None of the various predictions about the likely performance of the Guyana economy in 2009 has failed to sound a note of extreme caution. Much of this caution is due to a combination of factors including, particularly, the dismal performance and seemingly unending dilemmas of the sugar industry, the decline of the rice industry, the uncertainties associated with fluctuating oil prices and the likely impact of these on the productive sector this year, rising global food prices and the coincidence of bad weather which has wreaked havoc in the agricultural sector and a global economic crisis the likely impact of which on the local economy is as yet unclear.
While the Chinese company BOSAI has committed itself to the single largest ever private sector investment in Guyana it is by no means certain that the promised US one billion dollar investment will be forthcoming quickly given the drying up of investment capital around the world.
Without appearing to be too harsh on the political administration, most if not all of the assessments of the economy have continued to grumble over high taxation and particularly over government’s seeming indifference to calls for a lowering of the 16 per cent VAT rate. While the business community appears loathe to risk another falling out with government no businessman to whom we have spoken has been slow in describing the prevailing VAT rate as a burden that simply must be removed if the business sector is to grow to the extent where further investment can mean higher levels of employment and increased consumer spending power.
While the absence of reliable statistics means that we are unable to determine the precise contribution of the private sector to employment, it is clear that any significant reduction in the high level of unemployment will come mostly through private sector growth. In this regard, small and micro enterprises will probably play a significant role in the creation of new jobs particularly if the feared reduction in remittances that go mostly towards consumer spending becomes a reality and compels searches for alternatives.
Of course, the primary impediment to the growth of small and micro enterprises is the serious deficiency in investment capital and the stringent lending conditionalities of the commercial banking sector that keep their doors firmly shut (or at best, barely ajar) against small and micro investors. In this regard we are reminded that various official promises of a Credit Bureau to help address the capital needs of the small business sector are yet to materialize.
Government, presumably, will continue to look to overseas investors though whether the experience of 2008 coupled with the global drying up of investor capital on account of the global economic meltdown are hopeful portents is another matter.
There is, many business analysts believe, simply no way around a stimulus package that includes, particularly, a removal of the tax burden, and both the Private Sector Commission and the Georgetown Chamber of Commerce and Industry (GCCI) have made it clear that high taxation is high on their respective agendas for talks with government this year. Government, of course, is well aware of the pressures associated with the demand for lower levels of taxation though its current preoccupation with tax collection is indicative of its acute awareness of the limited alternatives to augmenting the state’s coffers.
Against this backdrop the 2009 national budget assumes a particular significance. Businesses will presumably be hopeful that a stimulus package complete with tax cuts will materialize while ordinary wage earners will be holding their breath and hoping for an adjustment to the income tax threshold and an attendant increase in consumer spending power to cope with high prices.