By Tarron Khemraj
Introduction
I thought I would be able to conclude the series of columns on elected oligarchy today. However, the recent outburst of President Jagdeo against the two main Guyanese hotels presents an example of the operation of the oligarchy. As a result, I would like to develop this column to show that the President’s quarrel is essentially a signal of the innate quest to control the business space in Guyana. Moreover, it is this control which causes the lukewarm pace of economic growth. As I noted before, the oligarchs are already rich and there is no need for them to promote rapid economic development as other countries have been able to pull off. Their plan is to dominate business and economic activities in Guyana so as to pocket monopoly returns unto themselves. Meanwhile, the masses will find it hard to find jobs and will need to grind it out in poverty for many years to come given the very slow rate of economic growth.
Let us back up a little and go back to the definition and root cause of the Guyana oligarchy. It is formed out of the PPP’s democratic centralism which allows for voter collusion to select the Presidential Candidate who is then offered to the electorate. The few individuals who control the decision making in the PPP now select and filter the Parliamentarians who are offered to the people. These individuals, once they win the election, have the 1980 Burnham Constitution at their disposal. This Constitution allows them to utilize taxpayers’ monies, and take on foreign debt that are backed by taxpayers and those who send back remittances, to dish out State largesse to selected friends and family members, which the President terms the Newly Emerging Private Sector (NEPS). This essentially is the nature of the Guyana oligarchy. No matter how much subterfuge is used by our little energetic letter writer to pronounce the US an oligarchy, this is the essence of the Guyana oligarchy.
Mr. Robert Badal
In previous essays, I wrote about the control of the business space by the PPP as being one of the most important reasons for the economic stagnation of Guyana. The recent pronouncements by the courageous Mr. Robert Badal present yet another clear example of the control of the business environment. Mr Badal noted that he had to borrow to finance his operation of the Pegasus, yet the government will use US$20 million to subsidize the Marriott brand in Guyana. Why does this government, which pursues a subtle anti-Western foreign policy, suddenly find favour with a major brand of Western Capitalism? The answer has to do with the desire to control the hotel and tourism industry and to kill off the other hotel competitors so as to generate monopoly returns for friends. In addition, a friend or family of the oligarchy must be receiving a cut of the US$20 million initial investment.
What is troubling is this government encouraged local investors to get involved in the hotel business for Cricket World Cup. Yet it has decided to use state resources, belonging to the people of Guyana, to jeopardize the existing hotel industry. Several commentators have noted that there is a low occupancy rate for Guyanese hotels. Mr. Badal notes that the occupancy average for the entire industry is approximately 35%, while the Pegasus enjoys 55%-60%. At this point in the country’s history why would we want to jeopardize nascent local investors? The government is sending a clear message to neutral investors – your profits are not guaranteed. Therefore, should we be surprised by the low rate of private investments relative to government investment – what I term the crowding out of private investors by an oligarchic state?
Competition
The President states that the owner of Pegasus is afraid of competition. Well, I can think of a better area in which to deploy the power of competition rather than allow it to destroy the local hotel industry. As I write this column (Saturday afternoon July 31), I did some random searches online for flights from New York JFK to three Caribbean destinations. I chose a random period of August 7 to August 21. I found several remaining JetBlue direct flights into Kingston, Jamaica for US$159 one side. That becomes US$318 for a return ticket to Jamaica. On Hotwire.com, I found an American Airlines direct flight (return) for US$715 to Barbados. JetBlue has one remaining seat to Barbados for return ticket of US$698. For the same period, Hotwire.com has an American Airlines flight to Trinidad (one stop in Miami) for US$643. Of course, according to Hotwire.com, one can also pay US$654 for a direct flight into Port of Spain with Caribbean Airlines.
But here is the punch line: Hotwire.com has a Caribbean Airlines flight for the same period for Guyana for US$1, 244. It is not even a direct flight. Guyanese have to endure higher prices and bad flying hours. I cannot help but notice when travelling with Caribbean Airlines how early Guyanese must wake up to travel to the airport only to have to stop over in Trinidad for two hours to then witness Trinidadians strolling into the aircraft after a full night’s rest (or perhaps partying). I do not hold any grudge against Trinidadians. After all, they have a superior political turnover at election time and they always have leaders with better vision relative to Guyanese leaders. They have a better life because of the choices of their leaders and of course because they boot out bad governments at elections time. Trinidadians also put aside ethnic allegiances when they decide to ditch bad governments.
Given my simple flight survey it seems to me that increased competition by allowing more airlines to fly to Guyana would be a good thing. After all there is no existing domestic airline to protect. Why not free up the airline space and allow major foreign airlines to enter? Why is this industry being controlled? Do we have to wait until the government does a public-private partnership with a chosen one? Do we really need a national airline when there are dozens of foreign ones which can fill this gap? Could we utilize the proposed funds for a national airline for other productive purposes? Can a national airline, with a single jet, provide the kind of flight capacity the tourism industry needs? I would think that the tourism industry, and those folks who invested in hotels for Cricket World Cup, would be better off if the air space is liberalized. Why the control? Perhaps freeing up this space might just bring in enough tourists to justify the Marriott.
Double-edged sword
Competition is a double-edged sword. The country, and not four or five individuals, has to decide which industries must face competition and which must not. The example of Mauritius would be instructive at this juncture of Guyana’s history. In the early 1970s Mauritius implemented a two-tier policy of protecting domestic investors from foreign competition (industrial policy), while simultaneously liberalizing other sectors such as establishing EPZs that would not compete with and disrupt the nascent domestic capitalist class. The rest is history, and Mauritius is seen as a success story today. I have also listed other examples in previous columns. For example, Toyota enjoyed close to 40 years of State protection before it was thrown to the lions in the global marketplace. There is a large literature on two-tier industrial policies in countries like Taiwan and South Korea. Of course, today the corn ethanol industry in the US is protected by tariffs and other opaque barriers to ethanol imports.
The US corn ethanol industry also benefits from state level mandates which allow for E10 blends. American media (and mainstream economists) do not like to call it industrial policy but that is exactly what it is. For example, in Florida imported gas is mixed with 10% corn ethanol made in the US. Readers of this column would recall that I have called for a national sugar ethanol mandate for Guyana so as to create a captive market (similar to the US captive corn ethanol market). Backed with a captive market, the government could very well implement a public-private partnership (but a transparent one) to pull this one off. Would DDL and Banks DIH be willing to invest (with the government) in an ethanol venture given the backing of an E10 (and eventually E15) mandate?
Please send comments and criticisms to: tarronkhemraj@gmail.com
