The Intermediate Savannahs

Frontier Farming Falters

While private investment will ultimately determine the success of The Intermediate Savannahs project , developers need more help from the government.

"Oh, give me a home, where the buffalo roam,
Where the deer and the antelope play,
Where seldom is heard a discouraging word,
And the skies are not cloudy all day."

That 1811 song ôHome on the Rangeö was the signature tune for a huge movement of Americans into the continentÆs inhospitable heartland to farm and feed a young nation. GuyanaÆs attempts to settle her interior came much later and to date have never taken root.

The Intermediate Savannahs occupy a belt of grass land covering an estimated 2000 square miles. They are roughly divided into three regions bisected by the Berbice river at a point roughly100 miles from the sea. In the south there are the Kibilibiri and Eberoabo Savannahs; in the centre Ebini, Kimbia and Tacama Savannahs and in the North the Wiruni Savannah. The terrain is undulating with a mix of open plains, forests and swamps. The soil is very different from the coast being sandy and this has always presented the possibility of growing different crops. The advantages to farmers are large acreage of available land; relatively little clearing of vegetation required and minimal land preparation; much less capital investment needed in drainage systems compared to the coast; and the opportunity for large scale fully mechanized crop production.

The History

However the soil is drastically deficient in key nutrients for both plants and animals and in the 1920Æs an attempt by the Rupununi Development Company to settle cattle in the Tacama area was unsuccessful.

With the establishment of the Ebini Livestock Research Station in 1941 a programme was put in place to introduce better grasses and this eventually led to its conversion in to a commercial enterprise the Livestock Development Company . LIDCO still owns and operates the Ebini Ranch but there is currently minimal activity .

Meanwhile in the 1960Æs the Ebini station started research into the cultivation of corn and soyabean for use in poultry stock feeds. It was the time for grand government projects and Global Agriculture was launched in the Kibilibiri savannahs. While soyabeans, blackeyes and peanut were grown successfully the government had to give the entity subventions as the cost of production was unsustainable. In 1975 the Guyana Agriculture Produce Corporation briefly took over Global Agriculture but operations ceased soon after. At the same time The Guyana National Service started cotton farming in the Kimbia Savannahs . This was a classic self sufficiency project that was to have seen cotton sold to a government cloth manufacturing plant. By 1975 there were 2000 acres under cultivation but this too faltered from poor financing resulting in tardy arrival of inputs and neglected farm machinery.

And in 1976 Caricom Corn and Soyabean Company jointly owned by the governments of Guyana Trinidad and Tobago and St Kitts and Nevis started production of soyabeans corn and black eye peas as a minor crop. There was some progress with acreage under cultivation reaching 2500 after three years though still short of the 10,000 acres projected. But once again cost of production made the price for corn higher than imports. Soyabean yields were also too low.

The size of the operation and the complexities of shipping large amounts of fertilizer, along with the distance to market made the venture uneconomic and by 1982 the project was abandoned . And so ended the first troubled chapter of GuyanaÆs experiments in frontier farming.

It was President Cheddi Jagan who resurrected the concept at a time when almost anything seemed possible. With support for planning and development coming from the Organisation of American States a number of studies were done commencing in 1994 and by 1997 the Intermediate Savannahs Project or INSAP was formed with eventual funding from the OAS of $252,000. This went in part to a marketing drive with glossy brochures to attract investors and the response was impressive. After a process of assessing 12 business plans 6 projects were approved following considerable delays. These were mostly related to issues with The Lands and Surveys Department and many investors expressed great frustration over the handling of their applications. By December of 2001 the OAS grant had expired and INSAP came under the auspices of NARI where it is hoped more resources can be brought to bear. NARI has a research station at Ebini although some farmers have said the location is too remote.

The Investors

Goldfield Inc has a lease for 7000 acres in the Tacama Savannahs of which it is presently farming a 500 acre plot of various legumes and citrus tress. The company has so far invested $50m drilling two wells and erecting buildings for the 50 workers now on the site. The red peas, blackeye peas and corn are being rotated on a three year cycle given the poor quality of the soil . The main problem is the acidity caused by the high aluminum oxides. This traps valuable phosphates and is actually toxic to plant roots at high enough concentrations. Soil management is therefore critical and firstly limestone has to be added at a rate of 1 2 tons per acre. Goldfield has to truck the lime and fertiliser in at a cost of $40,000 per trip. Still the company is encouraged by yields so far with some 800lbs per acre for red beans and blackeye peas 900lbs . But it is the corn with yields for 2001 of 1.5 to 2 tons which Goldfield is most keen to cultivate given the ready market of feed mills in Guyana. Presently some mills buy from American exporters under the PL480 programme. However with prices around $15 per lb it would require careful management to make production profitable. In addition to legumes Goldfield is planting 40,000 pineapples with the intention of boxing the fresh produce on site for shipment straight to the airport.

This would require more investment and the company is looking for joint partners or long term financing. Goldfield also has young lime trees and is cultivating passion fruit on a large scale along with fifteen varieties of pepper.

The Dubulay Ranch operated by Alex Mendes is the best established farm in the region .Located on 10,000 acres in the same Tacama savannahs on the West Bank of the Berbice river it was first set up as a beef production unit during the late 1950Æs. Lately Mendes has had some success with the acid tolerant MINICA 4 red pea developed by the Ministry of Agriculture and the Inter American Institute for Cooperation on Agriculture or IICA (hence the name.) All cultivation is done mechanically from planting to harvesting and last year's total production was 90,000lbs which supplied a large share of the local market. However costs have been high and small scale production is not considered feasible. Prospects for soyabeans and peanuts look more promising .There are also 60 acres of citrus trees approximately 5 years old although there have been difficulties with adequate nutrition .

Demerara Cashew Nuts is situated in the Kibilibiri Savannahs on 9000 acres. The owner Randolph Rambarran plans to set up a factory to process cashew nuts for export . However the project is stalled due to problems obtaining good quality seeds . The Brazilian agency EMBRACO has them available but is not willing to deal with him directly and he is apprehensive to buy from private nurseries without quality assurances .He has planted 35,000 local plants but half of these have died and the operation is presently at a standstill. Finding good root stock for grafting is also presenting a problem.

Rambarran has invested $80m in housing units, nursery sheds and field access roads.

He also has his own ship and plans to transport inputs through the Berbice river.

Tameer Bachir is developing 800 acres at Eberoabo Savannahs and has been on the land since 1994 with mixed success having to abandon 25 acres of citrus trees. He has 5 acres of Brazilian cashew trees and another 50 acres of the local variety.

Richard Lopes also at Eberoabo is occupying 1200 acres with goats and mixed breeds of cattle. Some of this is sold to communities along the Berbice river. Clement Sealy is also in the same area with 1000 acres and currently has 300 head of goat.

Gerald Mekdeci has had his application pending since 1994 and his plans to open a tilapia farm in the eastern Tacama savannahs have had to be abandoned due to environmental reasons .Presently he is farming a small plot of cash crops but intends to grow ,on a larger scale, exotic vegetables such as cauliflower and broccoli as he sees the need for high value produce to offset the costs of inputs and transportation to market.

In the Ebini Savannahs, Georgia Caribbean International intends to plant 50 acres of fast growing pawlonnia trees. A trial planting on five acres has seen the trees grow to 3.5metres in seven months although full growth would take ten years. In the interim the company plans to intercrop which will also help to add nutrients to the soil while supplying some income for operations.

Most notably 52 small farmers in the Wiruni Savannahs have recently had leases approved for holdings ranging from 1 to 40 acres. These farmers are residents of the area and have been planting red peas and watermelons for a number of years.

The Possibilities...The Problems

While there is activity in the region it is minimal and probably encompasses 12000 acres in total. Most investors are either being very cautious or are actually at a stand still after an initial burst of activity. There has not been the leap from small scale farming to large scale production and there are a number of reasons why developers are holding back. There are also investors who have done absolutely nothing with their grants and it has been suggested that many have used the project as a chance to grab land .The present rates per acre of $20 for the first two years,$30 for the next two and $40 for the fifth are not sufficient to present a punitive cost for non development. One idea is to adopt the unique Brazilian approach where farmers only pay for land they DONÆT use. Outside of that proposal, confiscation might be an option if the leases provide for that.

The primary concern for investors is marketing. Any large scale farming would produce quantities far too large for the local market and in the case of citrus and livestock would have to compete against producers on the coast. A pineapple grown in the poor soil of the savannahs has a distinct disadvantage over one grown in Canal No 1 both in access to market and application of nutrients. And even corn and soyabean would have a hard time competing against imports coming from huge subsidized producers in the United States even taking into account shipping costs. The PL480 is also more than just an economic device.

Agro processing such as an abattoir up to international standards with refrigerated storage, or a pineapple or cashew factory would be a better option .

