The local private sector is not up-to-scratch

Dec 06, 2020 Features / Columnists, Peeping Tom

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Kaieteur News – The President wants the private sector to “step-up” their game. As he says, it is no use speaking about the global economy without thinking about global competition.
He is correct. The main hindrance to local businesses entering into the global economy is not trade barriers – tariff and non-tariff barriers – but the failure to compete globally.
The President is also deluding himself into thinking that the local private sector is in a position to step-up their game. The local private sector lacks what it takes to “up their game” in order to compete globally.
Traditionally, the only global players in the local economy was the liquor and telecommunication companies. And the liquor companies were for eons into the exportation of bulk liquor and were sheltered from competition, enjoying a duopoly. It was only in recent decades that they have begun exporting branded liquor. The main telecommunication company enjoyed a monopoly on overseas calls.
Rice and sugar can be considered manufactured products. Neither has even been competitive. Both enjoyed preferential access into the European market, entering quota- free and duty-free. No sooner were these preferences removed that the market share plummeted. Sugar collapsed. Venezuela came to the rescue and offered good prices and the Common External Tariff shields these exports in Caricom market. Bulk rice and sugar are still exported.
There are hidden subsidies from which agriculture benefits. Government expenditure on drainage and irrigation costs represents a hidden subsidy which if removed is going to make the sector even less competitive.
The name of the game is concessions not competition. The Guyana Office for Investment is a virtual duty-free concession application centre. Local and foreign businesses line-up to be able to obtain concessions.
The President has been calling for the local private sector to lead the charge in dismantling the barriers which prevent Guyana’s entry into regional markets. These barriers are mainly in the agricultural sector. Even if the leadership of organizations such as the Private Sector Commission (PSC) was interested in dismantling these barriers, they lack the negotiating skills to do so. The PSC is a pitiful bunch.
The PSC is a self-serving institution. All it is interested in, is lobbying for are concessions from the government. Its keeps making the same demands: more concessions, tax reform and higher income tax thresholds. It sees the increase in the income tax threshold as a means of the state shouldering the burden of increasing their workers’ pay.
There has been a complete reversal when it comes to workers’ remuneration in the private sector. Under Burnham and Hoyte, the private sector used to pay more than the state sector. The PNC government struggled to match private sector wages.
The opposite now exists. State wages are now far higher than in the private sector. The average minimum wage for government workers is now G$70,000 per month. It is far less in the private sector and they are not going to be interested in the government setting a national minimum wage equal to the government minimum wage. But they always welcome an increase in the income tax threshold because it means that their workers will carry home more money without them having to increase wages.
The private sector has been represented at the highest levels in the Competitiveness Commission which has been woeful failure. Guyana’s score in the global competitive index has moved only marginally between 2006 and 2018. In other words, the country is no position to compete.
The private sector is just heating its seat on the Competitiveness body. It should excuse itself and allow for technical specialists, who understand what is needed to boost, to assume control.
The Trinidadians have come and grasped the opportunities in the oil and gas sector while our local private sector has been complaining about the lack of local content. The Trinidadians are not complaining; they are competing.
The local private sector wants a free pass to the opportunities in the sector. They want business to be handed to them and then they will piggyback on the efforts of others. They are hoping that the government will pass legislation which will allow them to get business in the sector and then they outsource to foreign firms.
The High Commissioner of Canada said that Guyana does not have the workforce to benefit from explosive oil-linked growth. She did not but could have easily said that the local private sector is not ready yet.
The President is pinning his hopes on a rotten thread. The private sector is part of the problem in Guyana and therefore it cannot be part of the solution.
But more fundamentally, if the world is a global community it means that everyone has to compete and not be looking for special advantages. The local private sector cannot compete but with its courting of the government it may still get that free pass that it is seeking into the oil and gas sector.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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