Chapter 3:

Renewing Guyana’s Purpose:

Expanding Our Wealth in a Healthy Economy

 

When you want fuh swim river, yuh gat fuh plunge inside fuss.

(You can only succeed at a venture by plunging into it whole-heartedly.)

            Guyanese proverb

 

Overview

s a private citizen and businessman, I see daily the waste and decay that so often characterize our economy.  After a lifetime of service as a soldier, civic leader, and businessman, I deplore the human cost and suffering that result from economic depression. Our nation deserves better. The children of Guyana should grow up in a land of hope and prosperity.  And this is within our reach if we have the will to turn our dreams into reality. 

In my early school days during the August break, I would spend time in Mahaica with my great-grandmother.   Watching her cook on the mud fireside was fascinating. And I cherished the moments I spent with her. In retrospect, I realize that the conditions she had to endure were very tough for an old woman.  And when I travelled around the nation campaigning in 2001, I was shocked to see that so many people must still endure such conditions.  Politicians must realize that until our people can rise out of poverty, Guyana has failed. 

In the following pages, I outline Guyana’s economic situation: the problems we face, solutions to these problems, and the scope of opportunity before us. Much of this material is not new, but it still remains to be made real. And with the active participation and leadership of ordinary citizens, expatriates and business leaders, we can make it a reality.

It is a cruel irony that the greatest ideals, when translated into theory and practice, have had the most destructive consequences.  This is particularly true of the social and economic systems that were introduced over the course of the last century, systems meant to eliminate the inequities of unfettered capitalism. 

 Guyana has not been spared this fate.  From its very inception as an independent nation, Guyana suffered from a weak and sickly economy. Initially, the government attempted to guide the economy to health by instituting a centralized, socialistic system. But this caused great damage to the economy—so much so that the recent efforts to guide Guyana along a path of free enterprise have not yet managed to create an economy capable of meeting the needs of the nation.

Trial and error in the laboratory of nations have demonstrated to all but the most ideologically dogmatic that the pragmatic practice of free enterprise is the most successful economic system for growth, progress and the well-being of the common man. When tempered by regulations prohibiting unfair practices, free enterprise utilizes the natural drive we have for self-improvement rather than imposing an idealistic model of forced altruism and equality. 

In the socialistic model, business must be subservient to a centralized, governmental force, which is itself not answerable to anyone. But out of the free enterprise system emerges an “enlightened selfishness” in which every businessperson is responsible for their own success or failure—and in which success is most fully realized when the status of all citizens is bettered.

As a youth growing up in the hinterlands of Guyana, as a young man in military service, and as an independent businessman, I have seen first-hand that only when an individual is made responsible for his actions does he truly strive to perform. Only when an individual is given the freedom to do his best does he truly excel. Only when an individual is part of a society in which it is clear that the more he helps others the more he will be helped does he work actively for the good of all.

That is why I believe that it is essential that Guyana strip itself of the vestiges of socialism and government control of industry and enterprise, and give the power and potential to succeed back to the common man and the businessman, the housewife and the corporation executive. Government’s job is not to control and engulf business but to guide and facilitate business. A free and successful Guyana is one in which free enterprise is encouraged to blossom, in which every individual is free to take part, in which glass ceilings are shattered and the shackles of the past are removed.

In short, government is welcome when it acts to protect the environment, to prevent unfair practices, to protect the consumer against dishonesty.  In this way, government plays its appropriate role. Beyond that, it governs best by governing least.

However, the matter does not end there.  In order to provide the proper soil on which free enterprise can flourish, government must be effective and directed.  When government becomes a tool for those more interested in their parochial advancement than in the well-being of the nation, then free enterprise and its attendant benefits necessarily languish.

And this is the unfortunate state of affairs in Guyana today.

Our economy is staggering under the stultifying effects of socialism, aggravated by the paralysis imposed by a political system focussed on party politics and self-aggrandizement.