Any developer must first be reasonably assured he can get a market for his produce at a high enough price .Some are now exploring partnerships with companies in the Caribbean who have access to markets in their own countries. With the onerous and, for many, protracted process of applying for land, most foreign investors would be dissuaded from entry. Applications are based on a ten year business plan and three agencies, the Lands and Surveys Commission ,the Ministry of Agriculture and Go Invest are all involved in assessing the venture. Then the final decision is made centrally by cabinet. Once that is done then duty free concessions for vehicles have to be arranged and this is one area where many developers are extremely frustrated. They complain that the system has no guidelines and that approval is based on negotiation. That presents uncertainty to investors since they cannot forecast their capital costs. It is a complaint heard throughout the business community and begs the question whether the present exemption system should be reviewed. Some argue that Go Invest should be given more autonomy in making such decisions and that clear criteria be presented upfront to investors before projects are started. The general impression from the business community is that the government works from a viewpoint of distrust as opposed to assuming equipment will be used for its stated purpose.

The cost of labour is much higher in the savannahs than on the coast both in wages and in benefits provided . Companies have to bear all housing expenses; food for workers has to be trucked in; and even entertainment provided to keep the employees down on the farm. In the case of medical emergencies, owners often have to drive workers 70 miles to Linden Hospital or boat them down the Berbice river to New Amsterdam at considerable costs. In other words the developers, despite paying taxes are playing very much the role of government.

Large scale production will be unfeasible without local labour or settlement by coastlanders. Meanwhile the communities along the Berbice river are actually experiencing an exodus engendered by lack of jobs and uncertainty over the bauxite industry. Water borne transportation is now down to a fortnightly private launch. From Ituni the road to Tacama savannahs has not been repaired since 1987 and many villages feel isolated . The Wiruni road is said to be in a worse state.

. Roland Fletcher was a consultant to INSAP until last year and he believes for the project to succeed the government must place more emphasis on development of the area both by building infrastructure and providing social services.

He notes that ôthe underpinning concept on savannah development did not originally embrace the economically disadvantaged riverain communities ....and anyone who feels that substantial skills and labour can be easily imported from the major urban centres to satisfy development projects need only to review the 50 year history of economic activity ... If the local population is emigrating because of social and economic shortfalls then one would hardly expect any substantial new settlement through coastal migration to compete for limited jobs in a depressed environment exacerbated by the economic crisis in the neighbouring bauxite communities. Fletcher expresses hope that the small leases recently approved will bring stability to the Kimbia community and that this would then inspire outside developers. In addition the savannahs present opportunities for the Linden Economic Advancement Project.. "but not without genuine dedicated support from the government .. that must ensure reliable transportation ,good basic infrastructure and improved social services."

The Intermediate Savannahs have presented opportunities for decades. The big socialist inspired projects of the seventies failed and this recent investor led approach is threatening to wither in the arid soil . What seems to be needed is a third way with responsive government involvement encouraging investors to take the risks necessary for frontier farming to become a reality.

National Development Strategy can be used as a guideline for progress

Mr Michael Correia, Jnr, the President and Chief Executive Officer of Correia Mining Company Limited, continues the series of comments of selected leaders

Mr David de Caires has asked that I give my views, in my capacity as a younger member of the Guyanese business community, on what is required to move business, and as an extension the country, forward in the short to medium term.

I would like to say that I am honoured to be asked and would like to start by thanking himself and his wife Doreen for providing an invaluable service to the country via the Stabroek News. I shall attempt to give a frank personal perspective on what I believe to be important areas that we need to concentrate upon in the near future. I realise that in so doing there is always the risk of being labelled to be in favour of some group or the other. I would like to assure the readers in advance that this is not the case.

One of the most important steps that civil society leaders can take, who are not already entrenched in our political fabric, is for them to speak out at every opportunity and express their own unique and different perspective. This is a very important trait of a strong democracy.

There is an old and wise saying "where there is no vision, the nation will perish", and in that light, I should say that we are already fortunate to have that 'vision'. This 'vision' of course, is captured in the "National Development Strategy", a document with inputs from hundreds of respectable citizens of civil society. It should be used as a guideline for government and all political parties as a broad indication of what our citizens feel is the right way to move this country forward. It would be healthy and desirable for discussion to take place in Parliament to engage our political leaders to work towards a Bi-partisan Agreement on extracting the elements of that strategy that can mutually be agreed upon. This can then be used as the basis for a national development plan that can be approved by Parliament. This plan will then be followed by whichever government is in power.

It is also important that our political parties define more clearly their philosophies, be it capitalist, socialist, labour, business, conservative or liberal. The present system of race based politics that has been created by the 'divide and rule' tactics of our past colonial masters is all we know at present and needs to be challenged.

I do not share the view of the majority of people that there exists an unusual racial problem in Guyana that requires special means or measures of resolving. If you look closely at other countries in the world, including the United States, I believe you will find that the racial problems are no better than ours, and in many cases in fact worse.

I believe that the problem in Guyana lies with our politicians who continue to use a race based political strategy in order to maintain a significant voter base as a means to win the elections. I believe we have more of a problem with political discrimination, than we do with racial discrimination, and the two are often confused with each other. Our politicians who promote race at every election, seek to infuse racial passions by creating fear and insecurity of the other race with the result that voting becomes based on self preservation and survival rather than policy.

This unhealthy political environment can be changed by a radical restructuring of our political system, which I believe is a process that is already slowly underway, but at present is meandering all over the place. The political losers of the race game will always be the minority, and I believe that even with the risk of destroying their race support base, the onus will be on the minority opposition to make the serious non-racial changes necessary, as the only acceptable way of winning elections in the future. This will also force the majority party to change their tactics after they finally lose. We will then be free at last from our racial shackles for good. I believe that the younger politicians will move in this direction in the future. I would classify this step to be the most important change that has to be made over the next elections, if we are to go anywhere quickly.

In terms of what actions need to be carried out now, I believe that the Government has to make serious changes in reducing government bureaucracy - by that I mean reducing the time that it takes to make a decision - and to re-examine the structure used to execute these decisions very carefully.

The decentralisation of decision making and empowerment of Ministers operating in a clearly specified framework would be a good start. If we are operating a market based economy and the private sector is to be the engine of growth or put another way, is to be the major creator of jobs - the government has to understand that their role will have to be the facilitator, and not the producer, of that growth. Government revenue will come from taxation of the private sector and not through involvement in business. Some believe that the private sector exploits the poor and avoids paying taxes. This only happens if government allows it to happen, and this is where the learning curve of government has to kick in- how do you control thousands of entrepreneurs with the fear and greed emotions that are generated in businesses. You do that by putting strong emphasis on the strengthening of the regulating bodies and agencies, hiring people with the technical competence who can put in place and enforce the appropriate laws that are necessary to properly regulate the private sector and ensure a free and fair business environment for all.

Open competition should be encouraged with minimal protection. The private sector, over the last thirty years, has become accustomed to lack of competition, having to work with corruption and bad laws passed by an undemocratic government. Once the government has established a level playing field with new rules, our private sector will adjust their practices to suit.

Government needs to seriously consider their dilemma of not wanting or not having the ability to pay market value for skilled technocrats. Money for this will have to be found, even if it has to be financed, whether they are recruited locally or overseas. The production capabilities of those individuals, if selected properly, will more than justify their cost to the nation. Making the public service smaller, better paid, and more efficient should be a major government priority.

Strengthening of the Guyana Police Force and re-defining the role of the Army must be looked at seriously. In so doing, government will ensure business and consumer confidence and will lay the foundations for a more fertile ground for local and international business in the future.

We also need to focus on the areas of:

l. Land distribution which should be all inclusive, catering for all classes, lower, middle and upper and foreign and local businesses, but most important, ownership of the land must be in the form of a bankable document - we have enough land to give every single man, woman and child one acre of land each. If Iwokrama can be given one million acres of land for environmental conservation, why can't Guyanese be given affordable land in abundance, after all, to whom does the land belong?

2. Power generation - the possibility of purchasing hydro-power from the Guru dam in Venezuela should be looked at, as I believe the Brazilians plan to do in the State of Roraima, as well as investing in other hydro-power projects. This may be the most cost effective way of generating power in Guyana in the future. If we want manufacturing to boom, we have to give them cheap power. This should be a target area for foreign investment.

3. Health - one of the reasons qualified citizens are reluctant to come back to Guyana is the state of our health care system - while we have spent a lot of money on the Public Hospital - we have few doctors to administer proper health care. One way of dealing with this is to encourage highly skilled medical doctors to return to Guyana by giving them free use of private rooms and equipment in the Public Hospital, in return for them providing free days of public health care and training of student doctors and nurses. This can be done on the job and is a system that works well in Barbados and ensures that the poor have access to the same doctors as the rich. Doctors could be given land free for their homes and to set up their clinics as an incentive to come to Guyana.

Government should put in place a temporary city drainage, garbage and waste disposal plan, perhaps being executed under the Ministry of Public Works, until a proper local government system is agreed and functioning. The dirty cities are a major problem for the tourism industry.

