Introduction
This week I was planning to prepare a piece on the economic impact of hosting large sporting events, with a particular focus with respect to ICC Cricket World Cup 2007 and Guyana. I feel that with two high profile news stories breaking as I put my thoughts down perhaps it would be more appropriate to wait until after the event and analyse the actual impact rather than posit what it may be. However the second piece of news does tie into a topic which I have been meaning to cover some time now. I recently began reading a book by Thomas L Friedman The Lexus and the Olive Tree which provides an introduction to the subject of globalisation. The recent appointment of foreign managers to oversee management of Providence Stadium is eerily familiar to some of the ideas being presented. Too often in Guyana I see a phenomenon I call the ‘ostrich’ mentality – we kid ourselves everything is alright by ignoring what is actually happening – the metaphorical head in the sand – until some event (usually spurred by external forces) suddenly leaves us realising that perhaps things aren’t as rosy as we have allowed ourselves to believe. In most cases a flurry of activity ensues to react to the events. In the case of the Cricket World Cup the ICC clearly were not happy with aspects of the approach being taken, and with ten days or so remaining until the first game was due to be played refused to endorse the appointees selected by the Local Organizing Committee and put their own manager in place.
What is globalisation?
When I think of globalization I normally think of large multinational companies exerting political influence by investing or withholding further investment. However I was interested to see Friedman introduce several more facets than I originally catered for. He cites the integration of technology, information and financial markets as the major indicators of globalisation. Wikipedia also adds the movement of labour, people and of goods and services to the mix.
Thus globalization was many facets in addition to what I had originally envisioned. When the term is used the context is important to understand which facet is being referred to. Friedman describes his vision of globalisation as global pool of investors “the financial herd” enabled by technology to allow them to make transactions with up-to-the minute information seeking out the most profitable transactions. He warns that unless countries put in place measures to facilitate the investment needs of the herd “the Golden Straightjacket” countries face missing out on a vast pool of potential capital.
He illustrates many cases where embracing globalisation has been of tremendous benefit, such as the rapid rise to prominence of Singapore. However, there are also downsides, with the potential for loss of culture and social cohesiveness.
Migration
Migration is the negative side of globalization which is perhaps impacting most on Guyana and its effects are having a crippling impact on the availability of human resource here. It is a vicious circle, since in the age of globalization in order to compete a knowledge-based economy is required, yet the very citizens who have the skills to power such an economy are the most likely to feel disenfranchised if they feel their country does not provide an acceptable standard of living. Such individuals will also find it easiest to find work in a country which offers an acceptable standard of living.
Limited resources spent on education are lost too if those with the skills migrate at the earliest opportunity. This leaves a large pool of unemployed and or unskilled labour who given the opportunity would grasp the chance to learn a new skill or vocation; however, the resources are simply not available for the state to provide wide-scale vocational training for the unemployed. Though training is available from the private sector it is those in most need of it who are least likely to be able to afford it.
Investment
I think a lack of jobs is a direct reflection on a lack of investment, which, following Friedman’s line of thinking is because Guyana has not embraced the requirements of the herd – transparency in governance, a stable political climate and an efficient judiciary to name a few.
Despite the claim Guyana is open for business, the fact is that nearly every major investment has taken place involving substantial concessions. The ensuing red tape means only the most dedicated need apply. Contrast this to the model adopted in Dubai, which, foreseeing the end of oil revenues has remodelled itself as a free-trade zone. Would it not be better to have an enabling environment in the first place such that investment will be encouraged without the need for concessions – and they are the exception rather than the norm? Abolishing property tax and lowering the rates of corporation tax, import duty and personal income tax are all measures which would make Guyana more investor friendly.
I believe that the implementation of value- added tax is a step in the right direction. If, as many believe that there is widespread evasion of taxes, which will be brought into the tax net through indirect taxation, then the ensuing revenue windfall will allow other taxes to be reduced. Failure to do so will mean Guyana is in danger of being passed by in favour of countries which are more welcoming to investors.
Judiciary
I believe our court system leaves a tremendous amount to be desired. The maxim of ‘innocent until proven guilty’ takes on a new meaning when it takes six years for a case to work its way through the system. I have seen cases where it has taken years for ex-parte injunctions to be heard.
Quite simply reputable ethical firms will pass Guyana by if they do not think their rights will be upheld in the courts or it will take years to do so. This is particularly the case in respect of intellectual property rights – it would take a brave company to implement a cutting-edge technological process here only to find that should a competitor steal it the matter might take years to resolve – if there were any laws dealing with the theft in the first place!
Perhaps this why much of the foreign direct investment has been in areas such as mining which involve significant capital expenditure and as such make it much more difficult to benefit from knowledge of a competitor’s operations.
Conclusion
There are many other areas of globalisation which, if ignored, will see Guyana’s development stranded relative to the rest of the world. I am sure I will return to the topic in future columns.
