Introduction
Recently the President blasted the AFC for being unpatriotic for stating that our nation’s economic stagnation is due to crime, corruption and lack of transparency as validated by many international reports. The PPP General Secretary also disagreed that crime does not affect investors. However, if one would survey overseas-based Guyanese on why they do not return home and invest, they would all say it was because of lack of security. It was unpatriotic for the PPP to refuse millions of dollars from the British to aid in reforming our security sector. The President also scared future investors by stating that his government is under siege by terrorists. This was a very unpatriotic statement to make.
Crime has taken over Guyana and has suppressed the investor class and working class. For instance, smuggling has made it difficult for legitimate businesses to compete. The drug dealers are also laundering money that put those who borrow at 15% interest rate from the commercial banks at a disadvantage. Violent crimes have also chased away skilled Guyanese, workers and potential entrepreneurs. In spite of the escalation of deadly crimes under the PPP, few are brought to justice.
Another unpatriotic act was not implementing the National Development Strategy (NDS). The PPP General Secretary also said recently that “infrastructure” was the reason there are no major investments. If we had implemented the NDS since 2001 and started the smaller energy projects recommended, Guyana would have been in a position today to attract large investment. The PPP is waiting for the silver bullet hydro project, as economist Dr Tarron Khemraj recently noted, to solve our energy needs. But one silver bullet energy project is not likely to solve the energy needs of Guyanese. The AFC proposes the portfolio approach to energy – we prefer geographically focused small/medium scale hydro projects, ethanol, bio-diesel, wind and solar energy. These are not only realistic, but also more likely to create jobs for our people. I will expand on this in next week’s column.
Liberalisation
The key factors to the economic development and sustainment of any country are simple and the same from the Egyptian Empire to the American Empire. Before there were social sciences called economics and psychology, before there were MBAs and Accountants, certain natural factors existed which when honoured brought prosperity to a people.
What are these factors? These factors are mainly an entrepreneurial spirit of the people, access to capital and low taxes. Whilst these factors are simple and clear, they often manifest themselves within the political framework of the particular society. It is the political framework of a society that either properly harnesses these factors for the overall prosperity of the country or stifles these factors to the detriment and stagnation of the country.
This concept holds throughout all societies and empires from time immemorial to the present.
It has been documented that about 85% of skilled Guyanese migrate. Our country also suffers from the exodus of the entrepreneurial and investor class. These are the people who undertake new and risky in investments. They organize labour, financial capital, physical capital and skilled workers in the best manner to achieve the highest productivity. In addition, it is well known that for a country to develop it needs a core set of engineers and scientific researchers who can imitate foreign technologies and then innovate by applying them to the domestic circumstance. Guyana lacks this core set of human capital.
We also lack business management specialists and financial experts who can take good ideas and inventions and turn them into commercial successes. An economic plan to retain and recruit back our expertise is needed.
Guyana is mired, after eighteen years of PPP rule, in a backward production structure and a punitive political framework – so much time has been wasted by the PPP. Guyanese are largely dependent on remittances to finance consumption. There is still a large smuggling and illegal underground economy as documented by the multilateral financial institutions and academic researchers.
There is no focus on production transformation and every policy initiative of the government has to be financed by grants and foreign aid a large part of which ends up paying foreign consultants. Remittances, the underground economy, and foreign aid have created a false sense of success and an illusion of development for the PPP ruling class. The illusory pockets of development, moreover, do not emerge out of the creation of domestic production and wealth by stimulating the ingenuity of our people, or from encouraging foreign investors to invest in Guyana. Rather it is unbalanced and artificial development that cannot be sustained unless we transform the production structure of the economy.
The latter is precisely what the AFC’s economic blueprint policy package seeks to accomplish. We seek to achieve rapid growth through production transformation, productivity gains and reducing barriers to enable development that benefits all Guyanese. Remittances would become less important to prop up the consumption of families as they find permanent jobs and investment avenues.
Also, the underground economy, and the recklessness that emerge from that sector, would be smothered through appropriate legislation, transparency and robust law enforcement. We also intend to achieve our production transformation (and jobs creation) while maintaining stable price levels and exchange rates via prudent fiscal policy and an independent central bank.
Conclusion
Emphasis needs to be placed on making the political framework as it relates to taxes and liberalisation of the energy and telecommunications sectors more conducive for entrepreneurs. This is the only way to harness the factors of entrepreneurship and capital which will make Guyana a prosperous country.
We have called many times for a complete review of our entire tax system with the goal of streamlining collection and expenditures.
We would like to develop Guyana within one generation as was done in South Korea, Malaysia, Singapore and Taiwan. This is a highly realistic objective. We are confident our policy proposals can achieve this fundamental objective of economic transformation.
An average of 7% per capita economic growth per year for twenty years would ensure Guyana moves to a middle income country by the end of 20 years after 2011 – that is we can achieve a per capita GDP of at least US$8,000 by 2030. Doable? – Yes! Until next time, “Roop”
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