In 1989, President Hoyte’s Economic Recovery Program marked the beginning of Guyana’s transition to a free-market economy. At first, the economy responded well, and from 1991 to 1997, GDP grew by over 7% a year. But in 1997 the economy lost its momentum and grew stagnant, and to this day conditions are bleak. On a national level, the Guyana dollar has sharply depreciated and the foreign trade deficit has increased. And on an individual level the poverty is felt that much more starkly. Per capita GDP is US$500. Thirty-five percent of the population live below the poverty line, and 21% in sub-survival conditions.  Fifty percent of the workforce is either un- or under-employed. And Guyana’s “best and brightest” are emigrating at increasing rates, causing a massive loss of talent and ability.

Some causes of this deeply troubled economy are external, such as adverse climatic conditions associated with El Niño and a cyclical decline in the prices of Guyana’s key commodities—sugar, rice and gold.

But Guyanese politics, myopically focussed on ethnic strife, bear the primary blame for the dismal economy.

Therefore, I call on politicians from every party to set aside their rancour and articulate a vision of national development that will alleviate poverty and attain the highest rate of economic growth. And I call upon every citizen to join me in this demand.  It is our collective responsibility to do better for the future of our common country. 

Realistically speaking, however, we do not have the luxury to wait for this development to take place. And so business leaders must take the initiative. Now is the time for business leaders to conduct the campaign for Guyana’s economic recovery. They must develop radical new ways to invest and plan, despite the inability of the Guyanese government to attract new growth or even manage the economy.

The government must step aside and acknowledge that, lacking a viable economic plan for the nation, it must seek help from the business sector.

 

 

 

 

 

The Situation at Present

he news is not unrelievedly bleak. In July 2004, the Stabroek News reported that despite a difficult security and political situation and wage pressures, Guyana's macroeconomic performance has been broadly in line with expectations. Important progress has been made in advancing key structural reforms in the fiscal, governance, and public enterprise areas.

Nevertheless, growth has remained weak, reflecting structural weaknesses and the difficult political situation. Accelerating the pace of poverty reduction remains an important challenge. Moreover, Guyana's debt burden remains high, even following debt relief under the HIPC Initiative.

According to the IMF:

The authorities' medium-term program, embodied in the Poverty Reduction Strategy Paper (PRSP), seeks to address these challenges on the basis of prudent macroeconomic policies, including sustained tax reform, the introduction of a value-added tax in 2006, careful wage policies, adherence to strict limits on external debt, and prudent monetary and exchange rate policies.

Sustained structural reform remains key to promoting private sector development, diversifying the economy, and achieving the poverty reduction and growth objectives of Guyana's PRSP. The 2004-05 agenda focuses on continuous restructuring in the state-owned sugar and bauxite companies, and strengthening the regulatory framework of the domestic banking system. In addition, budgetary procedures will be further improved, and social spending better monitored and targeted.

Going forward, strong efforts to safeguard debt sustainability and steadfast implementation of macroeconomic and structural policies in line with the PRSP will provide a solid basis for sustained progress toward poverty reduction.

That is our mission: to go forward, steadfast and solidly, one step after another until we reach our goal of prosperity and economic health.

 

 

 

Our Mission

ur mission as Guyanese people—in the government or in the private sector—must be to put Guyana on a practical, business-oriented track. To that end, the ruling political party must eschew failed economic theories and renounce traditional cultural divides and hostilities. Instead it must rule with a practical, business-like strategy.

Guyana must create a blend of micro- and macroeconomics especially tailored for our situation. The government’s fundamental economic objectives must be to promote efficiency in the use of resources, and to achieve greater international competitiveness.

The government must act carefully and with full awareness of unintended side effects. For instance, high levels of public spending in low-income countries are liable to hamper growth, contaminate the banking system and weaken macroeconomic activity. With a plan and proper focus, we will halt and reverse the continuing degradation of our industries and economic well-being.

Most importantly, Guyana must radically embrace modernization. We cannot remain a society dependent upon a few basic crops and raw materials. Instead, we must diversify our economy and bring it swiftly into the high-tech, twenty-first century global environment.

 

 

 

Problems

Privatization

A

lthough the government has taken steps toward privatization, they are only tentative and far from complete. Guyana’s public sector still owns a number of large enterprises, and these are able to function only with considerable infusions of capital.

