|Year of publication:
||Staff of The World Bank with external contributions.
||Suriname is a small economy with abundant natural resources. The extraction and processing of its significant bauxite, oil, and gold deposits have historically accounted for around 30 percent of gross domestic product (GDP) and as much as 90 percent of exports. Agriculture is another important sector, contributing more than 10 percent of exports in recent years, but it is concentrated and dependent on commodities as well.
The two sectors together account for an estimated 40 percent of total employment in the country. Suriname’s economy benefitted significantly from favorable global prices for its commodity export prices early this century, achieving real GDP growth of 4.7 percent per year from 2001 to 2013.
As the commodity boom ended in recent years, however, the economy began to contract, reflecting Suriname’s dependence on the extractives sector. The Government of Suriname redistributes revenue earned from gold, oil, and bauxite through significant public sector employment. Outside of the extractives sector, the private sector is generally underdeveloped, with most firms engaged in nontradable services often linked to extractives. This vulnerability to commodity price fluctuations has led to increased calls for economic diversification and private sector-led growth from government and civil society in Suriname.
This report seeks to inform the Government of Suriname about strategies to diversify the economy, with a focus on increasing private investment and removing constraints to competitiveness in agriculture and extractives. Recent policy research about diversification highlights the benefits of developing better products and entering new markets, in addition to developing new industries.
‘How’ you produce and export, in terms of product quality, can be more important than ‘what’ you produce and export. Suriname has existing productive capacity and abundant natural resources in agriculture and extractives, indicating a comparative advantage. Both also offer the potential to generate substantial export revenue, a key policy goal of the Government of Suriname given the current economic challenges. But current production and export is concentrated in a few commodity products, and both sectors face constraints to growth.
This report provides policy recommendations to guide the Government of Suriname in its efforts to create an enabling environment that facilitates new investment and increased competitiveness in agriculture and extractives.
Suriname has abundant land and water and a favorable growing environment for many products that could supply domestic demand (replacing current agricultural imports) and be exported to the Caribbean and global markets. Agriculture has been a traditional growth sector, and rice, bananas, fish, and shrimp are already important export products. Suriname has talented agro-entrepreneurs, several existing processing facilities have been certified to international standards, and foreign agribusiness firms have expressed interest in potential new investment opportunities. However, the sector faces significant constraints. Agricultural exporters report challenges with quality compliance and market access; laboratory facilities for food safety certification are limited, and firms face non-tariff barriers in many export markets. Domestic labor costs are high, and large estates often rely on migrant workers from other Caribbean countries.
The majority of land is publicly owned, and processes and procedural requirements to access land are not transparently understood, especially for foreign investors. There are state-owned agricultural estates with underutilized productive assets, but efforts to increase private investment such as through privatization or concessions have been limited. To increase agricultural production, including diversifying products and targeting new export markets, there is significant need to stimulate new private agribusiness investment in Suriname.
Given the investment climate constraints facing the sector, proactive reforms by the Government of Suriname will be necessary to improve the enabling environment for agribusiness investment. World Bank Group experience is that a targeted industry or ‘subsector’ approach can be the most effective way to generate concrete investments from such agribusiness reform and investment promotion efforts. This report presents the findings of an agribusiness ‘sector scan’ to identify subsectors with high potential for investment attraction. The analysis considers both the potential commercial value to new investors and the potential development value to Suriname of new investment in the subsector. The scan also considers specific constraints to new investment and exports, with the goal of identifying opportunities for ‘quick wins’ in terms of attracting new investment.
The purpose of the analysis is to identify subsectors for initial value chain support and investment promotion efforts, not to identify or prioritize subsectors based on their overall importance to the agriculture sector or economy. The subsectors identified as having high potential to attract new investors and generate development benefits for Suriname are fruits and vegetables, cereals and animal feed, coconuts, pork, and aquaculture. The main recommendation of the report is to select two of these subsectors for priority support, and then design and implement a strategic reform and investment promotion campaign. Additional recommendations are summarized in Table iii below.
The extractive industries play a central role in Suriname’s economy. Bauxite has been the dominant industry for most of the past century, although extraction and exports have come to a halt recently as accessible reserves were exhausted. Gold has emerged as the primary extractive industry, including private industrial gold mines and substantial artisanal and small-scale mining (ASM) operations that represent a significant source of jobs. The state oil company Staatsolie has been successfully extracting low-cost onshore oil for decades, with new prospects for offshore oil recently identified. There is potential for even greater contribution of the sector to Suriname’s economy. There is evidence of potential for significant additional extraction, both in the existing industries and of new minerals. Exploiting this potential could increase export revenue, generate new investment and jobs, and decrease dependency on the existing core industries. There is also scope to better govern the extractive industries to benefit the entire population in the long term, such as through bringing existing informal activates into the formal economy and improving social and environmental management. However, many factors constrain the sector from achieving its full potential. There is little reliable geological data about Suriname’s mineral reserves that could be used to promote investment potential. The legal and institutional frameworks for environmental and social protection are underdeveloped, creating uncertainty about requirements and risk of harmful impact. Indeed the legal and institutional framework for the sector as a whole needs reform; there is poor management of mining titles, the legal framework leaves significant discretion with the state to negotiate investment deals, and institutional capacity to regulate the sector is weak and fragmented across institutions.
There has been little development of local supply chains to create linkages between extractive investments and the rest of the Surinamese economy. This report analyzes the enabling environment for the extractives sector to identify options to attract new investment while at the same time better governing the extractive industries to achieve more positive and sustainable benefits for the economy and people of Suriname.
The main recommendation is to better understand and promote Suriname’s mineral potential, while at the same time implementing critical social and environmental, legal and institutional, and sector policy reforms. Specific recommendations are provided in Table iv below.
|1.1 Socio- economic Sector (OECD)
||322 Mineral resources and mining
|1.2 Institutional dimension
|1.4 Target group(s)
||2. SMEs/Private sector
6. General public/Opinion makers
4. Research community
5. Decision makers/Policymakers
|2.2 Production Chain
||3. Pest & Disease Control
9. Consumption/Product Use
1. Input Supply & Use
2. Production & Management
8. Quality Control
|2.3 Commodity group
Non-food agricultural products
|2.5a Agro-Ecology: Thermal zone