Ministry of Finance has little idea of potential productive capacity in the forestry sector

Dear Editor,
As a finger-in-the-wind budget the 2009 budget will be hard to beat.
Guyana’s forestry sector employs some 20,000 Guyanese consequently supporting a community of roughly 100,000 persons. The value of capital assets employed in the sector must exceed $20B and total investment in the sector to date has to have passed the $250B mark.
Yet, despite these formidable statistics the sector has warranted less than a single line mention in the 2009 budget: “The forestry sector is expected to return to positive growth of 0.3 percent in 2009.” That’s it, full stop, “kodal.”

But, with the current measure of forest production which includes illegal harvesting and without a national balance sheet of the sector’s capital stock (and the physical condition of this stock), the Ministry of Finance has little more idea of potential productive capacity in any given year and the dynamics of its relation with future demand (which is falling dramatically) than it had before the era of national accounts.
Minister Singh’s prediction of a 0.3% growth this week was a seat-of-the-pants judgement supported by a well-informed guess about the direction of the economy and reinforced by his electoral hopes; nothing more or less.

Fact is the GFC has become the supine plaything of the executive arm of government.
Against the current backdrop of GFC incompetence, ie incorrectly advising logging companies on their maximum annual cut; inaction on rampant illegal logging; arbitrary, punitive imposition of fines; lethargy, favouritism and vindictiveness in renewing expired leases and a raft of other malpractices, we are told that 0.3% growth is expected in 2009. It is an attempt to persuade us that the sector can grow marginally despite the pitifully poor levels of investment, much of which is actively being discouraged by bureaucratic incompetence and the arrogance of office. The Minister has crafted his sector budget on the belief that logging companies can squeeze more from their diminishing stocks of assets. “No way Jose.” All of this amounts to a finger-in-the-wind judgement. Our bright young Minister has no reliable evidence to prove his case, but equally there is none to prove him wrong. I am surprised he did not predict a 30% growth.

A properly constructed national balance sheet will go some way to close the information gap. For example, while GDP measures the depreciation of plant and machinery, there is no accompanying measure of its quality or any assessment of investment in intangibles, like the skills of the workforce that might raise the sector’s potential.

Nor crucially, is labour treated like capital so that the waste of skills that results from carrying a growing stock of unemployed and economically inactive people is measured. And the forestry sector is carrying significant unutilized human resource at this time thanks again to the dilatory nature of decision-making at the level of the GFC even where important decisions like lease renewals are concerned. One major logging company’s lease expired on January 9, 2007, over 25 months ago, and it still has not been informed of its status. As a result some 50-odd inactive employees sit around all day with their fingers in the wind making seat-of-the-pants judgements regarding whether they will ever work again.
When I read the Minister’s 2009 budget I think of a ship’s captain measuring the sea’s depth not by radar, but by throwing out a plumb-line at the stern and hoping that the front is not going around. The radar could be available in an independent GFC, with greater competence, transparency and improved statistics; all we have to do is to get it.
Yours faithfully,
F. Hamley Case

Around the Web

Comments