NBIC     Net asset             Earnings       Dividend
               Value                   per share
1999       7.00 (approximately)      .70             .40
2000       8.00                    1.10             .50
2001       .8.00                   .24               .13
 

If you take the earnings per share of .24 for 2001 and use a multiple of 8 the share value would be $2.00 a significant discount to its net asset value. The dividend yield at $2.00 would be 6.5%. The quote provided by Trust Company was $20 (which suggests a P/E of 83. Even at its net asset value of $8.00 the P/E now stands at 33. Far too high and only justified if future earnings growth were to be strong. Unfortunately NBIC recently passed on its interim dividend and as with the banking sector in general the future remains uncertain. In a freely trading stock market the shares would be vulnerable to a sharp discount. However, it must also be recognised that given the solid record of both NBIC and its parent company the market may make some allowance for the very substantial decline in earnings per share


GBTI ...
is less problematic . The Beharry Group of Companies paid $150 per share for 30% of the shares in 1994 giving them a controlling interest of 53%. There was a one for one rights issue at the end of 1995 with shares offered at $30,thus reducing the price to $90 ($150 plus $30 divided by 2)

GBTI     Net asset      Earnings       Dividend
               Value            per share
1996       $52               $9.81              $4.00
1997       $57               $8.64              $4.00
1998       $61               $7.93              $4.00
1999       $62               $4.78              $3.00
2000       $64               $3.41              $1.50
2001       $67               $3.98              $1.50


Looking at 2001, earnings per share were $3.98 which with a multiple of 8 suggests a share price of $32. At that price the dividend yield is 4.6%. Trust Company quotes the shares at $30. The recent uptick in earnings for 2001 may indicate the bank has dealt with its portfolio and in fact of all the private banks it has made the most provisions for non-accruing loans (36%). What may drag it down is the lack of investment opportunities. Anywhere (but not too far) above $30 might be its freely traded range. With a net asset value of $67.00 the company would be a candidate for a takeover were it not for the controlling interest.

Demerara Bank Ltd started off well since opening for business in 1995 but has run into difficulties in the past two years due to non-accruing loans which jumped from only 1% of total loans in 1999 to 33% in 2001 mainly because of the failure of GA 2000. Earnings per share increased from $3.55 in 1995 to a peak of $43.48 in 1999. Dividends peaked at $17 in 1999. The bank then reduced the par value of each share a factor of 100, so in 2000 the earnings of 32 cents per share would have been equivalent to $32 the previous year. Earnings dropped to 24 cents in 2001. Dividends were cut to 8 cents in 2001. With a ratio of 8 this would suggest a share price of $2.00 at a yield of 4%. Once again the problems in the banking sector and a sluggish economy would not hold out much hope for future growth in earnings so the current price quoted by Trust company of $1.50 would be a fair market price


Guyana Stockfeeds Inc's records for end of year 2000 showed earnings per share of 65 cents and a dividend of 17cents. At a multiple of eight this would suggest a price of $5.20 with the yield at 3.2%. This does not square with a recent offer, actually put on hold, of 25m shares at $20 as outlined in the company's prospectus . This would have been used for a US$2m processing plant and 12 ventilated pens (cost $1.5m) and a hatchery of $500,000; the whole facility being able to produce 1.3mlbs of chicken per month. Significantly the Chairman of the company Robert Badal was not taking up any shares. With this investment now on hold, a share price of $5-8 is more realistic


Demerara Tobacco Company has become a veritable cash machine since it stopped manufacturing cigarettes and started distributing them for its parent company British American Tobacco. In 1999, the year after it shutdown its factory, it had earnings per share of $ 19.48 and paid out almost all in dividends of $19.26 per share. This was partly because it sold off its assets and because there was nothing else to do with the money. In 2000 it had earnings of $10.94 and a dividend of $13.98 meaning it paid out of its reserves. 2001 earnings were $16.28 and dividends $17.85. Meanwhile its net asset value was only $10.14. At 8 times earnings the share would be the most valuable on an exchange at $130 and giving a very healthy yield of 13.5%. In this case the yield is important as there are no retained earnings and it is therefore a stock to hold solely for its income. Taking a yield of 5% comparable to a deposit account, the share price could reach as high as $357. The last trading price was actually $8.00.

Company                    Net asset      @P/e of 8    Actual/latest
                                    value                                quote
DDL (2000)               $6.7                $6.76               $7.00
Banks DIH (2001)      $8.34              $7.28              $8.00
Sterling (2000)            $73.00            $99.76            $25.00
NBIC (2001)             $8.00               $1.92              $20.00
GBTI (2001)              $67.00             $31.84            $30.00
Demerara Bank          ***                  $2.00              $1.50
Guyana Stockfeeds     ***                  $5.20              $15.00
Demtoco                     $10.14            $130.24          $8.00
 

Conclusion
The message from this exercise is that if and when a stock exchange starts operations there will clearly be a rationalisation of stock prices both upwards and downwards. For some companies higher share prices will enable them to raise more capital by offering new shares at a discount to the prevailing price. However a truly liquid market will be ruthless to companies that don't perform

The stock exchange will require a new corporate transparency and accountability with directors seeking to provide maximum returns in capital gains and income to the true owners of the company, i.e. the shareholders.

Where are we now?
Introduction
This is another in the series by leading businessman on the future of business in Guyana

Mr Everall Franklin is a chemical engineer and the proprietor of Franklin-Singh Disposal Services

It is not my intention, in an article of a few columns, to come up with an economic elixir or master plan for our country, but to present some of my views on what I believe are key elements necessary, for the Guyanese nation to venture with confidence into the already old "New Era."

Element 1
Political Stability
For most people political stability means an ordered society, which is governed by the principals of independent institutions of law, adherence to the Constitution by all custodians of power. It also encourages a responsible parliament, where ideas and differences are openly discussed and or argued until consensus is arrived at, with the national interest taking precedence over personal and partisan considerations

As a prerequisite to any meaningful economic development, this element to my mind is absolutely essential. We can now ask ourselves the question; Have we as a nation achieved or attempted to work towards this element? You be the Judge


Element 2
National Strategy
A national strategy for development with realistic aims and objectives, based on socially accepted programs, with short to medium term goals, within a long-term strategic plan must be arrived at. These national goals being born out of consensus should be resistant to changes of governments, thus allowing continuity. We must decide as a Nation, where our developmental thrust will take place and the entire administration must be in sync with that thrust

Applying political considerations to strictly economic issues and tasks further constricts the limited resources available

We can once again ask the question; what is our national strategy? Does it exist?

Element 3
Education
Let us for a moment assume that the first two elements are satisfied. The third element for long term economic development would be an excellently trained and educated people. Where discipline along with vocational skill or academic achievement would be the measure by which we are judged. The entire education system should be structured to support the national strategy for development. All individuals who study and apply these relevant skills should as a matter of principle, be given priority for all available State funding, grants and/or subsidies. Therefore the choice to either fund two engineering as against eight social studies students at the same cost, would be a simple decision

The education system needs to be accelerated to meet global standards and norms, in order to give impetus to our economic development. It has to be a dynamic system, being able to adapt speedily to changes in technology and new knowledge. We therefor must see our educators as the first major investment in the entire process of our development and all investments have to be protected

Having established the main elements as outlined in this article, the resultant effect would be a confident and hopeful people. A people willing to venture out dream and plan for a future in their own country. This frees enormous potential, which cannot be easily measured when present. In its absence however; What is left?
If we continue to practice emergency economics we are surely doomed. We have found ourselves in a survival mode, which is a non-productive state of economic activity. It is a state in which all our energy is sapped up, leaving no room for planning and innovation. Planning in most cases is reduced to choosing which country to go to. If, we're let in.
New ideas, which promote economic growth, have to be viewed as collateral and treated as such in this country. We have imposed restrictions on our development by limiting the ability of first time borrowers to access financing. So we see no new ideas coming to the forefront here in our own country. New wealth is not created and we continue to manage poverty

We are the architects of our destiny attempting to build a house working without a plan against each other with a large number of unskilled and under-educated workers

The result?

