Belize’s billion dollar industry? Cornerstone to Belize’s Development part two

In the last Our Economy, we looked briefly at the Private Sector Assessment Report and some of the more key points highlighted, including the role of innovation in terms of private sector development.
Picking up on where we left off, let’s refer to the work of 1987 Nobel Prize winner, economist Robert Solow, who, among other things, underscored the significance of innovation in his article “Technical Change and the Aggregate Production Function.” In that paper, Solow showed that more than half of economic growth that has occurred are attributable to not just capital and labor, but rather due to technological innovation.
Before going any further, it is necessary that we recall that we speak of technology in this column in its broadest sense, which includes not only computer technology but also improvements in education, institutions and methodologies. In short, a technological change could refer to the way in which we do things.
Innovation, however, we use in its standard definition: “It refers to the process of devising a new idea or thing, or improving an existing idea or thing.”
A good way of understanding the role that technological innovation can play in a society is by looking at a basic farming scenario. Let’s consider the case of a wheat farmer with a ten-acre rice farm, who becomes able to double his output per acre by mechanizing certain processes.
The addition of technology allows the farmer to increase his output levels without having to increase the size of his farm. The same, of course, may be possible if he decided to hire workers who come with better—maybe more modernized and efficient—techniques, possibly due to their high levels of agricultural education or training in the area.
In the case of the latter scenario, what if those highly educated hired hands realize that they could do more with the wheat by way of value-added products; innovation then sets in.
If we think of technology in terms of, let’s say, “better ideas”, we could easily observe the changes between Graphs A and B, which depict a simplified situation in which output (let’s say wheat production) is increased, not by buying more land, but by improving the state of technology being utilized.
Naturally, there is an element of human capital development that must be considered in this respect.
A case in point—limestone
Based on Solow’s theory, it is evident that improvements in technology and innovation are essential elements of a nation’s development. This, therefore, raises and supports the Private Sector Assessment Report’s point that there is indeed a need for increased research and development work in Belize. If we recall, the PSAR states: “Sufficient investment in research and development (R&D), especially by the private sector, is critical for long term growth and viability.
“This involves the presence of high-quality scientific research institutions; extensive collaboration in research between universities and industry; and the protection of intellectual property rights.”
But in what areas should we conduct such R&D? Well, there’s one area of research that isn’t necessarily new, but the public and private sector could benefit from giving the requisite level of attention—that is, the limestone industry.
In late December, the Jamaica Observer published an article, entitled “Jamaica can earn US$7 billion annually from limestone industry—local scientist”. According to the research group, Conrad Douglas and Associates, the country’s limestone stock is estimated at 150 billion tones “of which 50 billion tones is recoverable.”
The executive chairman of the research company, Dr. Conrad Douglas, explained that the country imports limestone products that can be manufactured locally. He went on to say that at least ten of the factories in the island state “can be ‘ramped-up easily’ for the production of …value-added [limestone based] items.”
Douglas, speaking at a stakeholder symposium, told Jamaicans:
“There are great opportunities… what we found was really large. We are talking about total cumulative value for the markets of some US$7 billion.”
Why is it worth so much? As Douglas pointed out, the mineral (in its different forms) could be used to produce paper, paints, polishes, rubber, glass, plastics, adhesives, cosmetics and more. Besides its usefulness in making cement and other construction material, reports show that limestone also has agricultural uses.
Okay, obviously Douglas was talking to Jamaicans who already have limestone factories; this, then, is an innovative step for them. However, in Belize, we haven’t even really started to explore new possibilities with this mineral that, according to a 1991 report entitled “Preliminary Survey of the Industrial Mineral Potential of Belize”, covers “most of the territory of Belize.”
The “Market Overview” section of that same 23-year-old study, states:
“The southern dolomitic limestones should be investigated as a source of magnesium, which sells for approximately US$ 1.50 per pound, and the pink limestones of the Humming Bird Highway, should be examined in detail to determine their adequacy for a tile industry which has a large international market, and commands prices of up to US$ 8 per tile.”
Belize may not have a US$7billion industry as the Jamaicans do, but even if we estimate our potential to be as low 10 % of the Jamaican’s (which we doubt is that low), that is still a US$700 million-per-year industry.
It’s a high-demand commodity. One geology site explained that businesses located in countries that do not have limestone are willing to pay five-times the stone’s worth in delivery charges to obtain it.
Obstacles anyone?
It should then behoove both the private and public sector to dialogue on this issue, and research innovative ways of using the resource in a sustainable way, thereby, creating a potentially lucrative industry. This type of improved technology could greatly boost the level of GDP and obviously GDP per capita. It would definitely go a long way in terms of aiding capital accumulation—especially if this industry is developed by local entrepreneurs working in tandem with the authorities.
But, like with most opportunities, there are downsides. In this case, reports on Belize’s potential to advance in this area have already cited the high cost of fuel (specifically diesel) and transportation as pivotal issues that must be addressed. While that factor can’t be ignored, if a proper Cost-Benefit Analysis or even an adequate check on the Return on Investment is done, it could be argued that GOB could either subsidies or, in some other way, incentivize investment in R&D and, subsequently, investment in this sector—at least in its infancy years, until the promising levels of returns are realized.
And the beauty here is found in the fact that although we’re using the term “technological innovation”, this process isn’t new; it’s just relatively new to Belize. There are several other countries that we could use as benchmarks in terms of best practices.
Another obstacle would obviously come by way of the availability of skilled labor to execute such a development plan. This latter point, which speaks to the need for human capital development in terms of training and education, automatically underscores the fact that any progress in this area has to be the result of long-term planning, and cannot be allowed to fall victim to short-term stop-gap initiatives that are more reflective of the myopic political ambitions.
If innovation and improved technology is the way to go, then a highly skilled work force is a must. As it pertains to this, it would then be necessary to formulate a national strategic plan that has the cross-the-board buy in from all political parties and private-sector stakeholders.
In the end, the discussion on this area of innovation and development must be discussed in true private-public dialogue; however, it should not be limited to just this particular recommendation; Belize has a wealth of other minerals that may be just as lucrative—if not more.
The bottom line, then, is that Belize—in line with the recommendations of the private sector assessment report—has to start thinking in terms of improving its “technology” so as to ensure that we augment output as much as possible in a sustainable manner.
It is on the government to ensure that there is indeed this enabling environment for business investors to feel confident to engage in any such R&D process and investment.
This is necessary both in terms of stimulating the economy as it relates to reducing the excess liquidity at the banks, and as it relates to boosting the Belizean economy, creating more jobs and opportunities for more Belizeans—thereby, reducing the alarming 40 percent rate of poverty and the relatively high 12 percent unemployment rate.
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