What are some of the parties’ proposals
on economic development?
The People’s Republic Party (PRP) outlined a menu of initiatives it proposed to advance under their economic development agenda in its manifesto which includes the following substantive items:
* Support and preserve canning and preserving of farm produce, and export to Caricom and other South American markets
* Proposes to review the sugar industry and act in the best interest of the workers
* Review of Bauxite situation
* Provide incentives to private sector
* Establish an agriculture development bank
* Proposes to set up a study committee to examine monetary and fiscal policy to make recommendations for the strengthening of the domestic currency, against the backdrop of the Guyana dollar is the lowest currency in the Caribbean against the US dollar.
Other proposals include telecommunications, tourism, public-private partnership and forest sustainability.
These are some of the major points under economic development in the party’s manifesto out of a total of 23 listed bullets. The others are not highlighted because they are not substantial per se, though they are perhaps good small initiatives.
Now, let’s examine some of the proposed development initiatives highlighted. Firstly, the ideas contained therein are not bad – they are actually good in spirit, but the practicality in terms of application for Guyana is another matter altogether and is of paramount importance.
Support and preserve canning and preserving of farm produce, export to Caricom and other South American markets, and exportation of food products: in order to achieve this, it would be helpful to examine what are the challenges that are inhibiting this in the current framework. For example, it is a given that Guyana has vast agricultural lands, arable lands and water, in theory, enough land to grow enough food to feed the entire Caribbean – yet, this has not been optimally achieved. It is estimated that Caricom’s food import bill will reach close to some US$8 billion in 2020. This hefty import bill is more than twice Guyana’s GDP. Therefore, it is not a question whether the market exists or not and its sustainability. One ought to understand that while we have many farmers, farmers need to be taught business skills. Gaining access to export markets requires developing high-value agribusiness which will require substantial new business investment and the ability to establish links with international markets. Government will need to play an enabling role rather than one of direct management. In so doing, this will require policies that will encourage private investment that brings technology and market linkage. The issue of packaging, branding, and energy cost are important factors that ought to be addressed as well.
Establish an agriculture development bank: in the past, Guyana experimented with development banks which unfortunately failed. The reason for the failures of these institutions largely surrounded the politicisation of the institutions and bad management. This is not to say, however, that a development bank is not needed. In fact, the case for a development bank was dealt with in previous writings by this author under this column. With the wisdom of hindsight, the model of any future development bank in Guyana would have to be different in that, the governance structure is fully anonymous by way of legislation, and that the Board of Directors and Managers ought to be strictly professionals, otherwise, the risk of repeating past failures might be inevitable.
Proposal to set up a study committee to examine monetary and fiscal policy to make recommendations for the strengthening of the domestic currency, against the backdrop of the Guyana dollar is the lowest currency in the Caribbean against the US dollar: this proposal is one that clearly does not reflect a deep understanding and appreciation of the determinants of exchange rates, and it also implies that the development initiatives proposed in the manifesto, in their utmost entirety are inherently weak and shallow.
To explain this in a simple manner, exchange rates are determined by the demand and supply for foreign exchange (FX), which is predominately the US dollar that is being used globally as the reserve currency of many countries and the global trade currency. Therefore, one ought to understand what are the main inflows of FX and outflows – that is, inflows are from exports, external debt, remittances, tourism activities and Foreign Direct Investments (FDIs); outflows constitute, imports, servicing external debt, capital outflows by firms and individuals. An important component in this equation is the level of foreign reserves held in the banking system and the central bank which would be derived from the net asset position of these transactions and while noting that the international reserves are accumulated over time. Hence, without getting into all the mechanics of this, which were also dealt with more extensively in previous writings, the long-term solution is embedded in how we earn a much larger level of foreign reserve and the simple answer is, Guyana needs to be transformed from a primary sector economy to a tertiary sector economy. Energy cost is a huge factor, the requisite skills, technology and innovation are also lacking. Having said that, a special committee to fix the exchange rate is not needed. A solid economic development plan will.