Sugar
To Close or not to Close.....
That is the question which will face Guysuco's Demerara Estates after 2005. The economic arguments for closure are convincing but they may be missing the very human element

Guysuco's Strategic Plan to modernise and expand sugar production has come under great scrutiny over the last two years and the corporation has since scaled down its investment. However the viability of the Demerara estates is still to be determined and while the corporation is making strenuous efforts to improve productivity, numerous external factors will play a large part in the fate of the estates

The original Strategic Plan which would have seen an investment of US$200m was examined in a LMC International report commissioned by the World Bank and the findings considered the plan to be high cost and high risk, generating low returns to the industry. Guysuco which rejected the report as simplistic has since altered its investment to some $110m although raising funds even for this plan has so far been a struggle

At the heart of the argument is the future shape of the preferential markets for Guysuco's sugar given that it continues to produce at a cost above world prices and even in its plan does not expect to produce below these, except at Skeldon, in the next ten years


Markets
Looking first at the opportunities and prospects for Guyana's sugar, the report makes clear that the Sugar Protocol and the Special Preferential Sugar Agreement available for the 15 sugar producing countries of the ACP will likely be modified in accordance with WTO regulations. However there is the opinion that any modifications will come much later given the current trade dispute with the U.S which has increased its own farm subsidies by some 80%. It is not apparent how such a modification will eventually be achieved but the LMC report predicts quotas will be cut to maintain the current price level of E523 per tonne up until 2006/7. After that prices will fall to 342 euros per tonne by 2014/15. The revenues accrued from these sales are calculated in dollars and Guysuco's Strategic Plan assumed a rate of US$1.07 against the euro when in fact since its launch the euro is still languishing at just under 90cents although of late it has reached .92cents. Most analysts feel that the dollar is overvalued and that at some point it will have to fall into line. But in the meantime the weakness in the euro has already affected the corporation' profitability as its sales to Europe are only profitable at .93cents. This is a cause for future concern given the sensitivity of any Strategic Plan to exchange rate fluctuations. Since the report the Every-thing But Arms deal has muddied the picture as it saw Guyana's quota under the SPS reduced but its preferential price increased. Over the next seven years the SPS will be gradually eliminated to accommodate 15% annual increases of LDC (Least Developed Countries) imports

CARICOM markets will perhaps present the most opportunities in the future assuming, quite safely, the sugar industries in Barbados, Jamaica and Trinidad continue their decline. St Kitts, although a small market, has made a decision to stop production in the next year. Trinidad's industry is still up in the air but is costing the government around US$50m a year in subsidies. However domestic politics plays a part given the value of 6000 sugar workers' votes. Barbados plans to rationalise its production over the next five years to half its present level. Closures if they come would also have the added benefit of freeing up some 17,500 MT on the EU Sugar Protocol for Guyana and another 28,500MT on the SPS although with the EBA agreement this is not clear. GUYSUCO currently exports 45,000 MT to CARICOM countries and enjoys a premium price more valuable than that of the EU SPS price, thanks to the Common External tariff of 40% on external imports. The establishment of the Caribbean Single Market and Economy will also result in greater revenues for suppliers as it will do away with country marketing boards. However the establishment of the CSME is not imminent and many more steps need to be taken to make it a reality

GUYSUCO is now starting a drive into CARICOM with packaged sugar which it can sell at a premium of 22 cents per lb. With an estimated market of 150,000MT in raw sugar and another 150,000MT in white, Guysuco is also looking closely at establishing a $10m refinery at Skeldon to capture that market.
However the report wonders whether in the future, governments in the region will feel the need to maintain the 40% CET on external imports if they do not have industries to protect. Trinidad got an allowance of 23000MT in 2001 to import from external sources and will likely get another 9000MT this year, on the grounds that Guyana's sugar is not of a sufficient quality to be refined

As it is, the predicted downward trend of the world price will mean a lower price for exports to CARICOM. At a world price of 5-6 cents even with the CET, external imports are far cheaper than sugar produced in the region. Guysuco is not actually making money on its sales to CARICOM because of the lower world price .It is now lobbying COTED for a safeguard mechanism which will see the tariff increase to up to 100% depending on the world market price.

The U.S sugar market has always been limited for Guyana, providing 12,000MT per year at a price of 18 cents per lb. All indications point to this quota being maintained accompanied by some decline in prices.
Domestic consumption stands at 25,000MT per year at a price of US11 cents per lb. This is controlled by the government and the GUYSUCO plan assumes this price will increase by 40% to the CARICOM price of US15cents per lb. To date there has been no increase and it remains to be seen whether the government would be willing to do this given the political hazards of such a move

GUYSUCO recently negotiated a 10,000 MT duty free concession as part of the Partial Scope Agreement with Brazil. This would be targeted at the Northern States of Amazonas and Roraima and is largely dependant on substantial improvements in the Lethem Georgetown Road. When you add up these various markets the current demand is in line with GUYSUCO's output of around 300,000MT. In other words none or very little sugar is being sold on the world market. With both the SP quota and the SPS declining, much of the increases in 2008 and 2014 would come from an expected CARICOM demand of over 100,000MT. But as mentioned above this assumes the CET rate will still be applied and enforced. In addition the low CET rates (15%) on white sugar primarily used in the soft drinks industry, make this commodity more attractive to countries in the region.
Prices are expected to level off between the various markets so that by 2014 the EU Protocol price would be just above 15 cents per lb and every other market below that price

The LMC expected that the long term trend in inflation adjusted world prices is a decline of 1.3% per year to 7.3cents per lb in 2015

This has been the movement over the last fifty years even given various spikes and troughs. However this was in the context of a heavily regulated trade regime and there is an argument that as preferential agreements are phased out or reduced and more sugar is traded on the open market, world prices would rise. Guysuco sees the world price rebounding to 10 cents as inefficient producers are squeezed out of production

GUYSUCO's Berbice units would be in a position after the implementation of the modified expansion to produce sugar at a cost below that of the various prices afforded under the trade agreements with Skeldon producing at 9 cents per lb. But the Demerara estates which will not enjoy rehabilitation would after a number of years run at a loss if the price estimates are accurate. The report therefore suggested " If the marginal cost of production for GUYSUCO (from the highest cost division) exceeds the marginal revenue received by the corporation (the lowest price it receives), the actual income for the entire company will be less than the potential income which could be received by the government for Guysuco's operations. In other words there would be a financial loss at the margin."
It is this argument which has been the most contentious. Guysuco claims that no other country takes such a simplistic view and that the reason the world price is so low is because many producers have established the practice of unloading their surplus at a loss after selling into lucrative markets first. Guysuco says it works from an average price for the whole industry regardless of individual estate's costs of production

Simple economics would dictate that those units which produce above the margin should be closed and the money used in other sectors of the economy. But "Only if the government could not find a better way to generate incomes (e.g. only if none of the alternatives elsewhere in the economy could generate a profit) would it make economic sense to subsidize the marginal production by GUYSUCO. If better opportunities can be found in other sectors, then it would be to the advantage of Guyana as a whole to restrict sugar output at the margin and invest the resources that are saved in this manner in other parts of the economy."
The report says closing the estates would enable the government to invest an additional 2.16% of 1999 GDP in infrastructure and that every dollar spent on infrastructure investment would induce an extra $2.48 of private investment with total employment rising by 38%

On the other hand the report estimated that if the original Strategic Plan had been implemented and the assumptions on demand are correct, in 2005 the Skeldon, Rose Hall, Albion and Blairmont estates would generate a profit of US$29m, but this would be offset by an $8m loss incurred by the Demerara estates. By 2010 Skeldon and Albion would make a profit of 37m, the Demerara estates a loss of $7m and Rose Hall and Blairmont would break even. By 2015 only Albion and Skeldon would be profitable and the overall profit would be $19m

