From commanding heights to demanding heights

Mar 08, 2024 Features / Columnists, Peeping Tom

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Kaieteur News – It is a bitter irony. On the one hand, there is now a rejection of the idea, endorsed by both Jagan and Burnham, that state ownership of the commanding heights of the economy is necessary to upturn exploitative productive relations and to improve the lot of the poor. On the other hand, the alternative to state domination of the economy is private sector development, except that instead of being a ‘commanding’ class, the private sector in Guyana has become a ‘demanding’ class.

It is a bitter irony. On the one hand, there is now a rejection of the idea, endorsed by both Jagan and Burnham, that state ownership of the commanding heights of the economy is necessary to upturn exploitative productive relations and to improve the lot of the poor. On the other hand, the alternative to state domination of the economy is private sector development, except that instead of being a ‘commanding’ class, the private sector in Guyana has become a ‘demanding’ class.

At one time, a regional Prime Minister threw a subtle hint at then President Bharrat Jagdeo. That regional Prime Minister spoke about some CARICOM leaders had developed a reputation for “[going] around, hat in hand, to every capital of the world like panhandlers on the street, telling people how we are the wretched of the earth, we are poor and that we need all sorts of charity.”

The term “panhandling economy”, in this sense, applies to countries that heavily rely on borrowing and seeking aid from other countries and multilateral agencies to finance their development projects or to sustain their economies.  In such cases, these countries may find themselves in a cycle of dependency, continually seeking external assistance to meet their financial needs.

At the start of the decade of the 1990’s, Guyana had a high and unserviceable debt. It required debt relief and financing for development. The country had swung from being a state-dominated economy to one that has more market-led policies. Consistent with this new dispensation, the country’s leaders set out on a path of begging and borrowing.

This mentality of dependency on external financing became engrained. And despite Guyana today being an oil-producing country and designated as the fastest growing economy in the world, our leaders are still trapped by the idea that they must continue to beg and borrow to finance development.

As such, Guyana is on a borrowing spree. Just recently it signed several agreements for loans. It has borrowed from the IDB to finance projects in the health and education sector. It is also awaiting funding from the EXXIM Bank of the United States for its gas-to-shore energy project.

All this borrowing has raised concerns about the country’s rising debt. But the country’s leaders find comfort in the fact that Guyana has a sustainable debt-to GDP ratio and debt servicing-to-revenue ratio. What happens when the oil runs out, however, seems not to have been a major worry.

The begging and borrowing mentality is now contagious. The country’s private sector has become a ‘demanding’ class.  They are fond of asking for concessions, tax concessions mainly. And they have been the prime beneficiaries of such concessions. In 2021, the Auditor General reported that concessions totaled some 266.7 B with more than 90% going to businesses.

The international financial institutions were long concerned that the government’s authority of issuing concessions would have been used selectively. As such, they had pressed for legislation to limit discretion in the awarding of concessions. A 2003 Guyana Development Policy Review, published by the World Bank, had urged that discretionary fiscal and tax practices be halted and an investment code be tabled that would provide equal treatment of all investors. One study had recommended reducing discretion and moving towards a more rule-based system for the granting of concessions.

An investment law was passed in respect to this. The Investment Act specifies that there should be no discrimination between local and foreign investors and between foreign investors from different countries. Yet, during the time of the APNU+AFC there was a major quarrel between the APNU and the AFC over the government’s refusal to grant concessions to a local investor, comparable to that offered to a foreign investor.

Despite this non-discrimination provision, allegations of discrimination in the award of fiscal concessions still prevailed. In one instance an investor complained that a sawmill had to be parked in the jungle because of the refusal of the government to grant concessions to him that were awarded to others.

The business class in Guyana is notorious for making ‘back-room’ deals. They are excellent at extracting concessions from the government and year after year they are rewarded with more and more concessions. Investors line up day-in, day-out to meet with political officials to negotiate concessions, something that is not consistent with a rule-based system.

The Guyana Office for Investment has now become a factory for the granting of fiscal incentive agreements. These agreements represent a major loophole in the system, and it hoped that the international financial institutions, would use the present leverage they have over the government, to demand a curtailment of these agreements and to egg the government towards a more rule-based system.

Such a move would however bring great displeasure to the local private sector who thrive in the role of courting government to provide more and more concessions to them. The ‘demanding’ class continues to ask for more and more each year, and they often get their way.

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

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• Development, except, heights, Jagan and Burnham, Peeping Tom

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