Critical Indicator
The service sector is the largest sector of the Guyana economy in more ways than one. It is made up of 11 different groups of activities and embraces almost everything of social and economic importance. Activities like transportation, storage, communication, information, distribution, health, education, electricity, water, real estate services, financial services, public service, safety and security are all part of the service sector. The service sector contains the elements (water, electricity, sanitation, health, education and social services) used to measure human development and the impact of public policy on Guyanese. With the inclusion of basic services like health, education, water and electricity, it should come as no surprise that the government is a heavy participant in the service sector. Much of its performance therefore is as much a consequence of government policy and investment as that of the private sector. Indeed, the government was responsible for about one-third of the output of the sector in 2011 while the private sector was responsible for the remaining two-thirds.
In 2011, the service sector continued to dominate the Guyana economy. It accounted for 62 percent of the economy’s output and has three (distributive trade, technology and transportation) of the four largest industries in the economy, and in which private sector investment is currently influential. Over the last five years, the output of the services sector grew at six times the rate of the combined sector of agriculture, fishing and forestry, and the twin sectors of mining and quarrying. It also grew at three times the rate of manufacturing. What happens in the service sector is therefore a critical indicator of what is happening in Guyana. The slowing of growth in that sector might be an indicator that the country is running into bottlenecks in critical activities required to keep the economy moving forward.
Uneven and
Unexpectedly Slow
Even though all components of the services sector grew last year, the rate of growth was markedly uneven and unexpectedly slow. The growth of the sector has been driven primarily by activities in the areas of health, “other services”, information technology, transportation, the distributive trade and financial services. These six sectors each achieved an average growth rate in excess of seven percent during the last five years. In other words, they all exceeded the average growth of six percent by the sector as a whole and five percent by the overall economy.
Despite doing better than the other components of the sector, there are three things that are noticeable from the data presented in the budget speech that ought to be of interest to Guyanese. Some of these things have a direct impact on human development and their resolution ought to be a matter of attention in this year’s budget. The three things are the dramatic decline in the rate of growth last year in the construction, health and information technology industries; the below average output in education; and the progressive decline in the activities of “other services” of which tourism is a part. A closer scrutiny of these issues might save the country from greater problems in the future.
Influence of
Government
The rate of growth in the service sector has been declining steadily over the last five years. With the exception of transportation and the education components which expanded growth last year, all the other components of this sector almost cut the rate of growth in half compared to the previous year. Compared to where the country was in 2007, the trend is obvious. The growth rate went from eight percent in 2007 to four percent in 2011. In five years, the growth rate for the service sector virtually has been cut in half.
Last year was a most telling year for many parts of the sector as well, suggesting that very little attention was paid to managing critical components of the economy during an election year. It might also reflect the significant influence of government in important parts of the economy like construction, healthcare and information technology. More than half of the investment in the construction sector comes from the government. That industry grew by less than three percent compared to an 11 percent increase in output in 2010. The slower pace of growth needs investigation, but Guyanese are right to be concerned about the status of many projects in which the government has invested huge sums of money, and for which the Auditor-General keeps raising questions.
Worrisome
Healthcare turned in an exceptionally poor performance as well. Healthcare grew by four percent compared to eight percent last year. This is particularly worrisome considering that the industry progressively increased its output from 2007 to 2009, with growth reaching 19 percent in 2009. Since 2010, the growth rate in output has been cut in half. Growth fell to eight percent in 2010 and to four percent in 2011 as if confirming the complaints and evidence seen about deteriorating health care. A similar dramatic change can be observed in the information technology industry. The technology industry grew by two percent as against the seven-percent performance of 2010. When this sector was introduced as a separate component of the national accounts, it showed a growth rate of 30 percent in 2007. Last year, the rate of growth recorded by this industry was 15 times below its observed pace in 2007, reflecting the inability of current investments to sustain growth.
The three industries examined above account for 20 percent of Guyana’s output and 17 percent of its income. They are important to the lives and livelihood of many Guyanese who find work in those industries. If as the administration contends that employment is expanding in those industries, then productivity is falling. There is a serious need to examine the situation in these three industries to ensure that money is not being wasted and the quality of service that Guyanese seek could be obtained.
Slipped
The second issue of concern pertains to the general trend in education. Despite recording a higher growth rate in 2011 than it did in 2010, education was unable, throughout the review period, to match the growth rate of the service sector over the last five years. Education experienced a growth rate of six percent in 2007, but by 2010 that had slipped to five percent. This industry seems to be struggling to make good use of the huge sums of money gotten from international lending agencies for reform and improvement of the industry. Discussions on this part of the economy are very important since education is the key to reducing poverty and the platform upon which the future of the country will be built. Even the World Bank has acknowledged that extreme poverty exists in Guyana and the UNDP Progress Report on the Millennium Development Goals indicates that Guyana would be unable to eradicate extreme poverty by the target date of 2015. The performance in the area of education lends credence to the publicly expressed concerns over the years about the quality of education for the Guyanese students.
Biggest Surprise
Perhaps, the biggest surprise is what is taking place inside the “other services” industry. This is an amorphous grouping of activities that includes the fledgling tourism industry. Like the information technology industry, “other services” started off with an exceptionally high growth rate in 2007, the first year after the rebasing of the national accounts occurred. “Other services” recorded an 18 percent increase in output in 2007. It is not clear what is behind this unusual trend, but a consistent decline in annual growth that reached one percent in 2011 points to an industry in serious trouble, and the budget speech offers no explanation for what could best be described as a disturbing trend.
It should be evident from the foregoing that the budget before the National Assembly needs to be re-examined to ensure that it addresses the critical concerns of the Guyanese public. Their social and economic conditions remain fragile despite the laudable vision for the country, and an uninterrupted period of growth. Even if job opportunities open up, many Guyanese might be unable to qualify because of improper preparation to take advantage of the opportunities. The budget negotiations offer a chance to begin the process of correcting that situation.