4. Education- the government has done an extensive job of rehabilitating schools, but we need to find better means of keeping out teachers from leaving. Private schools should be encouraged as this will reduce the numbers of children in our already overcrowded public schools. Teacher training colleges should be developed and prioritised. Teachers should be given special privileges and teaching should be recognised as critical, in terms of skills required for the country to develop. Free land and tax breaks should be considered as incentives for teachers working in the public system. President Jagdeo's dream of a computer in every school must be matched with acquiring the skills required to do the teaching. Spanish and Portuguese should be the main foreign languages to be taught in our schools preparing our children for out inevitable regional integration.

5. Telecommunication - Government needs to take advantage of the latest technologies now available with particular attention to wireless. GT&T's monopoly contract should be re-negotiated in good faith, recognising that without GT&T investment in Guyana we would still be in the dark ages as far as telecommunication is concerned.

All Guyanese need to seriously re-examine our moral values, which are in dire need of an overhaul. We must demand higher moral standards for the leaders in the society or else we will be forever doomed to corruption and misery. I believe that we should not refer to ourselves as Indian, African or Portuguese. We should refer to ourselves always as Guyanese, and say the words "I am a proud to be Guyanese".

After we have a development plan in place, the next most important step is creating political stability. This can only come out of respect for the "Rule of Law" and in that context our constitutional reform process is most important because if we do not agree on the rules of the game we play, how can we respect each other| Unfortunately, political jockeying by both major parties, to give one party an edge over the other seems to be the only game that is being played. There still remains a golden opportunity to put Guyana in a structurally better position than our neighbours with our own customised, non-colonial constitution. The most immediate part of the constitutional reform needed now is an agreement on the system of local government.

6. Foreign Policy - I believe that our foreign policy focus should continue to target Europe and North America. Closer to home - Guyana should aspire to become the country around which Caricom can rally, and should take a leadership role in our pursuit of a Caribbean Common Market. Closer relations with Barbados and Trinidad should be a priority. Also most importantly, Guyana needs to pursue regional integration with South America, especially Brazil and Suriname in pursuit of the vision of being the English speaking link for the Caribbean, North America and Europe, to South America.

7. Physical Infrastructure - the priority development projects, in my view, to support our vision over the next 5 years should be the road to Brazil, with a Deep Water Harbour, strategically placed, the Berbice river bridge and the regional airport based at Ogle. These projects will ensure regional transport integration with Brazil and Suriname by road and air. The construction of the Caricom headquarters will set the stage for Guyana to become the driving force behind Caricom integration.

In addition, there should be an ongoing programme of constructing and maintaining interior access roads, ferries, bridges, wharfs and airstrips in order to unlock the tremendous wealth of our natural resources locked in the interior.

The diversification of the economy and the promotion of the sustainable development of our natural resources should be the major thrust of our efforts over the next few years, especially in the areas of gold, diamonds, timber, oil, hydro-power, nature tourism, fish farming, fruit and vegetables, beans, poultry, cattle and dairy farming. Simultaneously, a strategy for value added manufacturing should be developed and put in place. Government should also constantly review their tax system and eliminate all taxes that are counter-productive and provide little or no revenue to the country.

Free movement of capital with a monitoring policy to maintain low inflation should be maintained. A strategic plan to attract skills should be developed and activated. Incentives can be limited to a minimum investment amount, in the case of an entrepreneur, or a minimum contract period of service in the case of a skilful technocrat. This will have the dual effect of reducing abuse of the incentive programmes and encouraging investment in our country. The cost of capital is critical to our economic recovery, we only have to see how the USA and Europe have slashed interest rates to realise how critical this is to economic expansion. With inflation now under control,Government has room to slash the interest rates of Treasury Bills further, and should continue to do so to force the commercial banks to reduce their saving and subsequent lending rates. Competition for good loans will drive interest rates downwards. Maintaining a low inflation monetary policy will pressure the spreads that the commercial banks now have between the buying and selling rates. Reducing the reserve requirement should also be considered without compromising good banking practices.

In conclusion, I would say that it is most critical that we as a nation, never ever again lose our democracy. It is proven to be the best political system of government in the world today, made only imperfect by the people and the flaws of the human race. The balance between socialism and capitalism can and should be determined by the voters. Maintaining political accountability is every bit as important as maintaining corporate accountability. It is for this reason I am personally against the political parties merging into a National Front Government. Where there exist corporate monopolies - governments are the watchman of the people. In a political monopoly, who will watch the watchman? As a citizen of Guyana I prefer to have a choice.

We must preserve and strengthen our democracy and endeavour to make it the best democracy of this hemisphere - holding the traditional democratic values that all men are created equal and they have the God-given right to live, to be free from oppression, and to be free to pursue their own happiness, within a framework of the rule of law, that is put in place by leaders of their own choosing.

Guyana's problems may seem large to us Guyanese now but in reality, they are small problems to fix with the right leadership and the right direction. Our population is less than one million - the infrastructure required to support this is small compared to the infrastructure that will be required to support the more populated countries. Our land mass is large on a per person basis - our soil is fertile - we have abundant fresh water, we have abundant sunshine, we occupy a perfect spot in this world, near the equator, we have a beautiful mixture of race and culture. All that we need are leaders who see the good of this nation as paramount over their individual and respective party interests. There is a once in a lifetime opportunity to create history with the glory that comes with it. Surely this is personally more satisfying than just winning elections?

Guyana is our home and Guyanese are tired of running away from home. They want to live in their own country - they want to work here - they want to die here.

It is possible to make this a place we call all be proud of - so why don't we just do it.

Banking
Deposit Insurance

While there is discussion of employing deposit insurance to add greater stability to the local banking sector , two World Bank studies indicate that such schemes can actually have the opposite effect.

The common analogy used to describe a deposit insurance scheme's role in financial regulation is of a safety net in a circus which encourages trapeze artists (banks) to attempt achievable stunts (prudent risk taking) without the prospect of falling to their deaths and taking their customers' money with them .

Deposit insurance was first introduced in 1934 in the United States following a series of runs on banks which helped to bring on the Great Depression . Regulators realized that if the accounts of small deposit holders were guaranteed they would be less inclined to panic and withdraw their savings on news, true or false, that their bank was in jeopardy. The social and economic catastrophes that bank runs can engender are then less likely to occur.

It was not until the Post War period, however, that deposit insurance began to spread around the world . The 1980's saw an acceleration in the adoption of deposit insurance, with most OECD countries and an increasing number of developing countries adopting some form of explicit depositor protection. Recently the IMF has endorsed a limited form of deposit insurance in its code of best practices.

In Guyana, IMF officials have had general discussions with the private banking sector on the subject and the overall consensus is that deposit insurance would be a useful additional tool in helping to stabilize the financial sector . One caveat has been raised that in establishing such a scheme at this time it might send the signal to investors that the banking system is indeed fragile.

The issue is relevant given the recent mini run on the Guyana Bank for Trade and Industry fuelled by what can only be considered unfounded rumours considering the bank's asset base. But the pernicious local grape vine did manage to make a number of depositors withdraw their savings . Bank runs whether based on true or false information are eventually powered by their own steam and have the potential to be self serving in that a sharp decrease in deposits might be enough to actually damage a bank's financial position.

But while deposit insurance schemes help to prevent bank runs , their unavoidable side effect is an economic phenomenon called "moral hazard". Moral hazard arises when there are incentives for individuals to act in ways that incur costs that they do not have to bear . A typical case is that of property insurance ,because once someone has insured their house against burglary they do not have the incentive to be as careful as they would otherwise be to protect their property.

Two World Bank papers show that deposit insurance can and does have profound negative effects on a banking system's stability. The first study, "Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation by Asl _ Demirge Kunt and Enrica Detragiache is based on evidence for 61 countries in 1980 97, and finds that "explicit deposit insurance tends to increase the likelihood of banking crises, the more so where bank interest rates are deregulated and the institutional environment is weak.ö The second paper ôDesigning Financial Safety Nets to fit Country Circumstances. A Progress Reportö by Edward J. Kane of Boston College looks at ways regulators can mitigate the side effects of deposit insurance.

In all countries where banks are formally chartered by a specific government there is always an implicit form of deposit insurance as there is a generally held belief by the public that in the event of a systemic bank failure, the government will see fit to safeguard the deposits of its constituents. It makes sense for socio economic reasons and when there are political incentives .

A deposit insurance scheme on the other hand is explicit. It usually sets a level under which all savings are guaranteed and banks contribute a small percentage of their assets to a fund either managed collectively by themselves or by the countryÆs central bank.

Moral hazard is present in two forms. As Kane notes ô The major cost is to diminish depositor discipline on bank risk taking by strengthening the implicit guarantees that government officials otherwise convey. Explicit arrangements reinforce implicit guarantees by providing bureaucratic and political mechanisms for patching weak banks.

Where transparency, deterrency, and accountability are weak, installing explicit insurance

may be a great mistake. In contradistinction to the IMF, we hypothesize that the ambiguous and unfunded nature of purely implicit deposit insurance leads depositors in poor informational and contracting environments to demand a risk premium that is broadly commensurate with the risk taking capacity of their bank.

