Introduction
As earlier indicated I intend to merge the ongoing discussion of Guyana’s public investment management into what is, hopefully, a fruitful consideration of the National Budget, 2013. Starting this week, I begin with a critical appraisal of government’s investment strategy, as this is the starting point for effective public investment management. Indeed projected capital spending in this year’s Budget is around 40 per cent of total expenditure.
As I have indicated to readers before, government spending (whether capital or recurrent) does not come out of thin air. Neither, does it fall like ‘manna from heaven.’ In fact, all government spending is provided for by either 1) taxes citizens pay; 2) government borrowing (local and foreign); or 3) overseas grants. Here government borrowing includes the printing of money. It must also be noted that government borrowings will have to be eventually repaid by Guyanese. There are no loans in perpetuity available to the government.
In this sense therefore, Guyanese should not focus exclusively on the $208 billion of government expenditure proposed for 2013, but they should pay attention also to the revenue government raises, as well as the debt it plans to incur (as this will have to be repaid through future taxes on citizens).
Troubled projects
Guyana’s list of troubled government projects is long and growing. It is also amazingly diverse. Presently, it ranges from a miscellany of relatively small projects (roads, bridges, culverts, drains, community and government facilities, wharves, ports, aircraft landing-strips, etc) to relatively humongous projects involving hundreds of millions of United States dollars (Skeldon Sugar Factory, Hope Canal and the Amaila Falls Hydro Scheme). In cases where these are partly funded by external loans or grants, all costs incurred by these projects due to inefficiency, waste, mismanagement and corruption will place economic burdens on Guyanese. Additionally, other costs incurred by projects that are not fully compensated for by future benefits accruing to them, similarly place economic burdens on Guyanese.
Markers
Arising from my studies of the Guyanese economy, as well as personal experiences, I pointed out last week there are two markers behind Guyana’s troubled projects. These are: 1) entrenched and recurring financial irregularities, practised by the State and 2) the seeming absence of deliberate and systematic thinking in the piecing together of the country’s public investment programme and its management.
While I have previously identified in earlier columns some of the principal financial irregularities, four of them are worth repeating for emphasis. These are, firstly, government’s off-Budget slush funds. At least two of these have been brought to the public’s attention in a scandalous manner, namely NICIL and the National Lotto Funds. Secondly, there are persistent irregularities in the process of legal financial authorisation of both state revenues and expenditures. These have been partly addressed in Carl Greenidge’s proposed amendment to the Fiscal Management and Accountability Act 2003 in two principal areas. One makes both the subject ministers and their respective public service officials liable for violations of the act and its procedures, while the other seeks to entrench the financial independence of constitutional agencies, including service commissions, in order to keep them at arm’s length from political interference.
Given the absence of, and weaknesses attributable to several regulatory and oversight bodies, grave defects remain, in particular the absence of an established Public Procurement Commission, and the “challenges” to the Office of the Auditor General in regard to conflict-of-interest considerations. Exactly three years ago, the authorities announced the “imminent establishment” of the Public Procurement Commission, with the advisory that what remained to be done was to shortlist the names nominated for the commission. Further, a year ago (May 2012) a cabinet minister publicly declared that the Procurement Commission would be established by the end of 2012!
The third irregularity is the persistent and underhanded misrepresentation and manipulation of economic and financial statistics. Finally, there is what can at best be described as the weak accounting for Guyana’s contingent sovereign indebtedness.
Later, I shall comment on these irregularities. For now, I focus on the economic inefficiencies in the management of Guyana’s public investment programme.
Phases of public investment management
At the outset I stress that, for purposes of examination only, (a heuristic device) I shall divide Guyana’s public investment management into four distinct sequential phases. I hasten to say that, in practice, these phases are not distinct. My purpose for so doing is to represent elements of this process separately, while acknowledging that in actuality they could be operating in a continuous and seamless manner.
The first of these four phases is the one where Guyana’s investment strategy is formulated. The second phase that follows combines feasibility studies/project appraisals with timely project selection and sequencing, for coming on-stream later. The third phase follows this, with the management and implementation of project(s). And, finally, there is the phase where the project is monitored as an ongoing operation. Routinely, this is expected to be accompanied by post-evaluation audits in order to ensure that the projects are not only performing as intended, but to be pro-active in addressing unanticipated/unexpected occurrences.
Some project practitioners in Guyana might argue that the above is a highly idealized version of both what Guyana has been doing and what the authorities are planning for the future. Despite the likely accuracy of this observation, I think what I propose to do is to present a model of behaviour, which yields incisive insights into why there are so many troubled public projects. Starting with next week’s column, I shall address each of these four phases in turn.
Conclusion
To conclude, it is my expectation in coming columns to successfully advance the proposition that, in view of Guyana’s economic circumstances an effective investment strategy must necessarily embody three vital characteristics; these are coherence, transparency, and accountability. As I shall explain, the first of these will be treated in a multi-dimensional way, specifically tailored to Guyana’s situation. The remaining two will be treated in a more orthodox manner.
