Dear Editor,
There is an interesting discussion underway with reference to remittances and their impact on our economy, and I have been reading Dr Prem Misir, Emile Mervin, Dr Tarron Khemraj (in particular his SN column, July 8) and a recent letter by one Kimberly James on this issue (KN and GC July 10). I rather suspect the latter to be from the Ghost-writers Club (GC). Kimberly James’ arguments are text book and coherent, with the exception of one off-target insinuation that there is someone out there that spits on remittances. In my reading I cannot figure out who is meant by that remark, clearly meant to target someone – that notwithstanding, the general thrust of ‘her’ letter is worth responding to.
Unfortunately, I did not ascertain any effort on Dr Misir’s part, nor Ms James’, in dealing with Guyana’s country specifics as Dr Khemraj did. General references were made by Dr Misir to India, China, Mexico, Latin America and the Caribbean, and by Ms James to the Eastern Europe and Central Asia (ECA) region, citing Egypt, India, Mexico, Portugal and Turkey as the countries that have incorporated remittances as a developmental tool for long-term sustainable development.
Guyana is quite unlike these countries in many ways, and India in particular has a surplus of engineers and other professional, first-rate engineering and business schools, and first-rate universities such as the University of Delhi. Guyana on the other hand, has a struggling university that does not serve our national interest as it could, and exports 83% of its skilled population. We therefore have an extreme dearth of engineers and professionals that is becoming ever increasingly profound with each departing flight out of CBJ, Timehri. Clearly, this ongoing haemorrhage of human capital will make harnessing remittances most difficult to spur national development – more especially, in the bid to serve long-term goals.
Presently, remittances are not causing large-scale production as there is no mechanism that mobilizes the small amounts to a large investment even though in aggregate, remittances exceed FDIs (Foreign Direct Investments). I was therefore most relieved that so far I couldn’t glean any disagreement in the discussion that FDIs are less important than remittances. However, given the present global economic situation exacerbated by our local state of corruption, crime, unreliable and insufficient electrical power and a lack of skills, it is not entirely surprising that FDIs are not easy to come by.
I find also Ms James’ multiplier argument to be very weak in our specific circumstances because of the high levels of imports (consumer goods, fuels and lubricants). This simply means that a lot of the foreign exchange gained from remittances is pretty much repatriated immediately, as opposed to being stimulatingly utilised within our economy. Again, under these Guyana specific circumstances, one wonders on the effectiveness of long-term remittances policies without sufficiently addressing this. The government has however become proactive on the alternative energy issue, albeit belatedly, and I do look forward to their success.
I doubt whether there would be any opposition from sensible quarters to me saying that it would be profoundly better for us to try to keep our skills at home, as opposed to relying on these persons to send what they can from the countries they are helping to build, such as Trinidad and Barbados (the latter which most abhorrently harasses and shows disdain for us because of our own disgraceful domestic situation).
I am worried about us resting on our laurels just because remittances have become so high – World Bank estimates place it at a little over 20% of our GDP, while other estimates that include barrels and hand delivered cash, are as high as 40%. I believe unharnessed remittances contribute to our social ills, one of which can be exemplified by the prevalence of the street corner limer who is reluctant to work, and often has other socially debilitating vices. Another social ill stems from the ruling elite and friends having ready access to the increased foreign exchange garnered from remittances to support their lifestyle. Their type of living is an incentive to crime and corruption as other sections of the society feel the urge to do likewise (no longer seeing the virtues of hard work and honest living). These local phenomena would be most appropriate for UG to research.
Foreign economic downturns and remittance fatigue (which I predict if social values continue to spiral downward) could cause shocks to our economy. We would without doubt be better off not being as reliant on remittances as we are now, and I would be careful about loudly touting the benefits while so much else is left undone – especially the shortage of human capital.
I am most certainly not knocking remittances, nor the potential to further our development, and I commend both Ms James and Dr Khemraj for presenting ideas on harnessing them. Dr Khemraj urges the government to come up with a comprehensive plan to engage the diaspora which can include knowledge transfer (brain gain or brain circulation), inward diaspora investments, and even special diaspora financial products (it therefore could not have been him that spat on remittances, and I would be grateful, if Ms James could qualify her statement). Ms James proposes financial incentive schemes to increase the volume of remittances via commercial banks, matching the development investments of migrant associations with government funds, and improving the investment climate for small and medium enterprises. She is also keen to engage the diaspora. However, as Dr Khemraj noted, the main constraint is the lack of business investment demand, which goes back to the shortage of human capital.