The more completely and more reliably government or private insurers cover depositors against loss, the less incentive individual depositors have to police the risks their banks can or do take. An unintended perversity of credible deposit insurance is that it undermines a depositor's interest in ethical responsibility to look out for itself by gathering information about an institution's financial condition and by reacting to bad news about this condition as soon as it is received.

In addition deposit insurance adversely affects bank behaviour .Kunt: As their ability to attract deposits no longer reflects the risk of their asset portfolio, banks are encouraged to finance high risk, high return projects. As a result, deposit insurance may lead to more bank failures and, if banks take on risks that are correlated, systemic banking crises may become more frequent. The U.S. Savings & Loan crisis of the 1980s has been widely attributed to the moral hazard created by a combination of generous deposit insurance, financial liberalization, and regulatory failure'. Thus, according to economic theory, while deposit insurance may increase bank stability by reducing self fulfilling or information driven depositor runs, it may decrease bank stability by encouraging risk taking on the part of banks.

How to mitigate against this influence is a challenge in designing a deposit scheme and Kane notes that there is not a one size fits all as each country's banking system and environment in which it operates are unique.

Kunt's study of 61 countries shows that up to 1997 33 countries had deposit insurance compared to 12 in 1980 .Most set limits on the size and nature of covered deposits with some as low as $376 in Tanzania . Schemes in other countries, although the trend is to move away from this, provide unlimited coverage. Recently five West African countries Congo, Chad, The Central African Republic, Gabon and Cameroon adopted a voluntary system setting limits of $3557 $5336 . Funds come from a charge on deposits of .15% and .5% of non performing loans. Closer to home Jamaica's scheme established in 1998 sets a limit of $5512 with bank contributions set at 0.1% on insured deposits. Trinidad's scheme sets a limit of $7957 with contributions of .2%. Coinsurance is also an option whereby depositors are contractually required to bear a share of their bank's accrued losses when their bank fails. About 15 countries make at least some depositors coinsure bank losses. In practice, putative loss bearers are either very large depositors, bonding companies, or subordinated debtholders.

In 22 countries the system is managed by the government, in 6 it is run privately, while in the remaining 7 countries some form of joint public and private management exists. Finally, in almost all countries membership in the insurance scheme is compulsory.

Kunt's study shows that setting the right limit on coverage is critical to mitigating moral hazard and through complex empirical analysis demonstrates that specific banking crises might have been avoided if the limits had been brought down to a level of 50% of per capita GDP. ô In the 1981 crisis in the Philippines the crisis probability would go from 21.0 percent to 3.8 percent; and for the 1980 crisis in the U.S. it would become 2.5 percent from 4.3 percent. Finally, the crisis probability in Venezuela in 1993 would have fallen from 17.0 percent to 12.5 percent. So the estimated effect of a change in coverage on fragility is not trivial. However Kane makes the point that "Because implicit insurance always exists, whatever explicit limits a government places on the insurance it writes matter less than it might formally appear."

Private Public Insurance Partnerships

Systems can either be managed by the banks or by the financial authorities or both . Kane notes that, "Differences in management and membership rules may also be relevant in shaping the impact of deposit insurance on bank stability. In a system managed by the banks themselves there may be less room for abuse than in a system managed by the government if banks have better information to monitor each other." He suggests a Private Public Insurance Partnership as "one approach to loss control where the.

partnership would seek to assign the government only the catastrophic risk and the particular loss control functions that are associated with bearing catastrophic risk. An immediate problem in implementing this scheme is to find ways to separate catastrophic risks from the privately insurable risks that private parties in a given society can credibly insure. A practicable screening criterion would be to insist that plan sponsors

establish just how satisfactorily the insurance functions they propose to transfer could be managed in the private sector in a crisis environment. The private deposit insurers would technically function as "sureties." They would act as third party guarantors that bond particular deposit obligations that an insured bank offered its customers. The deposit insurance law would insist that banks contract with a private surety to accept responsibility for absorbing the first "X" thousand dollars of losses that accrue to any deposit account if the bank were liquidated. This responsibility would lead private sureties to take over the first line of examination and loss control at every insured deposit institutionà Finally, each private surety would itself be subject to carefully targeted government oversight. Estimates of the loss exposure in a

surety's operations would have to be communicated regularly to the government overseer in each country in which the surety operates. If authorities judge that the surety's reserves have fallen to an inadequate level, prompt recapitalization would be required for it to continue operating as a deposit surety in that country."

Institutional Environment

Banking systems and their regulation are affected by the institutional environment in which they operate partly because the environment reflects the business practices and regulatory efficiencies . Kunt: "Advocates of deposit insurance often claim that the risk of moral hazard can be contained through effective prudential regulation and supervision of the banking system. The environment can be measured by "the degree to which the rule of law prevails ("law and order"), the quality of contract enforcement, the quality of the bureaucracy, the extent of bureaucratic delay, and, finally, the degree of corruption.. The institutional indexes capturing the quality of the legal system may also affect the relationship between deposit insurance and bank stability even if they are not accurate proxies for prudential regulation and supervision: in economies where the legal protection for creditors and investors is weak, so that the potential for strategic default, fraud, and abuse is higher, there may be more opportunities for gambling with insured deposits." The results of the study strongly indicate that "indeed good institutions (and, therefore, presumably better bank regulation and supervision) perform an important role in curbing the negative effect of deposit insurance on bank stability."

Kane also raises the question of the personal motivations of financial supervisors suggesting that in contrast to a fallen trapeze artist a banking crisis is often not immediately visible to the naked eye. "This indiscernibility creates opportunities for incumbent regulators to conceal and sugarcoat information about difficulties that occur during their particular terms in office. Precisely because top regulators do not want to see their professional reputation besmirched by being held responsible for a financial institution disaster, their ability to influence reporting protocols can be a mixed blessing. To the extent that regulators can block the flow of adverse information, their sensitivity to public criticism tempts managers and owners of insolvent institutions to reinforce this dangerous incentive conflict. They offer subtle and unsubtle benefits to top regulators who are willing to conceal an incipient crisis and to accept the social costs of postponing the strong public actions that may be needed to restore banking solvency. By helping to hide developing insolvencies, top regulators may reasonably hope to achieve a reputationally "clean" getaway. Most of the blame for allowing a crisis to develop can be sidestepped by patching whatever signs of crisis surface on their watch and shifting responsibility for recapitalizing the damaged banking system to succeeding generations of regulatory officials. Every country's safety net managers are pushed and pulled in contradictory directions. On the one hand, managers are expected to minimize the risk of a banking disaster. On the other hand, they are expected to minimize the cost of supporting troubled banks by subjecting banks to market mimicking disciplines.

Society must recognize the problem that opportunistically covering up evidence of

banking trouble and engaging in costly regulatory forbearance is a rational managerial response when safety net officials derive reputational and personal benefits from the strength of their political support."

Conclusions

Kunt concludes that while many depositors around the world are now protected ô the question of the effects of such schemes on banking sector stability remains an open one both from a theoretical and from an empirical perspective. Having analyzed empirical evidence for a large panel of countries for 1980 97, this study finds that explicit deposit insurance tends to be detrimental to bank stability, the more so where bank interest rates have been deregulated and where the institutional environment is weak.

Kane comes to much the same conclusion : "The weaker is a country's informational, ethical, and corporate governance environment, the more a wholly governmental system of explicit deposit guarantees is apt to undermine bank safety and stability."

Guyana with its many institutional weaknesses will have to think carefully before adopting such a system.

The Partial Scope Agreement

A little deal on the side

The trade agreement with Brazil has run afoul of CARICOM .Cheaper imports are on hold.

Exports to Brazil are already eligible for duty free concessions as set out under the Partial Trade Agreement signed with Brazil in June of last year.

But while Brazil had the treaty reviewed and ratified by its trading bloc organization ALADI, Guyana's concessions for Brazilian imports is running into some stiff opposition from CARICOM countries concerned they will lose their markets in Guyana .

At a COTED meeting on January 28th some members including Barbados and St Lucia had strong words to say about Guyana's agreement.

There has been considerable debate for a number of years over member states signing trade agreements with countries outside of CARICOM. Some have argued that such bilateral agreements undermine the principles of a common market while other countries claim their right as a sovereign state. These two positions were eventually reflected in Article 14 of Protocol IV which in 1997 amended Article 33 and 34 of the Treaty establishing the Caribbean Community.

It reads "Bilateral agreements to be negotiated by Member States in the pursuance of their national strategic interests shall: be without prejudice to their obligations under this Treaty ; prior to their conclusion be subject to certification by the CARICOM Secretariat that the agreement does not prejudice or place at a disadvantage the position of other CARICOM states vis a vis the Treaty ;where trade agreements involving tariff concessions are being negotiated,the prior approval of the Council for Trade and Economic Development shall be required."

That seems pretty clear. Then one might well ask how Guyana failed to follow the letter of the law with the Partial Scope Agreement. There was some urgency in the negotiations as Brazil was under a deadline to finish signing bilateral agreements by June 30th as part of its membership with MERCOSUR. They failed to get a deal completed with Suriname.

