COMMENTARY AND ANALYSIS

It is difficult to detect any real vision in this Budget. If the Minister is awaiting the completion of the National Development Strategy he should have stated that. That omission leaves the reader to wonder about the wisdom of allowing an economy that has slowed to run on autopilot.

For those individuals, organisations and groups who made submissions to the Ministry of Finance, the Budget 2000 will be a major disappointment. Except for the teachers and the members of the disciplined services the Budget offered nothing to anyone. The Government has clearly and rightly made housing a key pillar of its social programme. In 1999, it was announced that it would allocate 10,000 house lots. Unfortunately without offering any information on how successful that has been, the Government now proposes to double that number without indicating whether the Ministry or the Central Housing and Planning Authority has the capacity to execute this and whether the allocation for infrastructure is adequate. The capital expenditure proposals indicate otherwise.

Every Budget leaves a trail of unfinished business much of which represents promises to the private sector. Critics of course blame the government for over-commitments and under-achievement. Much of the blame however must be placed squarely at the feet of the leaders in the private sector who seem afraid to hold the government accountable. Too many of our private sector leaders prefer cozying up to the Government for favors to their own businesses rather than lobbying selflessly for the sector they represent and the economy as a whole. The Guyana Manufacturers Association in a letter to the Private Sector Commission noted “ its grave disappointment in not being afforded a reply to its submissions over the years.” The Association continued “ Our Association sees this (the Budget Consultation) as being an exercise in futility and is seriously considering the advisability of future submissions for the purpose of consideration within the National Budget Estimates.” It is unlikely that the Private Sector Commission did anything about the complaints.

The leadership of the Trade Union Movement has equally failed to make representations on behalf of workers. Whilst the personal deduction has been eroded and NIS contributions increased, the Trade Unions have by and large been extremely silent, more concerned about protecting turf than about defending the living standards of the workers.

Macro-economic Environment

The macro framework calls for single digit inflation, and perhaps slightly optimistically but dangerously close, the inflation target for the year is 9.5%. This no doubt depends on the exchange rate remaining fairly stable, an assumption that cannot be taken for granted.

Elections are due to be held very early into the new year. These are seldom without contention and disruption, which could destroy just about every one of the targets set for 2000.

Growth

Whilst projected growth is perhaps realistic, the economy is far too dependent on the traditional areas when Guyana is a price-taker. The performance of the economy in the past two years is well below that of the early years of the Economic Recovery Programme. The modest growth projected for this year will barely help us recover to the situation we were in two years ago. It certainly will not produce the transformation required if Guyanese are to see a future here.

Tourism

Tourism continues not to rank high on the priority industries despite Guyana’s unique product. In 1999 the Government committed itself to the establishment of a Tourism Board and an allocation of G$15M. One year later we are told “during this year the Government expects to complete legislation governing the establishment and operation of the Board.” This must be most disappointing to the operators in the sector but do not expect them to complain.

Tax Reform

Six years ago then Finance Minister Asgar Ally tabled a State Paper on Policy for Tax Equity and Reform. Religiously in every Budget Speech since we have heard plans to reform the tax system only to be repeated one year later. Yet we appear to play lego with the tax system. Bits stuck on when needed not only stay there but make serious changes later more difficult.

Focus and its counterpart Business Page have always been convinced of the benefits of the Revenue Authority if not for the reasons often advocated. That Authority will take no less than 3-5 years to fully establish itself. It would be a major risk to impose VAT on the Authority during that time.

Capital Gains tax, a small Corporation Tax rate and Property Tax cry out for action. Why can’t these be addressed as a matter of urgency?

Two additional points are worth making. Tax rates are too onerous and need to be reduced. Second, tax policy will have to change in response to e-commerce, tax treaties, removal of controls and the ever-changing business structures. High rates of tax make evasion attractive and discourage effort particularly when the income is taxed both when it is earned and when it is saved.

Transparency

Concerns about corruption are widespread and were recently rated as major by respondents to the Business Outlook Survey 2000. The Tender and Procurement policies of the Government have for years been criticised for the ease with which they can be corrupted. Hopefully, those procedures will now be seriously addressed.

It is interesting to note that the budgetary allocation or the overworked and understaffed Office of the Auditor General is being increased in the year 2000. Nothing will inspire more confidence than constitutional changes that will enhance its independence.

Debt Relief

The PPP/ Civic has been particularly successful in obtaining debt relief and the external debt has now been substantially reduced. However the Government has to ensure that the arrangements for long-term debt write-off do not cause onerous debt servicing in the short term.

Institute of Private Enterprise and Development (IPED)

The Budget seems to place much faith in IPED to assist the small entrepreneur. It should be aware that IPED’s interest rate policy is often the subject of adverse criticisms similar to those leveled at the banks. That same organisation will be managing the Guyana Youth Business Trust. Youth unemployment is too serious a problem to leave almost entirely to one organisation.

Distressed Companies

In 1999 President Jagdeo had announced plans to assist distressed companies. Widespread bankruptcies have to be avoided by creative restructuring which allows those companies to return to viability while providing higher recoveries to the lender than they would otherwise have received.

No New Taxes?

Whilst the Minister spoke confidently of no new taxes, workers and employers are only too well aware that NIS contributions have doubled over the past three years. Even if this is not theoretically a tax, it certainly reduces the take-home pay of workers.

Issues Not Addressed

The Acting Speaker of the House and indeed all women would have been disappointed at the absence of any women-related issues. The same is true of Amerindians and in the Budget to a lesser extent youth and technology. These are rather unfortunate oversights.