Blinded by their Pre-Occupation with Revenues: The PNC-Led Coalition is Stumbling on Economic and Human Development
I had advanced the thesis about two years ago that the PNC led government has an obsession with potential oil wealth (revenues), an attitude which has been cultivated at the expense of the other sectors of the economy which have, in turn, been allowed to slip from the government’s radar.
Photo : Dr. Tara Singh
I had advanced the thesis about two years ago that the PNC led government has an obsession with potential oil wealth (revenues), an attitude which has been cultivated at the expense of the other sectors of the economy which have, in turn, been allowed to slip from the government’s radar. The coalition government is concerned more about increasing the rate and scope of the country’s revenue base than with pushing forth economic and human development. Their neo-liberal policy of “tax and spend,” is part of a wider philosophy of wealth redistribution through the implementation of fiscal, job creation, contract awards, and other policies. Troubling indeed, is that these policies have not been designed to create wealth through the unleashing of the productive capacity of Guyanese.
One may recall that the Head of the GRA (Guyana Revenue Authority), Rawle Lucas, had claimed that rural people do not pay taxes. That was a veiled reference to Indians. Following that claim, the government imposed 200 new taxes upon Guyanese to widen the tax base but also to redistribute wealth; taking from one group and giving to another, and shifting resources from production and investment to consumption. While the development of a good revenue system is important, to focus primarily on “revenues” would not only continue to hurt other sectors but it also points to a bigger problem: the lack of an economic development strategy.
A glaring example of this fixation with revenue rather than with also economic and human development, was displayed by Minister of Business, Dominic Gaskin, who nonchalantly glorified the expected $(US) 300 million per annum oil revenues beginning in 2020. His enthusiasm seems to have had no bounds when he noted at a PSC (Private Sector Commission) forum, “the revenues which oil would bring into the country’s treasury in one year would take gold 8 years.” Gaskin praised the Production Sharing Agreement (PSA) that the PNC-led government re-negotiated with Exxon. He stated much to the dismay of the Gold Miners’ members in particular that the $(US) 300 million the country “stands to make come 2020, the first year of production, “is not chicken feed.” He proclaimed, “whereas it took the government eight years to make around the same amount of money from gold, it now stands to do it in just one year from oil and gas.” Note the heavy focus on revenue and not on the country’s economic and human development.
Alluding to gold production and oil revenues, the Minister has failed to understand or to put into proper perspective the critical role of gold production in GDP growth (Gross Domestic Product), job creation and other positive impacts of the gold sector. Apart from its contribution to GDP, gold has outstripped rice and sugar for several years now as the major foreign exchange earner. Had it not been for gold, Guyana‘s economy would have been in shambles. In 2015, for example, gold contributed 11% to GDP, it employed 14% (N=39,000) of the labor force, and it accounted for 52% of export earnings. One analyst even suggested that, given the precipitous decline of the country’s gold reserves, part of it (gold reserves) has probably been used by the coalition government to fund government expenses. Unbelievable!
Not unnaturally, the Guyana Gold and Diamond Miners Association (GGDMA) “slammed Minister of Business, Dominic Gaskin’s statements on the benefits of oil versus gold.” The GGDMA expressed surprise at Gaskin’s comparison between gold and oil. His contribution at the forum has had “the collateral damage” of seeming to “belittle the historical contribution of the gold mining sector.” In an apparent reference to the Exxon’s PSA (Production Sharing Agreement), the GGDMA states. “The local miners might produce eight times as much as they do now if they have unlimited duty free concessions on all equipment and spares together with full write off of exploration expenditures and a generous stability clause as the icing on the cake. Of course good public roads in the interior are a must. Not to forget the technical assistance to improve the gold recovery from 30% to over 80%.”
Gaskin’s views on gold production are restricted to it being just a revenue earner. In addition, he seemingly minimizes the role of small miners who produce 65% of the country's gold. He, like other government officials, views the impact of gold mainly from the perspective of revenue (or cash flow), and not from an economic and human development perspective. Two rhetorical questions were raised by the GGDMA. “What percentage of ordinary Guyanese stand to benefit from the Oil and Gas sector?” “How soon will ordinary Guyanese reap the benefits, if any, from the Oil and Gas sector?”
The PNC-led government’s approach to gold is almost similar to that of sugar and rice. For them, these industries’ value resides in their actual and potential contribution to the country’s revenue base. The government has refused to acknowledge that sugar also contributed significantly in one critical area, $(G) 90 billion between 1976-2000 to the other sectors of the economy when these were in trouble. The government continues to lament that they have to subsidize sugar by billions of Guyana dollars annually. They never mention about the billions of Guyana dollars annual subsidy to Linden, their political stronghold! They would never lament their action to drive thousands of workers and their family members into poverty!
With respect to sugar estates’ closure, the government fails to take into consideration the role of sugar in the country's economic and social evolution; its impact on sugar and neighboring communities such as massive dislocation and impoverishment; and its history and social force. The government moved quickly to close 4 sugar estates (1 in 2016 and 3 in 2017) without conducting a social and economic impact study, and failed to find alternative employment for displaced workers. The government seems unconcerned with the devastating impact that such a move would directly have on over 7,000 workers and their family members, totaling 40,000. Today, at Wales there is in the making a humanitarian crisis. Given the desperate situation, NGOs (Non-Governmental Organizations) have been forced to distribute food hampers, school supplies, and other forms of assistance to cushion the adverse impact from of the sugar estates’ closure. At Wales over 400 workers there were not given their severance package to which they are entitled by law. The matter is before the court but it seems to be languishing there. The closure of sugar estates and the consequential laying off of thousands of workers would drive the poverty level in the country to about 40%, the general unemployment level upwards to about 15%, and the youth unemployment to 45%. Would oil fill these gaps? Doubtful!
The PNC led government seems to share a similar view of the sugar industry as the PNM did in Trinidad when they closed Caroni (1975) Ltd on Emancipation day August 1, 2003. The Trinidad government felt that their oil wealth would more than compensate for the loss of thousands of jobs, and the ensuing economic and social upheaval. As in the case of Guyana, the Trinidad’s focus was essentially driven by revenue considerations. The Trinidad’s authorities didn't seem to care about how the thousands of displaced workers would adjust to the emerging harsh economic reality into which they were hurled. The prospect of oil wealth blurred their vision and weakened their sense of humanity. They are now paying the price for this indifference.
Rather than the Guyana government learning from the Trinidad experience, it is making the same mistake as did Trinidad. How would oil wealth empower Guyanese? Would the government dedicate funds to revive economic activity in the sugar belt as well as in economically depressed neighborhoods? How would oil revenues be distributed among regions and across sectors? When will the government make public its policy on oil revenue sharing, including the development of the Sovereign Wealth Fund (SWF)?
The experience of other countries like Trinidad, Venezuela and Nigeria that oil is nobody's economic nirvana is causing high levels of anxiety among Guyanese, who do not necessarily believe that they would benefit in personal ways from the oil wealth, but who are more fearful that the tendency to minimize the importance of other sectors would heighten. All sectors of the economy have important roles to play in GDP, job creation, revenues, and in creating economic and social stability. Oil alone will not do it!