Budget 2004: Dare we hope?
Business Page
Christopher Ram
Stabroek News
March 7, 2004
Introduction
While the preparations for the 2004 National Budget are taking place and the Minister of Finance holds consultations with various stakeholders, the only reasonable certainty about its presentation in the National Assembly is that it will be some time between March 15 and 31, 2004, the constitutional deadline. The latest news is that it has had to give way to a number of other pieces of legislation which this columnist understands the international financial institutions have insisted be passed before March 31.
The budget to be presented by the Hon Saisnarine Kowlessar comes after what President Jagdeo enthusiastically referred to last December as the greatest Christmas gift, when it was announced that further debt relief under the Enhanced Highly Indebted Poor Country (e-HIPC) had been approved. President Jagdeo must no doubt have been very nervous about the outcome of Guyana's plea for the additional relief after a year in which the international financial organisations and some major donor countries had expressed concerns about the inadequate state of governance in the country. The populace took the President's reaction as reflecting the government's own expectations of the economic prospects for the country, and would therefore anticipate that this will be expressed tangibly in the 2004 budget rather than just the speech.
Hope
It has given reasonable grounds for hoping that this budget will offer 'something' to help the working and non-working poor struggling to make ends meet, the youth, the business and professional classes about the wisdom of staying in a country that is unable to find itself, and a business environment that is inhospitable for those who want to operate in a lawful environment characterised by a level playing field that offers enough possibilities for profitability and sustainability. Guyanese will all be hoping for the police to finally accept its responsibility for their safety and security and for a more normal life. In short, this Budget, if it is to be considered acceptable, let alone popular, has a wide mandate, one that will take an enormous leap from the Minister if he is to adequately respond to the diverse, urgent needs of the nation.
Consultations
The Minister's view that the consultations are satisfactory is clearly not shared by those organisations he has met so far, judging by what appears to be their inadequate submissions to him during those consultations. Repre-sentatives of organisations state privately that these consultations, which are clearly too late to be taken into consideration in the actual budget preparation, only serve a public relations purpose, and that any time invested in the preparation of a submission will be no more than time wasted. Many of the submissions for this year have been pulled from the files and the year changed, but nothing of value or significance added. Business Page does not support such an approach since it is quite clearly defeatist, and allows the Minister full control of the agenda. No consultation should have been agreed that did not include full explanations from the Minister on the reasons for the non-inclusion of their recommendations of earlier years, and an undertaking that they will be given satisfactory reasons if any of their 2004 recommendations are not accepted. This would inspire confidence and trust, contribute to better understanding of the limitations under which the Minister operates, and foster more realistic expectations and demands in the future. After five years in the position, this must be as obvious to the Minister as to anyone else.
2003 agenda
In Ram & McRae's commentary on the 2003 budget we noted that the Minister had identified in his packed 2003 agenda, job creation through growth, promotion and attraction of investment, reform of the judiciary and taxation and more accountable government and crime fighting. At best, the government has had only mixed success. Having passed legislation aimed at radically overhauling fiscal management, the Minister deferred implementing critical sections of the new budget law which requires a four-year planning cycle, a half-year economic review no later than September of each year, and the overall better management of the budget. The Minister announced that the Act 2003 would not come into effect until the end of this year, and that its provisions would test the capacity of his ministry, a fact that he did not think warranted mention in the parliamentary debate on the bill.
Unemployment
numbers
The question of unemployment is another major area where any claim of success has to be considered with considerable skepticism, not only because of the empirical evidence available from the continuing business failures and reorganisations, but also because of the general lack of available data on the unemployment figures in the country, and the unreliability of those that there are. This is why Business Page has taken the view that instead of quibbling over unemployment figures, it would be better if we were to consider the less unreliable employment data from the National Insurance Scheme and the Guyana Revenue Authority. Since unemployment is officially measured by persons actively seeking work and available for it, in any economic environment where people have just stopped looking for employment for any reason whatsoever, the unemployment rate is misleadingly small and dangerously useless.
On the issue of taxation, the government hurriedly passed the Fiscal Enactments (Amendment) (No.2) Act 2003 containing what this column referred to on August 10, 2003, some of the most dramatic and perhaps controversial changes in our tax laws for decades. The act provided for, among other things, an amendment to make transparent the existing practice of remissions of tax, the extension of the service tax now paid only on hotel accommodation and telephones to other services offered by hotels, and a tax on the services provided by a range of professionals but which, as readers are aware, the lawyers have succeeded in challenging if only temporarily. Hopefully, the Minister will address in his speech the operational success of the measures and announce the steps he proposes to take in order to address lingering concerns.