Even when privatization has been implemented, it has often not been accompanied by proper regulatory safeguards.  As a result, the privatized domestic utilities, lacking the restraints needed to ensure competitive practice, have turned into private monopolies.

Land Access

Most of Guyana’s land is controlled by the government. Due to governmental policy, inefficiency, incompetence and corruption, businesses and manufacturers find Guyana’s land situation to be perplexing and veiled. Many potential investors, both local and foreign, must wait for years in order to gain approval of an application for land access.

Governmental Red Tape

Despite welcome steps toward privatization and freeing business from the stranglehold of a centralized, government-controlled economy, much more remains to be done.  Problems continue to exist in a number of realms:

 

!          Investment Licensing. Private investment in medium enterprises (and larger) must be approved by the cabinet, and even then the licenses are very restrictive.

!          The Court System. The court system is slow and congested, judges are inexperienced in commercial cases, decisions are not systematically recorded, and judgments are difficult to enforce.

!          Taxes.  Taxes are high and punitive to free enterprise, and implementation of the tax code is uneven and unfair.

!          Public Expenditures. Government resources cannot at present support public expenditures.

!          Public Financial Management. Public financial management is inefficient and not applied in an even-handed manner.

!          Civil Service. Civil service officials are largely unmotivated and unprofessional in their conduct.

 

Taxation

Guyana’s markedly high tax rates encourage evasion and discourage investment and production. In addition, Guyana’s tax collection rules and procedures are so uneven that many large-scale businesses are not required to pay taxes at all.

Professional Employment

Due to low wages and poor working conditions, it is difficult to find and retain professional workers. This situation is exacerbated by the flight of professionals from Guyana.

In addition, the market for the entry professional—i.e., graduate students—is limited and these students have difficulty finding jobs.

Investment

Private businesses are refraining from investing in Guyana due to the many difficulties involved, a great proportion of which are government-caused, difficulties such as:

 

!          Price controls.

!          Inadequate bank supervision.

!          Excessive regulation in foreign trade and business development.

 

Also contributing to lack of investment is the overall poor state of affairs, amongst which are:

 

!          The inability to control crime, leading to an almost total breakdown of law enforcement.

!          Political tension that spills over into violence.

!          Corruption.

!          Unfair and unjust application of laws and regulations.

!          A glacially slow governmental decision-making process.

 

Infrastructure

Guyana lacks the infrastructure that private investors want to see.  For instance:

 

!          No deep-water port exists.

!          Road systems are inadequate.  No rail system exists.

!          Electrical power is expensive and irregular.

!          Telecommunications are limited.

 

Excessive Regulation

So pervasive and invasive are Guyana’s business regulations that the Heritage Foundation lists Guyana almost worst amongst 161 countries in its degree of “government intervention,” only better than three other states: Cuba, Haiti and Venezuela.

Underground Economy

A sizeable underground economy functions in Guyana, resulting in significant losses of tax revenue.

Hampered Aid Projects

As presently administered, aid projects are hampered by a variety of factors:

!          Some programs inadvertently inhibit private initiative because they increase government growth and involvement.

!          The great number of these projects creates a logistical nightmare for the government.

!          There exists an excessive amount of governmental centralization in the decision-making process.

!          The government is often unable to help fund the projects.

!          Skilled workers are frequently unavailable.

 

Light at the End of the Tunnel

Guyana’s many economic troubles are daunting, but not insurmountable.  The Guyanese people have the resources, the ideas, the hope, and the optimism to overcome them. But we will succeed only when all of us—all “six peoples of this one land”—join together in amity and common purpose.

 

 

 

 

S

imply put, Guyana must work to attain the highest rate of economic growth possible. And this requires the realisation of two goals:

 

!          Shifting the economy to service- and knowledge-based activities.

!          Increasing exports while developing finished products.

 

            To realize these goals, Guyana must implement radical new policies in the areas of:

 

!          Macroeconomic stability.

!          Governance.

!          Capital.

!          Physical infrastructure.

!          Diversification.

!          Restructuring of traditional sectors, such as mining and sugar.

!          Diversification.

