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MPA III
Master of Public Administration
Program in Governance
2008-2010
Agricultural Food Exports of Suriname to CARICOM
By
Chantal M.M. Elsenhout, LL.M.
FHRISS: 0308006
Paramaribo, May 2010
Word count: 10.350 This paper is submitted in partial fulfillment of the requirements for obtaining the Degree of
Master of Arts in Public Administration in Governance (MPA) at the aforementioned
Institutes.
0
ISS Institute of Social Studies F.H.R. Lim A Po Institute for Social Studies
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TABLE OF CONTENT
ACKNOWLEDGEMENTS
LIST OF ABBREVIATIONS
CHAPTER 1: INTRODUCTION 5
1.1 Background 5
1.2 Research objectives 6
1.3 Research questions 7
1.4 Relevance and justification 7
1.5 Research method 7
1.6 Analytical framework 7
1.7 Limitations 8
1.8 Chapter overview 9
CHAPTER 2: LITERATURE REVIEW: SOME GENERAL AND ANALYTICAL
PERSPECTIVES ON THE MAJOR DETERMINANTS OF EXPORT EARNINGS
GROWTH 10
2.1 Introduction 10
2.2 Customs Unions and trade creation 10
2.3 Specialization and diversification 12
2.4 Tourism 14
2.5 Conclusion 16
CHAPTER 3: SURINAME’S AGRICULTURAL SECTOR 17
3.1 Introduction 17
3.2 Production development and agricultural export performance 17
3.3 CARICOM food market 22
3.4 Policy framework 23
3.5 Conclusions 25
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CHAPTER 4: AGRICULTURAL EXPORTS TO CARICOM 26
4.1 Introduction 26
4.2 Evaluating agricultural exports to CARICOM 26
4.3 Composition of agricultural exports to CARICOM 28
4.4 Conclusions 29
CHAPTER 5: SCOPE FOR EXPANSION OF AGRICULTURAL EXPORT
EARNINGS TO CARICOM 31
5.1 Introduction 31
5.2 Scope for expansion of agricultural export earnings to CARICOM 31
5.3 Constraints to agricultural export earnings 35
5.4 Conclusions 38
CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS 39
BIBLIOGRAPHY
ANNEX 1: SECTIONS AND CHAPTERS OF THE HARMONIZED
COMMODITY DESCRIPTION AND CODING SYSTEM 1992 (HS)
FOR INTERNATIONAL CLASSIFICATION OF GOODS
ANNEX 2: PRODUCT COVERAGE OF THE WTO AGREEMENT ON AGRICULTURE
(HS 96)
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ACKNOWLEDGEMENT
“Attempt the end and never stand to doubt, nothing’s so hard but search will find it
out…”
Robert Herrick
The last months of completion of the course “Master of Public Administration in
Governance” have been an emotional rollercoaster that irreversibly affected my view on
life, setting out goals and by far perseverance. Although many helpful people have
crossed my path during the journey, I express my deepest appreciation for my colleagues
whom allowed me every room necessary to finish this project; Ambassador R.R. for your
endless patience and continuous words of motivation and PS. J.A.N. for your push and
encouragement when I needed it most.
For my girls Alida, Meriam and Lindsey; thank you for the “interventions” and
understanding. Your friendship is invaluable.
For my supervisor Howard Nicholas; thank you for your guidance in reviewing and
editing this paper and throughout the process.
I dedicate this paper to my parents. To my caring mother, always striving to give me the
best; my deceased father for always being proud of me. For these gifts I am forever
thankful.
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LIST OF ABBREVIATIONS
ASEAN ASSOCIATION OF SOUTHEAST ASIAN NATIONS
ASP AGRICULTURAL SECTOR PLAN SURINAME
CARICOM CARIBBEAN COMMUNITY
CARISEC CARICOM SECRETARIAT
CET COMMON EXTERNAL TARIFF
CSME CARICOM SINGLE MARKET AND ECONOMY
CU CUSTOMS UNION
GBS GENERAL BUREAU OF STATISTICS SURINAME
FAO FOOD AND AGRICULTURAL ORGANIZATION OF THE UNITED NATIONS
FTA FREE TRADE AREA
HS SECTION HARMONIZED SYSTEM SECTION
IICA INTER- AMERICAN INSTITUTE FOR COOPERATION ON AGRICULTURE
LAC LATIN AMERICA AND THE CARIBBEAN
MAAHF MINISTRY OF AGRICULTURE, ANIMAL HUSBANDRY AND FISHERIES
MDC MIDDLE INCOME DEVELOPMENT COUNTRY
NAFTA NORTH ALTANTIC FREE TRADE AGREEMENT
MERCOSUR SOUTHERN COMMON MARKET
OECS ORGANIZATION OF EASTERN CARIBBEAN STATES
RTA REGIONAL TRADE ARRANGEMENT
SF SURINAMESE GUILDERS
WTO WORLD TRADE ORGANIZATION
CHAPTER 1
INTRODUCTION
1.1 Background
CARICOM countries are greatly dependent on agricultural imports to secure the food and
nutritional needs of their populations (Long, 1982). Ever since the 1970’s Caribbean
leaders began expressing concern over the mounting food import bill which actually
exceeded US$ 3 billion in 2008. The cause for this phenomenon dates back to Caribbean
countries’ plantation history in which agricultural production was primarily skewed
towards exports of traditional crops such as sugar, cotton and bananas. Agricultural
resource use insufficiently took into account domestic food needs, hence fuelling the
demand for imports of food. Pressure on food import bills has increased over the years
since a number of CARICOM countries shifted their focus away from agriculture because
of their geological limitations to excel in the sector. Many have demonstrated
comparative advantages in non- agricultural sectors such as mining and export services
such as tourism and off- shore banking. A logical corollary of this development is large
and increasing food import dependence. In addition liberalization of barriers to
agricultural imports during the years exacerbated these imports.
In 2008, around 86% of Caribbean agricultural imports were sourced from outside the
region.
Increasing food imports imply increased vulnerability to external food supply shocks as
was recently demonstrated with the international food and energy crisis and its adverse
effects on the economies of the region. In order to better absorb such shocks and protect
regional food security, CARICOM leaders renewed their plea for the region to produce
more of the food it consumes and vice versa.
In this context Suriname has often been considered a
potential “food basket” for the region, meaning that it
could be a potential food supplier for CARICOM
countries. This because together with Guyana and
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Belize, Suriname has the largest land surface of CARICOM that is suitable for the
development of agriculture – related activity. Of CARICOM’s total arable land of
approximately 4.9 million hectares, Suriname has around 1.5 million hectare considered
suitable for agriculture (ASP 2005-2010). But before even considering Suriname’s
potential as a food supplier to CARICOM, a critical look needs to be taken at the
country’s agricultural export behavior thus far.
CARICOM markets are not new to Suriname. Records of trade show data since the
1980’s. This data indicates that overall exports have excelled with Suriname’s accession
to the Caribbean Community in 1996. Export earnings expanded from the prevailing
currency of approximately 4,500.000 Surinamese guilders1 in 1980 to US$ 25 million in
1996. It is assumed that this expansion in export earnings growth also relates to
agricultural export earnings.
1.2 Research objective
With agricultural exports having so drastically expanded since Suriname’s accession to
CARICOM, this paper is interested in finding out the determinants of this growth. It sets
out to:
• Further assess the growth in the value of Suriname’s agricultural export earnings to
CARICOM;
• Explain this growth;
• Assess scope for increased export earnings to CARICOM;
• Offer policy recommendation to enhance growth of agricultural export earnings to
CARICOM.
1 Based on agricultural exports to Barbados, Grenada, Jamaica, Saint Lucia, Trinidad and Tobago and Guyana. Today Sf. 4500 would be the equivalent of US$1.600 calculated with the current exchange rate of 2.8 for 1 SRD. Because of a continuously fluctuating exchange rate in the 1980’s and early 1990’s, it is not possible to precisely reflect the correct value in US$
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1.3 Research question
With agricultural export earnings to CARICOM having increased over the last decades
this paper asks:
- What caused agricultural export earnings to CARICOM to grow?
- What can be done to build on this growth momentum?
1.4 Relevance and justification
Suriname’s agricultural exports have traditionally been geared toward the European and
Northern- American markets based on favorable terms. Hence, there has been less
emphasis on other markets such as CARICOM. Based on the region’s need for food in
combination with Suriname’s agricultural potential, focusing on increasing agricultural
exports to CARICOM could increase Suriname’s agricultural export earnings.
1.5 Research methods
Research was carried out through literature review, review of statistics and discussions
with key informants. Calculations are based on the author’s own from available data. The
approach adopted is to first undertake a literature review looking at other writings on the
causes of agricultural export growth in general, and in a customs union setting in
particular. This is followed by some background information on Suriname’s agricultural
sector and export of agricultural products. Against this backdrop the study moves to the
author’s own analysis of the drivers of Suriname’s agricultural export earnings growth
over the recent past. The relevant data was obtained from the General Bureau of
Statistics, the Ministry of Agriculture, Animal Husbandry and Fisheries (MAAHF), the
Ministry of Trade and Industry (MTI), the CARICOM Secretariat and relevant
documents from the internet. The data analysis was complimented by interviews with
knowledgeable individuals.