I would be most interested in Dr Misir’s take on the specific issues raised, since he can give a clearer idea of the government’s strategy to deal with our local specifics. Remittances have been significant for quite a few years now and since it is better late than never, kudos to the government for finally lending some thought to its harnessing – the AFC, almost four years ago, had made this a pivotal part of its elections campaign.
Yours faithfully,
Gerhard Ramsaroop
I’m not too well-versed in economics and making plenty money, though I know that a dollar saved is a dollar earned, and income $20, expenditure $15 means happiness, while income $15, expenditure $20 means sadness; and I’ve checked the dictionary usage of remittance, but does this big word mean that lil $US 20 (two Hamiltons) that our relatives post in a birthday card, hoping that the post office people don’t purloin it, and that we get to change into $Guy 4,000 to build a lil fowl pen and buy some lil baby chicks so we can raise them for food or sale?
What is quite interesting is to watch the PPP on one side of their mouths embrace the remittances from Non Resident Guyanese but on the other hand they disregard these same people.
Many in the PPP have stated publicly that they do not want Guyanese to return to Guyana, they want the money but they do not want anything else from Guyanese who have left the country as a matter of fact even Freddie Kissoon was a big supporter of that.
I remember the days when kissoon used to holler from every hill top that Non Resident Guyanese should not be given any incentives for coming back to develop Guyana, I hope he has done some reading and now understands the value that Non Resident Guyanese bring to Guyana and the greater potential for their involvement, especially in light of the current situation we find ourselves in where we are back to another dictatorship.
First, it does not matter what anyone says of Guyanese in the Diaspora, the mere fact that remittances dwarf FDIs is proof that the Disapora is keeping Guyana afloat.
Second, several Diasporans have already gone back home, some to work with government and others to work by themselves. For sure, they all have dual citizenship, just in case….
Third, I agree with the letter writer that government critics who wrote about remittances did not spit on remittances, but alluded to them as being used as a crutch by the government on which to hobble around boasting about macroeconomic stability. If we take away remittances, the crutch would disappear and government would then have to crawl on its belly.
We need more than remittances, we need a visionary to court investors to help develop our natural resources, or else we will die and the Brazialians, Venezuelans and others will come in and do it for themselves. Just read today’s SN editorial and se how the Brazilians are making hay while the sun shines, but Guyana is fiddling while the system burns with anger and frustration.
This is powerful stuff from Mr. Ramsaroop. I am also wondering if we are circling the wagon. Quantities of remittance and skills leaving Guyana may or may not be mutually exclusive events. Send your skilled labor (UG graduates especially) overseas, they get better paying jobs so they have more discretionary spending power. I am of the view that remittances to countries like Guyana are usually derived from the discretionary element of an individual’s budgets.Send your skills to large countries they develop the business contacts and skills then can be used as wealth creators in guyana through smart remigration policies.
I am in no mood to think or come up with solutions this morning. I have a long day ahead so tell me if I made sense with my reasoning.
Let me have it guys.
Cummings, I gather from your comfortable use of the jargon, that you are an economist or did very advance work in aspects of economic studies. I do enjoy the very insightful contributions of yourself and Terron Khemraj.
I fully agree with you on the issues you raised in your contribution above. However, the discretionary spending choice faced by the migrant and in this case Guyanese, is not one of the same choice in spending pattern faced by the rational consumer who is ’somewhere on the income “curve”‘. While the rational consumer is faced with the choice of ‘how much more to consume’ given ‘better paying jobs’, the Guyanese migrant is faced with an obligatory inclusion in his spending pattern/application of funds. Included in his monthly budget is ‘the lil bit I have to send home fuh meh mother, fuh help out deh family who sacrificed fuh meh get hay’.