 

 We must work together to foster the kind of growth that Guyana experienced in the early 90s.  The private sector, not government, creates wealth. I challenge the government to create the conditions under which entrepreneurs—innovators, investors and workers—can generate and sustain growth.  When this happens, jobs will be created, and the people will prosper.  Economic growth is built on the talent and hard work of the people.

Guyana’s new economy must result from a systematic approach that eliminates the national debt, decreases interest rates, and earns a much-needed cash reserve for the ailing economy.

In achieving its macro-economic objectives, Guyana must build on the unique strengths of the people—their creativity and cultural diversity—and its physical attributes–its resources, natural beauty and strategic location.

Despite its many problems, Guyana has a number of strengths upon which to build: 

 

!          Guyana’s strategic location and vast Essequibo River delta make it the perfect gateway for transporting goods and services into and out of the northern land-locked regions of Brazil and the eastern areas of Venezuela.

!          Guyana’s vast and pristine rain forests make it attractive to the burgeoning eco-tourist industry.

!          Guyana is the only English-speaking country in South America, which makes it amenable to English-speaking foreign investors.   

 

In regard to this last point, I remember visiting a senior executive of the Ford Motor Company in Detroit a few years ago, when Ford was having technical problems with its plant in Venezuela. When I asked him why Ford doesn’t move the plant to Guyana, he looked at me and asked, “Where is Guyana?”

Imagine how advantageous it would be to Ford to locate its plant in Guyana. Ford would not have to change its manuals into Spanish and it would enjoy a labour market even cheaper than Mexico. Why then have we not been able to attract large businesses such as Ford to our country?   Simply put, our politicians have not made an effort to do so.

And that underscores the fact that we cannot rely upon our politicians.  Instead, we must work together as a people to market our resources.

With that in mind, I and other United States-based business leaders recently established a non-profit organization called the Guyana Business Association of America (GUYBAA) www.guybaa.com, with the aim of bringing together leaders of the Guyanese Diaspora to improve and advance communication, trade, commerce and business amongst members in Guyana and the United States.

The Guyanese Diaspora to the United States has brought a wealth of creativity, energy, and cultural vitality to North American society.  The Guyanese Business Association of America is a non-profit venture that will provide an avenue for these expatriate Guyanese to consider investing and doing business in a resurgent Guyana.

As we restore Guyana’s economy, the Guyanese people’s work ethic, spirit and pride will be restored as well. Once that occurs, we must make a concerted effort to establish Guyana’s leadership status in South America. But even as we bring Guyana into the circle of economically successful nations, we must ensure that the process of globalisation does not unravel the social fabric of our societies.

The restructuring of Guyana’s economy will involve temporary disruptions. Therefore, at every point along the way, we must constantly gauge whether our goals for production and employment are realistic. This will ensure that medium- and long-term gains are worth the short-term losses.

Guyana’s economic plan must be comprehensive. The following points constitute a brief listing of the changes that must take place for Guyana to become a success—and, as it has the potential to be, a miracle of rebirth in the Caribbean.

Improving the Lot of the Common Citizen

 

!          Support Low-Income Citizens

"          Strengthen the social safety net for low-income families in order to offset some of the short-term economic hardships of economic change.

"          Increase the minimum wage by 20% and eliminate the non-taxable monthly ceiling.

"          Provide continuous workshop training and updated information in order to eliminate mediocrity, sharpen the skills of the working population and increase profits.

"          Reform the secondary school curricula and increase emphasis on on-the-job and close-to-the-job training.

"          Invest more in education for the Information Age.

 

!          Incentives

"          Create incentives to attract skilled workers and a massive return of the overseas Guyanese.  The goal should be 100,000 over the next decade.  I plan to assist in attracting the overseas-based Guyanese by setting an example that we can change our nation.

 

!          Jobs for Youth

"          Create quality jobs, especially for young persons.  Large private industries must create internships to assist in training our youth for better roles in society.

 

Natural Resources

!          Natural Resources

"          Make strategic use of our natural resource base.

"          Implement the approval of investments and concessions for the exploitation of natural resources. The main criterion for approval should be compliance with regulations concerning environmental protection, minimum wages, and occupational safety.