Economics is one thing politics is another. The recent experience of the government is that they have been prepared to subsidise an industry such as Linmine at a cost of US$6m per year just to keep jobs. In the case of Guysuco there would be no subsidy per se involved

It would be a difficult situation given that the unemployment from the closure of the estates, 8350 workers, could not be quickly addressed by new industries and would have a severe short term effect on the economy reducing GDP by 2.4%. The report concedes that such a move would be difficult. "It is painful to contemplate the costs of a recession that increases unemployment and worsens poverty for 3-4 years in a country as poor as Guyana. But policy makers are obliged to contemplate the costs of inaction -the costs of using 2.16% of GDP every year to subsidize employment in the least efficient estates."
Could the Demerara estates be made sufficiently productive that they would escape the axe?
Sucrose yields (the product of cane per hectare) are the standard for assessing a unit's (field and factory) productivity. The Demerara estates are below those of Berbice averaging 7 MT per hectare. Blairmont and Skeldon are over 8MT and these compare favourably with figures for Brazil and other producers although they fall short of yields in Australia and Swaziland (12MT+). The generally low sucrose content is a result of the climate and soil conditions in a tropical country as opposed to sub tropical climates where the most productive sugar is grown

Guysuco estimates future cane yields to increase by over 3% in the East Demerara estates. The report suggests this may be optimistic given that recent gains in Guyana and in other countries have been modest during the nineties. " With ripener already being applied to over 80% of the cane area ...there appears little scope for this technology to have a great impact on the cane sucrose content in the future."
In terms of field costs the Demerara estates remain significantly higher than those for Berbice with LBI averaging between 1995 and 1998 US450 per tonne of recovered sugar. Field costs for the Demerara Estates of LBI, Enmore, Wales and Uitvlugt were in 1998/9 between 160%-240% above average costs in the rest of the world. Factory costs were well above the world average. Meanwhile the Berbice estates managed to lower costs to 86% of the average during 1999/2000. But overall Guysuco's factory costs were above those of the leading producers

As part of the Memorandum of Understanding between the government and the World Bank no major capital investments will be done in the Demerara estates so productivity increases will have to come from better agricultural discipline. This would be achieved by the kind of field and factory management which characterised the company during the sixties, including proper land preparation, resolving drainage issues and the timely application of herbicides and fertilisers

Guysuco notes that costs in the Demerara estates have come down from 28cents per lb to 19 cents in only four years and they believe they can get them down to 13-15 cents by 2005. This would be sufficient to keep them open

The fate of the Demerara Estates will not be addressed until 2005 when the new Skeldon plant begins operations. This has been pushed back in part by the debate over the Strategic plan and the difficulties associated with accessing funds

Part of the US$110m is to come from land sales and from earnings. However the corporation made a $1bn loss last year and is only aiming to break even in 2002, once again because of the languishing euro and the world price affecting sales to Caricom

There are many variables in the modified plan's equation which are out of Guysuco's control including the shape of preferential markets, the exchange rate of the euro, the 40% CET and the world price level. A lot of these external factors have to remain the same or become favourable for the project to be profitable. Internally, a double-digit increase in the cost of labour would also have a significant effect

Despite the industry's best efforts in the coming years to improve productivity at the Demerara estates and penetrate the regional markets, there may be tough decisions ahead.

Mango prices up after crop shortfall
By Kunal Bose in Calcutta
The price of mangoes in the world market is set to rise sharply this summer as the crop in India, the biggest producer of the tropical fruit, has suffered a big setback

The Indian export surplus will be negligible this year in the wake of a 60-75 per cent fall in production in some of the country's major growing centres. This will make mangoes of every origin expensive

A tonne for $265
At the world's largest wholesale mango market at Nunna in the southern state of Andhra Pradesh, the best quality Banganapalli was recently selling at more than Rs13,000 ($265) a tonne, up more than 120 per cent on last year

The Nunna Mango Growers Association says exports from Andhra Pradesh will be badly hit by a combination of a very small crop and poor quality of production. "We are not ready to sell sub-standard mangoes in the world market and damage our reputation," it said. Europe is a main market for Indian mangoes

The crop setback was caused by the absence of rains in December when flowering takes place. "The crop was damaged by heavy January rains in Andhra Pradesh, but a prolonged winter and storms in April did the damage in West Bengal, Bihar and Uttar Pradesh," said Haripada Sarkar, a trade official

In the case of mangoes a poor harvest will always follow a good one harvest. But what has stunned the growers is the extent of production falls in most growing centres this season

According to an official of Central Institute for Sub-tropical Horticulture, the basic problem is that a large percentage of fruit-bearing trees in India are about 80 years old. "Replanting should not be postponed any longer. Productivity starts falling once a tree is over 60 years old," he said.

Universal and Caribbean Star
In December of last year two new airlines started services to Guyana. But unlike previous entrants Universal and Caribbean Star look like they will be sticking around

How do you become a millionaire? Become a billionaire and then buy an airline. A pretty standard joke in the airline industry and one that indicates the great risks involved in operating what is an extremely high cost and competitive business

In Guyana, numerous airlines have come and gone, most famously GA2000 which ultimately incurred debts of US$5m when it took over the operations of the old GAC. Its failure begged the question whether running a one plane airline to a limited market was feasible

Universal which started flights on December 13th of last year certainly thinks so and to date its strategy appears to be working

The great advantage Universal has over GA 2000's arrangements is the nature and cost of its wet lease contract. A wet lease, is also named an ACMI lease (standing for Aircraft, Crew, Maintenance, and Insurance). It's much like renting a car except you get a driver and mechanic. It is useful for a company just starting operations while local people are trained and while they gain sufficient experience. It is also a low cost way to test a market's viability. Universal was fortunate to go into contract talks last year at a time when the airline industry worldwide already had excess capacity even before September 11th. It was able to get a relatively low cost arrangement to lease a Boeing 767 300ER from LOT Polish Airlines, which has three such planes flying between Europe and North America. Lot Polish continues to be in financial difficulties given that its main shareholder SWISS AIR went into bankruptcy late last year. So Universal would have had some leverage in negotiations on the extended two year contract signed at the beginning of May .The agreement importantly stipulates that in the event the leased airplane breaks down a substitute will arrive within a specified number of hours. This is something GA2000 did not have in its agreement and meant that passengers were left stranded for days. The Boeing 767ER 300 has a lower operating cost due to its large capacity for passengers, cargo and fuel
The particular aircraft is also only five years old and so is not as susceptible to breakdowns. It can do a round trip to Guyana from New York without refuelling, a considerable advantage given that fuel costs are twice as much here. Universal's 767 is bigger and more expensive to run than their rivals' (North American and BWIA) aircrafts operating on the same route, but it is able to attract passengers by offering a greater luggage allowance, something not to be ignored given the tradition of Guyanese to use up all available pounds. The current allowance is 170lbs on the New York (70lbs to Trinidad) route compared to BWIA's 120lbs and North American's 100lbs. The plane has 18 seats in Business Class and 225 seats in economy and 87 cubic metres of cargo space, the equivalent of 15,000kg. The 767 has the capacity for 300 seats but Universal has chosen to keep less seats in return for more passenger comfort. While large for the route it may be just the right size given that it will have more seats available in the peak seasons but not be too costly to run in the off seasons. Break even would be about 160 seats

The airline business is all about filling a certain number of seats on each flight. Getting above that number means profits, falling below it can quickly bring an airline to its knees

Peak seasons in Guyana are pretty much the same the world over, being Christmas Easter and the summer months. However the off-season is particularly slow and that means keeping costs down is essential. Universal has 60 employees 43 of whom are stewardesses. Management is kept to a minimum with its offices in Georgetown and Queens making up the rest. Planning routes and other technical aspects of the business have been left largely to consultants