1.6 Analytical framework
Since export expansion coincides with Suriname’s accession to CARICOM, assessment
of the growth of agricultural export earnings to CARICOM will be based on the trade
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creation effects of joining a Customs Union (CU); specialization and diversification;
tourism and government support as determinants for export earnings growth.
1.7 Limitations
Limited availability of relevant data. The absence of data between 1980 and 1996
severely constrains insight in Suriname’s agricultural export behavior to CARICOM.
This lack of data is due to the poor status of statistics during said period, as well as the
fact that crucial data was lost due to the fire that burnt down the General Statistics Bureau
(GBS) in August 2003.
Diverging definitions. The delimitations of agricultural definition differ in various data
sets and documents rendering comparison and analysis of data difficult. The definition of
agriculture used to estimate/calculate data in this paper is based on the Harmonized
Commodity Description and Coding System 1992 (HS) for international classification of
goods,2 in particular chapters 1-24 that group agricultural products, unless otherwise
indicated. This is done to synchronize data with CARICOM data which is based on the
same grouping. But CARICOM data utilizes the so called “WTO definition”3 for
agriculture which omits the value of fish and fish products from its records, but does
include consumable products of non- agricultural origin or products processed from
agricultural commodities. For some of the Surinamese data agriculture only defines the
commodities from the sub- sectors crops, livestock and fisheries. This may not always
give an accurate view of the level of trade because depending in which form a products is
exported makes a difference in estimating shares in trade.
For Suriname detailed available data concerning CARICOM dates back to 1996.
Therefore most analysis will be based on the period 1996-2008. Furthermore the General
Bureau for Statistics Suriname (GBS) lacks domestic agricultural export data to
CARICOM for the periods 2002- 2003. Estimations for 2002 and 2003 were made by the
author based on the assumptions of linear growth.
2 See annex 1 3 See annex 2
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In addition, due to disclosure policies detailed data at the commodity level for
CARICOM imports was scarcely available rendering it difficult to analyze potential
scope for exports.
1.8 Chapter overview
Chapter 2 provides a review of relevant literature concerning the determinants for export
earnings growth. The chapter analyzes whether and to which extent Customs Unions
(CU’s) lead to trade creation, and addresses the debate on specialization and
diversification in the promotion of exports, while taking into account tourism demand as
a means for export earnings growth. Chapter 3 descriptively elaborates on the state of
Suriname’s agricultural production and exports since the mid- nineteen eighties to 2008
in general and in particular to CARICOM. It goes on to give a general overview of the
CARICOM food import behavior and trade regulations of both Suriname and
CARICOM. Chapter 4 analyses the growth in the value of agricultural exports to
CARICOM and assesses whether this growth is achieved by the trade creation effect of
CARICOM, specialization or diversification in agricultural exports or government
measures. Chapter 5 assesses potential scope for expansion of export earnings. Finally,
conclusions and policy recommendations are given to address the issue of increasing
agricultural export earnings to the Caribbean region.
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CHAPTER 2
LITERATURE REVIEW:
SOME GENERAL AND ANAYLTICAL PERSPECTIVES ON THE MAJOR
DETERMINANTS OF EXPORT EARNINGS GROWTH
2.1 Introduction
Since the main objective of the study is to explain the causes of agricultural export
growth in Suriname in the context of its accession to CARICOM, consideration should be
given at the outset to the general literature on the subject, and in particular the literature
which seeks to explain the growth of agricultural exports in general and in a Customs
Union (CU) or similar Regional Trade Arrangement (RTA) setting in particular. The
review will look at both the relevant theoretical and empirical literature.
2.2. Customs Unions and trade
In a Customs Union (CU) countries free trade among their members by abolishing tariffs
while imposing a common external tariff (CET) on imports from non- partner states
(Thirlwall, 2000). This measure is said to invoke trade creation and trade diversion which
are production effects brought about by a CU.
Trade creation signifies the replacement of demand from high cost domestic production
to cheaper imports from lower cost producing member states owing to the removal of
tariffs among member states (Cherunilam, 2008). On the production side it allows supply
to come from a more efficient producer within the union (internal trade creation) creating
increased export opportunities for countries with a comparative advantage in the
production of a certain good. On the consumption side, consumers gain from trade
creation because of lower prices and a greater variety of goods and services.
Trade diversion occurs when the demand is shifted from outside the union to higher cost
produced imports from member states because of the preferential trade treatment granted
to the latter group (Kelly & de la Torre, 1992).
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Most debates about CU’s concern the trade creation and diversification effects its
inception brings about. Empirical studies on the impact of a CU to member states are so
diverse, each using different methodologies, that it is difficult to reach consensus on the
outcome (Handjisky, Lucas, Martin, & Guerin, 2010). There is no conclusive proof to
show whether trade creation or trade diversion will dominate the CU and the outcome for
each union is different. Therefore determination thereof is an empirical issue.
For example, empirical study by Balassa (1967, 1975) on the formation of the European
Community (EC) found that the union was net trade creating for both the EC and non-
EC members. These findings were underscored by other studies such as Truman (1969),
Prewo (1974) and Aitken (1973).
On the contrary however, early studies by Noques and Quintanilla (1993) and Naya and
Plummer (1991) found intra- regional growth growth to be lacking between non- OECD
countries.4 Bayoumi and Eichengreen (1995) and Soloaga and Winters (1999) found
evidence of treade diversion in RTA’s. A study by Eicher, Henn and Papageorgiou
(2008) showed CARICOM to possess great trade creation effects, but also trade diversion
effects.
It is likely that a Customs Union has both trade creation and trade diversion effects
because it will allow trade between countries that might not have occurred before
inception of the CU. On the production side, increased trade leads to higher production
efficiency brought about by enhanced competition, decreased average production costs
due to economies of scale in larger markets, higher international investment, resulting
from an increase in investment opportunities and enhanced technological change
resulting from increased competition (Muhamad & Yucer, 2009).
From this starting point it can be argued that some countries will benefit from trade
creation if they can reach comparative advantages over others and become the lowest cost
producer in the region. At the same time this will lead to diminishing exports by less
competitive countries.
4 Countries not part of the Organization for Economic Co-operation and Development (OECD)
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2.3 Specialization and diversification
An important component of the theory on export growth is the debate on specialization
and diversification. Conventional trade theory suggests that export growth can best be
achieved by specialization, because specializing in those activities that a country is good
at will create a comparative advantage which will in turn increase productivity and
exports. It is also suggested that trade on the basis of specialization leads to more input at
the lowest cost possible. The theory on trade creation is linked to the doctrine of
specialization and comparative advantage. Trade creation promotes the reallocation of
resources from one sector to another and induces increased specialization because of the
removal of tariff barriers. Owing to increased specialization countries can reach
comparative advantage and become the lowest cost producer within the union (Thirlwall,
2000). Trade allows for more markets to be reached, and more markets mean larger
profits because there are more buyers. Based on traditional economic theory, openness of
an economy to international trade will allow comparative advantage to direct resources to
their most productive uses (Rodrik, 2006).
Research conducted by Amiti and Freund (2007) on China’s explosive export growth
over the last 15 years revealed that the country’s exports remained highly concentrated on
a small group of goods. The research that employed the Gini coefficient of export
equality showed enhanced specialization. Export growth was accompanied by an increase
in destination markets. However, the growth and specialization of these exports was
reached in so called “hard manufactures” such as appliances, electronics and computers,
whereas the share of agriculture significantly declined.
A study conducted by Ali, Alwang, & Siegel (1991) on Malawi, Tanzania and Zimbawe
found an export concentration on a narrow base of agricultural commodities to lead to
stagnant or declining real export earnings. In terms of agriculture a country is said to
specialize in the export of a certain product when the proportion of national exports of
that product exceeds those of the reference group (Taylor, 2007). Malawi, Tanzania and
Zimbabwe are highly dependent on exports of coffee, cotton, sugar tea and tobacco. With
the international instability of prices for agricultural commodities the pitfall of
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specialization in a narrow group of agricultural exports is that it can lead to instability in
export earnings as proved by said study (Ali, Alwang & Siegel, 1991).
Based on the export earnings instability that agricultural export specialization can bring,
export diversification is often considered a remedy by policy makers. Its primary motive
is the desire to enhance export earnings stability (Stanley and Bunnagi: 2001 and
Gutierrez de Pineres and Ferrantino: 1997 in Taylor (2007)). For many developing
countries export diversification is considered an important trade policy objective aimed at
accessing a more stable revenue stream in order to be able to better absorb shocks in the
market (Shepherd, 2009).
