Remittances and the ghost writers club

The loss of human capital will make it difficult to harness remittances for the purpose of spurring national development

Posted By Stabroek staff On July 14, 2009 @ 5:06 am In Letters | 19 Comments

Dear Editor,
There is an interesting discussion underway with reference to remittances and their impact on our economy, and I have been reading Dr Prem Misir, Emile Mervin, Dr Tarron Khemraj (in particular his SN column, July 8) and a recent letter by one Kimberly James on this issue (KN and GC July 10). I rather suspect the latter to be from the Ghost-writers Club (GC). Kimberly James’ arguments are text book and coherent, with the exception of one off-target insinuation that there is someone out there that spits on remittances. In my reading I cannot figure out who is meant by that remark, clearly meant to target someone – that notwithstanding, the general thrust of ‘her’ letter is worth responding to.
Unfortunately, I did not ascertain any effort on Dr Misir’s part, nor Ms James’, in dealing with Guyana’s country specifics as Dr Khemraj did. General references were made by Dr Misir to India, China, Mexico, Latin America and the Caribbean, and by Ms James to the Eastern Europe and Central Asia (ECA) region, citing Egypt, India, Mexico, Portugal and Turkey as the countries that have incorporated remittances as a developmental tool for long-term sustainable development.

Guyana is quite unlike these countries in many ways, and India in particular has a surplus of engineers and other professional, first-rate engineering and business schools, and first-rate universities such as the University of Delhi. Guyana on the other hand, has a struggling university that does not serve our national interest as it could, and exports 83% of its skilled population. We therefore have an extreme dearth of engineers and professionals that is becoming ever increasingly profound with each departing flight out of CBJ, Timehri. Clearly, this ongoing haemorrhage of human capital will make harnessing remittances most difficult to spur national development – more especially, in the bid to serve long-term goals.

Presently, remittances are not causing large-scale production as there is no mechanism that mobilizes the small amounts to a large investment even though in aggregate, remittances exceed FDIs (Foreign Direct Investments). I was therefore most relieved that so far I couldn’t glean any disagreement in the discussion that FDIs are less important than remittances. However, given the present global economic situation exacerbated by our local state of corruption, crime, unreliable and insufficient electrical power and a lack of skills, it is not entirely surprising that FDIs are not easy to come by.

I find also Ms James’ multiplier argument to be very weak in our specific circumstances because of the high levels of imports (consumer goods, fuels and lubricants). This simply means that a lot of the foreign exchange gained from remittances is pretty much repatriated immediately, as opposed to being stimulatingly utilised within our economy. Again, under these Guyana specific circumstances, one wonders on the effectiveness of long-term remittances policies without sufficiently addressing this. The government has however become proactive on the alternative energy issue, albeit belatedly, and I do look forward to their success.
I doubt whether there would be any opposition from sensible quarters to me saying that it would be profoundly better for us to try to keep our skills at home, as opposed to relying on these persons to send what they can from the countries they are helping to build, such as Trinidad and Barbados (the latter which most abhorrently harasses and shows disdain for us because of our own disgraceful domestic situation).

I am worried about us resting on our laurels just because remittances have become so high – World Bank estimates place it at a little over 20% of our GDP, while other estimates that include barrels and hand delivered cash, are as high as 40%. I believe unharnessed remittances contribute to our social ills, one of which can be exemplified by the prevalence of the street corner limer who is reluctant to work, and often has other socially debilitating vices. Another social ill stems from the ruling elite and friends having ready access to the increased foreign exchange garnered from remittances to support their lifestyle. Their type of living is an incentive to crime and corruption as other sections of the society feel the urge to do likewise (no longer seeing the virtues of hard work and honest living). These local phenomena would be most appropriate for UG to research.

Foreign economic downturns and remittance fatigue (which I predict if social values continue to spiral downward) could cause shocks to our economy. We would without doubt be better off not being as reliant on remittances as we are now, and I would be careful about loudly touting the benefits while so much else is left undone – especially the shortage of human capital.

I am most certainly not knocking remittances, nor the potential to further our development, and I commend both Ms James and Dr Khemraj for presenting ideas on harnessing them. Dr Khemraj urges the government to come up with a comprehensive plan to engage the diaspora which can include knowledge transfer (brain gain or brain circulation), inward diaspora investments, and even special diaspora financial products (it therefore could not have been him that spat on remittances, and I would be grateful, if Ms James could qualify her statement). Ms James proposes financial incentive schemes to increase the volume of remittances via commercial banks, matching the development investments of migrant associations with government funds, and improving the investment climate for small and medium enterprises. She is also keen to engage the diaspora. However, as Dr Khemraj noted, the main constraint is the lack of business investment demand, which goes back to the shortage of human capital.

I would be most interested in Dr Misir’s take on the specific issues raised, since he can give a clearer idea of the government’s strategy to deal with our local specifics. Remittances have been significant for quite a few years now and since it is better late than never, kudos to the government for finally lending some thought to its harnessing – the AFC, almost four years ago, had made this a pivotal part of its elections campaign.
Yours faithfully,
Gerhard Ramsaroop
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