 

!          Maximize the Potential of Our Traditional Economy

"          Strengthen Guyana’s traditional economy, based on sugar, rice, bauxite, gold, diamonds, forestry, cattle rearing and other agricultural products, by creating and developing new export-oriented industries.

"          Turn Guyana into a central port to be used by Brazil, Venezuela and the Guianas.

 

!          Environment

"          Enforcement thorough examinations must be undertaken to ensure that those given the opportunity to use Guyana’s resources to create wealth must do so in an environmentally safe manner.

Land Use

!          Land Leases

"          Allow long-term land leases to be transferable. Any leaseholder should be able to sell his lease to any other individual at a mutually agreed-upon price.

"          Eliminate the requirement that the government must approve land transfers. Government's only role should be to ensure that the transaction is registered.

 

!          Market System

"          Develop a market system that grants access to land for factory sites and agricultural operations, not dependent on government approval.

Businesses

!          Business Culture

"          Develop a business culture and a national spirit of innovation and entrepreneurship.  I believe that Government must ensure a fair and honest market place for business competition, labour management, cooperation, and investors with enforceable standards of integrity for financial and accounting systems. 

 

!          Small Business

"          Develop a thriving micro-enterprise and small business sector that is fully integrated into the economy.

"          Foster the expansion and decentralization of institutions providing micro-level and small business financing.

 

!          Conglomeration and Franchising

"          Promote the conglomeration and franchising of businesses to strengthen the economy.

 

!          Upgrade Business

"          Assist existing industries to upgrade their entire businesses so as to compete at high international standards.

Privatization

!          Privatization

"          Privatize service delivery operations.

"          Continue the privatization program that was first started under the Economic Recovery Program.

"          Invite participation by resident and overseas Guyanese in privatized companies.

"          Privatize the state-owned media.

 

Monetary Management

!          Entrepreneurship

"          Key overseas and local business leaders must come together to discuss and develop measurable initiatives that will jump-start our economy. The tremendous power of the entrepreneurial process and the force of the free market must be innovatively revived and tapped.

 

!          Debt Reduction

"          Maintain fiscal discipline by balancing the budget and reducing the debt by means of increased revenues.

 

!          Depreciation

"          Ensure that depreciation of the Guyana dollar does not degenerate into a spiral of inflation and further depreciations.

 

!          Balance of Trade

"          Increase production, manufacturing, inventions, and an open dialogue between the private and big-business sectors, in order to lead Guyana out of the current imbalance to a balance of trade.

 

!          Labour Unions

"          Facilitate the formation of a social partnership between organized labour and private sector employers in order to ensure that labour, capital, raw materials and ancillary inputs such as energy are efficiently employed in production.

 

!          Reduction of Imports

"          Ensure that our new economy does not rely so heavily on the import of foreign goods and services.

Investment

!          Local and Foreign Capital Investment

"          Attract a mixture of local and foreign capital investment in the infrastructure and productive sectors.

"          Provide fair opportunities for local businesses and investors to partner with foreign investors.

 

!          Develop Investment Strategies

"          Establish a solid investment strategy and guidelines to encourage entrepreneurship.

"          Establish a clear investment strategy based on principles that provide equivalent treatment to investors in all sectors.

"          Develop a workable investment code that benefits the investment community while significantly increasing the revenue of the country for the improvement of roads, water and electricity.

"          Create an attractive investment code by eliminating many constraints upon business owners and private and foreign investors.

"          Establish a well-designed program to market Guyana’s economic potential to investors both local and foreign.

 

!          Encourage Investment

"          Establish venture funds to encourage new ventures.

"          Mobilize private capital by offering incentives to expand, modernize and diversify the economy.

"          Intensify marketing of the natural beauty and resources of Guyana through a multi-media campaign in order to attract potential investors.

"          Stimulate investment activity by strengthening investment promotion, tax administration and land administration.

 

!          Increase Confidence in Government

"          The most damaging element to capital formation is the appearance that the government, knowingly or not, lacks total commitment to private investment. The most basic factor in economic development is capital formation. And this can only exist when there is confidence in government policies and practices. A government must proactively take a stand to visibly support the principles and practices of the free market.

