Important Pillars
The talk about competitiveness is not idle chatter and no one thinks that the administration sees it that way. But something has got to be wrong when two of the most important pillars of innovation that support improvements in competitiveness will record some of the slowest growth in 2012. The two areas are education and information technology. According to budget projections, for a 10 percent increase in expenditure, output in the education sector is expected to grow by less than two percent. This output is expected even after the education industry exhibited growth of seven percent last year and an average growth of five percent over the last three years with smaller budgets. Information technology also fares poorly in performance. After spending an additional G$6.8 billion on the e-Government network and the One-Laptop-Per-Family programmes, output is expected to grow by three percent after growing by over 10 percent annually for the last five years. One therefore has to wonder what the words “We will continue to promote investment in the sector aggressively in order to ensure that as many high quality jobs are created in the shortest possible time” means if the planned investment in the two industries will not lead to faster and more substantial growth than is projected.
Central Role
It is not clear why our investments at increased levels in education and information technology would yield lower output, and further study of the issue is warranted to understand the likely occurrence. What is clear from the budget presentation is that the administration believes that it must continue to accord itself a central role in the introduction of innovations in the education and information technology industries. All the expenditure on technology in the education industry is directed at the public institutions with no evidence of support for private entities, including educational ones. With responsibility for nearly two-thirds of the education industry, it is understandable why the focus in the budget is on public institutions. Moreover, research has shown that governments can contribute significantly to innovations that improve competitiveness. That expectation places a significant responsibility on the administration to help Guyana expand output and exports, especially since Guyana is a price-taker in almost all export markets and has to depend on quality and reliability of supply to compete.
Disjointed and Inadequate
Other writers have found that while important, the contribution of government to innovation is hardly ever enough to strengthen and sustain competitiveness. For them, success at increasing competitiveness calls for the participation of all economic actors in the innovation process. As one writer who likens innovation to an ecosystem observed, innovation is a complex web of activities that involves board rooms, court rooms, universities and coffee shops. From that perspective, every industry and institution has to pull its weight in a continuous effort at doing better. In the case of Guyana, in addition to the large businesses, innovation should be expected from street vendors, farmers, business schools and other types of small and medium-size entrepreneurs. What the spending proposals on education and information technology might be revealing is how disjointed and inadequate the effort at increasing competitiveness really is. The administration should be seeking the help of as much of the private sector as possible to speed up the introduction of new technology to strengthen skills and change work habits and customer service attitudes.
Little Understanding
Further evidence of the disjointed approach to innovation resides in the biased spending towards innovations in the productive sectors of sugar and rice, while very little attention has been paid to industries in the service sector that could deliver significant competitive advantage. There has been the introduction of new technology and operating methods by commercial banks with the use of bank cards and ATM machines. The health industry has also seen major changes in technology and operating processes with the use of kidney transplant technology. Be that as it may, a study on innovation in the service sector presented at an IDB conference late last year observed that businesses in the service sector are increasingly required to make innovations on an ongoing basis to survive. Yet, no special attention has been made by governments to position industries in the sector to do so. The study also reveals that there is little understanding in the Latin American and Caribbean region on how innovation in the service sector works, leading one to conclude that policymakers in Guyana are not in possession of adequate information to create appropriate policies for the sector. This might be another reason that the effort at innovation across the economy appears disjointed and inadequate.
Dominant Employer
Improving efficiency in the service sector impacts more than the set of businesses that makes up the sector. Through financial intermediation, security, health, transportation, warehousing, education and distribution services, other productive parts of the economy are kept afloat. For example, when workers have to stay home because of poor healthcare delivery, efficiency and output suffer. Similarly, when business owners and their workers do not feel safe, they incur greater cost than is necessary to protect their lives and property, helping to reduce their competitiveness. Even more telling would be the attitudes of drivers of service and transport vehicles on the road who operate these vehicles very unsafely. New methods of training and motivating drivers are needed to keep the roads safe. Traffic lights and road signs that help to regulate the flow of traffic better also help to increase productivity and competitiveness of Guyana’s products. Guyana ought to be looking for new ways to build better and safer roads. This means undertaking research to find different types of material that could yield a better product at lower cost. Increasing innovation in the service sector is important because, in Guyana, the service sector is the dominant employer. It also accounts for nearly two-thirds of the economic output of the country. To ignore the value of innovation to this sector is to leave a large part of the production support network inadequately prepared to deliver service that can keep quality products in the domestic and export markets.
No Conscious Effort
An important part of the economy is the contribution that is made by the small business sector. There is no publicly disclosed effort to support small entrepreneurs either as innovators of technology or to ensure that technology can help enhance their production efforts. This challenge is most evident in the telecommunication industry. The administration is pushing to reform the telecommunications act. The proposed legislation to liberalize the industry seems to ignore completely the ingenuity shown by many small internet operators and other types of small scale providers. These entrepreneurs are not being accounted for in a positive way in the Bill. They are treated as anonymous economic entities despite the positive social and economic impact they have on the lives of individuals and on the Guyana economy. As small as they might be, small operators too should be given a chance to position themselves to regularize their operations in the same way the preferred larger enterprises are being permitted to do.
These service providers seem to be regarded as nothing more than a nuisance and no effort is being made to accommodate them in the information technology transition. The headache for this type of small business will increase with the requirement that they will have to contribute to the universal access and universal service fund, if they were not explicitly exempted from doing so. The legislation seems likely to kill and not stimulate innovation as envisaged by the ecosystem model of innovation that calls for an all-inclusive approach to innovation. Now that the government has freed itself from the shackles of ownership of GT&T, it can look after the interests of all participants in the telecommunication industry, including the small-scale operators who might have been considered threats to its economic interests before divestment.
Underestimating
Achievements
The output of the education and information technology industries could be greater if there was a national effort to strengthen links among the various parts of the economic system with respect to achieving faster innovation. This goal could be achieved with the use of a public policy approach that expanded participation in the innovation drive to include small, medium and large scale enterprises.
One way is to ensure that reductions in the business tax rate are linked to the development of innovative strategies aimed at improving competitiveness. Given the condition of all industries in Guyana, all sectors should be given public support to adapt production and service systems. There is no indication that the budget accommodates this type of effort and could be underestimating the achievements possible from investments in the education and information technology industries.
