Today’s discussion focuses on some pertinent issues with the backdrop of the just concluded Guyana Business Summit 2017.
It is an indisputable fact that the private sector is the engine that can contribute to creating the new jobs, expand aggregate demand; and, by extension, become the principal driver of economic growth. It is also a fact that the private sector can make or break a government. Thus, any sensible government ought to have a vision around empowering the private sector as an agent of growth, rather than using the organs of the state to deny investing opportunities to the private sector. After all, the private sector is essential to delivering a stable revenue stream to the Treasury.
But the main function that private sector serves for the society is that it can rise to the task of lifting some burdens from the government’s shoulders, and lend legitimacy to the state as a facilitator for good action. Thus when one reflects on the evidence at hand in Guyana, one can find numerous Government actions that are aimed directly at squeezing the now dwindling private sector. Simultaneously, this Granger regime seems to be using the organs of state as special purpose vehicles to expand the public sector and crowd out the private sector. This is an utterly backward strategy, and requires urgent re-engineering.
Since Mr Granger moved into State House, he supervised the expansion of the force strength in the Army, consuming hundreds of millions of scarce dollars. But, as President, he has done little to offer policy support to the private sector. One very easy policy action points to the fact that Guyana is not a member of the progressive tax community in Caricom; I speak of the club of countries that offer their manufacturing sector a corporation tax rate of 25% (namely Antigua, Barbados, Dominica and Trinidad). If Mr. Granger wants the manufacturing sector to be more innovative, then he has to do his job to make sure that the business environment is competitive, and the evidence clearly points that it is not in Guyana.
But what is terribly concerning is the concerted and deliberate attempt to use state vehicles like SARA to witch-hunt the private sector. One only has to be reminded of a special political operation that was commissioned in January 2017 to conduct an inventory of high-rise buildings to ascertain ownership. In response to such adventurism in policymaking, the nation saw its most rapid acceleration of capital flight since the 1980s — so much so that it was estimated that some US million left the shores of Guyana legally in the first half of 2017 alone, and if this trend continues, some US million will be gone by Christmas. So irrespective of the Russians, Chinese, Brazilians and whoever else Mr. Granger thinks invest in Guyana, the fact remains there is a net outflow of capital, and it will not stop until he causes his government to embrace the local and foreign private sectors as partners in development, to connect people and transform economic sectors.
Rather than chastising the private sector for lacking innovation, what Mr. Granger should have been telling the business community is how much he would have been reducing the corporation tax in the 2018 National Budget. He left nothing on the table at that Business Summit, except for some idle words. But idle words do not build a nation; progressive actions do.
Going Forward
This Granger Administration must, at a minimum, consider the following policy actions in the 2018 Budget:
1) Expand opportunities for more local procurement, using the competitive tendering process.
2) Offer a fixed training grant of $10,000 to every newly hired worker, to acquire pertinent skills needed in the workplace, like Microsoft EXCEL, computer studies, learning to drive a motor vehicle, conflict management, report writing, customer service, and so on.
3) Grant a tax refund to any employer who hires more than 10 new staff in a year, and extend these opportunities to SMEs (measured by turnover) for hiring 5 new staff.
4) Establish the long-awaited State Development Bank, which is in the APNU/AFC manifesto.
5) Reduce the corporation tax rate for non-commercial activities to 25%.
It is imperative that the Government step in and prevent further asset destruction from happening in the private sector. But that requires a macroeconomic strategy, something I am yet to see in action from Minister Jordan. Maybe it was a blessing in disguise that Mr Jordan skipped the Business Summit, because such ludicrous statements as no new taxes in the 2018 Budget would not have gone down well after the backdrop of the heavy burden that was imposed in the 2017 Budget.