Exports

!          Increase Exports

"          In partnership with the private sector, export locally produced goods and services.

"          Employ sound financial management to increase revenues from exports.

 

!          Globalisation

"          Both Guyanese workers and businesses can benefit enormously from the economic boom—if we follow the right policies. The government must work towards more closely integrating Guyana's economy with the national economies of the world, particularly through trade, and capital and financial currents. It is especially crucial that Guyana earn a sufficiency of foreign exchange to purchase those goods and services that are not produced locally and that are vital to our development.

 

!          Favourable Terms

"          Arm our Foreign Ministry with the expertise that it needs to assist our country in obtaining the most favourable terms

 

!          Modernise and Diversify

"          Modernise and utilise the best available and most relevant technology in our current production. Even more important, add completely new types of products to our existing export mix.

Taxation

!          Improve Compliance

"          Distribute taxpayer identification numbers.

"          Implement computerized systems to assess degree of compliance.

"          Investigate failure to file tax returns.

"          Implement audit procedures.

"          Increase penalties for lack of compliance.

 

!          Improve the System

"          Simplify the tax code.

"          Make the collection systems more efficient.

"          Define and implement procedures for taxpayers to file grievances.

"          Increase salaries for Revenue Administration personnel.

"          Institute extensive staff training.

"          Enforce strict reprimand, including dismissal in cases of personnel fraud or other abuses of authority.

 

!          Reform the System

"          Reduce the consumption tax to a maximum of 8% across the board.

"          Lower company tax rates while broadening the coverage of companies registered to pay, thus leading to greater fairness and transparency in the tax system.

"          Drastically reduce the use of tax holidays (as a substitute for lower tax rates) in order to implement a more uniform tax system and to encourage greater participation.

"          Employ sound financial management to reduce taxes.

-           Welcome an atmosphere that provides challenges and opportunities, with appropriate tax concessions to allow favourable competition on the world market.

"          In the long run, Guyana's main sources of revenue should be:

-           Import duties but with a lower tax rate.

-           Value added taxes.

-           Income tax (personal and corporate) collected fairly and equitably.

 

!          Underground Economy

"          Diminish the underground economy by

"          Widening the tax base.

"          Further deregulation.

"          Improved governance of core public services.

 

!          Pro-Growth Strategy

"          Our goal for this decade must be the implementation of an intensive pro-growth strategy. Parliamentarians must introduce the necessary legislation and incentives required to encourage development of the local private sector.

Monitor Progress

!          Think Tank

"          Establish a think tank with membership drawn from the private and public sectors, trade unions, the University of Guyana and other skills-training and tertiary institutions. This council will recommend policy initiatives and devise strategies to achieve greater efficiency and competitiveness in the Guyana economy.

 

!          Review Fiscal Policy

"          Review fiscal policy, focussing both on expenditures and revenue-generating. The aim will be to make the delivery of government services more cost-efficient by eliminating wasteful practices and corruption.

 

!          Efficiency

"          Improve the efficiency of support infrastructure, such as transportation systems and government services.

Reduce Government Involvement

!          Redefine the Role of Government

"          Define the role of government as a facilitator of economic activity and creator of an environment in which entrepreneurship, innovation and fair competition can thrive. In so doing, we must ensure a balance of the interests of investors with those of the general public by recognizing the right of the public to quality service and fair pricing while at the same time supporting the right of investors to a reasonable rate of return (if they achieve reasonable marketing standards).

"          Cut regulations and reinvent government.

"          Eliminate unnecessary bureaucracy and expedite the overall process of doing business in Guyana.

 

!          Make Guyana Competitive

"          Optimize competitiveness of the goods- and commodity-producing sectors.

In Sum

To say that much remains to be done is an understatement.  Each of the goals mentioned here comes with significant difficulties and challenges. But working in concert, we can achieve them. We can even surpass the goals of our “realists” and attain the visions of our dreamers. 

To do so requires the greatest effort in working directly on these goals. And it also means that we must rededicate ourselves to a united Guyana and turn our backs on the destructive policies of division that have harmed our present and threaten the future of our children.