Under the wet lease agreement the company contracts a number of flying hours per month. Maximizing this usage obviously make sense as the hours still have to be paid for. So the company has recently started direct flights to Senegal as part of a charter service. This is the only direct flight out of New York to the Senegal capital Dakar and at only eight hours, saves passengers time and money in avoiding the traditional connections in Europe. So far there have been five flights out of New York returning through Guyana and while demand has yet to pick up on the return flights with about 100 seats sold in each flight, this has been made up by nearly full outward bound traffic. The company which charges a flat fee for the service to an agent in New York who then sells the seats, has also made an agreement that when the flight passes through Guyana on its return route, Universal passengers could come on board.
Universal has also established a code sharing partnership with Suriname Airways and hopes to benefit from that airline's connections to Cayenne and Belem. The high cargo capacity has enabled the company to offer services for produce exporters both here and in Trinidad. All shipments are containerised thus eliminating pilferage and with direct flights, frozen seafood and fresh produce spend less time in transit. The rates start at US$1.10 per kg for a minimum of 1000kg.The airline is also carrying U.S. and Canadian mail bound for Guyana and offers a UNIPAK small package service

Universal is now looking at an option to contract a smaller 737 with 160seats or a 60-seater plane to fly to Trinidad and Suriname. This could then feed passengers to the main flights north which might include Toronto in the coming months

Universal realises that it makes no sense to compete on price with BWIA and North American given their economies of scale and to date neither of the two have moved aggressively against the new entrant. Prices are virtually the same between the three and there has been no substantial discounting during the low season as what pertained under GA 2000. Universal says business over the last six months has been better than they expected and sales for the summer are looking strong

Now they are hoping the government will loosen certain regulations including the stipulation that 50% of the ticket price be put in an escrow account to safeguard passengers in the event the airline shuts down operations. Following in the wake of GA2000 has created its own turbulence as many companies an airline needs to do business with such as caterers, fuel suppliers and JFK airport have required inordinately large deposits. Universal is owned by two Guyanese businesswomen Rameshrie Singh and Chandrapattie Harpaul . Its President Sudarshan Singh has had many years experience in the airline business with the now defunct Pan American Airlines

Caribbean Star started its operations out of Georgetown the same week Universal had its inaugural flight. But the airline has been in operation since October 2000 first serving Antigua, Grenada and Port of Spain and then rapidly expanding across the region. Antigua is its hub and the Stanford Financial Group headed by millionaire Allen Stanford has strong ties to the Antigua government receiving praise in the country's budget presentation for its "considerable investment in our economy in banking, construction, aviation and tourism."
With a fleet of ten low cost Dash 8 (37 seats) and Dash 100 (51seats) planes which hop from island to island as opposed to going through hubs, the airline has grown prodigiously carrying 43,000 passengers in December 2001

Its Guyana route is said to be one of the most profitable with 65%-75% passenger rates

With an estimated 15,000 Guyanese living in Antigua alone, there is a ready market for the route.
Flights leave daily at 11.15am to Barbados and 4.45pm to Port of Spain. The immediate effect has been to lower prices on those routes considerably. Caribbean Star offers a 14 day return to Barbados for $110 and to Trinidad $108. Both prices have since been matched by BWIA whose previous price to Barbados was $180. They have code sharing arrangements with Virgin Atlantic for flights to Europe and with American Airlines out of Barbados which has become an unofficial second hub for the airline. This set off a heated row with debt laden LIAT who had stalled the airlines start by some six months with objections to its route licences. The argument boiled over with the application of Caribbean Star to fly the Barbados route. LIAT's chairman, Wilbur Harrigan said at the time "They're out to destroy us," and charged that the launch of Caribbean Star was part of "a sinister plot to kill LIAT,"
But Chief Executive Officer Gilles Filiatreault, brushed aside the LIAT-killing plot. "We don't want to kill LIAT," he said. "We are here to make a business, we are here to make a profit, but at the same time, the consumer will decide who is the best, who is the worst, who is going to live and who is going to die." Filiatreault was later sacked along with three other executives for reasons unknown

Meanwhile 40 year old LIAT with debts of US$80m, of which US$7.4m is owed to regional governments in unpaid landing and navigation fees, has restructured its operations to one similar to Caribbean Star i.e. island hopping The airline has also looked to reduce its workforce from 1,016 to 850 employees in a bid to cut annual costs by US$278,000

BWIA lost US$4.3m after tax in 2001 compared with a profit of US$7.4m in 2000, with the fallout from the terrorist attacks of 11 September being blamed for turning a profit into a loss. Operating revenue was US$276.1m (2000: US$261.4m)

The airline is trying to cut its daily operational costs of US$700,000, of which $US200,000 goes on pay, in response to the events of September 11th which caused lowered passenger numbers and revenue compared with last year.

World Homes Guyana Inc
A low income developer could transform the nation's lethargic housing drive. It just needs lots to build on.
When World Homes Guyana Inc placed an advertisement in this newspaper a few months ago; their offices on Main Street were swamped with persons wanting land to build a home

World Homes does not have land to sell but it can build a 500sqft 2-bedroom home for only $1.5m

What the company discovered was that many of the applicants had been unable to buy a low-income house lot from the government because they did not have children. However many were young couples who would eventually have children but wanted to build their "nests" first. The current requirement of being a parent excludes therefore a segment of the population who have the resources and sufficient income to pay off a small mortgage. Conditions of the US$27m loan from the Inter- American Development Bank stipulate that parents should be given first priority given the supposedly limited amount of land available for development. It is a requirement some in the IDB questioned at the time of the agreement and this will be reviewed when the programme is assessed next year

A visit to some of the housing schemes on the East Coast and East Bank shows that perhaps only 10% of the lots have houses on them

Part of the problem is that many of the successful applicants are single parents who do not have the wherewithal to build a home. In addition access to financing remains a problem as long as transports are not processed speedily. New legislation made it possible for owners of lots to apply for a mortgage once they had a letter of assurance from the Ministry of Housing. However while the New Building Society does accept these letters it prefers to wait for the transport once it has been advertised in the Official Gazette. Delays in the notorious Deeds Registry have led to a transport taking up to six months to be issued

Although the situation is improving, the delays are having an effect on the bottom line of the NBS which has seen a huge increase in deposits but is not able to turn these into mortgages in a timely manner

The market for small mortgages is very low risk for the banking sector but only Citizen's Bank has entered the low-income mortgage market reducing its rates to 8%

Meanwhile World Homes Guyana has a unique system which means once an applicant has paid for a lot they can build a home for $1.5m no money down. The lot holder first applies for a mortgage and once approved the bank or building society transfers the funds direct to the contractor to build the home. The monthly cost of the mortgage is $12,500 which is less than most rents in Georgetown. Qualification requires a gross monthly pay packet of $38,000-40,000

Edward Lai, President of World Homes who is originally from Jamaica but now lives in Canada, says home ownership is a huge factor in encouraging people to work hard and be law abiding. A home can transform a person's attitude towards life and Lai says many persons are not too concerned where they might get a lot. So he is glad to take part in a sector which will add to the country's stability and development. The homes are built using local inputs and construction is labour intensive with one home being built by perhaps 20-30 workers and taking only three weeks. He has a number of skilled persons on whom he can call to make up a crew. He says despite the huge response from the advertisements, construction has not taken off because of the unsuitability of the applicants. But he is hoping the Ministry will "allocate " World Homes a large set of lots at a new scheme at Parfait Harmonie on the West Bank. Persons can then apply to the ministry and the company would be able to go into mass production of perhaps a 100 homes at one time.
Eco friendly furniture

Liana Cane Interiors Ltd
How do you go about creating and managing a company which reflects your view of how the world should be run and still address business fundamentals? That is the challenge now facing Liana Cane

