Business Page – May 16, 2004

Poverty reduction

Introduction

For those who believe that the World Bank and IMF policies are the panacea and indeed the only way out of poverty, May has not been a very good month. The findings of a recent study have shown that countries which pursued independent, home-grown, sensible paths to economic recovery were more likely to succeed than those which accepted the IMF medicine. In our case, not only has that medicine seen us selling off some of our more valuable assets for a pittance, and opening our economy to all and sundry, but it also appears that the medicine is addictive - we now seem unable to survive without it. And the poor in India - the country which only this week was the recipient of encomiums from the Economist for its consistently high growth rate - voted out the government which practised privatisation, liberalisation, high-growth, etc, in the belief that wealth automatically trickles down. Is there a lesson for us or do we continue to march merrily to the IMF tune?

It seems that for us there is no change, even though since the recent round of consultations and comments - several very critical - on the Progress Report (PR) of the Poverty Reduction Strategy (PRS), there has been no word on whether the comments on the draft have led to any fundamental reconsideration. While we are quick to describe any consultations by the government as opportunistic and cosmetic, we should not underestimate the importance of the Progress Report, nor should the government feed such cynicism by ignoring the results of the consultations.

Having participated in one of the consultations, I considered it inevitable that participants would focus on issues that directly affected them, that as usual partisan politics would cloud the integrity of the discussions, that there was too little time for participants to discuss such a formidable document and that the draft had far too many deficiencies to allow for proper debate. But it was as a big-picture document that the draft had its biggest limitations.

Ambivalence

Despite having committed ourselves to an IMF programme for the past fourteen years, there still seems to be considerable ambivalence at all levels of our society, including the government and political opposition, that we are not too comfortable about an open economy whether it is at the regional level or internationally. One only has to look at our attitude to Caribbean businesses to recognise how insular our business community and our population are, or how we feign national hurt at the suggestion that external advice or assistance could help in resolving some of our entrenched political problems.

The irony is that we have no such compunctions about seeking aid, whether by way of loans, write-offs, concessional borrowings, or assistance on how to formulate a national tax policy, to name a few. This irony is evident in the very opening section of the Progress Report which, without specifying where our performance fell short, immediately blames "donor aid as [having been] especially slow and oftentimes focused heavily on structural reforms and less on programmes that generated quick supply responses in poverty reduction with serious implications for the achievement of the Millennium Development Goals (MDG)."

No one is quite sure who the authors of the Progress Report are, but their mixing of one document with another, the absence of any indication of what the progress is being measured against, and the casual use and often misuse of language, restricted the scope for meaningful comments or a proper evaluation of the PR. For a discussion on the Guyana MDG, please refer to Business Page of October 13, 2002, which can be found at ramandmcrae.com.

In the article referred to, we noted, "Just by way of example, for Guyana to achieve its poverty-reduction goal, economic growth has to be in the region of six per cent annually which in the current situation is highly unlikely." The truth is that the chances of Guyana achieving its goals are nil, but even this the Progress Report acknowledges only half-heartedly.

Some thoughts

Following the consultation, I submitted written comments on the PR noting that it was a "fairly large document containing a number of both subjective and objective statements," and that I proposed dealing with a limited number of issues only. Here are some of my comments:

1. There is an absence of the targets against which the achievements set out in the PR are to be measured. I was unable to find these in any clear manner, if at all. The same problem arises in respect of the future - what are the quantifiable goals and targets and over what time-frame? What steps are proposed to put the PRS and the MDG's back on track?

2. Civil society seems to be largely excluded from the PRS on a continuous basis.

3. Governance and management are paid far too little attention in the PR. The suffocating influence of politics over competence, and the lack of transparency and accountability are sources of frustration, suspicion and hopelessness among Guyanese.

4. There is no strategy to deal with the brain drain or to analyse the reasons for the high rate of migration if the country is doing better. While crime is an important factor, it is simplistic to think that it is the only one. It is clear that the constitutional reforms have not been bold enough or at all effective in dealing with the historical, perpetual insecurities of the nation.

5. While on the one hand we benefit from debt relief, we borrow and spend without any serious attempt at public-sector investment analysis. We borrow for some projects simply because the money is there, rather than for the net benefits of the investment. In this regard, the international lenders like the IDB have to accept some responsibility for the almost cavalier way in which it is prepared to extend credit to the country.

6. The PRS Programme began in 2000. Yet the public is only now being advised that a Monitoring Unit was established "in 2003." Not only is this putting the cart before the horse, but it is widely considered that the Office of the President is one of the most inaccessible places in Guyana - as formidable as Fort Knox. Two of the leading lights in the PRS - both foreigners - advised me that they could not speak to me without the approval of either Dr Roger Luncheon or the Minister of Finance!

7. We cannot speak of the absence of data without acknowledging that the necessary resources have not been provided to the Bureau of Statistics, and yet we seem so willing to use the "flawed statistics" to make a political point. Despite the claims of the "halving of poverty,' the public finds it difficult to understand how even as the economy fails to grow, the poorer people are doing better. Is it true that as a general rule of thumb it takes a growth rate of 2%-2.5% to reduce poverty by 1 per cent?

8. The Government regularly lists the laws it has passed without ever acknowledging the deficiencies in many of them, or their slow pace of implementation. These include the Companies Act 1991, the Money Laundering Act, the Integrity Act and the Procurement Act.

9. The PRS does not adequately address the problem of growing unemployment, and makes no provision for ensuring that the National Insurance Scheme remains solvent. I recommended that part of the debt relief should be applied to re-financing the scheme to return it to long-term viability.

10. While the heinous nature of crime understandably preoccupies the nation, it seems that no attention is paid to the level of lawlessness in the society - ignoring building codes, flagrant breaches of the traffic laws, noise nuisance, etc, many of which disproportionably affect the poor.

11. There seems to be very little attention paid to public health, which again disproportionably affects the poor.

Conclusion

The government has its work cut out to convince the population that its poverty strategy is working and that in fact it is not inherently flawed. There needs to be more emphasis on growth rather than poverty, income generation rather than distribution, private sector rather than public-sector investment. The PR inadequately addresses the concerns of the private sector, including the heavy hand of the bureaucracy, punitive tax rates, partisan political considerations in decision-making and the overall high cost of doing business in Guyana.

It seems that poverty reduction should be a consequence of sound economic management rather than the centerpiece of economic policy. What we need, therefore, is to develop an economic plan centred on growth and development with the PRSP as a subset thereof. Maybe the time for economic planning has returned.

Contributor's notes

1. BP last week had indicated that it would be reviewing GT&T this week. We found it very difficult to access current information, but the company has indicated its willingness to co-operate. It is definitely on next week.

2. Correction to assertion made in my review of GBTI's Annual Report 2003 (Sunday Stabroek May 2, 2004). Mr R K Sharma, CEO of GBTI indicated to me that his report was written prior to the Budget Speech 2004 in which the Minister reported a decline in GDP, rather than growth for the economy as stated in Mr Sharma's report.

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