Where has all the growth gone? (Part II)

Public Procurement

Last week, reference was made to the non-creation of the small business bureau as an example of an institutional problem that causes lower returns on the investments of Guyana.  But, there is more.  The impact of the institutional weakness is equally well understood in the context of the debate on public procurement.  The capital expenditure of the administration is an important component of the nation’s capital investment.  For the government, such investments comprise the many completed public works undertaken by private contractors, including the building of roads, bridges, culverts, schools, clinics and hospitals.  Work that leads to the construction of new facilities and improvements to land such as the erection of fences, the digging of drains and the upgrading of irrigation systems all add to the capital formation of the country.  These investments stand a good chance of yielding greater results if properly managed.

Key Component

LUCAS STOCK INDEX: In week three of December 2010, the Lucas Stock Index (LSI) gained 0.41 per cent over trades from the previous week, enabling the index to end the period at 117.25. Trading this week involved the stocks of Banks DIH (DIH), Demerara Distillers Limited (DDL), Demerara Tobacco Company (DTC) and Sterling Products Limited (SPL). DIH recorded no change in its stock price while the stocks of DDL and DTC recorded gains of 2 per cent each and that of SPL registered a loss of 4 per cent.

A key component of the management structure is the Public Procurement Commission.  The Procurement Act of 2003 acknowledges and defines the role of the Commission, but after seven years of agreed law, the Commission does not exist.  The end result is a myriad of inconsistencies that leaves very little confidence in the integrity of the procurement process.  Selected bids continue to vary wildly from the estimates offered by the engineers who advise the various Tender Committees.   In addition, many Guyanese continue to voice concern about corruption.  Under current conditions, competitive bidding still does not bring Guyanese the best results and waste and abuse flourish in the form of cost overruns, delayed and shoddy work.

Waste

A most recent example of shoddy work leading to waste of the capital investment is the unstable ferry stelling at Good Hope in the Essequibo.  While inquiries into the cause of the unsafe construction are to be confirmed, the occurrence of the event brings to mind several other bungled jobs, including the wharf that collapsed at Charity and the bridge that collapsed across the Rupununi River in 2008.  Apart from showing scant regard for the decisions of Parliament, the unwillingness of the administration to create the Public Procurement Commission only enlarges the institutional weaknesses that interfere with Guyana’s growth prospects.

Condition of Human Development

Another contributing factor to the inefficiency of the capital investment is the condition of the human development of Guyana.  Publicly available data show that over 60 per cent of the Guyana population that is over 15 years has no qualifications and that an unacceptably small number has a Bachelor’s degree or higher. Clearly, Guyana has insufficient skilled capacity to make many good things happen.  Judging from comments of the Minister of Education that were reported in the Stabroek News of May 31, 2010, this situation is unlikely to change very soon despite investments made under the strategic plan for education that would have been implemented from 2003. The Minister is quoted as saying that 60 per cent of the students (key targets of the G$70.4 billion investment) taking the Assessment for grades 2 and 4 were unable to read the first line of a paragraph.

The human development problem in Guyana is further exacerbated by the crisis reflected in attendance rates at secondary schools. With attendance in secondary schools estimated at 69 perc ent, the absentee rate is 31 per cent.  This problem was supposed to be fixed also by the 5-year strategic plan, but the problem persists even after billions of dollars would have been spent.  The implications of this participation rate for our capital investment are extraordinary since the administration would have spent money fixing or building schools that, in effect, are left empty by about 22,000 students.

Tucked away in the statistics on education is a health problem that might be escaping appropriate attention.  According to UNICEF, about 25 per cent of the children under age 5 are poorly fed and experience either low birth weight or wasting and stunting.  This means that 25 per cent of our children start school at a disadvantage with little likelihood of succeeding. These are the students who are expected also to enter high school at some point in time.  Studies show that stunting and wasting are associated with lower cognitive test scores and diminished short-term memory.  This health condition, often associated with chronic malnutrition, impairs the ability of affected Guyanese to lead useful and productive lives. If the issue of nutrition is not addressed in a serious way in time, the human development of Guyana will continue to erode, and a substantial portion of the population would continue to be marginalized.

Evidence

All these examples serve as evidence that productivity gains are not commensurate with the level of investment spending, and the evidence shows up in the disappointingly low final growth figures.  While this inefficient use of money is expressed as a number, it has at the end of it human beings whose quality of life is under siege.  I have to believe that the current administration cares about Guyana. I have to believe also that it is not up to the task of making the country a better place for all Guyanese and it should acknowledge that.   If it did so at this time of the year, it would be the best Christmas gift Guyanese would have gotten in a long time.

Since that was unlikely to happen, I would settle for wishing all Guyanese a Merry Christmas and a Happy New Year.

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