Export diversification in agriculture can be achieved by either mutating or adjusting the
shares of commodities in the existing export portfolio or by adding new commodities
(Ali, Alwang, & Siegel, 1991). Changing the export portfolio by adding new
commodities and providing a broader base of exports to counter negative effects of
instability in international prices is termed horizontal diversification and is associated
with productivity growth. Vertical diversification or crop specialization involves
additional uses for existing and new commodities through value added by means of
processing and marketing. In order for crop specialization to remain profitable, a country
could opt for creating niches in new high profit markets or shift the national
specialization of products that enjoy good international prospects in terms of demand
downward in the commodity chain. Because prices for processed goods tend to be less
volatile than prices for raw commodities, vertical diversification can expand market
opportunities for raw material and subsequently enhance export earnings growth. The
further down the higher the profitability and market power (Ngaruko, 2003).
Feenstra & Looi Kee (2007) showed by reviewing a sample of 48 countries during the
period 1980- 2001 that an annual increase in export diversity of 3.3% brought about
productivity growth of the same magnitude. However, Ali, Alwang and Siegel found no
clear relationship between the degree of export diversification and export performance in
Malawi, Tanzania and Zimbabwe.
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Against above backdrop, caution needs to be taken when contemplating strategies for
export earnings growth. Specialization could indeed lead to export earnings growth, but
this growth will surely be volatile because it is sensitive to developments affecting the
price or the import capacity of countries. While on the other hand diversification enables
stabilization of export earnings which in the case of developing countries could positively
affect investments in other sectors and lead to growth in productivity. Perhaps for
developing countries, a combination of both strategies would be best. The revenues from
specialization could be utilized for investments for diversification. With diversification
leading to productivity, those diversified products will eventually lead to larger scale
production which will again invoke specialization, but then in a wider range of products.
Evidence for this line of argumentation has been delivered by Imbs and Wacziarg (2003)
who did a study on the stages of diversification concerning a country’s development.
They asserted that specialization and diversification succeed each other in a U- shaped
curve, indicating that countries diversify over most of their development path and that
specialization occurs in a relatively late stage of development at which the gains from
specialization outweigh those from diversification. Klinger and Lederman (2004) on export
data come to similar conclusions in trade. As incomes increase exports become less
concentrated and more diversified.
In terms of export earnings it could therefore be argued that because the later stage of
specialization is in a wider range of products, it becomes less volatile.
2.4 Tourism
The link between tourism and agriculture is of significant importance to developing
countries, especially the countries of the Caribbean (Timms, 2006). This link generally
concerns the impact on domestic agricultural production in order to replace food imports.
It has often been argued by government planners that tourism benefits the agricultural
sector because tourist demand for food is believed to invoke expansion and
diversification of agricultural production (Momsen, 1998). In terms of diversification,
increased and varying tourist demand would lead to expansion of the production portfolio
and enhance the option for the marketing of local agricultural foodstuffs, hence
expanding the possibilities for the use of local agricultural produce.
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However, various studies such as Momsen (1972, 1973); Belisle (1983); Latimer (1985);
and Telfer and Wall (1996) found that these linkages failed to form (Momsen, 1998). In
general this failure is attributed to the inability of agricultural producers to comply with
tourism demands in terms of consistent supply and quality. Early studies on the
Caribbean found initial high food import percentages for countries of the region. A study
conducted by Momsen in 1972 on the tourism – agriculture linkages found that by value,
70% of tourism food demand was imported, despite the fact that small locally owned
hotels grew much of the food needed for their guests themselves. An updated survey in
1985 for St. Lucia found improvements in the percentages of imported food used by large
hotels. In 1968 Jamaican hotels imported 69% of their food. Studies for Jamaica showed
that the proportion of food imports decreased from 69.4% in 1968 to an average of 45%
in 1984 (Momsen, 1998). Jamaica seemed to have managed to create positive linkages
between the tourism sector and local food producers. Similar reductions were
demonstrated in Barbados between 1968 and 1990 (Momsen, 1998). A recent study on
Mexico conducted by Torres in 2003 found that when tourism meets the stage of
advanced mass tourism the potential to stimulate local agriculture is limited to
nonexistent (Timms, 2006). This failure is attributed to the fact that agricultural
development strategies are excluded from tourism development. In Mexico the provision
of food to the tourism industry was replaced by a small number of wholesalers with
supplies from outside the region.
Despite increasing linkages with domestic production, expanded tourism has a high food
import content and may lead to increased food imports (Kendall & Pettraco, 2003).
According to the FAO, the supply for tourist demand is greater from a regional
perspective, because some countries within a given region have a comparative advantage
over others in supplying agricultural products
(http://www.fao.org/docrep/t3384e/t3384e06.htm). From this standpoint it can be argued
that for those countries with comparative advantages in agriculture, increased tourism
leads to increased export opportunities and subsequently increased agricultural export
earnings and can therefore be considered a driver for export earnings growth.
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2.5 Conclusions
Based on theoretical and empirical literature review it became clear from this chapter that
CU’s lead to both trade creation and trade diversion and that there is no unanimity on the
subject. Both trade creation and trade diversion induce increased production, higher
production efficiency and export opportunities of countries within a CU because using
the advantages brought about by trade between these countries can lead to comparative
advantages of some countries, leading them to become the lowest cost producers in the
region.
Specialization could enhance export earnings growth because of large scale development
and comparative advantages. Nevertheless in terms of agriculture, export earnings from
specialization are volatile, because they are sensitive to various developments that affect
price and import capacity of customer countries. On the other hand, diversification
stabilizes this volatility and leads to increased productivity. Revenues from specialization
can be utilized for investments for diversification. With diversification leading to
productivity large scale production can eventually be attained which will again invoke
specialization, but then in a wider range of products. Because the later stage of
specialization is in a wider range of products, export earnings become less volatile.
Furthermore, vertical diversification or crop specialization grants primary commodity
exports increased chances at the international markets because its values are upgraded by
processing and marketing.
Agricultural export earnings can be enhanced by tourism, because of tourism’s high
import content. The pressure it places on countries with diminished resources for
agriculture will lead to higher food imports, which in turn offers countries with a
comparative advantage in agricultural production scope for increased export earnings.
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CHAPTER 3
SURINAME’S AGRICULTURE SECTOR
3.1 Introduction
Against the backdrop of assessing the determinants for growth in agricultural export
earnings to CARICOM, the current chapter will elaborate on Suriname’s agricultural
production sector and its exports since the mid- nineteen eighties. It will also take a look
at CARICOM’s food import behavior and review the basis for Suriname’s export policy
as well as that of CARICOM governing intra- regional trade.
3.2 Production development and agricultural export performance
Agriculture is of importance for Suriname for daily food consumption, income generation
for families - especially in rural areas – and macro income generation through exports.
But despite its importance, agriculture has been on the decline over the last 25 years.
Owing to more lucrative opportunities in the mining sector, focus shifted away resulting
in a marginalized agricultural sector. These developments of course affected agricultural
production as a whole as well exports.
Since 1985 agricultural contribution to GDP diminished by half dropping from 16% to
just 7% in 2008 (FAO, 2009). In 2008 it contributed about 5% of foreign exchange
generation. The decline is clearly noticeable in acreage cultivation. In 1987
approximately 100.000 ha of agricultural acreage was in production (MAAHF, 1995).
Total cultivated area diminished by half between 1985 and 2008, to around 49.000 ha in
2008 (MAAHF, 2009). Of this area about 85% was dominated by rice in 2008 followed
by 4% for bananas. The remaining acreage is covered by perennial and semi- perennial
crops. This data indicates that Suriname severely underutilizes its agricultural potential in
terms of land.
As a logical consequence of decline in production, agricultural exports and agricultural
export earnings also steadily declined since the 1980’s. In 1985 agricultural exports
(including marine products) accounted for 25% of total exports (IICA, 2002). In 1994
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this share was 22% and 10.9% in 2000 (WTO, 2004). In 2008 this share plummeted to
just 5% in 2008.5 Relative to 2004, overall value of agriculture exports steadily increased
again, both because of increased volume and prices. Total agriculture export earnings
increased from US$ 55 million in 2000 to $ 84 million in 2008, at current market prices
(FAO, 2009).
The agricultural export portfolio during the early 1980’s displays a rather concentrated
mix with rice, bananas, palm oil and citrus as dominant export products (Table 1).
Table 1: Suriname’s main export products 1980-1985
(Volume: x 1000 tonne; Value: x Sf 1 million)
1980 1981 1982 1983 1984 1985
Rice
Volume
Value
110,7
75,3
93,2
63,5
130,8
70,2
127,4
66,1
94,7
61,6
137,7
82,8
Bananas
Volume
Value
34,0
10,5
36,5
13,0
38,0
14,8
32,1
13,2
34,9
15,9
37,3
18,2
Palm oil
Volume
Value
2,0
1,1
1,4
0,8
1,2
0,6
2,7
1,0
2,7
1,0
2,8
0,9
Citrus
Volume
Value
-
-
-
-
1,3
0,6
0,9
0,5
0,7
0,4
0,7
0,4
Source: Central Bank of Suriname Annual Report 1982; 1982-195
From 1995 onwards, the dominant position in exports of oil palm and citrus were
overtaken by fish and shrimp. Between 1995 and 2002 exports of rice, bananas and fish
averaged around 60% of agricultural export earnings (Table 2).