And we have to get into an analysis of the “remittance base”….what proportions come from Guyanese with low paying jobs vs high paying jobs, this is a lacking piece in the many published analysis on the source side. I am not sure Guyanese with better paying jobs are faced with the same decision making process as the ones with lower paying ones since by definition their MPS will likely be greater and therefore they are faced with a different kind of decision vis a vis, how much from my domestic savings should be send home. It is not an easy choice to make about how much more we can send as remittances given our increased income from better job and higher incomes. Is increasing the amounts we send maximizing our utility considerations?
From the migrant’s account this is not consumption but rather saving (Y-C=S). From the reciepient’s accounts, this is investment income from abroad (S=I). This is what “Can Live Forever” is pointing out in his contribution. We know that there is leakage and not all goes to investment. The big question is what policy options are available to government to harnest remittances (free of cost – no interest and no payback) as an alternative ’stop gap’ investment financing tool which is a quite different policy position and direction from foreign direct investments financed by private savings and other investment financing options by Diaspora Guyanese.
I have a few minutes in which to make a contribution to this discussion. Let me start by reminding people here that policy making is more art than it is science. In a recent post I cautioned people against adopting the textbook way of solving economic problems.It is good to know what is in the text book but exploit its weaknesses to your advantage. Just remember guys, what economists know has already been found out by trial and error in the real world. It is important to be flexible thinkers and willing to change your mind going forward. Also policies cannot be transferred as a package from one to another place or to another time. Each period in history is unique so it requires fresh thinking.
Within these blogs here I see the hard thinking that is going on and I believe that people are on the right track. I have seen studies that show less than 10% of the money invested in a country have the finger prints of a foreign national and can be called foreign direct investment, FDI. I have also seen work that shows remittance does not create the economic value for a society because of the emotional detachment associated with it. For example, sending money to a family member in Guyana and that person, not having to work the over night shift which the sender works, thinks it is all good to buy the latest and go out and drink beer on a Saturday night rather than invest in a start up venture so that he might become independent. In short, people who earn money value their money and put it where they can get a good return on their investment or place in which they have an emotional attachment to. A combination of the two would be the perfect thing.
Migration from Guyana started in the 60’s, sped up in the 70’s, exploded in the 80’s and beyond. In that time Dell, Microsoft, FedEx, Cisco Systems,Nike and more than 1/2 of the companies listed on the NYSE became global businesses with market caps and revenues in excess of $1T. What I am saying is that there was a good chance that any one of the people who started these companies could have been a Guyanese (maybe a stretch on my part but not totally)
Let me throw these out there:
1)Let’s say that Guyanese Michael Dell (he is not Guyanese and is only used for illustration purposes) started Dell Computer in his college dormitory after he got to the USA. The company started growing and he decides to expand into South America. He also wants cheaper labor to remain competitive. Shouldn’t his Guyanese roots and a favorable business environment in Guyana make Guyana the first choice on his short list?
Dell’s Latin American business generates approximately $6B (don’t quote this figure, it is old) in revenue.
2) Harry Singh came to the USA as a teenager with his parents, attended college then went to work for Wal-Mart in their purchasing department as a buyer. Ten years at the retail giant the 32yo Singh decides to leave to start something on his own. He cashes out his 401K and other savings and decides that he can use his contacts within and knowledge of the purchasing department to become a vendor for the company. He decides to take his $40,000.00 goes to Guyana and buys and package tropical fish to supply the store. His product becomes a hit and is carried in all Wal-Mart stores, now the business is generating $1B in annual revenue. Wouldn’t this be good for Guyana?
3) Mary Jane who does medical billing and has developed quite a reputation while working here in the USA, comes up with a creative solution to turn her department into an outsourced function and takes it to her boss. She wants to lead the start-up and her aim is to cut the over head expenses of the company she works for. The place where she chooses must be comfortable to her, offer lower wages and keeps her in direct communication with her ex boss. Wouldn’t Guyana be on her short list?
The examples I listed above represents part of India’s development strategy.The owner of China’s biggest computer search engine once worked for Google. If those or similar examples come through they could, between them, employee (directly and indirectly) more than half the labor force in Guyana at competitive wages. My sense is that Guyanese living abroad and their resources and contacts could be the key to the development of that country. I hear all the time of Guyanese wanting to go back home but wouldn’t go because of the state of things there. Maybe UG can do some RESEARCH to find out what it would take to get Guyanese moving back and what the economic impact would be if at least 1500 creative Guyanese each year make there their “2nd home”.
