Dear Editor,
Many Guyanese citizens are yet to be convinced that, over the next 25 years, we will achieve national unity, and successfully avoid or overcome the negative financial, economic, social and political effects of the nation’s major challenges and risks: [1] the resource curse (‘Dutch Disease’); [2] climate change and the degradation of our coastal and marine environments; [3] the political stalemate – in the 2011, 2015 and 2020 national elections, the two major political parties (PPP/C and APNU/AFC) won the tiniest possible majorities in Parliament (by only one seat and by an advantage of less than 2% of total votes); [4] inter-ethnic suspicions that sometimes lead to physical violence, especially against Guyanese of Indian ancestry; [5] a very high poverty rate (43.4% of the population – 338,520 persons) among all the ethnic communities of Indi-genous (Amerindian), African, Indian, Mixed, Portuguese, Chinese and European ancestry; and [6] significant corruption in the public and private sectors.
With regards to the first major challenge, Guyana does not presently have the resource curse (‘Dutch Disease’). President Irfaan Ali’s government has begun to implement ‘One Guyana’ pro-poor and pro-business financial, economic, social and political policies so that no Guyanese individual or family are left behind. But avoiding ‘Dutch Disease’ will be easier said than done. Governments in most oil-producing countries had similar good intentions, like those of the PPP/C government, but yet many of these countries became more underdeveloped and poorer because most of their political and private sector leaders denied, ignored, downplayed or misunderstood the symptoms that could indicate whether the root causes of ‘Dutch Disease’ existed in their countries. Improve The Public Investments and Public Spending System – A root cause of ‘Dutch Disease’ is when a government inefficiently and ineffectively manages its public investments and public spending system (PIMS).
There are already symptoms that this could happen in Guyana. According to the International Monetary Fund, Guyana’s PIMS is 1.5 times less efficient than those in most countries of Latin America and the Caribbean. With the increasing inflow of massive funds from the oil sector, the government has to patiently expand its PIMS to avoid overheating the economy, to keep inflation at low levels, and to ensure that the foreign exchange rate is not reaching a level that would negatively affect the export opportunities for products and services from the non-oil economic sectors. The focus has to be on continuously monitoring, evaluating and adjusting the capacities of both the public sector and the private sector to absorb public investments and public spending. As those absorption capacities grow every year, the inflow of funds into those sectors could be increased. If this is not done, Guyana will experience ‘debt distress’ similar to what another new oil-producing country, Ghana, is presently experiencing.
Fundamentally, the government has to publicly and transparently outline its financing plan so that every single Guyanese will know: [1] how economic and social programs will be expanded and sustained over the next 25 years; [2] how development funds will be sourced at the lowest possible interest rates; [3] how the increasing public debt will be managed; [4] how the oversight of major projects will be improved to avoid missed deadlines and significant cost overruns; [5] how the tax base will be diversified to prevent over-dependence on oil revenues; [6] how both foreign and local investors will be encouraged to re-invest their earnings in the national economy; and [7] how the anti-corruption program in all government institutions will be effectively implemented.
Implement An Export Strategy for the Non-oil Sectors – Another root cause of ‘Dutch Disease’ is when local and foreign investments are mainly happening in the oil and gas sector and there is little diversification of the economy. There are already symptoms that this could happen in Guyana. Most of the new large local and foreign investments are in oil-related businesses supported by the government’s aggressive local content policies. In the beginning, this is expected and understandable because Guyana is a very new oil-producing country. However, if that initial imbalance continues for many years in favour of oil-related over non-oil investments, the export of crude oil will become an overwhelming share of all exports, as has happened in most underdeveloped oil-producing countries. Conse-quently, there was little economic diversification in those countries.
Guyana has a relatively small local market. Even with the impressive growth in construction, housing and other economic activities, diversified and balanced growth of the oil and the non-oil sectors, over the next 25 years, will depend on a significant increase of non-oil exports. Presently, most micro, small, medium and large businesses in the non-oil sectors are unable, on their own, to expand in current export markets and enter new export markets with value-added products and services. The government, in partnership with the private sector, has to immediately begin the design of a new export strategy that prioritizes the establishment of effective export promotion institutions for the non-oil sectors. A data-driven and integrated export strategy is one of the key “secrets” that successful oil-producing countries use to diversify their economies.
Implement Anti-Poverty, Job Creation and Immigration Programmes – Other root causes of ‘Dutch Disease’ are failures to reduce poverty and high unemployment, especially among youth and women, and failure to implement a well-managed and targeted immigration program. There are already symptoms that these could happen in Guyana. Significant wage gaps exist between females and males who perform the same work of equal value, and between executives and employees in the public and private sectors, and in rural, hinterland and urban areas. The government has to implement a comprehensive program to measure and decrease poverty in all ethnic communities. With regards to job creation, the government must be commended for its innovative programme to help families cope with the rising cost of living by hiring 11,000 persons to do part-time jobs in the public sector. But massively expanding the number of people employed in the public sector by at least twenty percent (20%) is not sustainable and this program could become an unintended waste of precious human and financial resources.
Only a government / business / trade union partnership could find the best solutions to overcome the existing labour shortages in some non-oil sectors and the high unemployment in specific regions and communities. The focus of that partnership should be the promotion of fair competition for labour between businesses in the non-oil sector, the oil and gas sector and the public sector. That public / private partnership also has to urgently design and implement a new immigration plan to reverse the continuing ‘brain drain’ by promoting ‘brain circulation’ from the diaspora and by selectively managing the recruitment of skilled foreign employees.
Continue Public Consultations and Dialogues, Transform Public Sector Institutions and Improve Data Collection and Analysis – Other root causes of ‘Dutch Disease’ are [1] failure to build a national consensus through regular public consultations and dialogues on a country’s top investment priorities and on the sequencing of major transformational projects; [2] failure to implement a program in partnership with communities and non-governmental organizations (trade unions, business organizations, community groups, religious bodies and charities) to reform government institutions and make them more accessible, inclusive, transparent, accountable, incorruptible, efficient and effective by using new thinking, staff incentives and new training; and [3] failure to improve data collection and analysis so that policy-makers at the national, regional and community levels could make more informed decisions.
Changing Petroleum Production Shar-ing Agreements (PSAs) – A major root cause of ‘Dutch Disease’ is the failure to change any onerous and unfair terms in a PSA. A government / non-governmental partnership has to be forged to change any provisions in a PSA that would infect Guyana with ‘Dutch Disease’. It is a real possibility that, with ‘on the ground’ implementation of ‘One Guyana’ policies in all ethnic communities, ‘Oil Dorado’ will mean that no individual or family will be left behind.
Sincerely,
Geoffrey Da Silva