5 2008 calculation based on data in the GBS 2008 trade statistics
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Table 2: Individual agricultural exports as percentage of total agricultural exports
1995 1996 1997 1998 1999 2000 2001 2002
Rice 41% 44% 42% 40% 35% 37% 37% 43%
Bananas 14% 9% 11% 15% 21% 22% 19% 13%
Fish 4% 4% 5% 4% 10% 22% 19% 13%
Source: FAO (2003), FAOSTAT-Agriculture database [Online] in Trade Policy Review Suriname,
WT/TPR/S/135 (04-2484 (World Trade Organization, 2004)
Between 2004 and 2008 this average increased to 96% indicating that agricultural exports
have become increasingly concentrated (Table 3). In 2008 approximately US$ 81 million
of agricultural export earnings was generated by rice, bananas, fish and shrimps.
Table 3: Individual agricultural exports as percentage of total agricultural exports6
2004 2005 2006 2007 2008
Rice 21% 16% 19% 22% 39%
Bananas 9% 18% 21% 24% 27%
Fish and fish products 14% 16% 18% 16% 14%
Shrimp 51% 45% 37% 34% 17%
Source: MAAFH Annual Report 2008
Fish and shrimp
The high share for fish and shrimp can be explained by high international prices. While
fish production shows a steady increase, shrimp production is decreasing. Overall the
value of shrimp and fish production was reduced with about 25% and its share in
agricultural GDP dropped to 23% in 2008, owing to diminished international (FAO,
2009).
Traditional crops
In terms of volumes, rice and bananas dominate agricultural exports. As traditional
exports rice and bananas primarily cater to markets with preferential access such as the
EU, the US and Canada (NAFTA). Despite this export concentration Suriname never 6 High percentages for marine products can be explained by high international prices. In terms of volumes rice and bananas dominate exports
gained comparative advantage in neither of these products. This can primarily be
attributed to the fact that preferential arrangements shielded the country from
international competition and did not help to increase efficiency. Suriname has become
increasingly dependent on support prices, reduced duties and assured demand for these
exports that it never found the need to diversify its agricultural export production,
diversify its markets and lower production costs in order to improve competitiveness. In
addition Suriname’s agricultural exports are supply oriented. Total banana output is
appropriated for the international market, while rice sells about 50% of total production
internationally.
Non-traditional Crops
Suriname’s agricultural export portfolio also recognizes some non- traditional exports.
However, these exports are composed by surpluses of vegetables, fruits and ornamental
flowers with as main exports markets the Netherlands and French Guyana. Between 2004
and 2008 exports of tropical fruits accounted for approximately 2% of total agricultural
exports whereas vegetable exports remained below 1%.
Agricultural export earnings to CARICOM
As recognized in the introduction, the CARICOM market is not new to Suriname. Records of
trade with Caribbean nations show export data since the 1980’s. However, available data
only covers total exports to CARICOM from 1980 – 1987. In general, recorded data
before 1996 did not reflect the composition of Figure 17
exports according to destination. Such
registration came only after the switch in 1996
to data collection through the internationally
standardized HS classification. In addition,
most data from before 1996 was lost during a
fire that burnt down the General Statistics
Bureau of Suriname (GBS) in 2003, which
20
7 Note: export earnings for 2002 and 2003 have been calculated by the author based on the assumption of linear growth
was entrusted with the collection of data. However, agricultural exports to CARICOM
ten- folded between 1996 and 2008 at an average growth rate of 18% (Figure 1).
Market share8 Figure 2
Agricultural exports to CARICOM expanded
with Suriname’s accession to the union.
Suriname’s share in intra- regional agricultural
exports to CARICOM in terms of value grew
from 1% in 1996 to 3% in 2008 signaling that
an increasing share of agricultural imports by
CARICOM are sourced from Suriname.
However, in relation to all five CARICOM
Middle Income Development Countries
(MDC’s) of which Suriname is part of, the country has the smallest market share (Figure
2).9
Striking is Trinidad and Tobago’s high market share given the fact that this country
hardly has agricultural production. It is the lowest producer of agricultural products with
an agricultural contribution to GDP averaging around 0.7% between 2002 and 2006
(CARISEC, 2008). Trinidad and Tobago’s shares can most likely be attributed to its
processing industry which encompasses prepared foodstuffs and beverages and to which
it has a comparative advantage. Based on availability of arable land, Guyana is
Suriname’s main agricultural competitor within the MDC’s. Guyana has the highest share
of agriculture to GDP ratio of all CARICOM countries at an average of 31% between
8 For the purposes of this calculation, a somewhat different calculation has been used. CARICOM data aggregation uses the WTO definition for agriculture which excludes fish and fish products. In general, Suriname’s agricultural data includes fish and fish products. To bring both data sets in congruence, the data for fish and fish products were removed in this calculation. In addition CARISEC included certain products that according to Surinamese standards belong to manufacturing. Therefore Suriname’s real share could be somewhat different than shown here. In addition, CARISEC lacks data for Antigua & Barbuda for 2001 – 2004 and 2008 and export data for Suriname for all years
21
9 The classification of MDCs are related to economic size and not to conventional criteria such as per capita income levels or social development indicators. Above countries are important for this equation because Barbados, Jamaica and Trinidad and Tobago are the largest in terms of market size as well as purchasing power. Accordingly, in the period under review respectively Jamaica, Barbados and Trinidad and Tobago sourced the largest intra- regional agricultural imports of all CARICOM from the region Suriname, Guyana and Belize are the largest potential scale agricultural suppliers owing to their vast resource endowments of arable land. Belize however is disregarded in this section because the focus is on CARICOM MDC’s
2002 and 2006, whereas Suriname’s share is just around 7% (MAAHF, 2008). Of Guyana’s total
agricultural exports, increasing shares are sourced to CARICOM with the highest share of 38% in
2008. In comparison, Suriname exports just a fraction of its available agricultural resources.
3.3 CARICOM food market
Ever since the 1970’s, CARICOM’s agricultural imports have significantly increased. In 2008 the
agricultural food demand exceeded US$ 3 billion. Of these imports an average of US$ 236 billion
was sourced from the region between 1995 and 2001; an average which increased to around US$
346 billion between 2002 and 2008.
Due to confidentiality policies of data gathering, data on agricultural imports could not be
disclosed by CARISEC impeding a specified overview of the agricultural demand in CARICOM
countries. However, CARISEC did generally indicate that the products most in demand by broad
heading are cereal products and beef and beef products. Table 4 below gives an overview of the
per capita food imports trends in the various CARICOM countries over the periods 1969- 2003.
Table 4: Food imports- selected food groups (kg/person/year)
Source: CARISEC in FAO, 2007
22
23
These trends give an indication of the most imported agricultural products imported and
consumed within CARICOM. It discloses a high cereal demand in which rice plays an important
role. Table 4 also suggests an increased per capita consumption of imported fruits and vegetables
in the Caribbean.
As became clear in chapter 2, tourism is related to the agricultural sector in the sense that it is
supposed to stimulate domestic production. At the same time tourism has a high food import
content. Many Caribbean countries have over the years moved away from agricultural production
as the primary economic sector and established comparative advantages in other sector such as
tourism. In terms of food provision especially the smaller countries are challenged because they
do not have the resources to increase domestic production, while at the same time tourist demand
pressures food supply, leading to excessive food imports. For this reason local producers are often
not able to cater to a year round demand for agricultural products.
3.4 Policy framework
Suriname
According to the Suriname Multi - Annual Development Plan (Meerjaren
Ontwikkelingsplan 2006 – 2011, Suriname’s trade policy is aimed at optimizing the
benefits of trade liberalization while minimizing its negative effects. Since mid-1990,
Suriname has increasingly been engaged in liberalizing trade by lowering trade barriers
on a unilateral basis and through regional integration. The liberalization regime is guided
by developments under the WTO, EU-ACP negotiations as well as the CARICOM Single
Market and Economy (CSME).
In 2003, the freight traffic law (wet goederenverkeer) replaced the previous import and
export decree of 1954. The new law eliminated all export taxes and encompasses
provisions prohibiting anti-competitive trade practices while promoting the free
movement of goods.
With respect to CARICOM Suriname's tariff schedule is based on the union’s common
external tariff since 1995. Duty--free access is granted to all imports originating in
CARICOM. In terms of export, trade hampering qualifications are alleviated and the
documents required are minimal. In addition to two logistical forms (freight company
24
invoice and an international trade transaction form based on the Foreign Exchange
Regime Code), the most important export requirements are an Only Document (Enig
Document); a customs document based on the Maritime Code and a Certificate of Origin.
