Amidst the good news about the first quarter performance of the economy, there are still concerns that are likely to dissuade potential investors and entrepreneurs from proceeding with haste to invest in Guyana. The bad news reposes not just in the embarrassing events that are unfolding in a courtroom in New York, alleging links between prominent persons in the political administration to criminal activities in Guyana within the last seven years; nor is it just about the loss by fire of a historic building that housed the Ministry of Health and important public health records under suspicious circumstances. Setting aside all these woes that attest to the country’s ongoing instability, the bad news is that Guyana remains in the tenuous grip of poverty, unemployment and diminished opportunities for most citizens.
Optimistic
In an effort to offer Guyanese some hope, the Bank of Guyana (BOG) presented an optimistic outlook for the future even as it reported that there was a decline in real output growth during the first quarter of 2009. Several sectors contributed to the weak economic performance during the first quarter. The agricultural and mining sectors were two of the ‘offenders’ that contributed to the further weakening of the country’s economy. Sugar, a habitual ‘delinquent,’ was also an underachiever last year and, as if on cue, simply persisted in the same vein during the first quarter of 2009. During the first three months of this year sugar production declined by more than 11 percent.
The mining and quarrying sector joined the agricultural sector in pulling the economy down. Bauxite was the ‘chief culprit,’ recording a decline in output of over 31 percent while gold production declined by 1.5 percent.
Meanwhile, the perennial woes of the country’s hapless manufacturing sector continued unabated while, in a surprising turn of events the transport and communication sector also shrunk. The truth is, there has been really little to celebrate about the Guyana economy in the first quarter of 2009. Nor has the level of private sector employment been anything to shout about. Forty-four percent of the labour force remains inactive, a situation which, in all likelihood, derives from circumstances rather than choice on the part of the unemployed.
The upshot is that a significant section of the Guyanese population is left without the ability to add to consumer spending and, by extension, hence to the expansion of the Guyana economy.
Trapped Potential
The optimism of the Bank of Guyana is not derived from or directly linked to any discernable breakthrough by any local sector or business enterprise, or, for that matter, from any foreseeable strategic moves by the administration or the business community. Despite ongoing exploratory activities, the prospects for the discovery of oil and, more particularly, for factoring it into the economy, remains mired in vague promises and a labyrinth of uncertainty. Oil aside, there is no promised technological accomplishment already ‘in play’ or on the horizon for that matter that encourages us to hold our breath in some sort of realistic anticipation. Maddeningly, what our political leaders apparently failed to understand that for us the poverty-stricken, promises that are hinged to ‘potential,’ a much abused word in Guyana, count for nothing in an environment where the wealthy, some with their ill-gotten gains, wallow around in affluence and are really not the least bit interested in the country’s potential.
All of Guyana is now acutely aware that the country’s potential is caught fast amongst the rocks of political bickering, race politics, short-sighted investment policies and, more recently, environmental commitments. Add to this the mind-boggling quagmire of corruption in which the
country has become stuck and we are in a difficult situation indeed.
Notable Absence
The optimism of the Bank of Guyana is linked to the behaviour of the rest of the world. It anticipates that oil prices will remain low and that the value of imports into Guyana will decline at a faster rate than the value of exports. These, of course, are shakey assumptions, to say the least. The central bank also appears to expect a greater flow of capital resources from bilateral and multilateral donors. A notable absence is any expectation of growth in direct foreign investment. Guyana enjoyed increases in direct foreign investment last year through investment in the communications sector among others.
Good news came in the first quarter in the form of a strong performance by rice which expanded output by 21 percent. Rice was joined by the engineering and construction sector which also recorded positive growth. An important variable in this favourable expectation is the price of fuel and lubricants. Oil prices have come down from the US$140 mark at which it once stood. More importantly, the price of oil is not expected to rise to the outrageous levels of the previous year and gives local industries a chance to be competitive, if the Guyana Power and Light (GPL) would let them.
Political Crisis
The optimism of the central bank was declared prior to the revelations emanating from that New York courtroom to which I referred earlier Robert Simels was the hired lawyer of Roger Khan, a national of Guyana, who confessed to trafficking in illegal drugs.
The economic outlook for Guyana could be complicated by the political crisis that is brewing on account of the disclosures coming from the Simels trial. Prominent figures in the current administration are increasingly being implicated in unsavoury activities. These linkages cast lengthy shadows over the integrity of the administration and its impartiality in matters of public safety and security.
The opposition parties are rightly concerned about whether or not the administration has the moral authority or willingness to protect the citizens of Guyana, or to carry out planned economic programmes. With so many citizens killed and most of their murders unsolved, particularly over the past seven years, , the recent disclosures in the US courts linking administration figures to unauthorised activities is more than sufficient for Guyanese to begin to raise searching questions of their own.
These legal developments follow a string of political missteps which include the improper transfer of taxpayers’ property (Sanata assets), permitting insurance companies (Clico et al) to transfer resources abroad in violation of the law and mishandling the assets of the National Insurance Scheme and the resources of the state.
The opposition political parties have shown a good and clear understanding of the likely impact of the US court disclosures on the image of Guyana and the inability of the administration to get and keep the economy on course for Guyanese. The legitimate protests of the opposition parties were likely to impact any economic progress that might have been possible.
Donor Interest
Sooner or later, donor countries and organizations will begin to ask themselves if they are satisfied with the explanations coming from the administration and whether they do not in fact need to know more about how and why certain names keep cropping up in the testimonies being given in the New York courtroom.
The least that donors can do to show that they care about the unfolding events in Guyana is to support a request for an independent and impartial investigation. The government too, ought to have a vested interest in such an investigation since it is its own image, its own ‘democratic credentials’ that are under threat. Such an investigation and its outcome may well help to keep the economic circumstances of Guyana from growing even worse.
Improved safety and security will also benefit the investment climate, a circumstance that potential investors and donor countries will doubtless welcome.