Business Page – April 15th, 2001

Business Page extends its congratulations to Mr. Saisnarine Kowlessar as substantive Minister of Finance. He was brought in midway in the previous Administration as a Minister in the Office of the President with responsibility for Finance. In its commentary on the 2000 Budget, Ram & McRae had noted that the state of the economy required that Mr. Kowlessar be given more authority and that he could not be held responsible for the shortcomings of that Budget since “the institutional arrangements for his effective functioning are just not present”. The elevation of Mr. Kowlessar is a positive step in at least two ways. It demonstrates that President Jagdeo who naturally takes the Finance Ministry to heart believes that Mr. Kowlessar can now do the job on his own and it also allows the President to concentrate on the increasingly weighty tasks of the presidency.

The appointment comes at a time of frightening difficulties which make the effective functioning of the government more than the usual challenge. It must be almost impossible for the Ministers, both old and new, to function and Business Page hopes for the earliest return to normalcy. With sections of the capital city lying in ruins as a result of the ill-advised work of arsonists and fears of further unrest, business activity is declining. Confidence is fast evaporating and nothing that the Minister can do can reverse the trend.

The fires in Georgetown have had a devastating effect on the country. The cost is more than financial. It is psychological and personal. It is also not discriminating. It consumes all in its path. The image of the country is being tarnished and its credit rating would have sunk to an unprecedented low. A number of store owners have expressed doubts about whether they will rebuild even if they can afford to. There is little productive activity taking place as workers from outside Georgetown and from the East Coast of Demerara in particular stay away from work in the city. The unregulated roadblocks on the East Coast create unease and fear and there is a reluctance to venture far from one’s base.

Commodity prices on the world market have had a negative effect on the economy and declining performance is becoming a regular feature. Investment will dry up and with it the prospects for jobs, growth and revenue. There will be a rush to the exit and the brain drain will continue. Can we afford this? Can we not stop it?

Insurance companies, which constitute an important part of the financial sector, must now liquidate its investments to settle the claims which they face. This will hit them hard. But there are other consequences as well. Premiums will inevitably increase perhaps outside the reach of many of the persons most at risk. Their participation in any investment opportunities including privatisations in which they have shown an increasing interest, will similarly be affected.

Both existing and future jobs are at risk and suppliers, intermediaries and consumers are disappearing and the prospects of further job losses are not distant. The fires have not been very discriminating and persons of various political affiliation have suffered either as owners or employees.

A political solution has to be found sooner rather than later. It is the responsibility of our leaders to bring the situation under some control. It may not be easy but that makes the need to act all the more urgent. Is there something that prevents the two principal actors from making a joint appeal to the nation and to getting down to addressing the problems facing the country? That both sides have agreed to meet is a good development and it is important that the arrangements are designed to prevent a breakdown in the talks. However the situation demands a more urgent approach by those who have been assigned responsibility to organise the talks.

Despite these overwhelming conditions, the Minister has to carry out the mandate with which he has been charged. During the past year much of the work that took place in Main Street was shifted to the Office of the President and this will now have to be reversed. It is not clear what the President’s ideas on the Ministry are but it would seem necessary that Mr. Kowlessar will have to rebuild a team of experience, ability and energy.

The planning capability needs to be addressed and there was even an expectation that there would be either a component or separate ministry responsible for planning and economic development. If we are to put the National Development Strategy to work someone of authority has to be assigned that responsibility. The annual budget exercise loses its effectiveness without a longer term framework out of which it is drawn. A study of the recommendations of the NDS has to be given top priority to so that an implementation schedule can be drawn up. We cannot afford to allow the work that went into the NDS to become dated for lack of action.

There is constant talk of tax reform and prior to the publication of the last Budget President Bharrat Jagdeo at a press conference had indicated that the 2000 Budget would address tax reform. It did not do so and the country’s tax system remains characterised by a narrow base, high rates, evasion, exemption and distortion. However, neither the information nor the Tax Policy infrastructure has been established that will enable meaningful tax reform to take place. He has to treat tax reform and not only VAT as a major priority. He must appoint a Commission made up of the best talent on the subject to run with the ball.

One of the benefits of the elections campaign were the extremely good ideas contained in the manifestoes. The Minister should review them adopting the best ideas for implementation. Among these is a National Economic Council made up of various interest groups. This body will address issues and make recommendations to the Minister and indeed to Parliament.

Every sector of the economy has been affected by international developments. Rice, sugar, bauxite, gold and timber are all facing difficulties. A Council would be a good vehicle to develop a strategy to address those problems. As we have seen the problems will not go away. It may be that drastic surgery and action is necessary. Painful though that may be early and more co-coordinated action is what is required.

The difficulties which the economy has gone through are reflected in the banking sector which has been reporting reduced profits. Perhaps the Minister’s options here are more limited but the automatic rescheduling of debts will merely postpone the difficulties. There is fortunately no danger of a collapse of any of our financial institutions and the Financial Institutions Act has forced them to look critically at the loan component of their operations.

As Minister in the Office of the President, Mr. Kowlessar’s authority was necessarily restricted. He must now show to the country that he is fully in charge and be accessible to the business community and all stakeholders. The 2001 Budget is a great opportunity for him to truly assert himself and to put the economy back on track so far as the conditions permit.