The private sector
Instead of confidence- building with the private sector, the government has been engaged in what many consider to be an unnecessary standoff with the Private Sector Commission, allegedly as a result of difficulties which the President has with leading individuals in the commission. An indirect consequence has been the absence of any progress on the investment bill, in gestation for more than four years. This is all the more regrettable because agreement on the passage of such an act was one of the successes of the October 1999 presidential summit with the private sector, and it had received the support of the business community.
Expressing concern at the inexplicable delay in the conclusion of this bill, this column had written on August 31, 2003, that while an investment act offered no guarantee that investments would come rushing in if other factors are not opportune, it does bring some certainty and order to what has so far been a largely politically-driven exercise. Even the head of GO-Invest, former Minister of Trade Geoffrey Da Silva could not offer any reasons for the prolonged delay, but sadly none of the private sector organisations has raised this with the Minister at the pre-budget consultations.
Crime
Since the demise of the main personalities involved in the infamous jailbreak two years ago, there has been a change at the top of the Guyana Police Force and the commission set up to look at the operations of the force is about to report. However, recent events suggest that there may have been some unorthodox and illegal steps taken to bring the crime situation under control, and the Minister of Finance would be very conscious of the serious allegations against his colleague, Mr Ronald Gajraj, the Minister of Home Affairs. It is perhaps safe to say that the resolution of those allegations will impact on the social and political environment within which his budget will be executed.
Growth
The budget must seek ways to revive growth in an economy that has been stagnant for several years. The Poverty Reduction Strategy Programme within which the Government now operates, projects growth of about 4% per annum, which is at the same time inadequate and unattainable! Putting people back to work requires a more investor-friendly approach by this Government leading to higher levels of investments.
This column has lamented the several weaknesses of the Companies Act which was passed some thirteen years ago under the Hoyte administration, and rushed by the PPP government into operation in May 1995, despite several limitations and ambiguities including some relating to governance in companies. We so often hear that the Government's hands are tied by the IMF and the World Bank, but surely there are no restrictions on the government addressing deficiencies in legislation already passed.
Other legislation which requires some adjustments that would promote orderly and organised businesses includes: the Environmental Protection Agency Act, including its insulation from interference by the politicians; the Financial Institutions Act which currently takes the one-size-fits-all approach and which needs amendment to ensure that the intent is not frustrated by the use of financial institutions posing as co-operatives, and the securities industry and the Insurance Act to give these bodies some more teeth. The Money Laundering Act is clearly not catching the millions being washed in this country, while the legislation governing the operations of the cambios seems to be used as a licence for the commission of all sorts of sins. Recent developments in the utilities sector suggest that the PUC may not have the authority to foster competition and to regulate the sector, and that the governing legislation should be reviewed to determine whether it is a matter of legislative deficiencies, resources or the ease with which its decisions can be frustrated.
The drug trade is doing enormous harm to this country and its economy. The financial implications, social impact and the danger that Guyana can become a pariah state for its failure to address the problem, should be enough to warrant serious action. There is certainly a need for a better-equipped Auditor General's Office with real powers and the resources to match, and a tax framework that operates evenly and fairly across the board. The GRA does not have the resources to withstand the legal challenges from the big players in the private sector, a danger that needs to be addressed by removing any ambiguities or loopholes in the law if we are not to have the tax base further eroded.
Conclusion
The numbers in the budget are obviously going to be very useful, particularly as indicators of how the resources of the country are deployed to improve the lives of the majority of Guyanese. But it is the policies and programmes that are announced that signal whether the Minister truly understands the issues facing the populace. His hands might indeed be tied because of international commitments which are beginning to assume permanence, but that is partly of his Government's choosing. It surely is time for us to exit the IMF programme and chart our own course.
But even if he does not yet have the confidence to take that step, there are other policies and programmes, many of them which are simple to execute, which are not only well within the country's scope, but which would do immense good for the rest of the budget and for the country as a whole. Dare we hope that despite this column's disappointment with the Minister over the years he will rise to the occasion?
Correction
The review of the Banks DIH 2003 accounts which appeared in the Business Supplement of Friday, March 4, was incorrectly ascribed to Ram & McRae instead of Christopher Ram, a shareholder in that company.