CARICOM
Within CARICOM trade is regulated by the Revised Treaty of Chaguaramas. The treaty
covers regulations aimed at sustaining growth of intra-Community and international trade
in goods among the Member States of CARICOM and between the Community and third
States. The regulations also aim to develop competitive production and to safeguard and
improve market access arrangements. Based on the Revised Treaty of Chaguaramas
regionally produced goods can be imported free of duty, enabling them to enter the
market cheaper than products from outside, provided that they comply with the treaty
regulations. To give effect to internal liberalization, the Revised Treaty of Chaguaramas
strictly prohibits trade barriers and quantitative restrictions on goods of community
origin, other than those authorized by the Treaty. To benefit intra- regional trade,
preferential rules of origin are instituted and a Common External Tariff (CET) is applied.
Rules of origin
The Rules of Origin (RoO) are instituted to distinguish between goods imported from
CARICOM countries that qualify for preferential treatment and those goods that do not.
RoO aim to facilitate regionally produced goods, promote regional input for production
processes intended for “intra CARICOM trade”, free of duty. Goods for this market
should meet conditions as stipulated in the Revised Treaty of Chaguaramas of which
most important conditions are that the goods are wholly produced in the region or
products wholly or partly derived from raw materials not from the community.
Common External Tariff (CET)
The Common External Tariff (CET) is a regionally applied common customs tariff to
products imported from outside the region to protect regionally produced goods. Among
the objectives of the CET is the provision of protection for regional agriculture and
industrial production of finished goods, raw intermediate materials and capital goods.
25
The CET can be suspended under conditions strictly dictated by the Revised Treaty of
Chaguaramas. It is also applied to imports that do not comply with RoO regulations.
Under CET CARICOM countries are obliged to give first crack at their markets to
producers within the community.
3.5 Conclusions
Review of the agricultural production in Suriname shows progressive deterioration of the
sector relative to 25 years ago. The decline in production is also reflected in export
volumes. This chapter showed that despite measures to liberalize trade, agricultural
export portfolios did not expand and exports have become increasingly concentrated,
with just four products accounting for 96% of agricultural export earnings in 2008.
The chapter furthermore revealed that agricultural exports to CARICOM increased grew
18% on average between 1996 and 2008. In addition, there is a high food import demand
in the Caribbean for cereals and beef and beef products. An overview of the import of
selected food groups from 1969- 2003 showed that CARICOM countries also import
considerable volumes of fruits and vegetables. The high volumes of fruits and vegetables
could most likely be explained by increased tourism demand.
Despite trade facilitating regulations by both Suriname and the CARICOM itself,
Suriname still has a small market share in the region compared to its MDC peers.
26
CHAPTER 4
AGRICULTURAL EXPORTS TO CARICOM
4.1 Introduction
Suriname joined CARICOM in 1995 and became a full member of the group's common
market in 1996 (IDB/INTAL, 2001). The country’s agricultural exports toward
CARICOM significantly increased since 1996. This chapter intends to provide evidence
on the determinants of Surinamese agricultural export earnings growth to the CARICOM
based on the determinants as elaborated on in chapter 2. There is however a significant
limitation in terms of substantiating evidence on agricultural export earnings between
1980 and 1996 because of lack of data due to a fire in 2003 that burnt down the General
Statistics Bureau of Suriname (GBS),which was entrusted with the collection of data.
The chapter will continue to analyze the recorded growth – or lack thereof – in the value
of agricultural exports to CARICOM between 1996 and 2008 and offer a few
explanations.
4.2 Evaluating agricultural exports to the CARICOM
Export earnings growth
Because lack of data to CARICOM no quantitative conclusions can be drawn for agricultural
export flows from the 1980’s to 1996. Based on available figures however, some qualitative
assumptions can be made concerning agricultural export earnings in that timeframe. In
1996 which for the purpose of this section is considered the base year, agricultural export
earnings to CARICOM were recorded at US$ 897,381. This value ten folded to US$ 17,
621,947 in 2008. Between 1996 and 2008, agricultural export earnings increased with
US$ 6,491,810 on average. Agricultural experts in Suriname confirmed that the country’s
agricultural exports during the above timeframe were even more dominated towards the
EU. Against this backdrop it cannot be considered likely that agricultural export earnings
to CARICOM exceeded the value of the base year between 1980 and 1996. From above
growth rate it can be assumed that the increase of agricultural export earnings since 1996
is a corollary of easier access to Caribbean markets owing to Suriname’s accession to
CARICOM.
Agricultural export earnings growth 1996- 2008
Figure 3 The increase in agricultural export earnings to
CARICOM mentioned in the previous
paragraph is consistent with an average growth
rate of 18% between 1998 and 2008.10 The
growth in agricultural export earnings to
CARICOM coincides with average growth rates
to the EU and NAFTA of respectively 6% and
9%. A growth rate of -10% was recorded to the
Rest of the World (RoW)11 during the same
timeframe, while overall agricultural export earnings remained stagnant at 1% growth
between 1998 and 2008 (Figure 3). This data indicates that there has been redistribution
in agricultural exports between 1998 and 2008. It can be concluded that the increase in
agricultural export earnings to CARICOM has affected export earnings to the EU and
NAFTA12, but mostly came to the expense of agricultural exports to the Rest of the
World. The ratio of export earnings from agricultural exports to CARICOM relative to
earnings by agricultural exports as a whole increased from 1% in 1996 to 20% in 2008 at
an average growth rate of 10%.
Government regulations facilitating trade liberalization were completed in 2003. From
2004 to 2008, a sharp increase in average agricultural growth to CARICOM is noticeable
relative to the period 1996 – 2001. The increase from 9% between 1996- 2001 to 25%
from 2004 - 2008 can be assumed to be a corollary of the abolishment of all export taxes,
tariffs and permits which hampered exports before 2003.
10 A sharp growth rate has been recorded between 1996 and 1997, but this has been omitted from calculations for average growth because it distorts the average growth rate picture. For the sake of consistency consecutive calculations for the EU and NAFTA have also been made for the same timeframe 11 RoW is constituted by Asean, Mercosur and Unaffiliated Countries
27
12 The fluctuations in agricultural export earnings to the EU are also affected by the international developments regarding rice and bananas which are the main export products to this region
Despite the average growth in agricultural export Figure 4
earnings to CARICOM between 1996 and
2008, annual percentage changes of intra-
regional agricultural exports to CARICOM
have been volatile (Figure 4). This can partly
be explained by various factors that affect
agricultural output such as bad weather
conditions and high import prices for
fertilizers and machinery. In terms of exports,
the volatility can predominantly be explained by the fact that agricultural exports to
CARICOM are based on prevailing market forces. Suriname has no clear agricultural
strategy in terms of market entry into CARICOM; therefore exports mostly take place
when “the price is right”. There is insufficient insight in the agricultural demand in
CARICOM in terms of the product mix, quantity and quality requirements. The Ministry
of Trade and Industry (MTI) only transmits information on specific demands which they
receive from CARISEC, while exporters often rely on their own networks and business
relations. Suriname has no specific overarching marketing strategy aimed at identifying
demands and markets, and exports remain supply oriented. Suriname also does not
actively participate in initiatives by the CARICOM aimed at bringing producers and
exporters closer together. This lack of knowledge negatively influences structural
planning with potential business partners. Due to the incongruence between supply from
Suriname and demand in CARICOM, Suriname misses out on increased opportunities for
export earnings.
4.3 Composition of Suriname’s agricultural exports to CARICOM
Figure 5
In chapter 3 it became clear that Suriname’s
overall agricultural exports are concentrated.
Agricultural exports to CARICOM also depict
a strong concentration between1996 and 2008.
In this timeframe cereals and marine products
28
constituted an average of 91% of total agricultural exports to CARICOM (Figure 5).13
Figure 6
As shown in figure 6, this export concentration
accompanied the upward trend in agricultural
export earnings growth to CARICOM. Based
on this data and concurrent with the theoretical
framework in chapter 2, the following
conclusions can be drawn. Firstly, growth in
agricultural export earnings to CARICOM is
attained by specialization, based on Taylor’s
(2007) definition.
The second conclusion relates to the exports of rice. Despite the fact that rice production
does not enjoy comparative advantage, Suriname outperforms most CARICOM countries
(except Belize and Guyana) in this area because of the difference in resource endowment.
Because of the smallness of their arable land, traditional cultivation and processing of
rice would be considerably more expensive than rice produced in Suriname. This does
not at all mean that Suriname produces rice cheaply. On the contrary, owing to years of
preferential shielding, rice production remains uncompetitive and high cost opposite the
international market. However it does entail that in relation to other CARICOM states,
Suriname can still be considered one of the lowest cost producers in the region and
therefore its rice exports benefits from trade creation within the union.
