Big projects have potential to transform economy

Apr 03, 2022 Letters

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Dear Editor,

Some critics of the government are totally opposed to the proposed big economic projects (hydro power generation, gas to shore, Wales Industrial Complex, etc.) announced by Vice President Jagdeo. Those of us who study economics would know that big projects have high level economic objectives and regeneration of an economy. This is not to say small projects should be ignored or that they are not attractive and are not important to an economy. In India, for example, small projects have performed better in rates of returns than some big projects. But big projects are critical to a rising economy. They have been known to transform an economy — creating jobs, boosting GDP, and raising standard of living. Infrastructure and health are basic requirements to attract private investments. Jagdeo understands this principle in economics and set out to achieve them during his presidency. Time and funding did not allow for their implementation. And suddenly, oil has been found in Guyana waters, providing resources to revolutionise infrastructure and the economy.
Guyana was desperately in need of some big projects (hydro power, new highway, specialty hospital, among others) over the last decade that would have transformed the economy. The PPP administration lost its majority in November 2011 and power in May 2015. Instead of giving consideration to and approving some projects (in infrastructure and health care) as proposed by Jagdeo and Ramotar presidencies, the succeeding Granger administration killed them. The Granger led APNU+AFC coalition apparently did not understand the benefits of big projects or “bigness’ as it is called in economics. There are negatives in bigness; but during 2010s, Guyana desperately needed some major projects for job creation and raising GDP. These were missing during the Granger presidency, resulting in rising disenchantment even among PNC supporters. This factor, among others like raising taxes, squeezing businesses leading to closures, terminating thousands of workers without replacement jobs, and racial discrimination, contributed to the coalition’s defeat in 2020. Voters overwhelmingly gave negative ratings on the coalition’s handling of the economy between 2015 and end of 2018, describing it as no match for Jagdeo’s handling of the economy when he was Finance Minister and President.
Unlike those who ran the economy during the coalition, Jagdeo is a master politico-economic strategist. He looks for projects that will develop the economy and that can also be considered as vote winners. The coalition is doing everything to lose votes. Jagdeo was pursuing ideas to win votes. He understands the value of big projects and recognises the importance of low taxation, cash grants, and keeping workers on the payroll. He would not have closed down sugar estates without first finding alternative means of employment. Sugar has its problems. But one can’t simply shut down estates when some 40,000 families are tied to them. That is why Jagdeo has proposed big projects that will transform the economy – tied to infrastructure that would attract private investors.
Big projects, the world over, result in boosting productivity, restructuring economies. Once properly thought out, with cost benefit analysis and appraisals by experts, offering value for money spent, they will boost an economy – with job creation, increased tax collection, GDP growth, and higher standard of living — as observed in my travels to and studies on China, Dubai, Abu Dhabi, London, India, Singapore, Malaysia, etc.
Big projects especially in infrastructure stimulate the macroeconomic aspects of the economy. Revenues invested on such projects result in a circular flow of money that benefits the entire economy with job creation and rising standard of living. There would be ancillary benefits like private investment near accessible roadways, rise of markets, imports and exports, and maybe a shift in trade with Guyana experiencing a surplus balance that would give stability to the local currency as well as the entire economy.
Big projects are not cheap and some of them proposed by the Vice President amount to several billions in American dollars. Guyana lacks that kind of money when total budget is barely $2.5 billion. Funding for such significant spending on big projects will, therefore, have to be financed by debt. Guyana can afford the debt for now without serious long-term consequences. With the country earning increasing amounts of revenues from oil, it can afford debt that is within its ability to repay. (We should learn lessons from Burnhamism and don’t over borrow). For the next two decades, once oil prices remain relatively high and oil keeps pumping out of the sea bed, the debt would have limited effect on the economy.
The country would be able to manage fiscal deficit and debt burden to finance infrastructure projects. Big government projects should be encouraged.

Yours truly,
Vishnu Bisram (PhD)

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