Dear Editor,
I do not have the time to write the ‘Development Watch’ columns at this point because of some pressing research I am conducting and other commitments that would keep me very occupied for the rest of 2017. I do intend to write them again in the future, assuming Stabroek News finds them helpful. However, I am moved by the recent article in the online version of your newspaper: ‘Gov’t accuses private sector of helping opposition undermine the economy’ (SN,
Feb 18). This article confirms my long suspicion of the main factor motivating the APNU+AFC economic policy since the May 2015 election.
The article indicates the government’s deep suspicion of the entire private sector, which includes heroic joint stock companies like Banks DIH Ltd, DDL Ltd, Caribbean Containers Inc, J P Santos and Company Ltd, Sterling Products Ltd, Guyana Stockfeeds and others. It also includes the all-important publicly traded commercial banks such as Citizens Bank Ltd, Republic Bank Ltd, GBTI Ltd, and others. These are just a few of the public companies whose CEOs are accountable to their shareholders and not a political party. These CEOs cannot shoot themselves in the foot by undermining their shareholders’ wealth.
The private sector is also comprised of numerous partnership and sole proprietorship businesses. It also includes a few substantial sole proprietorships which no doubt received favoured treatment and oligarchic largesse from the Jagdeo PPP. However, even these individuals use their capital to expand operations inside of Guyana, as Dr Bobby Ramsaroop has demonstrated vis-à-vis club cricket. One of my critiques of Mr Jagdeo’s economic management is not so much that he uplifted a few private investors, but that his policies were not conducted within the context of transparency and a well-defined industrial strategy, whereby the beneficiaries were required to pursue certain social goals, employment targets, production linkages and content requirements.
The government’s suspicion is furthermore rooted in the problematic and unrealistic over estimation of PPP corruption that is often juxtaposed with the entire private sector. So much so, that its economic agenda since May 2015 appears to be underpinned by the typical village rumours. This resulted in the heavy-handed actions of SOCU and SARU. It appears like the risk-taking private investor is the enemy and the only heroes are those uniformed army officers. Such a perspective resulted in a failure to reassure investors in the first week or two after winning the election. Such reassurance is standard policy for any new government which displaces a long-entrenched regime like the PPP.
Indeed, the waning confidence is reflected in the price (exchange rate) in the foreign exchange market and not so much the quantity of foreign exchange. The government and Minister Jordan are correct to say there is enough foreign exchange in the system, at least for now, in spite of the severe problems – some inherited and some created – in the sugar and rice industries. As in a classic hoarding phenomenon, people are holding on to their hard currencies (their quantities), so the exchange price has to adjust upward bringing with it all the social troubles of a de facto devaluation. To deal with this problem the government utilizes even more heavy-handed measures instead of sweetening the relative price of the Guyana dollar.
This hoarding is coming from a lack of policy clarity by the APNU+AFC government and the paranoia towards the private investor. It is coming from the pro-cyclical fiscal policy, which involves widening the tax base in an economic downturn. I am sympathetic towards the idea of widening the tax base and that the VAT is one of the effective ways of doing so. However, it is a matter of the sequencing and timing of the policies. It would be much easier to widen the base during good economic times. Furthermore, when widening the base they would need to better identify the tax evaders. I would bet my money on the outcome that the lawyer class, the minibus owner, the taxi operator, and other self-employed folks make more money (with less volatility) than the small or medium-scale peasant farmers, who are now coming in for some heavy-handed fees.
All these come on the heel of several credibility-deflating measures like the excessive ministerial salary increase, the D’Urban Park fiasco, an unwieldly Cabinet, and the City Hall parking meter contract which is totally lacking in transparency.
Yours faithfully,
Tarron Khemraj
