Budget has little to drive the engine of growth

Dear Editor,

This 2017 Budget again exposed that the Minister of Finance, Mr Winston Jordan, is not up to the job of rebalancing Guyana’s growth poles to ensure that we secure a growth rate of more than 5% in 2017 and beyond.  His ability to create policies to steer the economy in 2016 exposes a total abandonment of his duty to the people with that perilous performance so far ‒ 2.6%. Such a growth rate will never be able to offer the good life. Nobody will believe such nonsense.

But as one digs into the speech, very little of it is assigned to measures that are constructed to drive the engine of growth to be more export oriented.  So while the corporation tax to 27.5% is better than nothing, it masks a scheme of tax deception with so-called dual tax rates for companies.  Why all these tax trickeries by the Minister?  Why not come out plain and simple and give the private sector a flat 27.5%?

Then when one looks at the incentives for the new foreign direct investment geared for the export markets, it is patchy at best. So while Go-Invest claims that it facilitated some 6,000 jobs, there were no clear specifics as to the names of some of these companies that made these new investments.  Such opacity as the source of these round number claims can make these claims untrustworthy, especially in light of the fact that only a few months ago the Minister of Business claimed that there were now new fruits born from his trips abroad.

But more importantly, this budget is geared to crowding out the private sector as the government is now competing for the limited resources in the economy. This is a major policy mistake by the Minister.

All efforts should have been made to also rebalance the economy by stimulating a shift from services to manufacturing as a source of new jobs, as well as driving economic growth. But as the budget outlined, manufacturing is in the doldrums and there is no hope for this sector in 2017, compliments of this anti-manufacturing budget.  The manufacturing sector is expected to decline by 7.1% in 2016, but yet we cannot find one sensible measure in this 2017 Budget to reverse this trend. Even the credit to the manufacturing sector is set to decline by some 2.8% in 2016, which translates to business houses refusing to borrow and expand their manufacturing businesses. This is a terrible economic sign that exposes the fact that there is a limited attempt by the Minister to rebalance the growth poles.

The Granger administration continues to live in a misconstrued world that oil drilling will end all the nation’s woes when it happens in 2021, but they are dead wrong on this score.  Oil will be a curse for Guyana until and unless we construct an oil refinery and there is no mention of this in the 2017 Budget.  Clearly, it is not even on the Minister’s radar. So this is a clear case of the blind leading the blind in Exxon’s world, making it very easy for them to run away with the cream of this oil well by refining the raw oil in Texas, USA.

There is, however, one bright spot – solar farms. With the infrastructure, especially in the electricity sector in such disrepair, it is difficult for business houses in Guyana to compete with their counterparts in the Caribbean and further afield.  Thus this $1 billion renewable energy expenditure in the hinterland is most welcome.  But it is not enough. What about the economic centres of Guyana ‒ the coastal plains? One of the key ingredients to catapulting Guyana into the modern age is a low cost and reliable electricity supply on the coastal plain and this is clearly not happening in 2017.  This is what has been holding up the expansion of the private sector, especially the manufacturing sector.  You cannot run a factory efficiently without low-cost and reliable electricity. We need Amaila, we need Hope Beach Wind Farm, we need solar farms on the coast and it has to happen soon.

The next sector that is impeding Guyana’s growth is the shipping sector.  The backward state of Port Georgetown is an inhibitor to the export trade.  For years the Minister has been saying that he will develop Port Georgetown and he has said it again in this 2017 Budget.  So why should we believe him today?  When we see it we shall believe it. The electricity and shipping sectors are Guyana’s principal Achilles heel, but yet for the third budget, the Minister of Finance is lost at sea on how to strategize for these important sectors in the main economic centre ‒ the Demerara area.  Unfortunately, the Minister of Finance has failed to seize on yet another opportunity to transform the economy by outlining clearly what he is going to do for the private sector in the Demerara area, especially on timely and measurable deliverables on the electricity and shipping fronts.

For me, the heaviest pain point is the docility with which the VAT was approached. There was a VAT reduction for all, but a VAT imposition on the poor and the working class on their electricity and water bills.  How can Moses Nagamootoo, a man who claimed he was in the trenches with the working class, sit in Cabinet and allow the poor and the working class to be battered this much with this oppressive VAT imposition on electricity and water? Only an out-to-lunch policy maker will not know that even those in one-bedroom rented apartments pay more than $10,000 per month in light bills.

This is a clear act by the Minister of sparing the better-off 2% on the VAT and penalizing the poor with this VAT imposition on electricity and water.

What I am observing in this 2017 Budget clearly illustrates that the good life for the ordinary people is a very long way off once we have Winston Jordan in charge, save and except if your name is Hamilton Green.

As I dig in, I will be carefully analyzing the infrastructure sector since this is what concerns me most in this 2017 Budget.

Yours faithfully,

Sasenarine Singh

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