Government must take a more activist role in pushing development
Stabroek News
February 2, 2004

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Dear Editor,

Today all of us are transfixed by the "Matter of Gajraj", even as our economy founders as the traditional sectors are besieged - bauxite has collapsed, rice is on the ropes and the Demerara Plantations are going to be closed - and the Government doesn't appear to have a clue on what to do. But isn't the digression a metaphor for all that goes on in Guyana today? We're constantly forced to devote all our energies and attention to cope with crises precipitated by the Government's ineptitude and corruption - as for instance villages under water because basic maintenance of the D&I system is ignored. But we have to get back to planning for our future - to do otherwise would be to admit defeat. And this is not an option.

Industrial Policy

One of ROAR's major problems with the Government in the economic area is that it has evidently washed its hands of any focused role in economic development, (industrial policy) in favour of merely providing a stable macro-environment. This, of course, is in line with the World Bank's position that such an environment will attract investment. In our estimation this is tantamount to guaranteeing that Guyana never becomes developed. Apart from the fact that there may be other, non-economic, factors inhibiting investment - such as political instability - investment and the consequent economic growth is not just a question of creating institutional environments but rather one of creating institutional arrangements. We have to look at how others were able to create investment opportunities and how these were realised in a sustainable manner. Let theory be guided by successful practice.

The history of the world after World War II has demonstrated that the countries that were able to pull themselves out of the poverty trap - Hong Kong, Singapore, Taiwan, South Korea and then later Malaysia etc. all followed the example of Japan in that their states were integrally involved by formulating and executing explicit industrial policies. I know that we in Guyana, have had a disastrous experience with state involvement in development, but let us not throw out the baby with the bath water. Not all state actions are negative and in fact there may be the necessity for government interventions when the free market is stymied for one reason or other (market failure). And if we don't have market failure here, we certainly have market constipation. We need only to look at our banks being awash with money - domestic savings is not our problem - and yet we have little investment (T- Bills are issued by the Government to "mop up" this excess liquidity). After our sobering experience, we agree that the State has to be transformed into one that is as small as possible; but at the same time we have to insist that it should be as large as necessary to ensure that we move ourselves out of poverty in as short a time as possible.

Our development plans were driven by State ownership of production (State Capitalism) which destroyed the market forces necessary for competition and other disciplines necessary for sustainable growth. The socialist dogmas (the PPP not only supported the PNC but egged them on) undergirding the then development policies were inimical to the free market and spawned a culture of special interests seeking to benefit from the state policies (rent seeking). Yes, we should learn from our experience as to the downside risks of a large governmental role in industrial policy and act to minimise those risks - by controlling the nature of the interventions. But we cannot ignore the fact that no country in the modern era has risen out of poverty just on loans from World Bank/IMF and without strong Government intervention.


Entrepreneurial State

ROAR calls for the creation of what has been labelled a "Catalytic Entrepreneurial State" (CES). Such a state will firstly have to be a responsible state, with a strong commitment to development and simultaneously working assiduously to increase its legitimacy. The latter perspective is vitally necessary for Guyana, given the ethnic cleavages in our society. ROAR has proposed that an "Ethnic Impact Statement" be issued with the promulgation of every Government policy and programme - and in the economic sector this will be even more crucial, since much of the political dissatisfaction arises out of perceived ethnic discrimination in this area.

One of the reasons that ROAR has been dismayed by the recent accusations that the State may have been involved in the creating of Death Squads (and called for an independent Inquiry) is that any such criminality will destroy for sure whatever shred of legitimacy and impartiality of the State which still exists. The Government's relationship with the Public Service is another area of grave concern in the formation of a CES. In whatever endeavour the State engages, much will depend on the professionalism of the Civil Servants for the success of that endeavour. We have recently heard much about reform of the Civil Service - but the Government has not been clear in what context such reforms will take place. If, for instance, we envisage a CES, then we may not have to downsize our Civil Service but rather raise the salary scales and train the employees to perform their new tasks. In Singapore, the Government insisted that Civil Servants' salaries be on par with their counterparts in the private sector. In Guyana, we will definitely need to insist on new and higher standards for employment in the Civil Service and this may necessitate redeploying much of the present staff.

As we have accepted, the CES will also have to be a "facilitative State' to create a stable macro-environment as the World Bank has been insisting. We have no problem with the propositions that the Government will play a regulatory role to restore (and maintain) markets to their proper function (clearing markets). Similarly Govern-ment will have to provide education, primary healthcare and infrastructure. We acknowledge that public finances have increased in this area under the PPP. However, the corruption that is evident in the awarding of contracts in the capital aspects of these programmes has left a bitter taste in the mouths of Guyanese. And many are rightfully sceptical and even bitter about any suggestion that the Government should take a more interventionist role in economic development.

But this is what the moves to increase "transparency" in governance is all about. We commend the World Bank/ IMF to push the Government in this direction. But we can't cut our nose to spoil our face. We know that with our circumstances, investors are not going to flock spontaneously to our shores and pump money into our economy in quantities sufficient to put us back on the path of high growth. We will have to sit down with the World Bank and insist that the Government plays a more activist role in fostering diversification of the economy. This should have national approval. We therefore have to do whatever it takes to create a responsible, legitimate and broad-based government in place and then let that government take the more "dirigiste" role in development.

Yours faithfully,

Ravi Dev, MP,

Leader of ROAR