4.4 Conclusions
Since accession to the CARICOM common market in 1996, agricultural exports to its
member states have visibly increased, and have reasonably contributed to export
earnings. This increase represents an average growth rate of 18% between 1998 and
2008. During the same timeframe, agricultural export earnings from exports to the EU
and NAFTA grew with a respective average of 6% and 9%. The growth in agricultural
29
13 Suriname’s (main) cereal export product is rice. For the purpose of this paper cereal exports are identified with rice exports. Marine products are constituted by fish and crustaceans, mollusks and other aquatic invertebrates
30
export earnings to CARICOM has come to the expense of those to the rest of the world,
which recorded a negative growth rate of -10% between 1998 and 2008. The fact that
overall agricultural export earnings remained stagnant at an average of 1% in the period
at hand indicates that accession to CARICOM did not necessarily lead to increased
overall export earnings, but rather redistribution to existing markets.
Governmental policies of liberalizing trade, facilitated exports to the region as became
clear from the increase of exports after 2003, relative to earlier exports since 1996.
Average agricultural export earnings growth increased from 9% between 1996 and 2008
to 25% between 2004 and 2008. Despite the upward trend, agricultural export earnings to
CARICOM remain volatile, predominantly because exports take place based on
prevailing market forces instead of a clear strategy.
Exports are dominated by rice and marine products. Between 1996 and 2008 these
products accounted for an average of 91% of total agricultural export earnings to
CARICOM. Therefore it can be concluded that growth in agricultural export earnings is
based on specialization. Despite the fact that Suriname’s rice production does not have a
comparative advantage; Suriname can be considered one of the lowest cost rice producers
in the region owing. Therefore the rice imports in CARICOM that are sourced from
Suriname replace expensive domestic production in smaller, less abundantly resourced
countries.
From above data it can be concluded that agricultural export earnings to CARICOM have
significantly increased since Suriname’s accession to the Common market and that
agricultural exports have benefitted from the trade creating opportunities offered by
CARICOM.
31
CHAPTER 5
SCOPE FOR EXPANSION OF AGRICULTURAL EXPORT
EARNINGS TO CARICOM
5.1 Introduction
This chapter concerns the scope for expansion of agricultural export earnings to
CARICOM. The assessment of scope will be done mostly from the supply side, because
due to confidentiality no elaboration could be received of the agricultural product demand
in CARICOM.
5.2 Scope for export diversification towards CARICOM
It can be recalled from chapter 3 that many Caribbean countries have a comparative
advantage in tourism after having shifted away from the agricultural sector due to
insufficient resources to be competitive. For starters, these countries often have a hard
time to provide for the domestic demand. The pressure on demand is exacerbated by
relatively high numbers of tourist arrivals, pressuring the already limited agricultural
production. Together with the tourism sector’s high import content there is constant
pressure for many Caribbean countries to import food to fulfill its food demand. This
situation provides scope for food exports to the region.
Rice
Rice is an important dietary component in agricultural consumption in the CARICOM
region and in general its demand exceeds supply. In 2005 CARICOM rice imports
exceeded regional production by 158.059 tonnes14 (FAO, 2007). The largest regional
rice importers are Jamaica, Haiti,15 which respectively consume around 100,000 and
400,000 metric tonnes of rice per year. These are followed by Trinidad and Tobago, Saint
Vincent and the Grenadines and Barbados16. Of total regionally produced rice, around
14 Calculations are minus Cuba and the Dominican Republic 15 This was before the devastating natural disaster that hit the country in the beginning of 2010. In addition, CARISEC has no data on Haiti’s rice imports. Haiti has been omitted from further discussion because its food import capacity has become under strain since the devastating natural disaster that hit the country early 2010 16 Derived from CARISEC, 2010
Figure 7
45% is sourced from the region with Guyana
being the largest supplier. Suriname only
exports rice to Jamaica, Haiti and Trinidad and
Tobago. According to CARISEC data,
Suriname’s supplies provide an average of 5%
for Jamaica’s and 1% for Trinidad and Tobago’s
total rice imports. Between 1997 and 2008 only
2% of CARICOM’s total rice demand was
provided by Suriname.17 This data shows that
Suriname only marginally utilizes its export opportunities for rice (Figure 7).
Figure 8
Despite the upward trend the volume of
Suriname’s rice exports to CARICOM are
volatile (Figure 8). This can also primarily be
attributed to the mechanism of market forces.
Rice exports are supply oriented and offered at a
certain price. Exports are directed to the market
which pays the most competitive price.
The CARICOM primarily consumes white rice. Apart from the demand elasticity for rice,
around 15% of average income is spent on white rice in the region (Beveridge, Rowe, &
Bradley, http://www.maketradefair.com/en/assets/english/GuyanaRice.pdf). The bulk of
Suriname’s white rice exports are already directed towards CARICOM, since preferential
rice exports towards the EU traditionally focus on cargo. Between 2004 and 2008
Suriname exported an average of 71% by volume of its white rice production to
CARICOM countries. Against the backdrop of increasing tourism in the Caribbean, a
32
17 Calculations are based on CARISEC data which lacks information on rice imports from Antigua and Barbuda for the years 1996-1998, 2001-2004, 2008; Montserrat for the years 1996-1998; Guyana for 1996; because of unavailability of data
33
steady increase in white rice demand can be expected, creating scope for increased rice
exports from Suriname.
There is also potential for vertical diversification of rice products to the region, since
changing preferences in the region combined with tourist demands for more processed
foods can also be expected to affect preferences for even more processed rice products
such as parboiled rice. This would entail further development of rice products, concurrent
with notions of crop specialization. Production would then be shifted downward in the
commodity chain where it will enjoy higher profitability and market power and
subsequently yield higher export earnings. Increased rice production could lead to a
scaled economy where production costs can be lowered and comparative advantage can
be achieved.
However, even if Suriname were to be able to lower production costs, rice exports will
continue to run into competition from third countries which heavily subsidize their. For
example Jamaica’s rice imports are based on the United States “Food for Peace” food aid
program, also known as PL480. Under this program approximately 46% of Jamaica’s
total rice imports were sourced from the USA below the current market price in the
period 1996- 2008, causing unfair competition. Under CARICOM regulations these
imports are supposed to enter the country as third country imports, subject to CET.
However, CET imposition is waivered under PL480. In order to compete, Suriname
would have to insist on the consistent implementation of the CET for imports from extra-
regional sources, with minimal to no waivers.
Marine products
Fish has always been a major contributor to the nutrition and food security of the
Caribbean. The per capita consumption of fish in the region is 15kg. However, the marine
sector in the region is generally over- exploited. Although over-exploitation also
represents a challenge for Suriname, fisheries exports have continuously been increasing.
Suriname is one of four CARICOM countries delivering the largest landings of marine
products. The main fisheries market for Suriname is Jamaica.
34
Increased demand for marine products can also be presumed to arise from expanded
tourism demand. But due to overfishing shortages are imported from the region.
Therefore it can be expected that this demand will be continuous.
Contrary to many other CARICOM countries, Suriname has two medium size companies,
Suriname American Industries Limited (SAIL) and Guyana Seafood- that are equipped to
process and export marine products. Data for marine exports is blurry. Since 1992, the
MAAHF has not kept consistent records as to volumes exported.
Fruits and vegetables
According to IICA, food imports especially of vegetables, fruits, meat and dairy have
grown significantly since the process of trade liberalization in the Caribbean, (ECLAC
issue brief No. 19, retrieved on 5 January 2010 from
www.eclac.org/portofspain/noticias/paginas/2/9792/issue19.pdf). In addition, the FAO
indicated that tourism provides a stimulus for agricultural production and marketing
especially in the fruit and vegetable sectors
(http://www.fao.org/docrep/t3384e/t3384e06.htm, visited May 2010). In addition, Bourne
(2008) indicated that there are capacity shortages in the production of fruits and
vegetables.
With regard to fruits and vegetables, the CARICOM market is clearly untapped by
Suriname. Apart from incidental, perhaps unregistered exports, Suriname formally does
not export fruits and vegetables to CARICOM. Fruit and vegetable exports
predominantly cater to the domestic markets, with surpluses exported to the EU,
primarily the Netherlands. Marketing to the Netherlands has for many years been
motivated by the large Surinamese Diaspora and distributed by the so called “Toko
system”. These exports are primarily unprocessed and increasingly run into for Suriname
crippling food safety requirements such as HACCP and Global Gap.
The Ministry of MAAHF conducted a study in 2009 to assess the feasibility of
Surinamese fruits and vegetables in CARICOM based on the demand of Barbados
(because of its high tourism number) and Trinidad and Tobago (also on tourism demand,
but more importantly its high processing sector). Both studies revealed short term
35
opportunities for generic products such as citrus and roots and tubers, as well as
“common” products such as tomatoes, cucumbers, paprika, salad and melons. In first
instance these possibilities demand some level of primary level processing, namely the
cleaning, cutting and packing of products.
With regard to fruits and vegetables Suriname produces in the “range of small numbers”.
