The mediocre analysis of UWI Economics Lecturer (Part II)

Dear Editor,
In the previous article (outsiders must do their homework before wildly pinning “resource curse” narrative onto Guyana’s oil journey), I argued that the learned Economist Damien King’s prediction that Guyana could become trapped in the so-called ‘natural resource curse’ is a classic demonstration of academic mediocrity. The economist offered no analysis whatsoever, or citation of any study that he might have conducted, from which he derived the conclusions that weak institutions in Guyana will necessitate corruption and political crimes, and ultimately invite the resource curse.

What is the resource curse?
For the readers’ benefit, the paradoxical resource curse is essentially a theory that describes countries with oil or other natural resource wealth which have failed to grow more rapidly than others without.
Wright and Czelusta (2004) contended that the resource curse hypothesis seems anomalous, since on the surface it has no clear policy implication, but stands as a wistful prophecy. The authors argued that countries afflicted with the “original sin” of resource endowments have poor growth prospects.

How weak is weak?
To assert that Guyana’s public sector institutions are weak is a subjective notion, rather than an inference derived from an objective analysis of the evolution of Public Sector institutions in Guyana over time.

Historic overview of public sector institutions in Guyana: Institutional strengthening and improvement over time
There was a study done in 1994 titled, “Improving Guyana’s public sector policy implementation capacity to facilitate private investment: an institutional analysis and technical assistance strategy”. This study presented a comprehensive analysis of the state of public institutions in Guyana almost three decades ago. In the introduction of the report, it was stated that “Guyana has only recently begun to emerge from the effects of more than 20 years of state-led socialism following independence from Great Britain in 1966. Guyana’s leadership closely controlled all economic activity, either directly through state-owned enterprises or indirectly through tight price, credit, and foreign exchange controls. The cost of economic mismanagement has been high: weak economic growth (less than 1% per year during 1966-89), massively deteriorated physical infrastructure, capital flight, lack of investment, a significant “brain drain” of human resources, increasing poverty, and a huge accumulation of debt compounded with debt servicing arrears.
“By the late 1980s, Guyana faced a crisis that its socialist leaders could no longer address with stopgap remedies. Fundamental changes in development strategy were called for, and the Government of Guyana (GoG) turned to the international financial institutions for help”.
The report noted that, by 1994, “Guyana has been quite successful in turning the economy around over the past five years (1989-94), largely as a result of reforms that eliminated the system of government controls that restricted economic activity”.
Another important element in facilitating the expansion of Private Sector investment, according to the report, was the Public Sector Investment programme (PSP), which was intended to provide the necessary supportive infrastructure to make private investment both effective and ultimately profitable.
Evidently, the 1994 study has shown that the Public Sector institutions in Guyana had undergone a complete overhaul in the early 90s, naturally so as to facilitate the transition from a socialist central-command economy to a market economy following the implementation of the Economic Reform Programme (ERP).
Another important point to note is that, historically, during the socialist years that span some two decades, Guyana had in fact been a victim of the paradoxical natural resource curse under the stewardship of the former Government, based on the foregoing description of the economic and political state of the economy at that time; which ultimately resulted in Guyana becoming a bankrupt state.
To this end, it is the incumbent Government that successfully reversed the economic prospects of the economy, inter alia, successfully steering the economy out of bankruptcy to economic stability two decades later. Worthy of note is that this outturn could not have been achieved over the years without the consistent improvement and strengthening of Public Sector institutions to facilitate the buoyant and broad-based growth of the economy even before the discovery of oil.
Going forward, the Guyana Government understands the developmental needs and challenges of the economy. So far, the GoG is doing all of the right things to confront these challenges, in order to achieve the developmental goals, economic diversification, and transformation of the country. This includes the consistent improvement of, and allocation of, resources to continue strengthening Public Sector institutions and building the necessary capacity.
Of note, there are a number of institutional reforms and capacity-building programmes being undertaken (too many to mention): such as improving the audit capacity of the Guyana Revenue Authority (GRA), the Auditor General’s Office, Ministry of Natural Resources, and other Government agencies; investment in the information technology infrastructure to modernise the entire Public Sector, that will aid the overall improvement in the provision of public goods and services in an efficient manner, and thereby improving the ease of doing business.
Additionally, there is also the creation of new institutions to manage the oil and gas sector, such as the Local Content Secretariat; the Petroleum Commission, which will be established in due course, etc.
These are just a few examples of some of the institutional capacity-building programmes that the Government is actively undertaking, but which will take time and resources to develop.

It is against this underlying background that the learned Jamaican/ University of the West Indies (UWI) lecturer’s assertion that Guyana will suffer the natural resource curse because of weak institutions is highly unmeritorious and unscholarly. More so when in fact the incumbent Government has a proven track record of successfully delivering the Guyanese economy out of a historic era of the natural resource curse.
In view of the foregoing, I would like to urge the UWI lecturer to consider visiting Guyana to conduct an updated study extending on the 1994 study on the public institutional framework in Guyana: the efficacy of public sector institutional strengthening, development, and improvement in Guyana, and considering all of the current and medium-term institutional capacity-building programmes within the Public Sector. This would be a very good academic study, funded by UWI, that could potentially help the goodly economist earn himself a promotion from an ordinary lecturer to professorship.

Joel Bhagwandin