Over the past year, Guyana has witnessed some remarkable achievements in the economic area – almost 5% growth in 2006; this is expected to remain strong in 2007. Government has made inroads into reducing crime and improving the security situation in the country. The government has made significant efforts to reform the national procurement system including the revision of the rules governing public procurement, the establishment of National and Regional Tender Administration Boards and the establishment of standard bidding documents and evaluation criteria developed according to international standards.
And there is more good news. One of the cornerstones of the government’s recent fiscal reforms has been the introduction of Value-Added-Tax from January 1, 2007 as a follow-up to an ambitious programme embarked on by the Government in earlier years – such as removal of governmental discretion in issuing tax exemptions and holidays as well as improving public financial management.
This is how the World Bank sees the Guyana economy in a two-volume Investment Climate Assessment Report issued in June 2007 following a survey of some 163 firms in the country. Or at least that is the assessment as set out in the Executive Summary of the Report. Some commentators including University of Guyana Distinguished Professor Clive Thomas take a rather different view and one has to ask whether the critics and the World Bank experts are speaking of the same country. Even if the views of the critics are dismissed as politically motivated does the summary by the World Bank represent their considered and complete opinion?
The answer, perhaps, lies in the details of the World Bank Report following a survey of businesses in Guyana carried out between November 2004 and March 2005 by a team of several experts in a range of specialisations. Yet the Report fails to carry out any real analysis and evaluation of the data on the economy which appears to be the assessment of the authors and not that of the respondents. For example, in assessing the performance of the 2006 economy can one ignore the catch-up that followed the disastrous 2005 Floods or the heavy World Cup Cricket non-recurring expenditure which was undertaken by both the Government and the private sector? And who but the World Bank and the IMF would consider VAT’s so-called positive impact without its corresponding heavy burden on the overtaxed Guyanese, or would consider the Government’s failure to establish the National Procurement Commission under the Constitution or its resistance to a Freedom of Information Act while praising the Government’s effort at ‘improving public financial management’?
Perhaps the authors prefer to let Guyanese find for themselves some of the ‘fine print’ – that Guyana’s recent economic performance has in fact been relatively modest, although even this the authors qualify as being subject to (unspecified) external shocks. Or that nearly forty years after Independence, the economy is still ‘heavily concentrated in the production of agricultural commodities and minerals with a low share of manufacturing in GDP’.
This results in statistics that show Guyana having the highest imports of goods and services to GDP among four comparator countries (Honduras, Nicaragua, Guatemala and Grenada) as well as the highest exports of goods and services to GDP when we are supposed to be the bread basket of the region? Or perhaps worse, according to the World Economic Forum Guyana has the worst rate of outward migration in their survey of 117 countries and an internal market that has been static for decades. It is a paradox that high unemployment rates and high vacancy rates exist side by side and the Government itself has to rely on contract workers many of whom receive salaries and other periodic payments such as gratuities that private sector employers cannot afford.
The Report quotes the US State Department’s estimate of the informal economy of between 30% and 50% and while year on year this may reflect the same rate of change as the formal economy, the fact that ‘informal’ also includes ‘criminalised’ does not reduce that segment’s nefarious effect on the rest of the economy. That segment also distorts the tax burden which is estimated at about 40% of GDP, with many at the top end evading their responsibility with impunity while the salaried and the poor pay more than their fair share in various forms. It is no wonder then that despite ranking among the countries with the highest marginal as well as effective tax rate of all the comparator countries, the entities surveyed by the World Bank do not have a very negative perception of the tax burden! Why should they when one-third of large manufacturing companies have had tax exemptions between 2000 and 2003, and 44% of foreign companies and 28% of exporting companies? Or that despite all the tax reform identified by the World Bank, “not much appears to have changed” and 90% of the respondents to the survey expect to continue receiving the same exemptions in the future.
Strange as it may seem our businesses are more troubled about political instability than about taxation even though the relationship between the Government and the leading opposition has not been closer for decades. 20% of the survey respondents complain that they do not trust the Government – compared with an average of 45% in the comparator countries – but yet they have to fork out 15% of the contract value in bribes to get government contracts – much more than the comparator countries.
Only 15% say they do not trust the court system but 33% of those who used the courts over the past two years think that bribing court officials and judges occurs – a troublingly high percentage. The perception of the efficiency of the court system continues to be negative with progress on one front only – the Commercial Court. The substantial sums invested by the US Government in the Mediation Centre have not produced any significant results largely because of the absence of real commitment from administrators as well as attorneys and their clients. And even as the rest of the Caribbean including the OECS moves to adopt new civil and criminal procedures that would deliver fairer, cheaper and faster justice, Guyana remains stuck in its old ways of doing things – or rather not doing anything.
Would readers of this column share the upbeat assessment of the state of affairs in Guyana? That would be a tantalising subject for another survey.
