AGRICULTURE: BLACK SHEEP OF THE FAMILY?
AGRICULTURE: BLACK SHEEP OF THE FAMILY? – BASIL SPRINGER COLUMN WHICH APPEARED IN THE BARBADOS ADVOCATE’S BUSINESS MONDAY ON JULY 2, 2012
“Now faith, hope, and love abide, these three; and the greatest of these is love.”
– 1 Corinthians 13:13
The Malaysian Government introduced a policy labelled “Malaysia Incorporated” in 1981 when Dato Seri Dr. Mahathir Mohamad was Prime Minister. Malaysia Incorporated is about managing the country as an entity in which there is a willingness on behalf of both the civil service and the private sector to be more frank and friendly. It is about managing a country like a business.
In November 1993, at an International Conference on “Malaysia: Powerhouse of the 90s”, the Prime Minister stated that “the Government will continue to encourage greater private investment initiatives whilst ensuring that the public sector does not crowd out activities in the commercial and business sectors. Necessary support will be provided to strengthen and enhance the role of the private sector. The Government will ensure the machinery at all levels will work efficiently and closely with the private sector in the spirit of Malaysia Incorporated”.
The rest is history. Malaysia now enjoys, according the CIA World Fact Book (2011), a gdp per capita of US$15,600 averaged over a population in excess of 27.5 million. The corresponding statistics for Singapore and Barbados are US$59,600 (pop – 5.3 million) and US$23,600 (pop – 287,000), respectively.
The relative roles of the public and private sector under this system may be summarised as follows: the private sector “does business” and the public sector “stimulates a user friendly enabling environment”.
One gets the impression in Barbados that the policy of respective governments is for Government to take control of some sectors of business instead of mandating the private sector to “do business” in these sectors and then providing the necessary enabling environment in terms of appropriate regulatory and support (including finance) services.
One such sector is the agricultural sector – the black sheep of the family – even though it feeds us. Almost 10 years ago Government quite appropriately commissioned several business plans to: (1) transform the struggling and declining Barbados ‘Sugar’ industry into a thriving and profitable ‘Sugar Cane’ industry by diversifying into value-added cane-based products and services and improving the efficiency of integrated operations; (2) transform the Caribbean ‘West Indian Sea Island Cotton Growing’ industry into a thriving and profitable private sector-led ‘West Indian Sea Island Cotton Integrated Textile’ industry by expanding into value-added textile operations that will ultimately enable the manufacture of genuine, certified W. I. Sea Island cotton-finished goods within the Caribbean region; (3) rationalise crop production; (4) rationalise livestock production; and (5) rationalise the development of the Scotland District.
The sugar cane business plan proposed a totally new private sector joint venture (with Government financial support) with the Canadian owners of the Tilby Cane Separation System which would have replaced the traditional sugar cane crushing machinery with a much more efficient state-of-the-art cane separation system that would provide high-grade feed stocks to numerous downstream value-added processing facilities. However, because this was “new technology”, conservatism at the leadership level prevailed and Barbados lost the opportunity to become the leaders in the world in the roll out of this impressive technology. Despite several later studies, the industry has now reached an all-time low.
A private sector joint venture cotton business plan was duly prepared and partnered local and regional cotton producers with a passionate and interested overseas businessman with several years’ experience buying sea island cotton lint ginned from seed cotton grown in Barbados. This businessman converted the lint to yarn (spinning); then knitted garments or fabric; and then finished goods which were sold at retail in ‘High Street” in the US and elsewhere.
A company, Exclusive Cottons of the Caribbean (ECCI), was incorporated (80% private sector shareholding) to implement the business plan. Political interference ensued and very quickly the project was “high jacked” and became 92% Government-owned and the rest is history. Today, ECCI has made no progress and the industry (the family silver) is in demise.
What a shame!
It is perhaps possible to revive the industry with the original joint venture partner who is still interested and has reached out to several ministers to save the family silver but so far to no avail. The present Minster of Agriculture advised in a public forum two weeks ago that a proposed public/private solution would be made soon. The other proposed business plans were still-born.
The systems of a business include Corporate Governance, Marketing, Production, People and Investment Finance. The Corporate Governance and the Investment Finance models, in particular, have been weak in the context of the agricultural sector in Barbados. The Corporate Governance must be built around a public/private Agricultural Trading System and an innovative investment finance instrument.
Most VC financing in Malaysia tends to concentrate on companies at the early, expansion and mezzanine stages, hence biotech companies, which were at the post prototype, or start up stage are hardly supported. These later companies, post prototype or start up, are addressed by the innovative benevolent Seed/Venture Capital arrangement designed as part of the CBET Shepherding Modelâ„¢, the security for which is the Shepherding process which mitigates the risk of failure.
As a continuous effort to support the VC industry, a Government-owned VC company, Malaysia Venture Capital Management Berhad (Mavcap), was set up to manage a US$150 million fund in 2001.
The numbers required in Barbados, with a much smaller population, would be commensurately smaller.
Let faith, hope and love abide! Â Â Â (Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – CBET – Columns are archived at www.cbetmodel.org).