Growth, but no development

 

After its latest annual visit to check our economic pulse, an IMF team declared that our Gross Domestic Product (GDP) grew 3.3% last year, and will get to 3.5% this year. The Government, not surprisingly, seized upon this announcement to claim their economic policies have been vindicated; but those ordinary citizens who bother to read the fine print below the headlines trumpeting of “growth” must be scratching their heads about what the fuss is all about.

The full announcement, after all, was that while total real GDP increased as above, there was “a contraction in non-mining GDP”. In effect, what the IMF confirmed was that gold production was the sole generator of its “growth” metric, while the rest of the economy actually contracted. And herein lies the cause of the disjunction between APNU/AFC’s euphoria and the people’s gloom.

By disingenuously refusing to disaggregate the IMF’s “good news”, the Government is refusing to face the reality that the economy — led by manufacturing, rice, sugar and retain — is actually imploding. But even the increase in the production of gold, the Government should admit, was almost totally driven by the two large-scale producers, Guyana Goldfields and Troy Resources, which finally came on stream to their optimum production. While the Government will collect its royalties, since these companies are foreign-owned, how much of the revenue will actually remain in Guyana?

Government’s reliance on gold production statistics to be complacent on our economic condition illustrates the dangers of the much-talked-about “resource curse”, which they and most commentators only connect with the coming “oil boom”. Guyana already has experience with a large-scale gold producer “boosting” our GDP – the Canadian owned Omai. But what did that operation leave us with, but several gargantuan holes in the ground and one infamous cyanide spill from one of its tailings reservoirs? In a word, there was “growth”, but no “development”. And that is the clear and omnipresent danger posed by depending on mining operations — whether liquid or solid — to measure economic performance.

The major problem is that these mining operations do not automatically develop backwards and forward linkages with the rest of the economy: they literally parachute into the remote mining sites, employ some locals, extract the resource, and depart when that is depleted. For instance, Guyana Goldfields extracted 151,000 ounces of gold last year, which would have generated revenues of US$194M — exceeding those of rice exports — but employed only 500 workers. Rice, on the other hand, supports over 20,000 farmers and 10,000 milling and support workers while retaining all of its foreign currency earnings within Guyana. Gold from the large foreign operators merely exports our wealth abroad to develop other countries.

For there to be development which is focused on improving the welfare of the people, rather than just the empty rhetoric of “growth”, the Government must recalibrate and reorient its economic thinking. It should desist from spending the royalties from gold to support its wasteful and profligate splurge on boondoggles such as the Jubilee Park and bread-and-circus activities, and place it in the Sovereign Wealth Fund (SWF) it only talks about with reference to oil revenues. Is it not a national shame and disgrace that the people of our hinterland regions, from which the gold is extracted, continue to be the most poverty stricken in Guyana, just as they have been since the Europeans seized their country?

We should have a joint committee comprising Government and the Opposition to administer the SWF after it would have identified projects that would create employment and add value to goods that can be exported to bring in foreign currency. For instance, we have a small jewellery industry that can be boosted with strategic injections in the production and international marketing of items that incorporate our gold and precious and semi-precious stones that we presently generally sell as primary products. And this approach can be incorporated in other areas of the economy.