Business Page – September 17, 2000

FREE TRADE OR CORPORATE VENDING - THE ROYAL CASTLE OUSTER

Introduction

The ejection of two Georgetown-based businesses from Linden by the Linden Town Council has drawn sharp comments from free traders who oppose trade restrictions for any reason, and those who believe that the depressed state of the economy of the bauxite town demands that attempts to cream off the little cash that circulates in the town for a day or two each week can have catastrophic consequences for the town and must be prevented. The companies are MFK Trading, known for its buy-local crusade and Royal Castle, the food franchise out of Trinidad operated in Guyana by two of the leading members of the Georgetown Chamber of Commerce. The difference in these two operations suggests that the action is not about hostility to outsiders as it is about protecting the very fragile base of the town’s economy.

The arguments can be summarized simply. On the side of the free-traders - a term that is itself neither elegant nor particularly respectful- have lined up persons like Mr. Manniram Prashad, long serving President of the Georgetown Chamber of Commerce, Mr. John DaSilva(in a letter to the Catholic Standard which suggests that he was writing in his personal capacity) and the influential editorial of the pro-private sector Stabroek News which in its usual manner tried to balance its commitment to the private sector with some practical recommendations on preventing similar issues in the future. The main argument is that there should be no restriction on internal trade and that as citizens we must be free to ply our trade anywhere we want in Guyana. The Stabroek News argued that ‘barriers to trade protect services and industries that would not ordinarily survive in the marketplace and tend to hurt more in the long run.” It did not add however that protectionist measures can help fledgling or strategic businesses to develop and free trade may therefore be defensible in defined circumstances.

On the other side which includes small Georgetown entrepreneur Mr.Ovid Holder, it is argued that the authorities in Linden have a duty to protect the interests of the citizens of the town and “moreso their capacity for income generation and capital formation” They argue that the dislocation of their own small businesses posed both economic and social threats and that what MFK and Royal Castle were attempting to do was to make and take money out of Linden on the cheap.

It cannot go unnoticed that the eviction of MFK did not draw much comment in the Press and one has to wonder whether the influence of the two Guyanese owners of the Royal Castle franchise in Guyana has anything to do with the fact that a Linden resident “invited” them or the position taken by the Georgetown Chamber of Guyana. Our Chamber understandably defends its members’ interests with great vigour but it must be even-handed.

The issue

Once again this issue demonstrates our mistake in focusing on poverty rather than wealth creation, in promoting sector over principle and local over national matters. The manner in which the Royal Castle case in particular was handled is of course unpleasant and can give, as it probably did, the wrong impression and indeed backfire. Shutting out competition will not help the town in the longer term, and distasteful as it sounded the cheeky suggestion or bold threat by the Royal Castle manager that the action of the authorities in Linden “will not go unnoticed and other firms may be reluctant to set up shop in the mining town” is a real possibility. Of course one can respond that by any conventional definition Royal Castle certainly did not set up shop in Linden unless the manager was suggesting that wayside vending by his company constitutes setting up shop. In establishing high standards in a relatively short space of time Royal Castle has also managed to prevent pavement vending outside its Georgetown location. It must not be seen to be encouraging or practicing the same behavior anywhere else. Indeed if it wishes to be seen as a good corporate citizen in must be prepared to engage in the debate in resolving what is now a national problem. It can start by asking Mr. Ovid Holder whose business continues to be affected by vendors outside his business’ doorstep.

Free and fair trade

By now no one questions the benefits which competition offers although one must not forget the cost as well. There is no better test of the quality of one’s product or service than the marketplace. Consumers are a demanding lot with no sympathy for anything but considerations of quality, price and service. Unless a business has a monopoly or a niche therefore it has to ensure that its product matches that of its competitor. Free trade is also credited with the increasing wealth in most countries although many will argue that it is also responsible for the increase in poverty in so many countries. To parody the comment about elections however trade must not only be free it must also be fair. Pavement vending whether by the single parent or the corporate operator poses unfair competition to those who have to meet the fixed cost of a permanent establishment.

We have seen the consequences of pavement vending on established businesses. Now we are seeing something of the reverse: otherwise established businesses are threatening the survival of the wayside food vendor.