For Guyana the whole deal is now getting a bit messy. The CARICOM Secretariat is requesting that the agreement include provisions for a number of Articles in the Treaty of Chaguramas allowing for safeguard actions to be taken by a member state in relation to its trade with the rest of the Caribbean community .These would be equivalent to Article 50 of ALADI's Treaty of Montevideo .. Specifically the Partial Scope Agreement in its present form has some 800 concessions granted for Brazil from car parts to ham shoulders most of which are allowed in 100% duty free. Aside from the concerns raised by CARICOM states at the recent COTED meeting , a number of these products are on the List of Items ineligible for duty exemption under CARICOM rules. This category applies to products which can be supplied in the most part (70%) by local producers. That is the first objection as by law the exemptions represent a potential threat to CARICOM states.

Furthermore some of the exemptions on the Partial Scope jeopardise CARICOM's own trade agreements with the Dominican Republic and Cuba . The paper coming out of the COTED meeting had a thirteen page list of items which need to be removed from the Partial Scope and there is really no choice for Guyana and Brazil to accede to the request. Some of the categories struck off include bananas, plantains and other fruits and vegetables which normally attract a 40% CET . These are really not significant as Guyana is more than self sufficient in this area .More important are items such as varnishes and paints based on vinyl and polyester (15% CET); coffee affecting Dominican Republic; aerated and mineral drinks described as sensitive to Member states; lubricating oils and hydraulic brake fluid (CET 20%); shampoos, perfumes and toiletries Dominican Republic; camel back for retreading tyres; flat rolled steel products ,bars and rods ; plastics used in construction; barbed wire; oil and petrol filters; and a number of categories of textiles and clothing including the quaintly named petticoats ..

But the story is not over yet. The member states had until February 28th to submit additional products which could put them at a disadvantage. After that Brazil and Guyana will have to make the necessary amendments to the agreement and before (repeat before) signing the amendments Guyana will need to send the document to COTED for final approval. Later on it may also come to the point where CARICOM firms apply for relief from the effects of the agreement. The truth be told Guyana with little manufacturing is a lucrative market for CARICOM producers and they see Brazil trying to muscle in on the action. Trinidad exports eight times what it imports from Guyana. Barbadian manufacturers depend heavily on intra regional trade.

The Brazilian authorities are not making much of it and are expected to accede graciously to the changes which are minutiae in the larger scheme of trying to boost trade in the hemisphere. Much has been made over the building of a paved road to Lethem and how, along with a deep water harbour this would give Brazilian exporters access to the Atlantic . But most of the ôhigh falutinö rhetoric is coming from politicians in BrazilÆs northern states desperate for their own development. The federal government does not see developing the connection as a high priority. The fact is that Venezuela has a very nice paved road to Roraima and exports already flow along this route. An improved road to Lethem and the bridge will help to increase trade between the countries but there again a bureaucratic obstacle impedes the way. Intra state trade in Brazil is a big money spinner for state treasuries and goods crossing from Manaus into Roraima attract a tax. This includes the presently negligible amount of exports to Guyana and to date no cargo agreement has been put in place to make these goods exempt although it is hoped one will be established before the Partial Scope comes into full effect and the bridge opens .Another area which will help to increase trade relations is the scrapping of visa requirements by both countries. Presently Guyanese businessmen only receive a three month visa and it takes two days or so to be processed. Guyana requires a visa from visiting Brazilians but in practice few arrive with one because with there being (inexplicably) no Guyanese mission in Northern Brazil all passports have to be sent to the embassy in Brazilia a process which takes some weeks. It is worth noting that Guyana is the only country with a common border with Brazil which still requires a visa. But any scrapping of the current arrangement will require reciprocity.

With trade stalled pending the renegotiation of the agreement, importers are becoming impatient .One local tyre distributor had hoped to bring in supplies duty free thus avoiding the 30% tariff . Even with the increased shipping costs out of Sao Paulo it means a substantial savings in costs. Funnily enough Trinidad which also signed a Partial Scope agreement with Brazil is reportedly going ahead with exemptions despite also being presented with a list of ineligibles by CARICOM. It is in fact Trinidad which started much of the debate over bilateral agreements with its initiation of trade negotiations with both Mexico and Costa Rica.

CARICOM in its 2000 Caribbean Trade and Investment Report notes that this ætwin regional and single country' approach to ôhemispheric insertion could exacerbate any polarisation tendencies. For example if Trinidad and Tobago were to permit Costa Rican products to enter its market duty free ,this would make it possible for the latter to compete on equal terms with CARICOM producers for entry into that member country's markets. At the same time that Trinidad would have effectively made it more difficult for the other member countries to enter its market, it would continue to enjoy the protection that those countries provide for entry of its products via the Common External Tariff . This would tend to produce distortions in the Caribbean integration process and might accentuate asymmetrical tendencies in the distribution of benefits from intra regional trade particularly if it engenders tensions between member states or results in demands for compensation to industries and firms adversely affected." The report suggests that what might be considered building blocks for Caribbean insertion into the hemisphere might well end up being stumbling blocks to the creation of a Caribbean Single Market and Economy. Trinidad of course sees it differently given its drive to develop and diversify its export markets. The Minister of Foreign Affairs said such bilateral agreements "allow strong states to become stronger ..the better able to help the weak and not be shackled by mediocrity." It is strangely reminiscent of the children's story of the big bad wolf when the little girl remarks what big teeth he has.

Small Business

Paying taxes for the Self Employed

However one might feel about the way the government spends its revenue, paying taxes is a duty all gainfully employed and self employed persons are required to do. For self employed persons this can be onerous in time and expense. But it makes sense to follow the law because there are advantages to bringing a business into the tax net. Many banks require tax returns as proof of income, before they will offer financing .Secondly being legitimate, a business is free to promote itself and expand without fear that the tax man will coming knocking at the door. The third advantage is that by being required to keep records of revenue and expenses a businessman will start to get a better idea of how his operations are running and where cost savings could be made. It is recommended that you get advice from an accountant on how to set up your book keeping accounts and how to go about filing tax returns.

For self employed persons taxes are paid quarterly April 1, July 1, Ocotber1 and December 31 of the same year in which the income is earned . The taxes are based on the previous yearÆs income and then divided by four . First time filers must estimate their profits and make payments accordingly.

Taxes on income start at $216,000 per annum or $18,000 per month free of tax. The first $134,000 or $11166 a month is taxed at 20% and income above that attracts a rate of 33.3%.

Here is a typical example for a small business person

Last year's earnings 1,000,000 (83,000 per month)
Subtract allowance 216,000
Chargeable Income 784,000
Tax at 20% of 1st $134,000 26,800
Tax at 33.3 on balance 216,645
Total tax 243,445
Quarterly payment 60,861

If at the end of the year (April 30th) your income is lower than the estimate you are entitled to a refund and conversely if it is more an extra final payment will be needed.

Self employed persons are allowed several categories of expenses as deductions . That is why it is so important to keep proper records and all your receipts so that if queried you have documentation .

The deductions include:
Salaries and wages paid
NIS paid on behalf of employees
Bank interest and charges
Stationery postage and stamps
Rent rates and taxes
Motor vehicles operating expenses
Repairs to premises
Electricity and telephone
Bad debts owed to you
Maintenance of plant, machinery and equipment .

The list therefore gives many legitimate opportunities to arrive at a person's genuine income and what many self employed persons find to their alarm is that they are not quite as well off as they might have thought!

The claim for bad debts must be accompanied by the name and address of debtor ,the amount of debt, the date on which it was incurred; the reason for writing off the debt and the actions taken to collect it.

There are certain expenses not allowed .These include

Domestic and private expense. (The maid's salary is not deductible.)

Any disbursement or expenses not being money wholly and exclusively expended for the purpose of acquiring the income.

Any capital employed in improvements except land development ;any capital sum withdrawn or any sum employed or intended to be employed as capital .

Rent of, or cost of repairs to any premises or part of premises not paid or incurred for the purpose of incurring income . So if you live above a business repairs to a kitchen would not be deductible. Any sum recoverable under an insurance or contract of indemnity.

Depreciation is another area where the amount of taxable income can be reduced . All equipment, vehicles and buildings suffer wear and tear and lose value. An old car is obviously worth less than when it was first purchased. Each year you can calculate that depreciation based on the purchase cost. The rates differ depending on the asset with motor vehicles attracting 20%; furniture and fittings10% ;buildings 5%; boats 10% .Office equipment such as computers attract a 50% rate ;and plant and machinery 20%. There are certain conditions applied to these deductions which can better be explained by an accountant.

In conclusion the tax system pretty much bends over backwards to give self employed persons every opportunity to pay taxes only on what they truly earn. Careful book keeping practices can help you take advantage of this so that when tax time comes along writing the check is not so painful.

Micro business

Making Cassava Bread

Patricia Sam has been making and selling cassava bread since she was a teenager like her mother, grandmother and great grandmother before her.

