Between a flood and a financial crisis

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

Real life cause and effect
The administration has put forward a budget proposal that it thinks is in the best interest of the country. The plan to spend G$128.9 billion of the Guyanese taxpayers’ money emerged as the effects of a destructive flood were being absorbed and those of the unfolding financial crisis were being determined. The accumulation of revenues and expenses in the budget describes past and future actions that emphasize infrastructural development, legislative and regulatory reforms and selected activities of the institutions of social and public service.

As laudable as its proposals might be, the budget raises issues that challenge the vision of the administration and the ambition of the nation.  The budget paints a portrait of contrasts as it sets out undefined aspirations of “emerging” sectors while clinging desperately to a legacy industry of fading glory and economic worth.  Between these two scenarios, Guyanese are left to ponder the real life cause and effect of the financial crisis and domestic policy on the productive areas of the economy.

Office of citizen
This reflection is made more urgent by the potential disappearance, in less than 8 years, of a second institution holding substantial financial assets and retirement savings of many Guyanese.  In 2001, Globe Trust closed its door to the public.  The reason for the demise of Globe Trust had as much to do with bad management as with lack of due diligence on the part of regulators.  The same reason of poor oversight seems to be quickly emerging as responsible for the Clico crisis.  

Even as Guyanese await the legal outcome of the situation of Clico, they must critically decide if they want to totally place all of their economic and financial faith in the hands of the administration. The late Louis Brandeis, a former Associate Justice of the US Supreme Court once said, “the most important political office is the [office of] private citizen”.  With this unfolding financial crisis, the time has come for Guyanese to assert the office of private citizen and start holding the administration accountable for its harmful errors. There is nothing wrong with trusting the administration but Guyanese should make a greater effort at evaluating the assertions of the administration since its assurances are not always reliable.

Worrisome pattern of judgment
There is no better time than now, with the 2009 budget fresh on everyone’s minds, for Guyanese to abandon the posture of apathy and engage in responsible citizenship. The financial distress, induced by errors of judgement, comes on the heels of a second disastrous flood that was caused by misjudgment of the status and capacity of the drainage and irrigation system. Both the financial crisis and the flood have implications for the 2009 Budget.  So does the recent disclosure that duty is not being paid on as much as 96 per cent of the vehicles imported into Guyana.  Though the information refers to 2007, the report did not indicate that the excessive avoidance of duty had been curtailed by the administration. 

These and other recent events reveal a worrisome pattern of judgement that could be getting in the way of the economic and social progress of Guyanese.  Several issues in the 2009 Budget add to this concern. 

Despite being a country that produces a wide range of agricultural products, Guyana is still unable to avoid food shortages and prevent a sizable share of its population from going hungry.  For years, the administration refused to pursue the sensible goal of food self-sufficiency that was set out for the nation nearly 40 years ago.  It took a global food crisis for the administration to come to grips with this reality and to appreciate the value of mobilizing domestic investment in the area of food production.  Even with that late realization, the emphasis in the budget is on producing and exporting primary output.  As so many have already pointed out, there is no coherent domestic policy that coalesces around expanding the value-added activities of agriculture in order to increase food production, lower food costs, achieve price stability and secure higher export revenues.

The shortsightedness that plagued food production continues to plague manufacturing, despite the potential of the latter to add value to the output of agriculture and most other sectors. The activities of the manufacturing sector are pertinent to the personal care, hygiene, living conditions and healthcare of Guyanese.  Yet, this sector has been left to its own devices and there is no real domestic policy attempt in the 2009 budget to take advantage of its potential to help change and diversify the Guyana economy. 

Domestic policy must recognize that the manufacturing sector is broader than the few products that are exported.  Domestic policy must also support the activities of fledgling enterprises with greater commitment and purpose. Guyana needs to invest more in the type of research and support services that could be of value to large and small enterprises in the manufacturing sector and that could permit the country to use more of its own human and natural resources.

Small business
Even so, a review of the budget does not convey an enthusiastic embrace of small businesses. Small businesses reportedly make up more than half of the Guyana economy and, as noted in the budget, contributed the largest percentage increase to government revenues in 2008.  They have been given an eminent role in the fight against poverty. In contrast to its size and role, small business was given less than half of one per cent of the money in the 2009 Budget.  Not every small business is a small farm.  Many are manufacturers and many provide services.  The budget does not acknowledge this diversity of investments and the potential it holds for the economic advancement of the country.  Empowering these small enterprises requires more than small change.  It requires smart change to the way they are viewed and valued.

Lip service
Another impression of the 2009 budget is that some economic sectors appear to enjoy mere lip service.  For example, Guyana’s reputation for hospitality has not motivated the administration to declare a commensurate level of financial support for the tourism industry.  In addition, there is no attempt to harness the economic potential offered by a steadily expanding gold and diamond industry.  Instead, the administration has chosen to devote its energy and undisclosed sums of valuable money to keeping the sugar industry alive.  This is an industry that continues to flounder, despite receiving preferential treatment at home and abroad for over 40 years. 

Gold and diamond
In the case of gold and diamond, it looks as if the administration is unwilling to accept that, in the export trade, gold and diamond have consistently outperformed sugar, rice and bauxite.  In addition, the gold and diamond industry currently has strong economic value, on account of the global financial crisis. 

It also has an untested capacity to drive the economy forward.  With nearly 80 per cent of all gold used in some form of manufacture, gold could serve as an added pillar upon which economic diversification is built. With a more prominent role in the domestic economy, the industry can also serve as a means of presenting Guyana as a place of value and attraction to the region and the rest of the world. This useful purpose of the gold and diamond industry appears to have been discounted by the administration in its vision of the country.

Direction of economy
As it contemplates the way forward, the administration must confront the concern of whether its projected spending in 2009 is properly targeted, and whether it will help to put Guyana in a position to build a strong economy, create good paying jobs, expand opportunities and lift people out of poverty.  The financial crisis has not made things easier, especially since there could be less money to support vulnerable groups such as pensioners.  The direction that the economy takes depends on the prudent use of resources and the judgement of the administration.  It also depends on Guyanese accepting their responsibility as private citizens and forcefully and respectfully engaging the administration in good governance and accountability.

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