“We want to be able to gain more from our natural resources” – former PSC VC

…looks at how to capitalise on value-added products

Guyana’s manufacturing sector is continuously seeking to capitalise on value-added production, which refers to the increase in value of an article at each stage of its production, exclusive of initial costs.

And former Vice Chairman of the Private Sector Commission, Rafeek Khan, in providing advice on how Guyana can properly capitalise on its value-added products, has made certain remarks on “The Guyana Dialogue” show.
Focusing on the manufacturing sector, Khan mentioned that one of the ways value-added manufacturing can be achieved is by converting natural resource logs into dimensional timber.
“For me, I would say we need to at least look at converting logs into dimensional timber, targeted towards consumers who are currently willing to buy our timber. This includes applications for hydraulic and engineering uses, housing, framing, and roofing. You also have decking. These are applications that don’t require sophisticated value-added processes,” Khan explained.
Emphasising that this shift is driven by the desire to gain more from natural resources, Khan detailed, “We want to be able to gain more from our natural resources. So, if you’re cutting let’s say a truckload of logs and you sell it to India or China, the value of that truckload of logs without adding any value is just going to be about US$10,000. However, if you were to convert that truckload of logs into dimensional lumber, you’re not even talking about further processing…,” he explained.
By the simple act of converting a truckload of logs into dimensional lumber, Khan explained, a businessperson would greatly multiply revenue receivable on the logs.
“We’re talking about the first stage of production: from logs to lumber to rough-sawn lumber. And just by doing that alone, you’re moving towards almost doubling the revenue you will get from a containerload of lumber that you’re going to sell,” Khan explained.
“So, can you imagine if you were to utilise labour in-country, helping contribute to the country’s Gross Domestic Product by converting our raw material into more value-added products…?” he asked.
“That has been the broad objective of the Guyana Forestry Commission and the stakeholders within the forestry sector: to keep growing businesses by increasing revenues through value-added production,” he detailed.
Noting that if Guyana were to continue exporting raw materials without conversion, the desired growth would not be seen, Khan declared, “If we keep just exporting raw materials, we’re not going to see our profitability as we would like to. We would not be creating employment and we will not be increasing our GDP. So, from a broad perspective, we need to look at increasing value-added each year.”
Acknowledging that the transition has been challenging, he declared that possibilities are on the horizon. One of the major challenges over the past four to five decades, he said, has been the move from reducing log exports and hopefully one day banning them, to increasing value-added products.
Another key issue has been logistics, he declared. Moving raw materials from the hinterland to a sawmill to be processed into value-added products means that the cost of transportation can be as much as 50% of the total cost of the raw material, Khan added.
“If you’re spending most of your production cost on logistics, you’re not going to be competitive. However, what we see happening now —and why the opportunity is great for any company seeking to enter into value-added production — is that logistics’ costs are set to decrease by at least 50% due to infrastructure improvements being made to move logs from the forest to the sawmills,” he detailed.
“Another area where costs would be reduced, which has been a hindrance in the past, is energy,” he added.
As global demand for sustainably-sourced products grows, the need to move beyond exporting raw materials — making the shift towards value-added products — has become increasingly urgent, he explained.
Similarly, as Guyana continues to develop, maintaining upward mobility on a number of value chains across a range of sectors would be a challenge, he explained.
Natural Resources Minister Vickram Bharrat had in fact said in February 2023 that investing in these value-added products could be the key to ensuring the long-term viability of the forestry sector.