Our own experiences of free trade and the warning bells sounded by people of the calibre of Sir Shridath Ramphal alert us to the downside of globalisation. Yes as citizens we must have equal rights but does that justify globalisation at the local level?

Testing the market

In defending its position the Linden authorities call for businesses to take advantage of the incentives offered by the Government and come and set up businesses in the town. Suggesting that this is indeed what Royal Castle intends to do someone sympathetic to the company explained that the company was testing the market and the approach it was taking was to use this as a point of entry. Market research has come a far way and the approach is so unorthodox that the suggestion cannot be taken seriously. The principals of the company are surely aware that all relevant indicators point to a dramatic decline of the town. It needs to be rebuilt by policies and businesses that commit to investment and jobs in the long run. Weekend trading offers neither of these.

Local Government autonomy

While we talk of competition we miss completely the opportunity to address the question of the authority of towns and cities to regulate their affairs including the raising of taxes and setting rules for the carrying on of businesses in their areas. How much more useful it would be if Linden could establish policies which sought to attract businesses to its area rather than say to Georgetown or New Amsterdam. Just look at the brochures of the individual states in the USA to understand how far they go to attract businesses to their own state. In Guyana those who had the opportunity to carve a constitution which promotes growth and development have once again done the nation a grave disservice in their obsession with political issues and perpetuation of arrangements which have not only held the country back but has put it firmly in reverse mode. True democracy should allow for the decontrol and de-concentration of power from the centre and to enable towns, cities and communities greater autonomy over their affairs.

The authorities in Linden are clearly trying to assert themselves and they may come in conflict with the law. Philosophers and ethicists will argue on how to resolve such conflicts but the issue has to be forced on the agenda of the country. More of the same policies which have failed us are a guarantee of further failure.

Protectionism

At the same time the residents of Linden and indeed all of us have to recognise that we are living in a real world and that protectionism seldom helps anyone in the long term. Protecting inefficient businesses whether they are a Linmine or Ms. Jones can be a costly proposition. Small businesses will continue to exist at the mere survival level unless they understand the marketplace, are well managed, financed and directed. If protectionism helped, the policies of the late President Forbes Burnham should have made this country into an economic powerhouse. The authorities in Linden need to take positive action to help the budding entrepreneurs and residents of that area rather than negative measures to keep people out.

The food business

Whether it is chestnuts in England, hotdogs in the US or doubles in Trinidad, outdoor eating has an attraction of its own. Yet bauxite dust is a serious discomfort if not hazard and roadside food vending in Linden therefore poses additional risks which the health authorities need to address. Do all the individuals who sell food to the public have the relevant certificates and indeed does the operation have a separate hygiene certificate to sell at a particular spot?

Protecting small businesses

The country’s economy is dominated by small businesses and matters affecting them are therefore of great importance to the country and the representatives of small businesses. In the circumstances, two voices that one would have expected to hear on this issue are the Government’s and the Small Business Association (SBA). Minister Geoff DaSilva’s portfolio includes trade and he is an active, energetic person who is proposing to lay in Parliament legislation addressing small businesses. He has to take a position on this matter and ought not to ignore it no matter how politically uncomfortable it may be. The SBA must also indicate where it stands on this matter approaching it in a balanced way taking account of its members’ as well as the national interest. The position of the Linden Chamber of Commerce would also have been useful in formulating a less antagonistic response to the development.

Conclusion

This experience must now be used as a catalyst for action and change in Linden. It is a small community with strong bonds. Its political difficulties are not the same that have plagued the rest of the country. It has some unique features which it can use to develop the area. But first it must rid itself of the lethargy and hopelessness that have engulfed it. It has lost much of the skill and gloss of the past. It would be good if it now recognises that losing hope in the political parties in Georgetown would be a positive development. Its solution lies in itself. Its leaders must now re-assert and re-define the role of Linden in the new decade.

It must make sure that consumers are not short-changed in price or quality and in regard to food the latter can be a matter of life and death. It must train and empower its entrepreneurs in management, providing outlets for their products, assisting in sourcing finance and joint venture opportunities. It must make it clear that inefficiencies and unethical conduct will not be condoned and that responsible civic behavior including the payment of taxes, and meeting obligations to the area and the country is the quid pro quo for support.