By Clinton Urling
2011 Year’s Economic Growth
Continuing an impressive streak of growth that has now run for six consecutive years, Guyana’s economy turned in another stellar performance last year, growing by a rate of 5.4 per cent.
This overall favourable economic environment is reflected in the performance of the Georgetown Chamber’s member companies. In a recent survey of members, 84 per cent indicated they either broke even or recorded a net profit in 2011. Echoing the larger economic trend, a large majority also are highly optimistic about this year’s prospects for Guyana’s economy and their businesses.
The bulk of current growth arises from the primary commodities and agriculture sectors with mining and quarrying, as a whole, registering a 19.2 per cent rate of increase in 2011.
Most notable in the agriculture sector was the 11 per cent increase in the rice industry. Guyana’s sugar industry grew at a similarly robust rate of 7.1 per cent even though total production levels were lower than what could have been expected, given the country’s potential capacity for this industry.
While these numbers are strongly encouraging, we cannot afford to become complacent and rely too heavily upon these primary goods sectors as the basis for our principal strategy in extending our streak of economic growth. Such excessive reliance could leave us exposed and starkly vulnerable to volatile external price shocks and fluctuations in these sectors.
Thus, we must capitalize upon our current positions of robust economic growth to invest in and diversify other sectors, especially manufacturing and the services industries. As a starting point, we must have more engaged conversations that address lifting the constraints inhibiting the manufacturing sector as well as implementing wider measures to make Guyana’s services industry more globally competitive.
Some might argue (including myself) that most of the prescriptions dealing with issues of diversification have already have been outlined in the National Competitiveness Strategy (NCS). Therefore, now is the ideal window to accelerate the deliberations process and move toward implementing the programmes of the National Competitiveness Council (NCC). Facilitating this process would, however, require a professionally enhanced and independent National Competitiveness Strategy Unit (NCSU), which has been tasked with administering and implementing the policies of the NCS and the NCC.
We’re certainly within striking distance of having all of the tools in place to sustain and expand our recent trend for economic growth. In the past decade, Guyana’s government has prudently supervised and managed the major macro-economic fundamentals that drive our economy. This judicious approach has led to reductions in the public debt burden and has unquestionably strengthened the foundation for the favourable economic environment that prevails today. However, within the last few years, Guyana’s national debt also has been on the increase. In order to achieve this complex objective, the government will have to strike an appropriate balance in pursuing essential economic projects while not slipping back into a debt trap that plagued Guyana in the past and which today has rattled even the most developed economies in Europe and North America.
Budget Debates and Cuts
Impassioned debate, prudent deliberations and fully engaged discussions comprise the hallmark of a well-functioning democratic body politic. These elements also most often lead to fractured and contemptuous environments of public dialogue, as widely divergent views and ideas percolate, come to dominate, and then fade within a continuously regenerating cycle of political positions and proposals.
In Guyana’s parliament, the situation and circumstances are no different.
This year represents the first time since Guyana gained independence that we have a parliament where the ruling government must work closely with the minority parties in the House who hold the key to building successful coalitions for legislative majorities. The outcome of last year’s general and regional elections consolidated this unprecedented political environment so it should surprise no one that the opposition parties were not going to automatically agree to every budgetary proposal as advanced by the government. The debates present Guyana’s best opportunity for ensuring our long-term economic health and also represent a defining moment in Guyana’s history and one that is good for the country moving forward.
As it turned out, the main opposition negotiated with the government and effected increases from $8,100 to $10,000 in allocations to senior pensioners. This example precisely represents the ideal spirit of compromise and maturity essential to making the new parliamentary dispensation as effective as possible.
However, any hope of continuing this spirit of dialogue was dashed recently when the government and opposition parties could not agree to a compromise on the budgetary allocations. This led to the combined opposition voting to remove some allocations until the government met certain conditions.
Among the largest allocations in limbo is approximately $18.4 billion for numerous economic and social development programmes in the Low Carbon Development Strategy. In addition to initiating small- and micro-enterprise development and strengthening the institutional agencies connected to the strategy, these programmes include the Amaila Falls project, Amerindian Land Titling, Amerindian Development Fund, the Cunha Canal rehabilitation, and the hinterland electrification project to install 11,000 solar home systems in 150 communities.
While the opposition parties have argued that funds for these proposed allocations have not been earmarked in the contingency reserves and are conditional programmes, few, if any, would deny the intrinsic value of these programmes for stimulating economic growth that potentially reaches to all corners of society. Some of these projects should have been funded and allocated in the budget, regardless of whether or not the government had met the requirements to access the Guyana REDD+ Initiative Fund (GRIF).
The two most notable initiatives that immediately affect the private sector are the Amaila Falls project and the small- and micro-enterprise development allocations. No further elucidation is required to expound on what these two initiatives would mean economically to the private sector. Notwithstanding, it is not too late for both sides of the House to discuss the potential benefits of these and other proposals with the aim of having supplemental provisions funded, a more satisfying alternative to the political posturing that has become the norm since the budgetary removals were announced.
Allocations and Targets
In terms of final targets and allocations projected for 2012, the government appears to have taken the modest case scenario in its forecast, anticipating a growth rate of 4.1 per cent. The expected 1.8 per cent increase in the mining and quarry sectors is especially modest. In fact, the sectors likely will turn in a far more robust performance given what we are witnessing in the gold industry along with large-scale investments in other mining projects such as manganese.
Inflation – which is projected to be 4.6 per cent – will require especially careful attention by the government to ensure it does not balloon out of control. In the survey, virtually every Chamber member cited the rising operational costs of business as a major constraint, which would then be passed onto consumers and trigger eventually a chain of other socioeconomic problems.
Also, the budget cuts will have an impact upon final economic projections.
What would be helpful is for the Finance Minister to make public his opinion as to if and how the budgetary cuts will revise original growth forecasts and what those updated projections will be. Such transparency will be helpful to all parties in the public and private sectors as they continue to fine-tune their own economic plans for the remainder of the year.
Clinton Urling is the President of the Georgetown Chamber of Commerce and Industry