Just thinking out loud here guys because the FDI theory has been debunked because of the emotional connection and return on investment pairing factor and the remittance strategy fails because of the “easy come, easy go” principle.
I believe that Guyanese, local and foreign, have to lead the development of Guyana, and I hope the government can find a way to tap into that fact. The brain drain phenomenon in the country could be made temporary even if it can’t be completely reversed in the near future.
What y’all think?
For Prem Mizir and the members of the Ghost Writers Club, the more Guyanese that migrate, the more remittances will flow, a sure source of development financing…. no pressure on the government to deliver jobs…”plenty US dollars from other people sweat fuh sport and be happy”…yea, til it run out!!! From Jagdeo running around the world with cup in hand promoting his mendicancy and extortionary policies to exporting Guyanese so they can send back money so their families in Guyana can live. Quite a great developmental strategy. Linden Harry asked yesterday about Jagdeo’s outstanding achievements, well here is his “Nobel Prize” contribution to the development of economic science. Importantly, though, job losses among Diaspora Guyanese has reduced the flow, tightening up on the flow of drug receipts laundered as remittances also has put a dent to the flow in Guyana. The application of remittances are around consumption – food and fancy clothing and some durables commodities. Some are used to finance investments in homes. I understand that this is significant in Guyana. Remittance does play a significant role in development, while a cheap source, transferring foreign savings at no cost, it is not a sufficient source. Any government which is bent on this source of cheap development financing as permanent is lacking in imagination and intellectual foundation. So while it is good that many Guyanese remember their brothers abd sisters back home, ‘the lil thing dat dem does collect at Western Union is only ment to be a top up’; earned domestic income from wages, salary and profits are what a government should ensure are permanent sources of development finances.
Evan Thomas,
What I have explained in my earlier blog comment is the reason why no local government can use remittances as a reliable resource for local development of any kind. There is the invisible hand of the shadow banking system that already has that money earmarked for their own pockets.
Joe.
To understand why remittances are allowed in the first place we must examine the role of the people who allows it and why there never was a “war on remittances”
Make no mistake about this my friends, there are watchdog groups in the USA that follows and tracks these remittances all over the globe. They have a better handle on exactly how much goes where, than your local government. The International Financial Institutions need this information to get an idea of how much more dept the country can endure.
Fiat currencies ( that is money created out of thin air)was being “manufactured” by the private Federal Reserve. Now if this money was allowed to just sit around on American shores, inflation will result, so they deliberately pushed it off shore. In otherwords, what our relatives saw as a financial bonanza was actually inflation being exported. That is one of the reasons your local currency is now 200 to 1.
In economics they teach you that inflation occurs when the price of goods and services increase, in reality it occurs when the supply of money is increased by the Feds.
Why are they so concerned with where this money ends up? Because if it is allowed to bottleneck and buildup in any one part of the ecomomic globe, rampant inflation will arise and this will diminish the value of the dollar which needs to remain strong in relation to other currencies since it is the weapon they use to own and control the rest of the world and its resources.
The Federal Tax we pay in the US was one of their first attempts at a “remittance” system, which is to siphon off all extra cash from the economy. What happened was that after the first or second world war, America was a country with no mortgages or credit cards and led the world in industrial output.
It was a great period of production and wealth, this created a large oversupply of money in circulation so the Feds came up with the Federal income tax to withdraw this glut. It was to be temporary until inflation came under control but since no one complained they have been suckering us with this tax since then.
That is why some taxpayers like Wesley Snipes and his financial advisers challanged the courts, arguing that the Fed tax is voluntary. They are right, these is no clause or law in the Fed tax code that says you must pay this tax. However no court judge mindful of his career and life will rule in your favor. That is why Wesley is in the slammer today.
Every penny of our federal tax goes to the Federal Reserve coffers to paydown on the national debt which they created in the first place, moreover the Federal Reserve is the only private corporation not required to pay taxes on this windfall of ill gotten wealth.
