Tuesday’s Economic Corner
By Peter R. Ramsaroop
Introduction:
I have visited many areas that will be affected by the Low Carbon Development Strategy (LCDS). Many residents felt like they were told what the strategy was versus being engaged in consultations. The sad part is many are being told Guyana will get all this money from some donor country and they in turn will benefit. From 2007 to present all reports indicates that the government collected over 60% more in VAT revenues than was estimated. I can tell you my visit to Kwakwani last weekend proved that none of that extra money got to them, same as my visit to Moruka. I am not sure why we should believe that any new monies coming into Guyana would create a better economy for us. We are all in support of protecting our environment, but this must be balanced with sound economics and good governance, in other words we need sustainable economic development.
The European Union recently significantly reduced sugar subsidies after many years. The impact on Guyana was severe. What if we make such a commitment to protect our forest and after a year Norway policies changes and we are then left holding the bag with no new industries as we are today? Then our people are more out of jobs. We must have a balanced approach to Guyana’s development. Agriculture Minister Robert Persaud said last Monday that, the draft LCDS seeks to help Guyana take care of its own needs. He also said “How long do we want to be with our hats and our caps in hand seeking and begging for money?” Isn’t this what we are doing with the LCDS strategy as currently being rolled out by the Office of the President?
A grave mistake in the development of this plan is that it excluded the National Development Strategy (NDS) and major economic plans such as the Guyana 21. Guyana is going to be better off pursuing a LCDS in its own self-interest. Two immediate reasons are that Guyana is a net importer of fossil fuel and its coast line is vulnerable to sea level rise occasioned by global warming.
LCDS is not new:
We should give an award to the hundreds of Guyanese who developed this plan in 2001 that the President is taking credit for now. The following are some short excerpts from the 2001-2010 NDS that was never implemented.
5.IV.12 Given the fiscal constraints which the country faces in its quest for economic improvement, and the fact that the conservation of our forest ecosystem brings benefits not only to Guyana but also to the entire world, mechanisms will be put in place to finance the non-timber uses of the forests. Put in another way, a scheme will be devised and implemented to compensate Guyana for any decision it makes not to exploit its forests for the production of timber and timber products. A special foundation, which may be known tentatively as the Guyana Rainforest Foundation, that will mobilise funding from international NGOs, corporations, and bilateral governmental donors, will be established. This foundation will set up an endowment fund to receive donations and will apply the earnings from the endowment to the payment of royalties and fees which will compensate the people of Guyana for the opportunity costs that will be incurred from not utilising a proportion of their forest resources. These fees and payments will be assessed to cover and will include the loss of taxes and royalties, job opportunities, technological advancement and industrial processes, among other things.
5.IV.13 The proposed Guyana Rainforest Foundation will also seek to promote ecotourism, the medicinal uses of the forest, and other income-generating activities which do not entail the felling of trees for commercial purposes. It will also promote international agreements on carbon offset (for industrial pollution in developed countries), as another source of compensation to Guyana for setting aside part of its natural resource base.
Economic impact:
Value propositions in the sectors like ethanol, co-generation, and rural power transmission are just some examples of what is needed. The Ethanol Plant proposed in 2004 is yet to take shape.
The fact that citizens are told they will get free money if they support the LCDS takes away from putting in incentives to entrepreneurship. The LCDS as rolled out by OP spends all the money on projects approved by a government body. In the AFC working group document we added a component for Guyanese to directly benefit from Guyana’s resources without the government deciding. There can be educational campaigns to encourage folks to invest and not just spend. Some people might be in a situation where spending on immediate needs is the best investment. For others that money can well be seed money for some investment scheme. The real key is government policy hence the need for a new government. While we sleep, a group of Chinese entrepreneurs will install in Boa Vista a distribution centre for products imported from China. All this is due to the new Brazilian Federal law, which created Boa Vista and Bonfim as Free Commerce Areas, and therefore the local entrepreneurs in Boa Vista and Bonfim do not have to pay importation taxes. While it is happening, this administration is going to Lethem and Region 9 talking about LCDS with no immediate plans to compete and engage in cross-border economic progress.
We also need to answer, for example, what rate of deforestation will be compatible with a Guyanese LCDS? If it is zero, then it could mean that Guyanese would not have access to 60% to 70% of the national territory.
Conclusion:
As the former Guyanese Inter-American Development Bank official, Clarence Ellis recently said, “We must avoid these top-down approaches to development. We have to develop from the bottom up. Bottom-up approaches will depend on more knowledge than we have now.”
A sustainable LCDS for Guyana needs to be driven by a governance process that is inclusive, transparent, incorporates a lead role for private sector investment, and a government that acts as a facilitator of entrepreneurship and investment. Guyana is a nation that needs to come together and focus on creating opportunity for all its people. Historically Governments of Guyana have used the resources available to them to divide the country. This is why a comprehensive LCDS must minimize the role of government to those essential functions which only government can provide and allow the private sector, NGOs, and the wider civil society within a framework of the effective rule of law to maximize employment and economic activity.
Thus Guyana needs to retool its LCDS to fit with a national consensus on a development strategy developed with the involvement of all stakeholders, and incorporating additional input such as the Guyana 21 framework. In this way Guyanese would make a real contribution to reducing global carbon emissions rather than just serving as a tool for third party symbolism on global warming.
Until next time “Roop” peter.ramsaroop@gmail.com