Guyana Observer News

Peter R. Ramsaroop, MBA

Overview
“The goal of economic development includes the objective of creating, promoting and encouraging an economic system capable of achieving and maintaining a sustainable competitive advantage in the context of a global competitive environment, by fostering entrepreneurship, individual and group initiative and creativity, and strategic alliances with domestic and global business partners in the private sector” - Article 14 of the Guyana Constitution.

If we had a government that followed the constitution, the current budget presented would have looked totally different. So where does this leave us? I have always argued that Guyana has never operated as a conventional economy. We have been in a perpetual underdevelopment and applying conventional tools like fiscal and monetary policies are not productive…the numbers look nice but where is the development? This is why I argue for a stimulus type package to save jobs and help the vulnerable to cushion the shocks.

DEFINING POLICY:
Ravi Dev’s column of Feb 15 in this newspaper on the budget was right on target, especially the point he makes about an industrial policy. There is a great need to define a new strategy based on some fundamental relationship with the rest of the economy. We cannot at this time do things in isolation of each other. The macro economy is complementary in its sectors and we cannot look at one sector alone…so for example, we have to look at our competition policies, our education policies, our export and import policies all together and then implement complementary pieces of the national developmental strategy/policy architecture.

Mr Dev rightly commented on the tools available to the Minister of Finance and he is correct. The model the IMF uses is an iterative methodology and therefore the macroeconomic fundamentals are without foundation relative to the productive responsive capacity of the economy; Ravi calls it ‘arbitrary’. Because of what the IMF was set up to do, the policy options referred to - fiscal and monetary - are the only ones available to them to curb deficit spending, these policies are macroeconomic management policies.

You see, while we all talk about fiscal stimulus and Dr. Prem Misir wrote a nice piece on this (well the theory part of his argument, not his application which was rotten) we forget that the fiscal arrangements is about providing money to cover expenditures which are likely to create growth in the economy. But this growth does not come from just spending, it comes from spending of a set of policies which facilitate growth in production and output.

The question we need to ask about Guyana is whether we have the supporting policies in place to allow the expenditures to be effective. The answer is a plain no. We have been for too long concentrating on the poverty reduction strategy instead of the national development strategy to the extent that the NDS needs revision because as Khemraj Ramjattan said at the launching of the AFC a few years ago, the building blocks of the then strategy have significantly deteriorated…education standard, human resource capacity, manufacturing capacity, etc. on and on we can go.

SO WHERE DOES THIS LEAVE US?
Growth type incentives (as opposed to tax holidays etc) should be given to investors and entrepreneurs the whole year round to stimulate the economy based on sound policies which facilitate sustainable growth. We do not have the production capacity to respond to just fiscal stimulus. On the monetary side, lower interest rates will not allow growth in output since we do not produce consumer type goods which would help our manufacturers. The traders/retail shops will be able to borrow money from the banks at a lower rate to import goods, but who would sell cheaper, where will the competition come from.

The point is that conventional stimulus packages will not work for a small, underdeveloped and provincial economy like Guyana’s. We have to be imaginative and creative in financing the support the Guyanese people will need to ride the world recession. I would hope that this will be a good lesson to the Guyana government that they need to get off of their laurels and work. Agriculture will go no way without a transparent and realistic policy which has links to other policies such as an industrial policy, education policy etc. It seems as if our policies are in the heads and say so of the gang at Freedom House. Robert Persaud talks so glibly about agriculture and sugar, where are his policies….in his dreams. Every morning he wakes up he spouts agricultural development policies!!

We cannot look at the arbitrary nature of the IMF financial programming model and its limit of only fiscal and monetary policies tools, we have to also look at the developmental policies which the government does not have in place. I once pointed out that the government can provide guarantee for funding of development of cheaper ecotourism (this to my mind is still a take-off sector). They can provide funds to businesses to retool so that production cost can be reduced by introducing new and appropriate technologies. There are a whole set of ways that the government can support businesses from the budget which can be cost neutral to the budget.

CONCLUSION:
The reason we do not have our economy solved, fundamentally lies with the government not following the basic guidelines of the Guyana’s Constitution. One just has to read the prior Article of the Constitution, Article 13:

“The principal objective of the political system of the State is to establish an inclusionary democracy by providing increasing opportunities for the participation of the citizens and their organisations in the management and decision making processes of the State, with particular emphasis on those areas of decision-making that directly affect their well-being:”
Are you and I part of the decision making? Until next time “Roop”