Patricia is 41 and lives at Ann's Grove on the East Coast Demerara. She is one of 23 children. She has eight of her own and as a single mother supports her family entirely form her sales. She has no relatives abroad. It is a lot of hard work as she plants her own cassava on six acres in the backdam behind the village. Often before day light she is out in the fields. She normally makes bread in the early part of the week and then goes off to sell on Friday and Saturday , taking a minibus usually to Hopetown and Mahaicony and then walking through the villages with a basket. She has been doing this for a number of years and has a regular set of customers. But her main buyers are supermarkets in Georgetown including C and F Supermarket, Guyana Stores and The Guyana Marketing Corporation . In total she sells around two thousand packs a month at $90 each. She keeps no records and does not know how much it costs to make the bread. A sugar bag of cassava costs $3000 and after that her biggest expense is electricity for the mill . Each packet she sells carries a very small label saying "P. Sam's Bakery, Ann's Grove."

Her house is about as far as you can go in the village before the farm lands start .In her front yard there are a set of zinc sheets raised off the ground on which are lying rows and rows of bread drying in the sun . Patricia is at the fireside quickly pouring the flour into round moulds and then as soon as they get a little firm flipping them over on the clay surface heated by coconut shells. The smoke and heat are tremendous and it appears primitive. But she can churn out 1000 slices in a morning after grating the cassava and squeezing out the bitter juice which she uses to make casareep. She has a machine to do the grating and milling to save time but would like to get another one since it is getting old. She also makes quiches, a kind of cassava bread sandwich with grated cocunut , ginger and other spices in the middle. This she sells for $30. Sam has never seriously tried to get financing she once inquired at IPED but her friend says they take too long to approve the loan and then they want you to take transports and all kind of documents. The lack of financing has not stopped her although she is probably in the same position she was ten years ago. It is a condition many very small business people find themselves in as they cannot seem to grow into more established operations. Whether this comes from a lack of financing or the unwillingness to take such risks is unclear. Many proprietors are poor with families to feed and they may not be willing to jeopardise the income they already earn. As the only worker Patricia would be hard pressed to produce more than she does now and the local market is quite limited. So she is looking for a regular market overseas either in the Caribbean or the United States as she has sold to many overseas Guyanese to take back to America. She supplements her income by making pepper sauce although right now she says pepper is scarce. And she does floral arrangements around Christmas time and for Valentine's Day.

There is little time for her to take a break and even on Sundays she tidies up and gets ready for the week .The hard work has meant she had enough savings to recently build a sizeable wooden house and she can afford to send her children to school.

Get Unwired with WLAN

How many yards of tangled cables do you have snaking around your office connecting computers? There is a simple solution to getting rid of it all and never having to buy another piece of cable even if you add many more terminals.

It is called WLAN which stands for Wireless Local Area Network. WLANs erase the need to lay and install cable into offices or stores, replacing traditional cables with radio wave signals.

Wireless LAN networks are comprised of three main devices. Access Points for receiving, Desktop stations for workgroups, and PC cards for mobile applications make up the components of any WLAN. Working together these small units not much bigger than a book replace the need to run "cable" for nearly every situation.

Access Points are the central hub for any wireless network and work best mounted on a wall sending out information to and from its central location like the hub of a wheel. This is done using the free band 2.4megahertz frequency. The Access points can also connect to wired networks via standard connections so you don't have to change the whole system all at once.

The second major components of all WLANs are the Desktop Stations and Adapters. Desktop stations and adapters connect individual PC's or workgroups to the wireless network. Acting as the spokes in the WLAN wheel, these small units send and receive the user data throughout the network. By interfacing with a NIC card in your desktop computer you can be connected to your network without running cables through your office.

The final piece of WLAN equipment is the PCMCIA card adapter. The PCMCIA card works similar to desktop stations, it has the ability to communicate with access points and participate in your wireless network. The PCMCIA card can be utilized in any hand held device that has a built in PCMCIA slot.

This makes it easy for employees to move around the office

without having to plug in their laptops to a terminal every time. And moving desktop computers to new locations becomes less of a hassle for technicians.

The speed for the popular 3 Com WLAN system is 11 megabytes which is adequate for most communications and 63 users can be wired in at the same time.

There are however some drawbacks . The power limit of the 2.4 GHz frequency band is 1 Watt, and signals in this band tend to bounce off solid objects, causing delays in data delivery. It does not cause interference, but 'absorbs' any interference you like to throw at it such as cordless phones but not cellular phones, wireless security cameras and microwave ovens. WLAN's work best in open plan offices with partitions and have a horizontal range of 300ft. They do not have the power to transmit through thick walls or floors and ceilings. This is easily corrected by installing another hub in a different location and wiring it to the existing network.

The security of WLANs is different from wired LANs. WLANs are far more vulnerable because of badly implemented security in the concept itself. However, hackers do need to be in close proximity of the network. Parking a car in the parking lot of a large enterprise will often be close enough. There is special software on the market to address this threat.

The investment is minimal with an access point at NETCOM retailing for US$700 and PCI cards for desktop and laptops around $120 $125 each .

There are versions of WLAN that can also go outside the office connecting buildings up to a distance of three miles away. These work with directional antennas and do require line of sight .Rain can also present a problem with data transmission. This system would be useful for stores with bonds or other branches in separate locations enabling computer networks to communicate with each other.

Getting out of the Office

All work and no play makes Jack a dull boy is how the saying goes . For many Guyanese businessmen faced with the uncertainties and unique difficulties of doing business here, sports and other pastimes give them an opportunity to unwind.

Here four of them tell Stabroek Business about how they enjoy life outside the office.

Dennis Beepat Managing Director Beepat and Sons and dedicated bridge player

I have been playing bridge ever since secondary school, and competitive or duplicate bridge since 1982. Duplicate bridge means pairs play the same hands in the course of a match and compare how they play them. This removes the element of luck and you have to rely on your skills at bidding for and making contracts . If you don't have good cards then you have to know how to deny your opponents making their contract.

The thing I have learnt from bridge which may have helped me in business is that no two persons ever think alike and that you have to be attuned to what others are thinking and take that into consideration when making decisions.

Players can make a convention whereby your partner can know just from the way you bid what the point value and shape of your hand. However opponents must be told what kind of convention is being used . Bridge when played properly should be completely honest but at the same time you have to make a lot of very quick assessments about your opponents' and partner's hands by what cards they are putting down. Discipline is paramount since often you see a nice hand and think you can make it and your system says that it is not possible but you just can't resist. Like many players this happens to me and nowadays I normally stop to gather my thoughts and throw some cold water on my face to try and get back on course.

I usually play every Tuesday and Thursday evenings at the Georgetown Cricket Club with around 10 or 20 members. We really need new players but Guyana still has a pretty strong team and must be ranked in the top four in the region .It comes from the culture of playing trump chal which is not so different from bridge. Guyana recently hosted the Southern Regional at Lake Mainstay. There were eight countries represented and Guyana won the team category while my wife and her partner won the pairs competition. I also travel a lot to tournaments. Last December we were in Colombia ,this year we are off to Costa Rica, St Lucia and in October Barbados. We also have a trip coming up to England. The funny thing is that one hardly gets to see any of the countries as it is usually straight from the airport to the hotel and then to the card table. And it gets pretty intense. A typical day would last from ten in the morning to midnight with breaks for meals. And this can go on for ten days so you need some physical and mental stamina. After a day's play you need a few drinks to relax the mind and stop thinking of all the hands you have played. There is a good camaraderie amongst players and we often meet the same friends when we go off to tournaments. But remember at the table the only friend is your partner. Jackie ( Ramdat Rampersaud) and I have been playing together for over eight years and while everyone else is chopping and changing , we are the oldest surviving partnership in Guyana . With age of course comes a better understanding.

My biggest weakness is concentration . It is so important since if you waver for one second and play the wrong card you can destroy the whole contract. I really don't get enough time to play bridge. To be a top class player you have to put in about 20 24 hours per week or else you lose your sharpness.

Paul Fraser Managing Director of C&F Supermarket. and fly fisherman/ orchid collector

. It was Tony Mekdeci who introduced me to fly fishing when I was barely a teenager. The joy I get from the sport starts with making the lures and the challenge of simulating the appearance of the food the fish are feeding on. Then on the water you have to give the lures an attractive motion . Fly fishing is quite an art as you have to be able to cast a bait weighing only a few grams anywhere from just in front of you to 100 feet away. You have to look at structures in the water such as rocks and old trees as well as studying the riverbank to assess where the fish might be. After a time one gets a good understanding of the fishes' behaviour. I like to catch lukunani. They can be found further up most rivers in Guyana as they do not like brackish water. Up the Essequibo past Rockstone there are some good areas and in the Abary Conservancy. It is an enjoyable fish to catch as it is aggressive and gives a good fight. . The largest one I caught was a ten pounder in the Rio Negro in Brazil. I normally just catch and release as I really don't need to take the fish home. I think too many fishermen are greedy and nowadays the fishing is not like it used to be even ten years ago . Commercial fishermen with nets are also depleting the stocks.

Fishing helps me to relax after the stresses of trying to run a business in a pretty stagnant economy .Being in the rivers is very tranquil and perhaps over a long weekend I get to think more carefully about work. Of course I don't get to go away as much as I would like to, out any chance I get to go fishing I take.

