The two-edged sword
Editorial
Kaieteur News
March 28, 2007
By all accounts, remittances are now the biggest business in Guyana . Even the most conservative observers now estimate that Guyanese from the diaspora plough back at least US$200 million into the economy on an annual basis.
This, as one analyst pointed out, is more foreign revenue than the combined sugar and rice industries produce. When we have a source of revenue that exceeds the contribution of industries that employ over a quarter of our labour force, we had better sit up and take notice of its impact on the local scene.
The most obvious effect is that the Guyana diaspora provides a most significant and effective cushion to the poverty that has become endemic in Guyana because of the moribund economy. Unlike the funds from the various aid agencies and foreign governments that are supposed to assist in “poverty alleviation”, the remittances go directly into the hands of the real-life “Guyanese public” who can then use it directly to ease the pain from wherever their shoe “pinches”.
Apart from the directed, government run macro-projects, a large chunk of the aid money gets siphoned off by the large administrative structures that are part and parcel of the aid business. And it is a business.
In the money-transfer business, the administrative costs are also onerous – especially for the recipients - albeit not in the same league as in “aid” programmes. There have been repeated calls for the reduction of these costs and promises made to effectuate such reduction, but the results have not been visible.
In light of the size of what we have to now label a “sector” of the economy, which the Minister of Finance assures that the Bank of Guyana is monitoring “closely”, the government may be best advised to investigate how the transaction costs may best be reduced.
Another area that needs closer monitoring is the “cambio” or money changing business that has grown up to handle the remittances. While there is regulation of the official cambios (which we are sure needs tightening) there is a burgeoning unofficial industry in the alleys and villages across the land.
A huge chunk of the remittances are sent by the small man or woman in New York or Toronto, who want to maximise the money they are sending to their relatives “back home”. They utilise several informal routes such as returning Guyanese visitors, and these funds get changed by local operators who are known in the local communities.
But a crucial impact of the high level of remittances that has not received an adequate level of comment has been its effect on the psyche of the Guyanese recipient of the largesse. The remittance funds appear to have had a very negative impact on the work ethic of many local Guyanese. With an almost guaranteed source of income from their relatives abroad, many so-called “unemployed” have absolutely no interest in looking for a job.
In most local communities one cannot employ even casual labourers for less than $1,500-$2,000 per day. This is significant.
Most of the Foreign Direct Investment (FDI) that we are hoping will come into Guyana to create employment can go to scores of countries across the globe as we seek to employ very highly skilled workers for that kind of daily wage.
The remittances, therefore, while helping to reduce our poverty, have also simultaneously helped to push our effective minimum wage rate to a point where we may have priced ourselves out of the global market. And we are talking about a work force that is not even minimally skilled.
Local companies have long had to deal with this phenomenon. The discipline implicit in the wage relationship has been severely diluted by the level of remittances. Monday is an “off-day” for many workers after a hard weekend of revelry fuelled by remittances. Workers are not hesitant in walking off the job at the slightest reprimand.
This is the two-edged sword that we will have to deal with if we hope to develop a self-sustaining economy. All the newly industrialised countries (NIC's) were able to kick-start their economies by having workers who were willing to work hard and save.
The increased productivity and high local saving rate obviated even the need for “aid”. We have to think through the “remittance issue”.