The Economy: Budget 2018 – What’s good in it?
The budget debates have now come to an end and was approved without any amendments thereto – on December 15, 2017, by the National Assembly. While it was received with widespread criticisms from analysts and other commentators alike, including this column, and of course Opposition M.Ps (Members of Parliament); it does contain some amount of positive elements. In this regard, these should not be ignored, or reduced to insignificance. Therefore, recognition is given to this notion, by this column in the interest of stimulating – national goodwill – if such a proverbial terminology is permitted.
Before delving into the core discussion and analysis of today’s piece, however, it must be acknowledged that the restructuring of GuySuCo and the resultant unemployment of some 4,000 sugar workers commencing January 2018, is the single most dominant adverse reality stemming from the budget – the effects of which – the economic and social consequences, that is, will be real.
Notwithstanding, the budget has allocated the sum of $6.3 billion to support the restructuring program of GuySuCo inclusive of severance pay for the redundant sugar workers. With this in mind, it is therefore hoped – in ‘good faith’ – that with the co-operation, cohesiveness, determination, patriotism and effectively holding the government to ensure they seek to speedily deliver on its other alternative programs as promised, to cushion the effects of this economic shock.
For instance, (1) the leasing of lands to the sugar workers for the purpose of other Agricultural products. And (2) the Central Government has established a Special Purpose Unit (SPU), which is mandated to examine, in a comprehensive way, the future direction of the entity which includes the Privatization agenda as well. While these initiatives, among others, should have been executed simultaneously and in a timelier manner, we, the nation should be more cautiously optimistic that overall, the risk of a poverty-riddled sugar producing communities and village economies – could be averted in the long run.
On another positive note, is the reversal of the Value Added Tax (VAT) that was instituted on Private Education in the 2017 budget, after much resistance across the nation and pressures imposed by all relevant stakeholders to quash this policy. In this spirit, the 2018 budget has allocated the sum of $19.91 billion for the Education Sector, of which $2.8 billion is provided for capital expenditure and the remainder for recurrent expenditure.
To that end, it should be mentioned that the Head of State was a strong advocate for strengthening and improving the country’s Education System during the 2015 elections campaign – more so on the quality of education. The philosophy of this agenda was centered on the notion that education is the underlying pillar of economic growth and prosperity of the people of a nation.
As an example in this regard, an examination of the history of economic development of Singapore revealed that about fifty years ago, this country was an undeveloped country of a GDP per capita of less than US $320. This country is now one of the world’s fastest-growing economies with a GDP per capita at an incredible US $60,000, making it the sixth highest in the world, according to the Central Intelligence Agency figures. For a country with no territory and natural resources, the economic ascension of this country can only be characterized as remarkable. By embracing free-market capitalism, globalization, education, and strict pragmatic policies the country was able to become a global leader in commerce by overcoming their geographic disadvantages – this is a country that Guyana should strive to emulate.
In the extractive industries, gold production is expected to remain stable while bauxite production and other mining are projected to decline by 2.3 percent and 12.6 percent, respectively. Of interest to note, Linden is where the core bauxite mining activities are carried out. And, over the years this region has been the beneficiary of subsidized electricity of over $2 billion annually. Thus in the last five years, the government expended over $13 billion in subsidies for the provision of electricity. Given this, there exists the opportunity to transform Linden into a manufacturing hub.
Should this opportunity be recognized by the Private Sector actors and/or other investors, and is exploited, such initiatives will have a positive spin-off effect to the regional economy of Linden and also the broader economy. One would recall that at the last Business Summit the Head of State charged the Private Sector to be more innovative and implying for them to take on bold risks and invest in the economy. While there is some amount of valid nervousness for such reluctance, there is also merit in the commentary made by some advocates that the Private Sector should not meddle too much in the political affairs of the country. Support for this notion is to some extent meritorious because it takes ‘confidence’ to propel an economy by all stakeholders particularly the investors, despite the prevalence of whatever political tensions in the environment.
Finally, readers of this column would recall that on November 18, 2017, a special article was featured under this column for “the need for a State Development Bank to propel Guyana’s Economic Development” https://newsroom.gy/2017/11/18/the-economy-the-need-for-a-state-development-bank-to-propel-guyanas-economic-development/. In this respect, the author of this column is pleased to see that the Government seemed to be making a concerted effort to have this initiative become a reality. It was announced by the Ministry of Finance that the Government has secured a loan from the Caribbean Development Bank to conduct the feasibility study for a State Development Bank, for which work will commence in 2018. This is another good move for Guyana’s economic development.
*The author of this column is the holder of a Master of Science Degree from a UK university in Business Management, with a specialism in Global Finance and Financial Markets.