Many fishermen also collect orchids .The two seem to go hand in hand. My mother used to have a collection and I started seriously about a year ago. Right now I have around 300 different species. Some are hybrids but I also want to concentrate on the wild orchids in Guyana. Orchids are tremendously detailed flowers and the colours can be incredible.

Alfred Mentore Managing Director of Lifetime Realty and. champion golfer.

As a youngster I always used to watch golf on television but I never knew there was a course in Guyana! Raj Sankar introduced me to the game and I took some lessons from the coach Basil Sookram. I have been playing for about four or five years and came late to the game. But I had played a lot of cricket for Guyana so I adjusted quickly.. I was pretty intense for the first two years going up to Lusignan four times a week. It's the challenge of the game I like most. It is something you have to manage the whole way through . Every shot you have to figure out. At first my irons were my strong points but lately I am not so accurate. I like to try different things with my swings and sometimes you lose something. I drive pretty long off the tee about 250 yards and that helps. My putting comes and goes and with the greens at the club you never really know what to expect. I won the Banks DIH National tournament last year shooting a 74 and a 73 over the two days a little under my handicap of 7.

My weakness stems from my affinity for the under dog, in any sport. I don't know why but I think I almost put myself in a come from behind position to test my character. I would relax on the opening holes and then see if I can pull it off at the end. If I play really hard from the beginning as I do in tournaments I am hard to beat.

I don't play golf to get away from the stresses of work. If my work is going well then I treat myself to a round and I find my game is better when I am confident about my business. Nowadays what with work being so busy I play mostly on the weekends with Hilbert Shields, Raj Sankar, Patrick Prashad, Imran Khan or Colin Ming.

I like to watch Tiger Woods play but only if he is in the same come from behind situation or under some serious pressure. I used to admire Jose Maria Olazabal as he had such a good swing. I have also read about Vijay Singh and how he grew up playing on Fiji's

only golf course. I think if I keep on playing I should be able to get my handicap down to two or one judging by the progress I have made so far. My favourite hole at Lusignan is the 16th because with my length off the tee I can make the green in one and then have the chance for an eagle.

Guillaume Warnery Executive Assistant Manager Le Meridien Pegasus and water skier. Perhaps my most memorable experience of waterskiing was on New Year's Day a few years ago . I was working in a hotel in Khartoum Egypt and that day, despite bad hangovers from all the celebrations a group of us went skiing on the River Nile.

As a young boy growing up in France I did do some waterskiing .But it was in the River Nile where I really got to improve.

Being in the hotel business I get to travel a lot and I am trying to make it so that I ski on every continent. So far I have skied in Libreville in Gabon and in Phuket which was really fantastic. I also did some skiing in Greece. So far I have not seen any activities in Guyana but the show that came here was excellent.

. I normally use a monoski which is more difficult than two skis because it tends to concentrate the pressure in one location and getting out of the water is hard work. After a few attempts most learners have to rest. So you need to be in good shape, but a mono ski is very flexible and one trick I like do is cross quickly from side to side using the strong traction of the boat. Water skiing is very much a social activity and usually I would go with a group of friends and we would eat and drink.

Here in Guyana I have been playing a little soccer with the staff. Which is good as then we are all equals and I get to know them better. I have also taken up golf recently and am taking lessons at Lusignan. It really is beautiful to be outdoors early in the morning on an uncrowded course . All sport for me is ultimately relaxing as you have to focus solely on what you are doing which then blocks out thoughts about work. In Thailand the hotel was very demanding and I would be on my feet for 14 16 hours a day. There was a masseuse who used to practice foot reflexology and she could do miracles. After a session with Thai music and incense oil burning I would be completely revitalized . The staff soon realized that it was best to have a meeting after my massage as I would be very relaxed!

Manufacturing

Rising from the Ashes

Sometimes in business you have to pick yourself up dust yourself off and start all over again .This was what Fibre Tech was faced with after a 1994 fire swept through their Triumph East Coast premises.

Every business starts with an idea and Fibre Tech was born in the mind of owner Somat Ali who as a resident of Canada took a trip home in 1992 and saw there was a large vacuum for fiberglass products. He had threatened relatives that he would come back to Guyana and just two months later he was breaking ground for a factory at Triumph . Ali has decades of experience in fiberglass having worked at Eddie HamÆs Plastics when he was only thirteen . After emigrating he set up his own company part of which produced fiberglass moulds .This is a painstaking process as the moulds have to be built to withstand high temperatures and be used many times over . But it also very lucrative and registered designs are protected for fifteen years.

Production started in early 1994 and Fibre Tech æs big breakthrough came at the Guy Expo of that year when it showcased a wide range of products from garden sets to countertops and canoes. Ali recalls that it was easy to sell in those times as there was no competition and with new moulds brought down from Canada production picked up .

Misfortune can come in many forms and the fire of July 31 1994 gutted the premises and destroyed an estimated US$4.6m in moulds and equipment. Ali might well have packed his bags and headed to the airport like so many remigrants have done in the face of adversity. Instead he started all over again asking great sacrifices from his workers some of whom took half pay. It was a slog and not until early 1997 that production really started again. This was primarily because Ali was unable to access financing. His main insurance claim was disputed by the company and he eventually had to take the matter to court where he won a judgment which was then sent for appeal where it is to this day almost eight years after the fire. It was difficult for him to find coverage given the disputed claim and the small policy he now holds costs him $28 per $1000. Without adequate coverage banks have been unwilling to finance his operations so Ali has built back his business the old fashioned way from turnover and a small overdraft facility. In retrospect it might have been a blessing in disguise given the hard times many manufacturers have lately had paying high interest loans in a stagnant economy.

Still the company wants to expand particularly in to regional exports. Already they have sold product in Trinidad and Grenada, Getting out of the Office mostly custom ordered countertops and kitchen cabinets. But Ali is being cautious so as to not get ahead of capacity and then fail to fill orders on time . This year he plans to visit Barbados to market products many of which can be used in the hotel industry. Ali is a great believer in intra regional trade but notes that shipping costs between islands are higher than to the United States.

Fibre Tech's Getting out of the Office product line caters to all income ranges from a $4500 draining board cheaper than any metal import, to a fully fitted $ 200,000 jacuzzi which is very popular at the moment. But it is in the kitchen where sales have really taken off with durable countertops and unique cabinets which are completely made of fiberglass, something Ali believes is being done nowhere else in the world. He intends to apply for pioneer status on the process.

Finding and keeping unskilled and skilled labour remains a challenge as it does for all companies in Guyana. As soon as any worker gets any kind of skills in fibre glass production he goes off to the Caribbean islands such as Barbados and the Bahamas where there is a thriving boat repair industry. Ali is quite philosophical about it and usually writes a letter of recommendation for the employee. In effect he has become a training ground and exporter of skilled labour sadly with no compensation. It is becoming increasingly hard to find suitable replacements and Ali recalls that some applicants are unable to read directions on a tin of chemicals or read a simple tape measure. Still he has managed to keep a number of employees from when the business first started. Over the last few years Ali has learnt an important lesson in the need to delegate responsibility. He recalled that he had always been a hands on manager fearful that without his involvement the business would fall apart. But he was forced some time ago to relinquish control and what he found was a revelation. Instead of catastrophe employees were more than able to make decisions and importantly willing to take responsibility for them. Ali says the business is now far more productive and he has stopped sweating the little stuff. He can now concentrate on expanding sales outside of Guyana.

Most of the smaller items Fibre Tech produces are sold through distributors in Georgetown such as Muneshwers, Hamid's and Guyana Stores. Ali has resisted opening a show room in the capital mainly because he does not want to compete with his distributors and the more expensive items are ordered from the showroom at Triumph opposite NARI. Although it is some distance out of town, word of mouth and some advertising brings in new customers.

Plans for the future include breaking into the lucrative mould market in North America taking advantage of lower labour costs. Fibre Tech is also involved in the country's Getting out of the Office large housing drive and is working closely with contractors to produce lines of shower units and kitchen sets suitable for all income levels of home ..

Ali says Fibre Tech is 90% back from its production before the fire . It has taken time but the company is financially sound and its products are finding an increasingly receptive market both at home and abroad.

Sococo Inc

Identifying an Opportunity

One day in 1998 a quiet Sri Lankan gentleman stepped off a plane at Timehri. His name was Soma Segaram and while vacationing here he soon noticed that there were a helluva lot of coconuts and no factory to process the milk.

Asian countries, Rising from the Ashes in particular the Philippines and Thailand, dominate world production of coconut milk which is widely used in their own cooking but also in pina coladas and desserts . Segaram, who has had many years experience in food processing including a stint in Brisbane Australia ,saw that with Guyana's location in the Americas there were huge markets right on its doorstep.

