What Cushion? – Economic plan needed

Oct 10, 2008 Features / Columnists

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Peter R. Ramsaroop, MBA

INTRODUCTION
This is my third column on the global financial meltdown as it relates to Guyana. (See October 3rd and 5th Economic Corners) It is known that we only have a one-day stakeholder meeting when it is necessary for the government to sway public opinion on a specific subject without any deliberations and analysis, as we saw with the EPA summit.

Instead of the President spending time in his own country, working with the private sector and financial institutions to proactively deal with financial issues relating to Guyana, he is running around the world as a lone ranger, even though Caricom has already agreed on the EPA.

He now seems to think Guyana is beyond the economic crisis and he can put some form of “firewall”. The President is way out of his league.

We need to be proactive on our current financial environment to include the banks, export market for our goods, the higher prices we will pay on imports and what measures will be necessary to curb inflation. Actually, we started our own meltdown after the excessive VAT system implementation in 2007.

WHERE IS THE PRIVATE SECTOR?
Economic growth requires a partnership between the public and private sectors. It necessitates cooperation and a collaborative group effort. Although many have been outspoken on this subject for quite some time now, including me, there has yet to be any noteworthy progress toward such noble goals.

Our dormant Private Sector Commission only recently came out in support of the President’s view on the EPA without ever being part of the build-up towards the agreement.

This should not be the role of the Private Sector Commission. It should be active as an economic council for the country with or without Government’s involvement.

Two years ago, there was one of those Government Stakeholder summits titled “Turning Words to Action” that brought to the forefront the lack of understanding of what it takes to create an economic boom in Guyana. Two years later, no mention of the objectives or results of that summit.

Inflation for the last two years has been in the double digits and our spending power has been significantly reduced. Adding this to the excessive VAT has caused our economy to be in a tailspin for awhile without any major new jobs being created. Many government and private sector selectees had great speeches.

“Words” were spoken, but the true “action” required was nowhere on the agenda of the summit. Two years later, it was as I wrote then, “Government Quick Sand”, and they purchased it.

REFRESHING OUR MEMORY
President Jagdeo, during the high profile Banks DIH 50th anniversary a few years back, told Guyanese that the private sector must rise to the challenge of being the driver of enhanced competitiveness and greater economic growth.

President Jagdeo then pledged that any government he leads would not allow the country “to return to the days where the government tried to be all things to all people, and in so doing sapped the spirit of entrepreneurship throughout the country.”

At that time, the newly born-again President then indicated that the private sector must demonstrate vision and leadership to create a new entrepreneurial culture, seize market opportunities that present themselves, help the government make evidence-based policy by providing empirical backing to policy advocacy, and look within the private sector for solutions to business problems. I guess he backslide as they say in the Christian community before he even got started.

In 2006, the President said it was bad policy that brought about poor economics. This was the first confession I have heard since the PPP took government in 1992 that they have instituted bad policies. I am still waiting for his 2008 confession on the economy, especially given the global financial meltdown.

ECONOMIC REALITY
Economist, Dr. Clive Thomas has stated many fundamental facts about Guyana’s economic performance and global competitiveness.

One such statement noted, “In a stable political environment, with minimal crime, a strong macro-economic policy and a ‘pro-business’ approach to economic management, it is expected that firms will generally do better than in an economy where any or all of these conditions are lacking.

Having to pay for private security, because security is weak, adds to a firm’s costs and reduces its competitiveness.

Where judicial processes are weak and public administration is arbitrary and whimsical, firms will seek to leave or minimise their investments in that country. In a worst case scenario of endemic violence, business becomes all but impossible.” In Guyana, we have poor or non-existent energy and when it is available, it is extremely expensive.

Telecommunications, energy costs, transportation and an under-educated population, because of a poor school system, add to the non-competitiveness of Guyanese companies. Sugar is a good example.

We are producing sugar at far above global prices. None of these factors create the climate of competitiveness promised by the President. Why were none of these things in his Wednesday briefing on his so called “Firewall”?

CONCLUSION:
Without real jobs for our people, a revised tax code, a friendly investment code and justice and security in our nation, our economy will not survive the global crisis. The Private Sector can only go as far as Jagdeo’s administration and legislation will allow it to go.

Even more, the restraints placed on the nation’s would-be entrepreneurs by this administration are like chains that keep us bound to the present failing economic system. The “quicksand” is still for sale.

Time to close down that business and get on with running our country, right. Let us get together and create a true economic plan. I will join the group.
Until next time, “Roop”.

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