By Peter R Ramsaroop
Introduction
I have travelled to many countries over the last month and had the opportunity to read many different newspapers. In every one of them, there is an article on the cost of living and the local economy woes. It is no different here in Guyana. Cost of fuel this week hit an all time high of $US113 a barrel.
The effects will be felt on our local economy more than they already have.
Many governments around the world are starting to intervene in areas that can bring relief to their citizens. In the US, tax rebate checks are being issued to those that most need it; other countries are intervening in areas such as taxes, spending and subsidies. There are critical interventions that our current PPP/C government must make now to adjust our economy to offset the impact on consumers and businesses.
Global issues that will affect us
As the United States cut discretionary spending in order to reduce their federal budget, less money will be available for aid that countries such as Guyana depend on mainly because of our lack of our own plan to revitalize our economy. There is also a critical US programme coming to an end in September that Caricom leaders are advocating be renewed urgently, the Caribbean Basin Initiative Act which facilitates the economic development and export diversification of Caribbean Basin economies which includes Guyana.
One of the key issues is that US ethanol producers are forced to compete with companies who set up ethanol production facilities in the region and take advantages of the free trade act. It is too bad that Guyana has failed to capitalize on this arena even though we were targeted as such a producing country for many years now. With the increase in oil prices, Guyana is not looking at alternative energy sources aggressively. . Our hyped hydro-power project seems to have disappeared with no comments recently by the Prime Minster who signed the agreement two years ago with Snergy Inc. Our region does benefit from the act in other areas therefore we must lobby for the US to renew the Caribbean Basin Initiative Act. The US must realize that the region is in their backyard and that our development is crucial to a strong America.
Consumer needs
Consumers are limiting their spending on discretionary items as they struggle to pay mandatory bills such as electricity, water and transportation. It is a well established economic fact that around 60-70% of the Gross Domestic Product (GDP) is simply consumers spending just about all of their hard-earned income. Every dollar we spend turns the economy at least ten times; therefore the consumer needs as much of their money as possible to spend.
a. We cannot let the issue of VAT disappear. We must continue to lobby for a reduction immediately. This alone is affecting our cost of living and a reduction to 7% at this time will greatly improve consumer survival. (We have also called for VAT tax rebate checks and tax threshold increases in the past.) The 7% figure equates to the Government estimate of what they expected to collect.
b. In contrast, government must freeze expenditures to offset this reduction especially in pet projects such as the Kingston pipe or hotel project.
c. A comprehensive overhaul of our tax system needs to be on our 2008 agenda with the goal for more money in the consumer’s pocket.
d. We need a complete suspension on all taxes on fuel
until we can analyze the alternatives.
Business needs
Mr. Geoffrey Da Silva, CEO of Go-Invest said recently that there was a need for a change in the business culture that currently exists in Guyana to ensure an environment is created where there is more information sharing among businesses. He failed to say that what we really need in our business community is improved efficiencies by government agencies in facilitating a fair business culture.
a. Government must establish export free zones
b. Invest in the completion of areas such as the road to Brazil, alternative energy and deep water harbour
c. Improved safety and security for all – a key ` ingredient to investment success
d. Improved coordination with all governmental ministries on economic issues
e. Improved transparency in all government’s decision making and a better investment code.
Conclusion
Our elected government’s responsibilities are to lead without fear or favour, with the implementation of some fast financial decisions, for both individuals and businesses. A crisis management approach is urgently needed. The private sector needs to revitalize itself and be the advocate for both businesses and consumers alike.
Until next week, “Roop”.