After a chat with Go Invest, a site was identified at the Coldingen Industrial Estate and Sococo moved in to the premises in 1998 becoming in the process the only coconut milk producer in the Western Hemishpere. There were initial problems finding financing as banks were not willing to accept leased land as collateral. But Segaram scraped up over $60m of his own money and with an additional $7m from IPED equipment was imported. For IPED the venture fit perfectly into their concept of value added agri processing and they have worked closely with Sococo on the technical and marketing aspects. Processing coconut milk is a complicated task which first requires grating the meat out of the shell with machines, then milling it and removing impurities, before pressing out the milk with hydraulic pressure and homogenizing and pasteurizing the final product. Production finally started in May of last year and Sococo has had some success on the local market selling 4800 cans per month with minimal advertising. Most Guyanese housewives still make coconut milk from scratch. But Segaram believes this is changing especially in Georgetown where life is faster and working women don't have time to spend grating coconuts. Cost wise it is not much more expensive as a can contains the equivalent of milk from four coconuts and retails for $150. Ultimately cooks have to ask how much their time is worth.

Initially the product faced competition from imported brands and the company applied for and received a waiver of the 30% consumption tax .This concession will expire in October and Segaram hopes it will be extended given that the company provides employment for seventeen workers . This will double as export markets are established. Getting skilled labour remains a problem and productivity is low .

Sococo has already started selling within the Caribbean to Trinidad, Suriname and Dominica and sales are around 4800 cans per month also, But the company needs to break into more tourist dependent economies where the milk is used in tropical cocktails . Barbados is one country where the company is now looking for a reputable distributor. With a wholesale price well below Asian producers Sococo is confident it can take a share of the market .The can's labels are also written in Portuguese and Spanish as part of its plans to sell into the huge markets of Brazil and Venezuela.

The company has successfully applied for a $49,000 grant from the Caribbean Agricultural and Fisheries Programme for marketing in the region .

Ultimately Segaram has his sights set on Europe and the market in Holland where there is a vibrant Indonesian community. But first he plans to get ISO 9000 certification as many buyers ask for this as a demonstration of quality processing .Secondly classification as an organic product will differentiate the milk from Asian brands where most coconuts come from trees treated with phosphates .Organic products are becoming increasingly popular with European consumers who are willing to pay a premium for them . Amazon Caribbean, local producers of heart of palm have found the strategy has helped them compete against farmed varieties.

Segaram also has plans to open a dessicated coconut plant as there is a scarcity of the product which is discreetly used by large bakeries for texture .The technology is expensive at US$500,000 .

Meanwhile Sococo's plant has a capacity to produce 76,800 cans of milk per month .Supplies of coconuts are plentiful and inexpensive due to the glut of copra globally. Being the only producer in a protected market means all the fundamentals are in place for the business to realise its potential.

Bauxite Outlook

Linmine has the best quality refractory grade bauxite in the world. But any investor will have to cut costs to regain world market share.

Total world consumption of refractory grade bauxite is estimated at more than 1,000,000 tons per year and has remained at that approximate level since 1985. The world's iron and steel industries use two thirds of the bauxite based refractory products including blast furnaces and steel ladles. It is a relatively small market compared to that for metal grade bauxite as produced by Bermine and ABC in Berbice which goes to making aluminum.

Production of refractory grade bauxite is dominated by China which started developing its reserves in the seventies from two provinces Shanxi and Guizhou as the main centres of production.

The supply of Chinese refractory grade bauxite has improved during the past 20 years,in part due to the installation of several controlled processing plants. However there are a number of quality control problems, post processing.

Prices have been low and there have been accusations of dumping but with new export taxes being put in place prices might soon increase closer to world market levels and this would then be an advantage to the South American producers.

Brazil since the 1980Æs has managed to capture a large share of the European market at the expense of Guyana's industry despite having an inferior raw material requiring costly processing . This is compensated by a relatively thin overburden of perhaps 30 feet . Total production capacity out of the CAEMI facility now stands at 140,000 tonnes per year.

The United States had always been a traditional buyer of Guyana bauxite and with the slow decline in the American steel industry at the expense of more efficient European producers demand has slowed. Those efficiencies came about from new kiln designs, lower per ton of steel consumption of refractories; and conversion of the electric arc furnace to water cooling. At the same time many customers either switched to cheaper Chinese bauxite in the late seventies or blended it with Guyana grade due to reliability problems out of Guyana.

In the year 2000 Linmine's operation produced 106,000 tonnes about a tenth of the world market and a fraction of the highest year of 1975 when exports totaled 789,000 (see chart). That was the same year the Demerara Bauxite Co. was nationalised and from then on production went sharply down hill.

Linmine's main markets in 2000 were the United Kingdom 27,400MT the United States 32,000MT. Italy 11,000MT and Holland 9400MT .

Prices recovered from 1999 and in 2000 the average export price was US$139 per tonne.

Guyana's RASC bauxite is the purest of the three producers with a ferrous oxide content of under 2.5%. It needs only rudimentary processing being crushed to less than 9 cm in diameter, washed and screened, crushed to less than 4 cm, rewashed, then rotary kiln calcined, with some final de ironing before shipment. This cuts down on expenses but either side of the process Linmine has a major disadvantage over its competitors. With an overburden estimated at 200ft costs of mining are high . In addition there are significant shipping costs of transporting material down the Demerara river . Labour costs are also disproportionate to production levels. To date no investor has appeared interested in the operations although OMAI is said to be seriously studying the company's viability and looking at the operations. With its experience in mining and careful management practices an OMAI run Linmine could once again be profitable, but any investor would have to infuse at last US$30m and sharp labour force cuts would be required. Analysts believe that the unique qualities of Guyanese bauxite mean it will continue to be the preferred material for many refractory companies and customers around the world.

Still demand for refractory grade bauxite is unlikely to see a large increase in the short term and current projections do not go much higher than a 3% expansion per year. Guyana bauxite will always be in demand but improving reliability and controlling costs are vital if it wishes to improve its share of the world market.

Bauxite slump did not immediately follow nationalisation

In the March issue of Stabroek Business it was stated in the article captioned "Bauxite Outlook" that Demerara Bauxite Company (DEMBA) was nationalised in 1975, "and from then production went down sharply".

DEMBA was in fact nationalised on July 15, 1971 and based on the chart, which accompanies the article, during the ten year period after nationalisation the operation attained the highest level of production. The decline started after 1982 and not immediately after nationalisation.

We regret the error.

Bibi Khan

Welder, butcher, chicken farmer, seamstress, record store owner and chef, Bibi Khan has worked hard in her life. But she has remembered to have fun along the way.

Most times when you pass by The Spotlight Record Bar on Robb Street you will see Bibi Khan in an apron talking with her customers. She is not one to lock herself away in an office . She likes to be on the front line of her business. Sales is her strength, be it the latest record, a plate of steamed vegetables or a pound of beef . But what she really sells you is an irrepressible personality that has helped her succeed against all odds.

Bibi Khan was born in Hague on the West Coast of Demerara but the family soon moved to Herstelling where she attended Providence Government School . At sixteen she went to work at Georgetown Seafoods and spent four years there packing prawns for export. Her mother was not well at the time and Bibi had to support her six brothers and sisters also selling ice blocks at work and planting pakchoy in the backyard. Her step father was an arc welder and she learnt the profession from him and soon after ,despite being the only woman ,she took a job at Friendship Marine repairing boats .She was paid 42 cents a day. She had hoped to open a small welding business at the familyÆs home but that did not work out so she eventually took another less demanding job at Auto Supplies in the music section .The pay was very bad and she decided to strike out on her own by opening her own record shop at Robb St and Avenue of the Republic. In 1971 Musical Spotlight was born and became a Georgetown institution . Bibi recalls that it was a lot of fun with her spending most of the time dancing . Over the years she kept apace of the musical fads from disco to reggae and Indian .

She did spend a year in Miami but quickly came back .It was not her style. Guyana was and still is the place she loves. But after 23 years at the same location disaster struck in 1994 when a fire destroyed the shop. Hard times came but as they say you can't keep a good woman down and the single mother of two boys ,after sorting out her finances, re opened Musical Spotlight at its current location on Robb Street between Camp and Alexander.

She has never been one to put all her eggs in one basket having run a chicken farm and done some garment manufacturing over the years. So she also started Bibi Khan's Halaal Meat Centre which her eldest son Martin now runs. She complains he is becoming so popular that she is starting to feel a little jealous. But a few years ago she chopped her hand helping out so she has retired her meat cleaver. Her other son Trevor is in charge of the record bar leaving Bibi free to run her Roti Shop. When her mother was sick she had done a lot of cooking and today she directs traffic in the kitchen from early in the morning, trying to prepare healthy dishes without too much fried food.

As a businesswoman and certainly not one afraid to speak her mind she finds some men are jealous .But she does not take them on and for many she is a mother figure ô a big auntie" feeding them and ready to have a good laugh. At the same time she never stops hustling . At 54 she is still trying to make an honest living.

No time for a shut eye in the afternoon or to watch Young and Restless although she does make sure to look at the death announcements .She is happiest when she is with her customers selling a record or making sure the food is fresh.

Bibi says she is not afraid of risk and she has plans to open an ôafter hoursö fast food place since that seems to be all the rageà and a small garment factoryà and a mini mall and through it all you just know she'll keep on smiling.