Fusion is probably the best word to describe Liana Cane Interiors' business philosophy. A fusion of capitalism with social and environmental concerns. For Jocelyn Dow co-founder of the rattan furniture company, business should not be all about money, but must address the issues facing a world rapidly depleting its resources and marginalising the poor. In many ways the company is a concrete example of the ethics expressed at the Rio conference on biodiversity in which Guyana played a large part, encouraging developing countries to maintain their forest cover by exploiting only sustainable resources

But like many small manufacturers in Guyana the company has been beset with the usual difficulties of finding suitable financing and markets for its unique and high quality line of wicker furniture

Although Guyana has been producing wicker items commercially for a number of years the skills are not indigenous to the country despite the resources having always been readily available. Colin Forte of House Proud had really pioneered the industry and made furniture available from a number of craftspeople who still work today in the Pomeroon river. Liana has built upon that by creating furniture with a strong and unique design component which would satisfy the high end of the world wide market at a price which reflects fair trade and not exploitation

Its location on Charlotte Street between Camp and Alexander Streets is not one of the best and the building is partially hidden by shrubbery. It is not the kind of place that you would notice and stop

The company also does very little advertising and as such most business comes via word of mouth and from institutions as opposed to consumers. What they get is top quality and well designed furniture at what could be considered reasonable prices given the attention to detail and general craftsmanship. Chairs retail from $32,000 and sofas from $83,000, more expensive than conventional wicker furniture but the material has been treated for termites and is lacquered. Sales are now picking up after years where the subdued economy has been a significant factor

Liana was assisted in developing its workforce under a United Nations programme with visits by craft workers from the Philippines. This fit in with Liana's philosophy of emphasising technology transfers between developing countries or South/South cooperation . This also reflected a belief that Guyana 's future does not lie in foreign direct investment and the emphasis on cheap labour, but instead the prioritisation of businesses that are nationally owned and use the natural resources and the skills of its citizens in a sustainable way

All well and good, but marketing remains an uphill task as the company competes with the huge east Asian industry. It has had some success in the Caribbean which was seen as a spring board for entering the U.S and Europe .A number of hotels throughout the region have been largely furnished by Liana. Locally the market has been very receptive with Le Meridien and Cara Lodge using its furniture extensively. There is now a Liana Cane in Suriname and the two entities hope to develop the partnership so that indigenous crafts done by the djuka can be sold in Guyana. This is a practical example of the Guiana Shield Initiative a programme established by the Netherlands Committee for the International Union for the Conservation of Nature in 1996. Its mandate is the promotion of environmental sustainability and conservation in the Guiana Shield region of northern South America

The company has appeared at prestigious design exhibitions in Milan and New York which have indirectly led to a number of contracts including an order from the cosmetics giant Estee Lauder. This involved the design and production of a multi material stool for use in Aveda salons the corporation's eco friendly arm. Not a small achievement given that such a company could have sourced the furniture anywhere in the world

The shows also led to a visit of 18 students from the New York Parson's School of Design. The group worked along-side the employees to create children's furniture which was eventually unveiled at the International Contemporary Furniture Fair (ICFF) in New York. For the employees it was an empowering experience as they realised the quality of their practical skills

Liana has also started producing an award winning chair designed by Tony Whitfield of the Parson's School. This required a large investment of some US$20,000 much of it spent in shuttling prototypes back and forth. But it will retail at over US$2000 and is aimed at the high end market. It was nicknamed the Soca Boat by workers in the factory because of its unusual shape. A group in Toronto also plans to open a store retailing the Liana's furniture along with other indigenous pieces

Internally the company has attempted to apply its vision including the principle that workers should not be alienated from what they produce. This means employees are allowed to produce furniture for their own homes only paying for the raw materials. As for wages, Liana has applied a mix of day rate and piecework which encourages workers to be self directed. This accepts that the human element is essential for high quality production. Liana also hopes to outsource some of the production of components to indigenous communities which now only gather material

Preserving resources is also an important issue given that over harvesting can lead to long-term in-creases in costs. This shortage is already being seen in the Pomeroon where producers are paying more for material. Liana therefore stipulates that only vines of a certain diameter should be harvested thus allowing for regeneration of the resource base of the three materials cufa, nibbi and tibisiri. They have also worked closely with Iwokrama and Conservation International

All these efforts have not gone unnoticed and the company has just been selected as an example of an environmental entrepreneurial initiative reflecting the aims of the Rio Summit. One of only three such projects in Latin America and the Caribbean which will be showcased at The World Summit on Sustainable Development in Johannes-burg in August

In preparation Focus on the Global South (FOCUS) an organisation devoted to the identification and documentation of innovative grassroots community-based efforts in sustainable development will this month be making a documentary on the company along with TV Cultura of Brazil.
The irony is that while Liana engenders tremendous goodwill both locally and in the development community it still struggles with the more mundane realities of cash flow. It hopes to access a more developed mode of financing away from commercial credit

It may be lauded for its contribution to sustainable development, but will that be enough to ensure its own survival in the market place?



The Month in Business

Euro and Gold rise
The euro soared to a nine-month high against the dollar amid persistent worries over sluggish corporate profits in the US

The euro reached $0.9249 by on Wednesday May 22nd, having earlier jumped to $0.9276 - a level last seen in September.
Analysts attributed the euro's rise to growing doubts over the strength of the US economic recovery following a recent string of disappointing corporate results

Fears over a fresh wave of terrorist attacks in the US were also cited as a factor behind the turnaround in the euro's fortunes

Fears of a military conflict between India and Pakistan have also pushed the price of gold to a 27-month high

The gold price reached $320 by last Friday its highest price since it hit $338 in October 1999, as investors sought a safe-haven for their money.
Some analysts predict gold could reach $340 by year-end

Both rises are good news for Guyana and in particular GUYSUCO whose sales to Europe are calculated in euros while expenses are largely based on the U.S dollar.

Mazaruni Granite looking rocky
RBTT Merchant Bank of Trinidad is said to be moving against Mazaruni Granite Products Ltd to recover its US$16m loan to the beleaguered quarrying business

MGPL blames its troubles on delays in public infrastructure works it was counting on since taking over quarry operations at Tiperu in the Mazaruni River from Guyana Granite Products Ltd in 1997. Observers have noted that the quarry with a capacity of 3m tonnes per year was simply too large for Guyana's needs and shipping stone to Caribbean islands was uneconomical. So far no parties have shown interest in the company's assets

MGPL has also been brought before the court by Taipan Shipping Ltd for non payment of a disputed amount of US$ 566,000. MGPL, in a consensual judgement has promised to pay $244,100 of the amount over 12 months .TPL is also suing for US$1.8m resulting from the alleged termination of a two year contract for time charter parties.

Bauxite Blow Up
The long running saga between Bermine and ABC over loading schedules came to a head when Viceroy Shipping removed its transhipment facility at Crab Island stating that only Viceroy ships could use the remaining mooring facility, thereby denying Bermine's customers loading rights. Amidst protests, a television slanging match and letters to the newspaper the government will now ask Viceroy to allow third party ships to use the loading basin. This is in the context of continued low prices for metallurgical grade bauxite making both ABC and Bermine's production unprofitable


DIDCO grows local
Didco Trading Company opened a fully computerised poultry farm on the Linden Soesdyke highway part of a US$16.6m investment of 27 tunnel ventilated pens each able to hold up to 37,000 chickens. When complete the investment will go a long way in making Guyana self sufficient in poultry and to supply DIDCO's KFC franchises


Caribbean Shipping Association
.....held its semi annual conference in Georgetown amidst tight and private security given fears over the crime situation in the country . On the agenda were improvements to the Georgetown harbour and security procedures in light of drug smuggling and world (not domestic) terrorism


For the want of a letter
The June opening of a branch of Development Finance Ltd has been delayed because the government has yet to write a letter formally approving waivers on corporation and withholding taxes for the regional development bank. Meanwhile the Guyana Stock Exchange will not open before September following difficulties in finding a suitable applicant for the senior administrative position


Cell phone congestion
GT&T revealed that its number of mobile subscribers has increased five fold in one year from 9,800 in first quarter of 2001 to 51,244

A fact experienced daily by cell phone users who more often than not fail to complete their calls.

