Understanding economic diversification versus economic devastation: setting the record straight

BY: JB

Over the last few weeks, this author embarked upon an assignment to analyse the manifestos of all the contesting political parties. This week, the author intended to focus on the manifestos of ANUG and Change Guyana; however, upon examining both manifesto’s economic development programmes, neither of them present any insight as to how they intend to achieve those ambitious ideas proposed therein. As such, it would not be worthwhile to present any analysis for this reason as there is really no scope to do so.

Having said that, today’s article is a diversion from this series and next week, which would be the last Sunday before elections, this author will perform a comparative analysis of the manifestos of the two major contesting political parties.
Today’s topical issue is prompted from an article carried in sections of the media where it was reported that the Minister of Finance boasted of some 4.7% growth in GDP for last year despite poor performances in traditional sectors, and that investors continue to ink concrete deals regardless of the political environment. The Minister went on to elaborate and suggest that over the years, the regime has been building and diversifying the economy.

This analyst is hard-press to posit that the Minister perhaps is seemingly taking credit for that which was not engineered by him through any of his projects, programmes and policies. Economic diversification and economic devastation are two completely different realities altogether. The economic realities for which the Finance Minister’s policies and by extension the regime are largely responsible for are in fact, redistribution of wealth (an entire article was previously dedicated towards this), and economic devastation – that is, the case of downsizing the sugar industry which in effect led to massive unemployment rates, depression in the sugar communities, increases in non-performing loans in the banking sector, extraction of over $40 billion from circulation in the economy which in turn, sustains the village economies and has far-reaching economic sustenance implications on the macroeconomy— a contributory factor, admitted by the Minister himself, for the financial constraints of the National Insurance Scheme (NIS) investments, and a massive loss in private consumption of about $180 billion.

In fact, the Commission of Inquiry (CoI) into the Guyana Sugar Corporation Inc in 2015, headed by Guyana’s prominent economist, Dr Clive Thomas, never recommended the closure of any of the sugar estates because Dr Thomas, as an economist, understood the macroeconomic implications of such a move, and what was even worse, the CoI cost taxpayers over $50 million. This is largely why the traditional sectors continue to under-perform as admitted by the Minister. This underperformance of the traditional sectors resulted in a loss of some US$2 billion in foreign exchange over the last five years, despite being offset by Gold exports, other exports and foreign direct investments owing to oil and gas-related activities in the economy. It is the number one factor why the central bank’s international reserve is less than the universal minimum benchmark of three months import cover for the first time in more than ten years when it has always been above three and four months import cover.

Now, let’s examine the economic diversification which the Minister boasts of: as contended previously, the investments by foreign investors in the hotel and tourism industry and the reportedly explosive expressions of interests by foreign investors in the US, Canada and the UK and many other counties, to invest in the Guyana economy, are largely directly attributed to Guyana becoming a petroleum-producing state, the tsunami of economic opportunities that the emerging oil and gas sector of itself will induce in the next two decades, and of note, these developments are not a result of any projects conceptualised or implemented by the subject Minister, rather these are direct results of projects, policies and initiatives that were already in place under the previous regime. It is public knowledge that the Exxon’s contract was signed in 1999. In other words, these developments that are occurring now are simply a natural default of this fundamental fact.

The subject Minister’s policies have no evidence of any economic diversification plan. It should be noteworthy to mention, more so, that even all the road projects and other developmental projects in the Hinterland regions and other parts of the country which are somewhat alluded to in the National Green State Development Strategy, were all conceptualised and developed in the National Development Strategy since 1996-1997. The National Development Strategy was put together, inter alia, 300 hours of meetings by 23 technical working groups consisting of over 200 Guyanese and is by far a more superior development strategy than that which is contained in the Green State Development Strategy.
These contentions will be extended in greater depth next week.

(The author is an experienced macro-finance and research analyst, Lecturer and Business & Finance Consultant. The views expressed are exclusively his own and do not necessarily represent those of this newspaper and the institutions he represents. For comments, send to jbbankingadvice@gmail.com).