There is a lot more to this my friends, but again it will take me a book.
To understand more of how money is used to manipulate and control the world, visit the following site.
http://www.devvy.com/
Joe.
The remittance system is the way the shadow banksters wash their money my friends. If you were a businessman and did the same thing, you would be accused of money laundering and thrown into the slammer.
Much of this world is owned and run by a small clique of greedy powerful gangsters. Not one of them has a degree in economics, neither does the mob, it is not necessary in a business that is based on the simple art of the shakedown and loan sharking.
The rest of the world beneath them is run on economic principles and that is why no conventional ecomonist can put a finger on why no third world country can ever get out of debt and prosper.
The few economists that can see though the vail of deception are labelled as conspiracy theorists, doctors of doom, and sellers of pessimism porn.
Gerald Celente one of the foremost trend forcasters responded this way. “They are spreading optimism opium, while I am a political atheist, I bow to no political system or party, I do not see things the way I want them to be, I see and indentify things the way they actually are”.
Joe.
Can you name those “few economists that can see through the vail (sic) of deception”, their qualifications, research and reputable institutions?
Celente had some reversals and missed predictions. Can’t find anything about his qualification and training.
http://en.wikipedia.org/wiki/Gerald_Celente
Here they are :::Gerald Celente CEO Trends research
Peter Shiff CEO of Capital something I cant remember.
Max Keiser Somewhere in France.
Ellen Brown author of Web of Debt.
Noam Chomsky, Proffessor and author of over 100 books including the Globalisation of Poverty.
Also read the Confessions of an Economic Hitman. I cannot remember the authors name.
you can also utube all of these folks and get a quick insight of how things really work in this Economic world.
Cheers mate. Joe.
Stop making stuff up Joe.
Your posts contradict each other. You are not suggesting that US France England Germany etc. are run by gangsters without degrees?
Prof Noam Chomsky is the only solid reputable one, but his field is in linguistics not economics, and he did not write the Globalisation of Poverty. That was written by Michel Chossudovsky (Prof of Econs). Careless, Joe, careless. Wonder what other carelessness you’ve committed?
well ceasing i mean saying flat out they are gansters is putting a bit of a harsh tone I think what Joey maybe referring to is the get rich clubbers and corruption in the things you see wid dicky boy cheney and his haliburton connections and maggie thatcher and her arms dealer son.
To name a few popular examples, you know what i am saying?
After all is the CIA that was caught importing drugs into the US as well as all the other criminalia u know what i mean? iran contra sounds famile?
Csingh, I never suggested any of what you are saying, I said that there is a shadow banking system that controls the world with money and these guys do not have economic degrees, but do not get me wrong these folks are some of the most wily and smart characters on the planet.
Below their hierachry is the rest of the world being run on economic principles that no economist can figure out why nothing works that can bring third world countries out of perpetual debt.
Joe.
You Can Live Forever, thanks for the correction, but can you come up with some sort of healthy argument instead of nitpicking my blogs.
You are obviously one who disagrees with my opinions and you have every right to do so but please if you want to present a rebuttal make it something sensible and intelligent or simply ignore my blogs and move on to those that suit your tastes and beliefs.
Joe.
Hack we need a Noam Chomsky or Gore Vidal to write on Guyana politics tek up de mantle nuh? Ah wonder if right said fred gonna write a book one day?
Evan, as always, I look forward to your comments. Never having practised in the field after graduation, I am going through a relearning process, and you always manage to take the discussion higher which is of great help to me. Same goes for Cummins and a lot of the bloggers here.
Evan, I hope you are properly documenting your ideas in case we get a goverment in the future that will listen to people like you – hopefully sooner than later. Can you please drop me a line at gerhard.ramsaroop@gmail.com?
To the Moderator: It would be better I believe if on this website there was a permanent forum so that discussions can go on for longer, and also be easier to find. Much of what has been written here is valuable stuff and gets lost too easy with time. When you are caught up in day to day survival in Guyana, reading time can be a luxury, and a discussion board would help people like me to catch up.
This is a very valuable contribution from Gerhard. It synthesizes the remittance debate wonderfully.