Deposits can't stop growing
There is no let up in the sea of deposits swamping the commercial banks. Total deposits from the private sector increased by G$2.05bn in the first three months of the year

Deposits have grown by 11% from March 2001. Meanwhile loans and advances have fallen from $52.1bn in March 2001 to just over $50bn for March 2002

With the 91 day Treasury bill Rate touching 5.88%, almost the same as the small savings rate of 5.77%, banks are looking overseas for investments. Commercial banks' foreign holdings (other) increased to $3.9bn in March up by $1.04bn year on year

With the outlook showing little signs of new demands for loans, we can expect to see banks continuing to expand their overseas holdings. The big question is what effect this will have on the exchange rate.

Recycling plastic bottles
Turning plastic into cash
Who should clean up all the plastic soda bottles? The companies who make them.
There are no accurate estimates of how many plastic bottles are imported or produced in Guyana every year. The figure being bandied around is 5m per month which would be 60m per year. A staggering amount and a figure that is rapidly growing given that the beverage industry is turning more and more to plastic for its containers

The evidence is everywhere, in the city landfill, in the drains, by the roadside and during Easter in the National Park. It is a becoming a major environmental problem and an embarrassment to this country. Emerging sectors such as tourism can be affected by the prevalence of litter. Mosquitoes can find a place to lay eggs and in general an untidy environment contributes to lawlessness and a poor outlook on life. To date no one has come up with a solution and the bottles keep piling up

But a recent seminar organised by the Guyana Training Agency offered a number of possible models which could immediately help the situation and at the same time provide income for many small entrepreneurs

The uses of PET mushroomed with the improvement in processes for PET production that involved fast crystallization of the polymer. This allows it to be moulded into containers, especially those for soft drinks - the ubiquitous soda bottle. In fact, the production of soft drink bottles accounts for over half of the yearly production of PET worldwide. PET can also be recycled for a number of uses such as carpet backing. The polyester fibre industry is a major user of recycled PET. Recent technological advances mean PET can be blended with resins for use in manufacturing car bumper bars, recreational vehicle parts, computer keyboards and boating equipment

While the amount of 60m bottles per year might seem large, in actual tonnage this is not considerable and it is unrealistic to expect Guyana to start actually producing recycled PET given that domestic uses would be negligible and shipping it overseas would probably be uneconomical. However shredding or chipping the plastic bottles is a relatively simple process and requires a minimal investment of around US$30,000

What the moderator of the seminar Dr Heino Vest explored was which type of system could be put in place to collect the bottles and how this might be financed. It is clear from projects in other countries that an economic incentive is the primary motivating factor. Appeals to keeping a country clean, notwithstanding Guyana, might encourage persons not to litter but do not necessarily result in everyone collecting their old bottles and dropping them off at a recycling centre

The incentive would therefore consist of a bounty on each container so that small entrepreneurs, school children; anyone could get cash for the bottles they redeem

Finding out how much that bounty might be is tricky. Setting it too low would result in a poor redemption rate and not solve the primary objective of cleaning up the streets. In Jamaica a programme to recycle glass containers only got off the ground when the price was raised from $4 to $5. Too high a price and the system would become unsustainable. One way of looking at it is to calculate how much an unskilled labourer might be willing to work for in one day .The seminar assessed this at $1000 and estimated that a person working for eight hours could collect five hundred bottles. This would mean a bounty of $2 on each bottle. This may not be enough given that you cannot buy anything for less than $5 in Guyana. But concerns over feasibility have to be addressed and in this regard even $2 would likely be too high a price

Looking at it from the side of where to sell the chipped plastic is the next part of the equation. Currently, compressed unwashed plastic bottles are being bought for export to Trinidad at $40 per tonne. Worldwide scrap prices are higher in the range of 6-10 cents per pound or about $179 per tonne. However the market is very volatile given that supplies are affected by virgin PET production and price. Using the first figure, a large bottle of water weighs 44 grammes empty. It would take 25,000 to make a tonne. This means the value of each bottle is US 0.16 cents or in Guyana dollars 30 cents obviously way below a level which would be an incentive for persons to go around collecting bottles. At $179 per tonne the price per bottle would be in the range of G$1.3.
Whatever the price used, the system would not be viable on its own and additional income needs to be found. This is where things get tricky

It is in the interests of manufacturers and importers of beverages that they take a lead role in making sure a recycling project works and is self-sustaining. And Dr Vest gave an example in Southern Africa where manufacturers of aluminum cans set up their own non profit company to redeem used cans. In the region cans are the preferred containers for 90% of all beer and soft drinks. In Botswana this meant in 1990 an annual consumption of 200m cans .For the whole of southern Africa there were 3bn cans or 120,000 tonnes of raw material. The situation in Botswana was desperate with the road sides covered in cans and huge piles of containers at local dumpsites. It threatened the country's fledgling tourism industry and the governments in the region were concerned enough to talk about tough regulations. The three manufacturers ISCOR Steel, Nam PAK and Crown Cork formed Collect-A-Can which would build a collection and recovery system for used beverage cans. It was logistically quite difficult seeing that the distances were very far and the value of the product minimal. But in each country in the region they set up a central depot and then it was largely left to entrepreneurs to take advantage of the opportunities to make money. Through help from the European Union small entrepreneurs were given financing for mobile balers that could compact cans. Schools charities and religious groups have all become involved in the system. After only a few years the recovery rate which had been zero in 1990 was up to 63% and there are now 37,700 collectors earning up to US$1500 per month from the programme. Cans now only make up 1% of all landfill volume in Botswana and the companies have paid out US$10m for raw material. Needless to say Botswana is a tidier place and the governments in the region are satisfied that the private sector initiated system has solved the problem

What about Guyana? It was disappointing that the two large beverage retailers in Guyana, Banks and DDL did not send more senior representatives to the seminar. Guyana Beverages, importers of BUSTA did not send any representative and when contacted said they saw the environmental levy as their contribution to the issue although they do place garbage receptacles in some schools. Instead there were personnel from the City Council and other public agencies and also consumer groups. Where the money would come from to make up the short fall in revenue was also addressed and it was agreed that beverage companies could impose a $5 charge on each bottle and still not see a noticeable decline in sales. This money would go to....and at this point there were some differences of opinion . Some present wanted a private company others wanted government involvement. Guess which won?
But the fact is that such a system does not need inputs from consumer groups or even the City Council to function for the benefit of all. Since the system would be largely funded by the beverage companies it is they who would need to be in charge and run a recycling facility given that it would be in their interests to make sure the surcharge on bottles does not keep increasing and money is not squandered. A $5 surcharge would more than cover the costs since only a percentage of bottles would be redeemed. Collection of bottles could easily be integrated into their delivery systems just as empty glass bottles now are. All bottles could then be dropped off at a central location jointly owned and operated by the manufacturers

Instead what has been decided is that the City Council will hold a meeting to discuss Dr Vest's report on the seminar and there is all the danger that the whole project will end up fading away

The problem has been created by the beverage companies and as such it is in their interest to solve it. It was noted in conclusion the great challenge presented in having to mix the public and private sector in any project and it would be unrealistic to ask the companies to finance such a system if they did not have complete control over its finances and operations. One possible source of funding for a completely public sector project could be from the environmental tax which is now only applied on imported containers at a rate of $10. In 2000 this amounted to $134m. If local manufacturers were also levied the same amount the revenues would be more than double and this would be easily sufficient to finance the system. But for the companies such a programme would give them no benefits while imposing a tax on what is a price sensitive product

It behoves them to move quickly in putting in place their own programme from which they would get some money back from the sale of the plastic. However this would require a level of trust and cooperation not normally evident in Guyanese industry

