Guyana falling into trap of ‘Dutch disease’ – financial analyst

Oil sector

…slams Govt for failure to create new industries, maintain old ones

By Jarryl Bryan

Guyana’s economy is at a crossroads. After most of the productive sectors showed contraction, it faces the economic pitfalls of the ‘Dutch disease’ and according to one financial analyst, must figure out ways to create new industries while sustaining the old ones before it is too late.
According to economic advisor to the parliamentary Opposition, Dr Peter Ramsaroop, Guyana may be getting billions of dollars in revenue in the coming years from the oil sector. However, he noted the importance of focusing on what is happening in the economy currently such as the closing down of sugar estates and retrenchment of thousands of sugar workers.
“This government has put in zero transformation projects in the country that can be

ready when you have more money to execute, such as the agriculture belt. We are shutting down sugar, but with no alternatives for socio-economic, for new industries to be created. In other parts of the world, for instance St Kitts – prior to shutting down sugar, St Kitts invested in a lot of technology. So as the sugar workers became retrenched, they were being trained in other, higher-paying industries. And they were able to (transfer) themselves to better paying jobs.”
“The (government) said they’re going to train them in catering and sewing. But what is catering and sewing going to do for Guyana that will improve the lives of

people? Without transformational projects, no matter how much money we get, we will not be able to improve our lives in the next five years. So every year we stagnate the economy, we are falling behind.”
Dr Ramsaroop noted that if systems were not put in place, Guyana would not solve the economic, as well as energy issues it currently faced. He pointed to the Government’s track record of being unable to spend budgetary allocations in a given year and questioned how it would handle the oil revenues.
“We can’t even spend 50 per cent of a billion dollars and implement new strategies, how do we expect to spend that (oil revenue) if we cannot even spend our current budget and put plans in place in order for people to benefit”

Lessons
According to Ramsaroop, Guyana is running the risk of falling prey to the ‘Dutch disease’ afflicting other oil-producing nations. The ‘Dutch disease’ can cause a reduction in the value of other exported commodities and is often blamed on the sudden development of one sector at the expense of others.
Ramsaroop noted that the country has failed to learn from the example set by neighbouring Venezuela, once an economic powerhouse in the region. The Spanish-speaking country is now in dire economic straits.
“There are so many models around the world. We have Nigeria, other models that show (the pitfalls). Look at Venezuela. Venezuela was one of the richest oil countries and look what is happening today in Venezuela. People don’t have food today. You would think that we, as a nation, would step back and say, we will get money, but we’re falling into the same trap as these other countries.”
“The economic policy of Granger and his government is stagnating. And they have not implemented a single project over the last two and a half years that will change Guyana and bring new revenue to the people of Guyana. They’re betting on oil, so they’re going to (idle) for five years hoping that oil money comes in by 2020.”
He noted that with thousands of people out of work, the ripple effects on the economy would be significant. Using examples, the financial analyst pointed out that the taxi drivers and the shopkeepers in Berbice would not be able to make the amount of money they formerly did owing to less spending.
“And after 10 years of oil, oil may not be an important necessity in the world,” he added, a reference to the global push towards clean, renewable energy. The world is moving towards different kinds of energy. By 2030, they may not produce a single car using gasoline.”
The Finance Ministry’s half year report for 2017 had showed contractions in certain sectors when compared to the corresponding period in 2016. The declining sectors had included sugar, livestock rearing, forestry, mining and quarrying, and even the bauxite industry.
It showed that sugar production was recorded at 49,606 tonnes at the half year and when compared to 56,645 tonnes during the first half of 2016, represented a decline of 12.4 per cent. The livestock industry also contracted by 10.9 per cent in the first half of 2017, owing to heavy rainfall severely affecting production, especially in the second quarter.
The forestry industry also showed an 18.2 per cent contraction in the first six months of 2017, compared to the same period in 2016. Declining production within the forestry industry was a result of structural changes in the industry.
The mining and quarrying sector contracted by 4.0 per cent, during the first half of 2017. Gold production fell by 1.7 per cent to 317,096 ounces, in the first half of 2017, compared to the same period in 2016. Also, it showed the bauxite industry declined by 11.5 per cent, as a result of reduced production of higher valued grades.
This was as a result of poor weather combined with mechanical issues at one of the mines. However, production of metal grade bauxite (MAZ) increased by 97,016 tonnes or 21.3 per cent, the report had stated.