Horticultural producers usually operate on a small scale based on risk diversion, causing
them to be inefficient and have low productivity. As a result there are poor innovations
and dis-economies of scale. Producers operate based on traditional practices and have
technological and infrastructural constraints such as high costs of fuel, utilities and poor
water management. Costs for inputs are high and unattainable for the individual producer
because of insufficient access to affordable credit. In addition there is limited or no
cooperation between producers affecting their viability in production and marketing.
In order to be competitive production will have to be increased in order to drop
production costs.
Small ruminants
Against the background of the beef demand in the Caribbean, a study on the feasibility of
exports of small ruminants was conducted. This study showed that there is limited to no
opportunities for exports from Suriname.
In order to increase the agricultural export base to CARICOM, Suriname will have to
conduct market studies to identify the most competitive products for the CARICOM
market. Doing so will allow the country to more specifically assist the sector in its
development and market studies will also assist producers in making informed decisions.
5.3 Constraints to export earnings growth
Despite growth in export earnings, exports to CARICOM have not been able to accelerate
because of a mix of endogenous and exogenous constraining factors. Some of the
endogenous factors specifically apply to the CARICOM market while others address the
general constraining factors to productivity and subsequently export growth.
36
Firstly, Suriname has a narrow market orientation. As with many other Caribbean
countries Suriname’s export policy traditionally focuses on securing market demand for
traditional products. Between 1996 and 2008 an average of 10% of agricultural exports
were sourced to CARICOM against 42% to the EU.
Secondly, Suriname’s agricultural sector is inefficient predominantly due to low
production levels and subsequent high production costs. With the exception of a few
medium to large companies, agricultural producers usually operate on a small scale based
on risk diversification causing them to be inefficient and have low productivity. Because
of the low production rates supply is not guaranteed. In addition there is insufficient
cooperation between producers, so exporters do not have sufficient sources to
continuously deliver to demand.
Thirdly, Because of poor pre-conditions for production the agricultural sector has a poor
image, discouraging young entrepreneurs to enter the sector. As a result young potential
farmers migrate from rural to urban areas leading to ageing in the existing farming/ rural
population and depleting rural areas of its best human capital.
Fourthly, there is little investment in providing added value to primary goods. Linkages
between small farmers and agro- processors are poor and product quality along the
market chain is insufficiently addressed. Small farmers are constrained by the high cost
of packaging due to lack of economies of scale in importing small quantities and lack of
knowledge of suppliers of good used equipment/machinery for their respective product
lines.
Towards CARICOM, the major constraint of agricultural export growth is in- congruence
of demand and supply. On both the production and export level there is insufficient
insight for Suriname in the demand within CARICOM countries in terms of the product
mix, quantity and quality requirements, negatively influencing structural planning with
potential business partners. The market studies done for fruits and vegetables by the
MAAHF showed that Surinamese exporters have little knowledge of- and experience
37
with CARICOM countries so there is unfamiliarity with mutual cultures, customs, and
preferences.
Supply security is further impacted by high transportation costs between Suriname and
the rest of the CARICOM countries. With the exception of Trinidad and Tobago there are
no direct air connections between Paramaribo and the rest of the CARICOM countries.
Sea- freight connections are irregular and handling costs in Suriname are expensive.
Furthermore Surinamese exporters do not enjoy export subsidies causing costs to increase
dramatically.
On the demand side, getting access to regional markets is often considered hard because
of red - tapism. Several CARICOM countries, - in trying to protect their domestic
producers - impose unnecessary and prohibited non- tariff barriers. Protectionism from
the government as well as businesses also results in minimal information sharing which
makes cooperation with companies in the agro- sector difficult.
Surinamese products, especially typical non- traditional products are also relatively
unknown to the Caribbean resulting in lack of demand. Contrary to for example the
Netherlands, Suriname does not have a large Diaspora in CARICOM, nor traditional
trade relationships so products remain unknown.
In its 2005-2010 policy note, the MAAHF envisaged a new role for the Government
which is aimed to create supportive conditions for a modern, private sector driven
agricultural sector. The Government is increasingly withdrawing from agricultural
production. The new role includes that the Government commits itself to inter alia,
creating a sound investment climate and investments for added value. However,
Suriname still scores low on the “Doing Business” rating and the new investment law
aimed at facilitating investments and trade is still not implemented.
Due to Suriname’s engagement in trade liberalization processes, protection of domestic
producers is inhibited. However, policies of fiscal incentives as an export promotion tool
38
are common in the English speaking Caribbean. Nevertheless Surinamese exporters do
not enjoy such support.
5.4 Conclusions
Based on available CARICOM demand info and Suriname’s production potential there is
ample opportunity for agricultural export earnings growth towards CARICOM. Rice
exports could easily be increased because Suriname has the technology, knowledge and
scale to do so. With the high demand for white rice and possibly processed rice products,
increase of rice exports as well as crop specialization are attainable on a relatively short
term with the consideration that Suriname seriously takes on the constraints to expansion
of export earnings growth. In terms of marine products, Suriname has the advantage vis a
vis fisheries sectors of other countries that it has considerable fish landings and expertise
of medium scale companies which process and export marine products. However, the
effects of over- exploitation must be taken into account.
Expanding Suriname’s export portfolio will certainly take more time and could be
considered a mid- to long term measure. Market studies will need to be conducted in
order to assess the most competitive products to CARICOM. The export products need to
be strategically chosen in order to ensure that resource endowments and market
opportunities are fully exploited.
39
CHAPTER 6
CONCLUSIONS AND RECOMMENDATIONS
This paper set out to asses Suriname’s agricultural exports to CARICOM.
Assessing agricultural export earnings before- and after accession to CARICOM was
severely hampered due to lack of data and no quantitative conclusions could be drawn.
However, based on qualitative assumptions derived from the growth in agricultural
export earnings to CARICOM between 1996 and 2008, it was concluded that this growth
was accelerated by Suriname’s accession to CARICOM. Agricultural export earnings to
CARICOM ten folded between 1996 and 2008, equal to an average growth rate of 18%.
Analysis of the product composition of agricultural export earnings to CARICOM
showed that there is a clear dominance in rice and marine products. With rice and marine
products dominating agricultural exports to CARICOM it can be concluded that the
growth in agricultural export earnings to CARICOM can also be attributed to
specialization in exports. However these exports are highly volatile indicating that
exports take place based on prevailing market forces. Trade volumes and values are not
secure and the intensity of trade is determined by the “right price”.
Governmental support in terms of exports only consisted of removal of export barriers
through legislative reforms that were completed in 2003. Although trade liberalization
measures were not specifically taken towards CARICOM, agricultural export earnings to
that region were facilitated by these measures.
In terms of scope, increased instances of tourism provide a continuous opportunity for
expansion of agricultural exports toward CARICOM, given the fact that many countries
in the region have challenged agricultural sectors, combined with increased tourism
demands.
There is room for expansion of rice exports and marine products owing to increasing
tourism demand. From previous rice production and export data it can be derived that
40
Suriname has the potential to reach comparative advantage and economies of scale in
terms of rice. From historical rice production data it can be concluded that Suriname will
be able to deliver increased demands, if the overall constraints to agricultural
development are addressed.
There is also scope for fruit and vegetable exports, evidenced by market studies for these
products.
Suriname’s agricultural export policy remains predominantly focused on traditional
preferential markets. Although the Government recognizes the potential of the
CARICOM market for export earnings growth, there is no clear policy on how to utilize
available opportunities.
41
RECOMMENDATIONS
In short term, further specialization in rice exports can be considered feasible, given
Suriname’s considerable potential for scaled rice production which can easily be
expanded. From historical rice production data it can be concluded that Suriname will be
able to deliver increased demands, if the overall constraints to agricultural development
are addressed. Increased production can enable comparative advantage and economies of
scale, making rice exports more competitive.
In addition, Suriname should look into the opportunities for product diversification along
the market chain such as parboiled rice, since further processed products will yield higher
revenues. Suriname has the potential in terms of technology and knowhow to easily
increase not only white rice export volumes but also parboiled rice.
With regard to rice exports, it is clear that there is considerable market potential. In its
exports to CARICOM however, Suriname is sure to run into competition from cheaper
rice imports from third countries such as the USA which heavily subsidize their products
in order to protect local farmers. In order to secure market access at lower costs,
Suriname would have to insist on the consistent implementation of the CET with minimal
to no waivers.
In order to further expand export earnings, as medium- to long term measure, some
products could be added to the export mix of which Suriname has the potential to develop
comparative advantages over time. Although this would be considered a measure of
diversification because of expansion of the export mix, it would lead to production
growth and eventually of large scale production and comparative advantage as well as the
fact that the export base would not extensively be adjusted. Adjustment for example 4 – 5
products would still allow Suriname to reach for comparative advantages.
With regard to these products, the Government will have to focus specific attention on
identifying which products have potential in the CARICOM in order to ensure market.
These products would then be the framework for investments in the agricultural sector
aimed at increasing capacity. Suriname will have to assume a more aggressive marketing
42
strategy to find out where the markets lay and participate more actively in initiatives by
the CARICOM aimed at bringing producers and exporters closer together.
