AFC’s Action Plan is rooted in 200 years of Knowledge – Part 1

Oct 23, 2011 AFC Column, Features / Columnists

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By Dr. Tarron Khemraj

INTRODUCTION
President Jagdeo accused the AFC of plagiarizing the Low Carbon Development Strategy (LCDS), the National Competitiveness Strategy (NCS) and something called a central banking manual. Notice, the President did not say anything is wrong with the AFC’s Action Plan (AP), only that it was copied from PPP policies. The AFC rejects this outright. Notice also that the President did not give a single example of a sentence which the AP supposedly copied entirely from the PPP. We excuse President Jagdeo from his novice statement since he has never done serious academic writings in his time.
I want to make it clear that the AFC’s AP contains over 200 years of conventional wisdom from the history, theory and practice of development economics. The economic principles upon which the AP is based have been ventilated in various scholarly and historical outlets over the years. Hence, these ideas have become conventional wisdom and one does not need to cite these principles (I will outline them in part 2 of this column) in a political party’s manifesto.
If the manifesto were an academic document, however, that is a different matter and all standard citation criteria must be met. Any serious political party, however, must craft economic policy taking into consideration these best practices. It is not typical for Manifestos to have references and other forms of citations. These principles are time-invariant and universal. They are applicable to any country with suitable adjustments taking into consideration the domestic context.
UNIQUE FEATURES OF THE AP
While the AP is based on 200 years of development practice and ideas, it has several unique features relevant to Guyana. For example, we make a commitment to constitutional reform and limiting the powers of the President. We are the only party that has a Diaspora policy framework because we believe the Diaspora is a crucial asset.
Neither the PPP nor APNU made any such commitment. We are committed to transparency and freedom of information (not the “castor oil” FOI the PPP proposed). We will re-engage the British for police reform and we will work willingly with the DEA of the US. We will refocus foreign policy around economic policy. We have a Hinterland development plan and a Region 10 plan. We have national beautification programme to enforce building codes and improve quality of life. None of this is on the PPP’s radar.
In addition, we have a proposal for a State Development Bank (SDB) and how to use this bank to mobilize remittances and Guyanese savings for productive investments. The idea of a SDB mobilizing remittances for investments is non-existent even in the scholarly literature. There will be procurement and public service reform.
We are the only party that has a plan to modernize the public service into a developmental state so that it can implement effective industrial policy. The AFC is the only party proposing a national mandate for Guyanese manufactured ethanol so as to save the sugar industry. While ethanol mandates exist in the US, this is new to Guyana and nowhere to be found in the LCDS or NCS. There are numerous other unique ideas and I urge Guyanese to read the AP which can be downloaded at http://www.voteafc.com/images/ap2web.pdf.
LOW CARBON DEVELOPMENT STRATEGY – REVENUE FAILURE
The LCDS is based on an idea I first became aware of as a young economist working at the Bank of Guyana. In 2000 I read a paper called “Evaluating Carbon Offsets from Forestry and Energy Projects: How do they Compare?” This is a World Bank Policy Research Working Paper that can be downloaded for free. The point is the LCDS did not cite this paper and no one expects it to do so. The principle and idea, however, are older than the LCDS and many were familiar with the basic idea decades before the LCDS.
The PPP coined its own concept by projecting that Guyana can receive US$580 million per year for eternity for maintaining a low rate of deforestation. In other words, the LCDS is based on the old idea that Guyana must be paid to preserve its forest. It is a commendable idea, but impractical given the cut-throat nature of global climate politics (see EricPooley’s book “The Climate Wars”).
The LCDS fell short of its finance target which most likely will never be realized. Norway promised to pay US$250 million divided over five years. The World Bank is holding the funds until more transparency is forthcoming from the government. The Norway money, however, is significantly below what is needed to develop Guyana. The LCDS, therefore, failed to bring in sufficient development finance. Why would the AFC want to plagiarize that? The AFC has several sources of development finance, one of which is to reestablish a development bank in Guyana and aggressively pursue foreign companies to invest in Guyana.
LOW CARBON DEVELOPMENT STRATEGY – HAND-OUT ECONOMICS
On the spending side the LCDS proposes the US$30 million One Laptop Per Family (OLPF). This programme is fraught with problems and corruption. It took a vigilant media and opposition to expose the dubious contract awarding system to get the government to back off and retender for the laptops. The hand-out of laptops is bad economics and it is a vote-buying political scheme. No jobs will be created and the laptops will be depreciated after three years. The AFC will never want to plagiarize that.
Furthermore, had the AFC implemented this programme it would have placed desktops in the schools with trained IT teachers and internet access. It would not have been a vote-buying handout scheme. Moreover, as AFC Executive Mr. Gerhard Ramsaroop noted, the desktops would have been assembled in a factory in Guyana creating jobs for Guyanese. This is the fundamental difference between the AP and the LCDS. The LCDS is about handout economics, while the AP is about jobs economics.
Another feature of the LCDS is its promotion of subsistence living among the masses. Massive wealth creation is only for a few with oligarchic connections. The proposed solar panels for our Indigenous people will light one bulb. One wonders how they will get electricity for the laptops. That is not the vision of the AFC and we will never plagiarize that.
The AFC proposes a more comprehensive Hinterland development plan that will see the produce of Indigenous peoples access markets quicker and easier. We want our people to work and attain wealth. We do not want to be handing out boat engines and little goodies at election time.
EFFICIENCY AND RENEWABLE ENERGY
A guiding principle of the AP is the need to achieve efficiency in government spending and capital projects. Efficiency will be passed on to citizens of Guyana by offering them lower prices and higher wages. For example, the LCDS proposes one large hydroelectric plant that will cost US$835 million. Financing cost has to be added to this amount. This will likely lead to high electricity rates for Guyanese given the present demand for electricity (at around 190MW annually).
The AFC, on the other hand, proposes the use of several sources of renewable energy such as small/medium scale hydro plants and bagasse and coconut shell/waste electricity. This will be complemented with an ethanol mandate and a bio-diesel programme to help coconut farmers. This is a more efficient vision for the country. The AFC has a more comprehensive renewable energy framework compared with the LCDS. The diverse approach of the AFC will also have a bigger impact on immediate job creation. Our approach will save foreign exchange for perpetuity.
HONOURING OTHER GUYANESE – ADOPTING AND UPDATING THE NDS
We understand that the infrastructure proposals of the National Development Strategy (NDS) make tremendous sense. Hence, much of the AFC’s infrastructure proposals mirror the proposals of the NDS. The NDS has been ignored by the PPP.
The AFC intends to honour the many Guyanese who worked tirelessly to put together that development plan. We will implement the infrastructure proposals of the NDS. These are very sensible proposals. However, we will also update the production proposals of the NDS to reflect the AFC’s adamancy that manufacturing and industrialization are necessary conditions for development; particularly industrialization focusing on renewable energy, which is at the heart of the AFC’s production transformation plan.

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