DIVERSIFY THE ECONOMY

Oct 02, 2016 Editorial, Features / Columnists

Understandably, the government has a fixation on economic growth, but it continues to measure economic growth based mainly on the production of sugar and rice and bauxite, the three main pillars of the economy. Gold and timber are recent additions.
The achievement of economic growth in a small, open, undiversified, developing economy such as Guyana depends on a number of factors. Guyana cannot develop its economy by itself. Its growth and development are largely determined by and dependent on external factors such as the price of oil, the demand and price for its products, remittances from abroad, especially from the diaspora, natural disasters over which it has no control, and the policies it intends to pursue.
However, poor fiscal and monetary policies can discourage economic growth by stifling the ability of the business sector to take advantage of favourable external circumstances if and when they exist.
This is why the government must not only provide an environment that is conducive to business but it must also be business-friendly. Yet the majority of people believe that Guyana can achieve economic growth and become a developed country because of its vast resources, its countless waterways, skillful manpower and its near perfect weather.
The truth is that economic growth is not only desirable in Guyana, it is needed because a larger pie means that the country could provide a better life if not for all, for the vast majority of the population. This has not been the case, but those in authority keep telling the people that Guyana’s glorious days are ahead.
During the periods when there were high growth rates in the country, interestingly, the standard of living for the people, especially the lower working class took a nose dive. Therefore, having a high GDP growth rate does not necessary translate into improving the well-being of the majority of Guyanese because the gains from the high growth rates have always been concentrated among a small group of people, mostly the business elite.
In the past, high growth rates in GDP have only made a few wealthy, not the majority of Guyanese, including the so-called middle class who were not better off. In fact, cost-of-living had increased with the high growth rates, which made life unbearable for some.
The reason is Guyana has one of the most uneven distributions of income and ownership of wealth and assets in the region.
A depreciating exchange rate coupled with a mix of feeble monetary and fiscal policies, alongside poorly regulated state agencies and institutions as well as massive corrupt practices could pose serious economic challenges for Guyana.
It could make the very generous assumption by the Minister of Finance that Guyana will achieve a growth rate of four percent by the end of the year an unreasonable approximation. Moreover, the struggling economy could paint the country in a negative light and make it less attractive to foreign investors.
Since assuming office, the government has adopted positions that best suit its political interests and has pursued policies for the good of the majority. But it is rather unfortunate that after those months in office, the government has not embarked on a strategy to diversify the economy away from rice, sugar and bauxite.
There are no plans in place that are geared towards realizing that objective. While there is tremendous potential to expand the country’s agricultural base, the Minister of Agriculture has not seized the opportunity to do it.
For months, the Minister of Agriculture has spoken extensively on diversification of the economy. However, the Minister has not matched words with action because nothing has come to fruition so far.

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