More symptoms of Dutch Disease, PPP/C has to take national approach to good governance

Since August 2020, the new PPP/C government has begun to implement an impressive twopronged strategy. It intends to carry out pro-poor and pro-business policies to meet the “basic needs of every single Guyanese”, and secondly to develop good economic, financial, social and political governance policies to avoid the oil ‘Dutch Disease’.

Without using any oil revenues, the government must be highly commended for immediately implementing a basic needs strategy. It reduced or removed taxes on products and services. About US$140 million was expended through cash grants to citizens for alleviating the negative impacts of the COVID-19 pandemic and the recent massive floods. Child education grants were re-introduced. There were increases in Old Age Pensions and in payments for persons on social assistance and those with disabilities. More funds were allocated to non-governmental organizations dedicated to ending domestic violence against women and children. For low income families, accessibility to home mortgages was improved.

The PPP/C government’s intended governance policies are comprehensive and forward-looking.

In the economic sphere, its priorities are to [1] build modern infrastructure for electric power, roads, highways, bridges, ports, sea and river defences, drainage and irrigation canals and new housing areas; [2] support the development of a diversified, resilient and competitive private sector economy in traditional, new and emerging non-oil sectors including agriculture, manufacturing, Information and Communications Technology [ICT] and tourism; [3] facilitate the growth of entrepreneurs and the small business sector by funding Research and Development (R&D), business incubators, agroprocessing and packaging facilities, and new industrial estates; [4] implement a Development Plan in hinterland communities that includes entrepreneurship and apprenticeship projects for Indigenous (Amerindian) Guyanese; and [5] mobilize the Guyanese diaspora for the development of the nation.

In the financial sphere, the government intends to decrease government deficits so that the private sector is not ‘crowded out’ from access to bank financing. It promises to prudently manage government debt by sourcing development financing and servicing debt obligations at the lowest possible interest rates, and by ensuring that the debt-to-GDP ratio will not significantly increase.

In the social sphere, the government intends to [1] distribute 50,000 low income and middle income house lots; [2] facilitate the creation of 50,000 jobs by 2025; [3] provide a well-balanced quality education across the country with more skills training in technical and vocational centres; [4] support the creation of more jobs and businesses especially for young people; [5] expand specialty care for good mental health, suicide prevention and for good maternal, child and elderly health; and [6] expand sports programmes.

In the political sphere, the government has publicly committed that it will practice democracy, respect the Constitution and the rule of law, strengthen the justice sector, and reform government institutions and their systems to make them more accessible, inclusive, transparent, accountable, efficient and effective.

However, successfully achieving good governance policies to avoid the resource curse (‘Dutch Disease’) is easier said than done. Many oilproducing countries had similar good intentions, like those of the PPP/C government, but they became more underdeveloped and poor because their governments early on ignored, downplayed or denied the creeping symptoms of ‘Dutch Disease’.

Some symptoms of ‘Dutch Disease’ have begun to appear.

In the economic sphere, there are signs that the economy could become heavily skewed towards the oil-related sectors. There is growth of all kinds of imports, including raw

materials and foods that could be produced in the country. To ensure balanced development in a relatively small local market, the government has to prioritize, in addition to its local content policies, the creation of an export strategy that would build effective institutions for supporting Guyanese businesses and foreign-owned companies in the non-oil sectors to expand in current foreign markets and enter into new export markets with value-added products and services.

In the financial sphere, there are indications that the government may be considering to speculatively borrow from the future sales of oil to finance projects. Many projects still go over deadlines with cost overruns because of poor planning (trying to rush many projects) and ineffective oversight. The foreign exchange rate is appreciating and, in the near future, it could negatively affect the competitiveness and export opportunities of the non-oil economic sectors. So far, the government has not publicly outlined how its plans to source financing over the next 10 years, how it will diversify the tax base to prevent over-dependence on oil earnings for its revenues, and how it will encourage both foreign and local investors to re-invest their earnings back into the national economy.

In the social sphere, many types of crimes are increasing. There are significant wage gaps between females and males, and between political office holders and workers and farmers. The education system is unbalanced with the continuing dominance of legal and medical graduates over engineers, scientists and managers. In the health sector, there is no publicly outlined programme to end the stunted growth of many children in hinterland areas.

There is an undocumented influx of foreign workers. A clear immigration policy has not been outlined to end the continuing ‘brain drain’ by promoting ‘brain circulation’ from the diaspora and by selectively managing the recruitment of skilled foreign employees.

We are yet to see a comprehensive programme to measure and reduce deep poverty across and within the ethnic communities of Indigenous (Amerindian), African, Indian, Mixed, Portuguese, Chinese and European ancestry. At least 344,000 Guyanese (out of 780,000 persons who live in the country) are below or near the poverty line. These citizens cannot afford, like the upper middle class and the rich, to buy private health care and private education, and they do not own cars, electric generators (to deal with the many power outages) and purifying water systems.

In the political sphere, there are few genuine consultations with the public. To date, initiatives have not been prioritized to build political stability and overcome the never-ending inter-ethnic suspicions, especially between Guyanese of Indian and African ancestry, and also reverse the worsening political stalemate whereby, in the 2011, 2015 and 2020 national elections, one or the other of the two major political parties won with the tiniest of Parliamentary majorities – one seat and a margin of less than 2% of total votes! The government’s “One Guyana” programme to bring together citizens from all ethnic communities has not started.

Most of the key national institutions urgently need strengthening with “living” strategies and anti-corruption cultures based on clear guidelines and Standard Operating Procedures. There is no public plan to transform public sector institutions and their systems, with the direct support and involvement of communities and civil society organizations.

The most worrying threat of ‘Dutch Disease’ is that oil revenues will be a massive financial bonanza for American, Canadian, Chinese, European and Trinidadian companies and a small multi-ethnic elite of some Guyanese companies, politicians and officials, but not for the majority of Guyanese.

The Production Sharing Agreement (PSA) that was signed between Exxon (with its partners) and the former APNU+AFC Government of Guyana has to be changed. The new PPP/C government’s position is that they cannot renegotiate that PSA because they have to adhere to the sanctity of contracts. But until the wicked, hypocritical and onerous provisions of this PSA are renegotiated, as was done in Trinidad and Tobago and other countries, the people of Guyana will be denied the sanctity of their selfrespect and well-being. There has to be a ‘sanctity balance’ to ensure that all Guyanese workers, farmers, the unemployed, the marginalized, the poor and the hungry experience significant improvements in the quality of their lives.

In spite of these concerns, there are positive signs that a significant majority of Guyanese, representing all ethnicities, genders, ages, classes and different abilities, want to believe that the intended policies of the PPP/C can make Guyana a better place, provided it acts as a national government and all its members and supporters, not just its leaders, genuinely and humbly reach out with courage to all grassroots communities to overcome the political stalemate and debunk ethnic fears and stereotypes.