Rawle Lucas is a Guyanese-born Certified Public Accountant and Assistant Vice President of the Lending Services Division.
Mr. Lucas has agreed to serve as a columnist with the Stabroek Business and will be contributing articles on economic, financial and development matters.
By Rawle Lucas
Competitive position
Amidst high unemployment, high food prices, high gas prices, high electricity cost and high production costs, Guyana pushed forward last month with the implementation of the national competitiveness programme. The programme is an initiative aimed at responding to the challenges and opportunities of globalization and the Caribbean Single Market and Economy. By improving its competitive position, Guyana hopes to diversify its economy to achieve economic expansion and stability, and to compete successfully in international markets. The rationale for pursuing the national competitiveness strategy rests on the belief that a larger private sector with more efficient producers of goods and services has the potential to spur faster economic growth, higher employment and yield higher incomes for Guyanese.
The effort to improve the competitive position of Guyana includes the undertaking of institutional and operational reforms by the government to remove impediments to rapid and sustainable private sector development. The focus of these efforts include the procedures for the registration and incorporation of a business, the current tax structure, the commercial dispute resolution system and the legal and regulatory framework for establishing a credit bureau. The thrust of the national competitiveness programme suggests that the external environment is responsible for the uncompetitive position of businesses in the private sector.
Also, the programme anticipates that, as the business environment improves, private investment will expand thereby creating jobs and goods and services that could be sold competitively at home and abroad.
The expectation is that new businesses would emerge and, along with existing ones, utilize their core competencies to create value for their owners, workers and consumers.
The success of the programme thus hinges on the competence and integrity of the administration and the ingenuity of the Guyanese people.
Too early to tell
Anyone who cares about the people of Guyana would embrace and celebrate the goal of improving the competitive position of the country. Despite what the per capita gross domestic product (GDP) numbers say, Guyanese are having a hard time making ends meet while simultaneously trying to plan for a comfortable future for themselves. Guyanese found themselves in this untenable position as the administration undertook macroeconomic adjustments to the economy. These adjustments have not translated into a significant expansion of the private sector and job growth.
The days are early yet in the implementation of the national competitiveness programme and it would require time to see if the administration is capable of living up to the promise of creating a favourable and enabling environment for strengthening and expanding the private sector. In a way, the programme offers the administration an opportunity to redeem itself and finally start doing the right thing for Guyana.
Lack of confidence
The experience of the past few years may not give Guyanese much confidence that the administration will deliver on its promises. As if on cue to disappoint, the administration announced new rules that could restrict export trade in timber, rammed through the Parliament a major piece of legislation on tax incentives that raises questions of fairness, equity and integrity and convened a deflated seminar on tax policy. These three events occurred barely one week after the fourth meeting of the National Competitiveness Council (NCC) was held and Guyanese were told that the obstacles to competition were being dismantled.
In addition to working at cross-purposes, the administration may have already succeeded in discouraging enthusiasm for the national competitiveness programme despite the availability of US$27 million from the Inter-American Development Bank (IDB) to finance the programme. The administration missed a golden opportunity last month to engage opposition parties in sincere parliamentary debate to build a national consensus on tax reform. This particular issue is of seminal concern to the private sector. Yet, the administration refused to work cooperatively with the opposition to achieve a unified and beneficial position on tax policy. By inference, the administration has signaled to some members of the private sector its willingness to ignore them and exclude them from the national competitiveness programme.
Instead of improving the external environment for the private sector, the administration continues to muddy the waters. This is in addition to its failure to assuage long-standing concerns about the integrity of the public procurement process that has left a bitter taste in the mouths of many in the private sector. The unhappiness with the procurement process could only have deepened with the recent collapse of a bridge in the Rupununi and one in New Providence that were built under the atmosphere of disaffection with overall procurement practices.
The collapse of the two bridges and the doubts about the reliability of many other public works are difficult for many in the private sector to accept. Instead of improving its competitive position, the private sector has to watch $16 million in potential tax breaks worthlessly straddle the Rupununi river for an indefinite period. Here it is that the administration has been reluctant to reduce the corporate tax rate for fear of losing revenue but is willing to tolerate procurement practices that end up throwing away millions of dollars and hindering productivity.
The private sector needs to press its case for an urgent reduction in the corporate tax rate. Leaving the money in the hands of this administration will only hurt efforts to improve its competitive position. The benefits to the Guyana economy would exceed the wasted $16 million on the bridge over the Rupununi river. By way of example, a 10 percent reduction in the tax rate could leave an extra G$3 billion in the hands of the private sector annually to invest in attracting and retaining vital human resources. Given its current contribution to the economy, the additional private investment could help expand GDP by about $5 billion.
This reallocation of resources is equivalent to creating about 1,500 decent paying jobs every year.
Little comfort
Acting as it has, the administration gives little comfort to those who are skeptical of being treated fairly under the competitive initiative. The administration should realize that the façade of transparency and the invisible hand that appears to be manipulating the public procurement process only serves to deepen the threat to the competitive position of the private sector. The administration needs to take steps to prevent similar appearances of impropriety from continuing under the national competitiveness programme. For its own sake and success, the private sector itself must prevent the administration from engaging in seemingly unfair trading practices.
Additionally, it would be foolhardy for the private sector to believe that its competitive difficulties are found solely in the harsh external environment in which it operates. The needed remedies and options available to the private sector are not limited to those espoused by the national competitiveness strategy.
There are other options that need to be explored even as the competitiveness strategy is implemented. Some of those options deserve examination in a subsequent article.
