sustainability of the rice industry; national and regional plans to address the constraints identified in the diagnostic analysis; preparation of finance proposals that incorporate the institutional structure for implementation, mechanisms to support the implementation as well as identifying the responsibilities of the various actors at all levels to guarantee future sustainability.
Persaud said the diagnostic study was completed in June this year and the terms of reference for consultants to undertake national and regional plans have been submitted. The recruitment of consultants was expected to take place shortly. Political intervention was now needed to push the process forward, Persaud said.
A strategic plan for the industry in Guyana was also undertaken earlier this year with support from the Inter-American Development Bank.
The purpose of this was to determine a 10-year vision for the rice industry and to develop strategies.
The strategic planning process lasted four months and the final document was submitted to the Guyana Rice Development Board (GRDB) in May.
One of the outcomes of the strategic plan was the establishment of a steering committee which is due to meet on a regular basis to monitor and evaluate the implementation of the plan.
Persaud said GRMEDA continued to face financial difficulties and this was not being helped by the fact that GRDB has not fulfilled its financial obligation to the association.
Persaud was unanimously re-elected as president for another term.