Despite its objective of cleaning up the streets, bottle collection is simply about putting in place an efficient redemption programme. It is distribution in reverse and all three companies have the experience and systems to make this efficient and to their advantage.
It would be good for the environment and it would be good p.r.  Guyana Unit Trust
With interest rates on savings accounts offering record low yields, investors are increasingly looking for alternative investments . The Guyana Unit Trust might be one option

A unit trust is an organisation which invests funds subscribed by the public in securities, and in return issues units which it will repurchase at any time. The units which represent an equal share in the trust investment portfolio produce income and fluctuate in value according to the interest and dividends paid

Trust Company Guyana Ltd which manages the Guyana Unit Trust has been in operation since 1969 having been formed by the Sandbach Parker Group

The great advantage of any unit trust is that its spreads risk amongst a group of securities. For the small investor who may not be sophisticated enough to analyse company reports a unit trust is therefore an ideal way to reap benefits by effectively holding shares in companies the trust considers as offering the best return

The Guyana Unit Trust owns blocks of shares in most of the major public companies in Guyana. These include DDL, Banks DIH, GBTI, NBIC, Sterling products, GTM, Demerara Bank, Demtoco and Diamond Fire and General Insurance, Guyana Stock Feeds. They also hold shares in some companies that are now defunct or in serious financial difficulties such as Guyana Refrigerators Ltd, IDS Holdings. These do not contribute to the fund but do not represent a burden. Shares in domestic companies make up 60.8% of the portfolio and another 7.88% is invested in treasury bills.
With limited opportunities for investment in Guyana the fund is increasingly looking overseas and now has 20.72% of the fund in various shares and bonds issued by Caribbean companies including Neal and Massy, Goddards, Ansa McAl and Republic Bank

Another 8% is invested in United States corporations such as Microsoft AOL Time Warner General Electric, Caterpillar and Wal-Mart. Most of these shares have performed poorly in the last year and a half but with the U.S now coming out of recession they should make a better contribution to the fund in the future

Over the last five years, the Unit Trust has averaged an annual yield of 3.5% on the current price of $12 per unit. Not stellar but also tax free income. In addition the value of each unit has increased since 1990 from $1.00 to $12.00 a considerable capital appreciation and the main benefit of holding units. Income of the fund is distributed twice yearly. The funds capitalisation as of February 2002 was around $200m with some 18.9m units issued distributed among 800 holders

Unlike shares in many companies in Guyana, the trust company is bound to buy back units from its customers thus giving the investment liquidity

With the establishment of a stock exchange hopefully in September of this year investors will be able to freely trade the units and with the expected stock market's reassessment of the values of shares held by the trust, the units could see a rise in price.

Managing conflict
This is the second in a series of articles prepared by Dr Godfrey Sears, President of The International University Guyana. The articles are intended to help companies with various aspects of management, marketing and human resources

Managing conflict involves the analysis of interpersonal conflict in three categories:
1. The nature of the difference. Are the parties fighting over facts, goals, methods, or values?
2. Underlying factors. Do the parties have access to the same information? Do they see the same information differently? How much is each influenced by his or her role?
3. Stage of evolution. Are the parties at the point of anticipating a fight, in open conflict, or somewhere between?

DIFFERENCES
The manager often experiences his most uncomfortable moments when he has to deal with differences among people. Because of these differences, he must often face disagreements, arguments, and even open conflict. To add to his discomfort, he frequently finds himself torn by two opposing desires. On the one hand, he wants to unleash the individuality of his subordinates in order to tap their full potential and to achieve novel and creative approaches to problems. On the other hand, he is eager to develop a harmonious, smooth-working team to carry out his organization's objectives. The manager's lot is further troubled by the fact that when differences do occur, strong feelings are frequently aroused, objectivity flies out of the window, egos are threatened, and personal relationships are placed in jeopardy

Because the pressure of differences can complicate the manager's job in so many ways, it is of utmost importance that he understands them fully and that he learns to handle them effectively. It is the purpose of this article to assist the manager to manage more effectively by increasing his understanding of differences among the people he works with, and by improving his ability to deal with others

A large part of what follows will focus, for simplicity of exposition,, on differences which occur among a manager's individual subordinates. However, it is important to understand that the principles, concepts, methods, and dynamics discussed throughout much of the article apply to intergroup, to interorganisational and to international differences as well

The basic thesis is that a manager's ability to deal effectively with differences depends on:
* His ability to diagnose and to understand differences

* His awareness of, and ability to select appropriately from, a variety of behaviours

* His awareness of and ability to deal with his own feeling's - particularly those which might reduce his social sensitivity (diagnostic insight) and his action flexibility (ability to act appropriately)

There are two basic assumptions underlying the approach to this problem

1. Differences among people should not be regarded as inherently "good" or 'bad". Sometimes differences result in important benefits to the organization; and sometimes they are disruptive, reducing the overall effectiveness of individuals and organizations

2. There is no "right" way to deal with differences. It may be most beneficial to avoid differences, to repress them, to sharpen them into clearly defined conflict, or to utilize them for enriched problem solving. The manager who consistently "pours oil on troubled water" may not be the most effective manager. Nor is the manager who emphasizes individuality and differences so strongly that cooperation and teamwork are simply after thoughts. The effective manager is one who is able to use a variety of approaches to the differences and who chooses any specific approach, on the basis of an insightful diagnosis and understanding of the factors with which he is faced at that time


DIAGNOSING DISAGREEMENTS
When a manager's subordinates become involved in a heated disagreement, they do not tend to process in a systematic manner to resolve the difference. The issues often remain unclear, and they may talk at rather than to one another. If a manager is to be helpful in such a situation, he should ask three important diagnostic questions

1. What is the nature of the difference among persons?
2. What factors underlie the difference?
3. To what stage has the difference evolved?

Nature of the Difference
Now, looking at the first of these three important questions, the nature of the difference will vary depending on the kind of issue on which people disagree and there are four basic kinds of issues to look for:
Facts. Sometimes the disagreement occurs because individuals have different definitions of a problem, are aware of different pieces of relevant information, accept or reject different information as factual, or have differing impressions of their respective power and authority

Goals. Sometimes the disagreement is about what should be accomplished - the desirable objectives of a department, division, section, or of a specific position within the organization

Methods. Sometimes individuals differ about procedures, strategies, or tactics, which would most likely achieve a mutually desired goal

Values. Sometimes the disagreement is over ethics - the way power should be exercised, or moral considerations, or assumptions about justice, fairness and so on. Such differences may either affect the choice of either goal, or methods

Arguments are prolonged and confusion is increased when the contending parties are not sure of the nature of the issue over which they disagree. By discovering the source of the disagreement, the manager will be in a better position to determine how he can utilize and direct the dispute for both the short-and long-range good of the organization. As will be outlined later, there are certain steps, which are appropriate, when the differences are about facts, other steps which are appropriate when the differences are over goals, and still other steps, which are applicable when differences are over methods or values


Underlying Factors
When people are faced with a difference, it is not enough that their manager be concerned with what the difference is about. The second major diagnostic question he should ask is why the difference exists. As we try to discover useful answers to this, it is helpful to think in terms of:
* Whether the disputants had access to the same information

* Whether the disputants perceive the common information differently

* Whether each disputant is significantly influenced by his role in the organization.
These questions involve informational, perceptual and, role factors. Thus: informational factors exert their influence when the various points of view have developed on the basis of different sets of facts. The ancient legend of the blind men and the elephant dramatizes this point as vividly as any modern illustration. Because each of the men had contact with a different part of the elephant, each disagreed violently about the nature of the animal. In the same way, when two persons receive limited information about a complex problem, they may well disagree as to the nature of that problem when they come together to solve it