In order to increasingly benefit from export opportunities, Suriname should have
incentives and conditions in place aimed at improving agricultural production. Among
these conditions should be clear and supportive regulations, investment opportunities and
other incentives that stimulate domestic producers.
In terms of CARICOM, Suriname will have to set clear policy outlines regarding
agricultural exports to the region which will guide further development. During this stage
of development, the Government is an indispensable partner in the process of expanding
the export value of the agro-sector.
In terms of increasing capacity towards in general, Suriname will have to alleviate the
general constraints to agriculture and develop or adapt appropriate technologies in order
to improve yields, product quality, and above all profitability in the long term. A key
challenge is to formulate cost-effective policies, incentives and services that will enable
small farmers/fishermen to develop the capacity and tools required to be efficient and
competitive. Consequently, the Government will have to invest in research and
development to assist the small productive sector into modernization and increasing of
productivity. Important aspects of this capacity building, particularly with respect to the
small and medium size producers, is good farm practices, appropriate equipment,
processing and marketing infrastructure, including standards, grading, packaging,
transportation system and storage.
43
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47
ANNEX 1
Section I
Live animals; animal products
01 Live animals
02 Meat and edible meat offal
03 Fish and crustaceans, molluscs and other aquatic invertebrates
04 Dairy produce; birds' eggs; natural honey; edible products of animal origin, not
elsewhere specified or included
05 Products of animal origin, not elsewhere specified or included
Section II
Vegetable products
06 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental
foliage
07 Edible vegetables and certain roots and tubers
08 Edible fruit and nuts ; peel of citrus fruit or melons
09 Coffee, tea, maté and spices
10 Cereals
11 Products of the milling industry; malt; starches; inulin; wheat gluten
12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or
medicinal plants; straw and fodder
13 Lac; gums, resins and other vegetable saps and extracts
14 Vegetable plaiting materials; vegetable products not elsewhere specified or included
Section III
Animal or vegetable fats and oils and their cleavage products; prepared edible fats;
animal or vegetable waxes
15 Animal or vegetable fats and oils and their cleavage products; prepared edible fats;
animal or vegetable waxes
Section IV
Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco
substitutes
48
16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates
17 Sugars and sugar confectionery
18 Cocoa and cocoa preparations
19 Preparations of cereals, flour, starch or milk; pastrycooks`products
20 Preparations of vegetables, fruit, nuts or other parts of plants
21 Miscellaneous adible preparations
22 Beverages, spirits and vinegar
23 Residues and waste from the food industries; prepared animal fodder
24 Tobacco and manufactures tobacco substitutes
Section V
Mineral Products
25 Salt; sulphur; earths and stone; plastering materials, lime and cement
26 Ores, slag and ash
27 Mineral fuels, mineral oils and products of their distillation; bituminous substances;
mineral waxes
Section VI
Products of the chemical or allied industries
28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-
earth metals, of radioactive elements or of isotopes
29 Organic chemicals
30 Pharmaceutical products
31 Fertilisers
32 Tanning or dying extracts; tannins and their derivatives; dyes, pigments and other
colouring matter; paints and varnishes; putty and other mastics; inks
33 Essential oils and resinoids; perfumery, cosmetic or toilet preprarations
34 Soap, organic surface-active agents, washing preparations, lubricating preparations,
artificial waxes, prepared waxes, polishing or scouring preparations, candles and
similar articles, modelling pastes, "dental waxes" and dental preparations
35 Albuminoidal substances; modified starches; glues; enzymes
36 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible
49
preparations
37 Photographic or cinematographic goods
38 Miscellaneous chemical products
Section VII
Plastics and articles thereof; rubber and articles thereof
39 Plastics and articles thereof
40 Rubber and articles thereof
Section VIII
RAW HIDES AND SKINS, LEATHER, FURSKINS AND ARTICLES THEREOF;
SADDLERY AND HARNESS; TRAVEL GOODS, HANDBAGS AND SIMILAR
CONTAINERS; ARTICLES OF ANIMAL GUT (OTHER THAN SILK-WORM GUT)
41 Raw hides and skins (other than furskins) and leather
42 Articles of leather; saddlery and harness; travel goods, handbags of animal gut (other
than slik-worm gut)
43 Furskins and artificial fur; manufactures thereof
Section IX
WOOD AND ARTICLES OF WOOD; WOOD CHARCOAL; CORK AND ARTICLES
OF CORK; MANUFACTURE OF STRAW, OF ESPARTO OR OF OTHER
PLAITING MATERIALS; BASKETWARE AND WICKERWORK
44 Wood and articles of wood; wood charcoal
45 Cork and articles of cork
46 Manufactures of straw, of esparto or of other plaiting materials; basketware and
wickerwork
Section X
PULP OF WOOD OR OF OTHER FIBROUS CELLULOSIC MATERIAL;
RECOVERED (WASTE AND SCRAP) PAPER OR PAPERBOARD; PAPER AND
PAPERBOARD AND ARTICLES THEREOF
47 Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap)
paper or paperboard
48 Paper and paperboard; articles of paper pulp, of paper or of paperboard
49 Printed books, newspaper, pictures and other products or the printing industry;
50
manuscripts, typescripts and plans
Section XI
Textiles and textile articles
50 Silk
51 Wool, fine or coarse animal hair; horsetail yarn and woven fabric
52 Cotton
53 Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn
54 Man-made filaments; strip and the like of man-made textile materials.
55 Man-made staple fibres
56 Wadding, felt and nonwovens; special yarns; twine, cordage, ropes and cables and
articles thereof
57 Carpets and other textile floor coverings
58 Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery
59 Impregnated, coated, covered or laminated textile fabrics; textile articles or a kind
suitable for industrial use
60 Knitted or crocheted fabrics
61 Articles of apparel and clothing accessories, knitted or crocheted
62 Articles of apparel and clothing accessories, not knitted or crocheted
63 Other made up textile articles; sets; worn clothing and worn textile articles; rags
Section XII
Footwear, headgear, umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips,
riding-crops and parts thereof; prepared feathers and articles made therewith; artificial
flowers; articles of human hair
64 Footwear, gaiters and the like; parts of such articles
65 Headgear and parts thereof
66 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts
thereof
67 Prepared feathers and down and articles made of feathers or of down; artificial
flowers; articles of human hair
Section XIII
51
Articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products;
glass and glassware
68 Articles of stone, plaster, cement, asbestos, mica or similar materials
69 Ceramic products
70 Glass and glassware
Section XIV
Natural or cultured pearls, precious or semi-precious stones, precious metals, metals
clad with precious metal, and articles thereof; imitation jewellery; coin
71 Natural or cultured pearls, precious or semi-precious stones, precious metals, metals
clad with precious metal, and articles thereof; imitation jewellery, coin
Section XV
Base metals and articles of base metal
72 Iron and steel
73 Articles of iron or steel
74 Copper and articles thereof
75 Nickel and articles thereof
76 Aluminium and articles thereof
77 Reserved for possible future use in the Harmonized System
78 Lead and articles thereof
79 Zinc and articles thereof
80 Tin and articles thereof
81 Other base metales; cerments; articles thereof
82 Tools, implements, cutlery, spoon and forks of base metal; parts thereof of base metal
83 Miscellaneous articles of base metal
Section XVI
Machinery and mechanical appliances; electrical equipment; parts thereof; sound
recorders and reproducers, television image and sound recorders and reproducers, and
parts and accessories of such articles
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
85 Electrical machinery and equipment and parts thereof; sound recorders and
52
reproducers, television image and sound recorders and reproducers, and parts and
accessories of such articles
Section XVII
Vehicles, aircraft, vessels and assiciated transport equipment
86 Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway
track fixtures and fittings and parts thereof; mechanical (including electro-
mechanical) traffic signalling equipment of all kinds
87 Vehicles other than railway or tramway rolling-stock, and parts and accessories
thereof
88 Aircraft, spacecraft, and parts thereof
89 Ships, boats and floating stuctures
Section XVIII
OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING, CHECKING,
PRECISION, MEDICAL OR SURGICAL INSTRUMENTS AND APPARATUS;
CLOCKS AND WATCHES; MUSICAL INSTRUMENTS; PARTS AND
ACCESSORIES THEREOF
90 Optical, photographic, cinematographic, measuring, checking, precision, medical or
surgical instruments and apparatus; parts and accessories thereof
91 Clocks and watches and parts thereof
92 Musical instruments; parts and accessories of such articles
Section XIX
Arms and ammunition; parts and accessories thereof
93 Arms and ammunition; parts and accessories thereof
Section XX
Miscellaneous manufactured articles
94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed
furnishings; lamps and lighting fittings, not elsewhere specified or included;
illuminated signs, illuminated name-plates and the like; pefabricated buildings
95 Toys, games and sports requisites; parts and accessories thereof
96 Miscellaneous manufactured articles
53
Section XXI
Works of art, collectors' pieces and antiques
97 Works of art, collectors' pieces and antiques
ANNEX 2
54