Perceptual factors exert their influence when the persons have different images of the same stimulus. Each will attend to, and select from the information available, those items which he deems important. Each will interpret the information in a somewhat different manner. Each brings to the data a different set of life experiences which cause him to view the information through a highly personal kind of filter. The picture which he gets, therefore, is unique to him. Thus, it is not surprising that the same basic "fact" may produce distinctive perceptual pictures in the minds of different individuals

Role factors exert their influence because each of the individuals occupy a certain position and status in society or in the organization. The fact that he occupies such a position or status may put certain constraints on him if the discussion is related to his role.  (To be continued next month)

Profile
Jean Guillaumot
Jean Guillaumot, the General Manager of Le Meridien Pegasus is one of those larger than life characters people want to be around. But his joviality belies a fixed ambition that has seen him steadily work his way up the hotel industry ladder

If you want to find Jean Guillaumot, a good place to look is at the Pegasus poolside. Lunch time finds him chatting with guests and visitors, a generous handshake for les hommes, a kiss on the cheek for les demoiselles as he saunters among the tables. Like Maupassant's character in Bel Ami, he is the effortless charmer radiating joie de vivre from his six foot plus frame and generous girth

Jean was born on November 26 1961, in the 12th Arrondissement of Paris. As one of three brothers he wanted for little in his childhood partly because his parents had been through the German Occupation of France during the 2nd World War and like many of their generation ensured their children were always provided for. Jean says he was an average student just doing enough to go on to the next class. After taking the Baccalaureat at 17 he entered a Hotel Management School . Soon after he took up his first internship at the Intercontinental in Berlin which at the time was still a city divided by the wall. It was quite an eye opener for the young man and he met a number of musicians who had defected to the West from East Germany. Berlin was a vibrant place open all night, cosmopolitan and full of young people many avoiding compulsory military service. Jean started at the bottom as restaurant cashier moving up to night cashier and income auditor. He realised early on that the key to a successful career depended on hard work. He says he has also been fortunate in life to have found people who believed in his abilities and would take the time to help him get ahead. He notes that the hotel industry does not attract Harvard graduates and you can rise to the highest positions, since a career is based on your experience and not academic qualifications. As long as you are industrious and have a modicum of common sense you can succeed

After six months in Berlin, Jean returned to Paris and took courses in cooking, waiter service, hygiene, law, English, german, and accounting-the building blocks for a career in the industry

He then took another internship this time in New York at the Hotel Intercontinental in the heart of Manhattan, a city he says every young man should spend some time in.. As a front office receptionist, the work was hard but he enjoyed it immensely, in particular when Diana Ross gave him four tickets to her concert ! More importantly it helped him to improve his English which would be a deciding factor in allowing him to help run a hotel in Chicago a few years later

After 18 months he returned to Germany but this time to do his one year of military service then compulsory in France. Despite the lack of freedom he made the most of a bad situation becoming an elected spokesman for his contingent - a kind of French Sergeant Bilko. Between organising barbeques he honed his negotiating skills at weekly meetings with the camp colonel where the two would haggle over how many days off the men should get for unloading the regular train car of wheat for the bakery! It was always the same conversation with the same result!
Still he considered the year a diversion from his goal which by then was firmly set on becoming a General Manager of a hotel, and after being discharged Jean went to work for Le Meridien Hotel's Paris Etoile. His job was as night auditor for a year and then as income auditor. He recalls that the pay was lousy but says material things have never been a big thing for him. He prefers people and simple pleasures such as reading a book or listening to music, good company good conversation and of course good food. He is more a collector of life's moments than of things. He loves to travel, a prerequisite in the hotel industry and something he learnt from his father who also travelled the world in his career. He could remember him coming home from a trip. The family would sit round the dinner table and he would show photographs and talk about faraway places. But his father would always say." It's nice what I show you but you have to go yourself ." As such Jean never felt himself limited to France and considers himself more a citizen of the world welcoming different cultures as part of life's journey. He is also a sports enthusiast dabbling in golf, tennis, football and even evening jogs on the seawall

After two years and a half at the Hotel Etoile he took a job at the Intercontinental Paris which he recalls he was simply not ready to fill. After a couple of months he was told that he was not the right person. It came as a surprise for someone so confident but he learnt that one must know one's abilities and not be-come discouraged. Career paths like true love are never smooth. He returned to the Le Meridien hotels as a cashier at Le Meridien Montparnasse and quickly became the night manager with responsibilities for the front desk and some 30-40 staff. At the time the hotel was undergoing extensive renovations and it was a tremendous challenge to keep the 950 rooms operating

In 1990 he received a proposal to become rooms division manager at Le Meridien Chicago, a gourgeous boutique hotel popular with movie stars and singers. Among the guests were Whitney Houston, Julia Roberts and Billy Joel who played the piano in the bar just for fun. Despite the glamour Jean was not star struck and realised that the famous really wanted to be treated like ordinary folk and just have people be polite to them. Also all the talk of heavy drinking was at the time a myth as the most many of the entertainers requested was mineral water ,fruit and a treadmill! He loved Chicago and made many enduring friendships there. He also enjoyed the architecture and the lively night life centred around various blues bars. But he also realised how stressful American life could be in an ultra competitive environment. It was in contrast to what he describes as the Latin culture of countries such as France, Spain and Italy and by extension countries in South America where quality of life is more expressed through food, friends and family. La Dolce Vita. He returned to Le Meridien Montparnasse in 1993 and spent three years as rooms division manager and then spent another two years in the same capacity at Le Meriden Etoile in the same capacity coming under the influence of one of many mentors who have helped him develop his skills

Then he got a call to go to San Diego California. Despite the perfect climate he did not much enjoy the nouveau riche environment with all its talk of fast money. So he left rather quickly when offered the position as No 2 at Le Royal Meridien King Edward in Toronto another city he adored with its high quality of life and respect for cultural differences. It was a good learning experience ,as the 360 room hotel was a bit exclusive requiring great attention to detail. He also dabbled in the movie industry helping to find locations in the hotel for the producers of the show La Femme Nikita. This led to a starring role as an extra walking out of an elevator! But the taste was not enough for him to change careers although it helped him to visualise how spaces in hotels could be used or adapted to the Clients'needs. Then one day he got a phone call from Le Meriden's Manager for the Americas who asked him how he was enjoying the snow in Canada. Jean, sensing an offer was in the works, said the snow was fine. The manager asked him if he would prefer some sun and eventually asked if he would like to be the G.M for Le Meridien in Georgetown Guyana. This drew a momentary blank until he inevitably recalled Jim Jones and the Jonestown tragedy. He asked for a few days to decide and spoke to Barry Curran then in charge of The Pegasus. Barry said he had enjoyed his experience immensely and was able to relate his passion for the country. So Jean decided to take the job arriving on April 5th 1999 to a fabulous welcome from everyone. He has enjoyed the country and the hotel from the start

As G.M. he has strived to make the hotel as accessible to Guyanese as to foreigners and has enjoyed his relations with both communities. For Le Meridien everyone is important. Delegating responsibility is a big challenge for any manager and Jean believes it is vital for a hotel's success and the performance of its employees. It does not mean giving someone a task and leaving them alone. First they must be trained to assume responsibility and monitored to ensure the task is completed while at the same time giving them a level of autonomy. Successful delegation enables an organisation to progress much faster. As there is not too much cultural activity Jean has had more time to spend talking with people and has made many friends along the way. He is still amazed by Guyana's beauty and its cultural diversity recalling that he has been invited to several Christmas dinners where the mother was a Hindu and the father a Moslem!
And the future? "If I listen to my heart I would stay here forever, but if I listen to my career I need to move on.." It has been three beautiful years and Jean believes that the country has everything it needs to succeed. For him it is a shame so many people are leaving . The hotel's biggest competitor, staff wise, is USA and Canada. He hopes he could come back in 10 or 15 years and find a fully developed, peaceful country

Meanwhile Jean has developed a hankering for the Far East. Wherever he lays his hat he will call his home. It's just another stop on his journey to experience all that the world has to offer.