The Jagdeo 10 year economic report card

The Jagdeo 10 year economic report card

Posted By Stabroek staff On August 19, 2009 @ 5:01 am In Daily, Features | 17 Comments

Development Watch

By Tarron Khemraj

Introduction
This month marks ten years since Mr. Bharrat Jagdeo became President. I will dedicate this column to an analysis of several economic variables from 1999 to 2008. The indicators I have chosen are fundamental to the stability and well-being of a country. However, in order to perform a meaningful analysis of the President’s 10 years in office it requires that I compare the variables with other similar small countries like Guyana. I have chosen several sister CARICOM countries. The Caribbean Centre for Money and Finance (CCMF) has done a remarkable service by summarising the data on various Caribbean economies. I use the CCMF data for the Caribbean economies.
Tarron Khemraj [1]

Tarron Khemraj

However, I believe it is important that we look at other small developing economies such as Botswana, Mauritius and Fiji. Mauritius and Botswana are seen as two remarkable success stories in Africa. On the other hand, Fiji is a small Island economy (sugar-based like Guyana) that suffered from ethnic and political conflicts during the period of analysis. For these non-Caribbean countries, I sourced my data from the World Bank’s World Development Indicators (WDI electronic access). For all the economies, I obtained foreign direct investment (FDI) data from the same WDI electronic access.

It is important to use other small economies like Guyana when performing such an analysis. First, the economies are all susceptible to global shocks and harsh world price conditions. These economies take world prices rather than make prices. Second, one country, Suriname, also suffered from significant floods like Guyana. Other Caribbean Islands like Jamaica and Grenada suffered immensely from the destruction by hurricanes. Third, these economies have a similar British historical legacy.

Some economists would argue that it is important to “control” for geography/location when making these cross-country comparisons. I believe the geography variable is covered by my small sample – Suriname is also on the South American mainland right next to Guyana; Belize is on the mainland of Latin America. But I want to make it clear that the purpose of this column is not to explain economic variations across these economies; rather the column summarises several economic variables in order to place the Jagdeo years in office into context. It will take a lot more than a 1,200 word column to explain the stylised variations.

Nevertheless, some readers would have observed by now that my thesis for Guyana’s underdevelopment is rooted in policy failures – both political and economic in nature. In other words, policy matters in my analysis. For instance, our policy makers at Office of the President (OP) have constantly failed to grasp the purpose of IMF and World Bank policies which they follow like model students without a second thought (Yes, did the Leninists at Robb Street ever once ask the OP planners where is the industrial strategy?) The policy tools of the Bretton Woods institutions are meant for short-term stabilisation and palliative (pain-relieving) poverty reduction. The task of long-term transformation still rests with the government and people of Guyana.

The development economics literature has several candidate explanations for variation in economic performance among countries. These include investment rates, the level of financial development, natural resource endowment, geography/location, institutions (property rights, historical origins, etc), and education and skills of the workforce. On the other hand, a formidable list of heterodox scholars has emphasised the importance of getting policies right (and not only prices). Therefore, in my opinion both economic and political policies matter – Guyana has failed since 1966 on both fronts. I will continue to develop this thesis over the coming weeks, but for now let us observe the data.

Before we move on, I report data on the EC Currency Union, which is made up of eight member countries: Antigua and Barbuda, Anguilla, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. The CCMF reports aggregate data for this sub-regional grouping.

Macroeconomic performance
The average growth rate for the period 1999 to 2008 was calculated for each economy. This is reported in Table 1 below. The data revealed that only Jamaica and Barbados clocked a lower rate of growth over the ten years (there is a virtual tie with Barbados). However, this data should be interpreted with caution. The per capita GDP numbers show that Guyana is the least developed country in this list with an average for the 1999 – 2008 period of US$1, 076. Barbados and the Bahamas, while recording fairly lukewarm growth rates, have per capita GDP of US$9, 165 and US$17, 647, respectively. Both of these economies and most of the others (especially Mauritius) underwent important structural transformations through active policies since the early 1980s. It is well known that the rate of growth of an economy slows down the more developed it gets. However, Guyana is the poorest (on average) and grows at an anaemic average rate.

With respect to inflation, two countries recorded double digit inflation – Mauritius (10.66%) and Suriname (28.86%). All the others appear to have been quite stable from an inflation perspective as Guyana. Guyana has achieved a relatively low debt service ratio – that is the percentage of each export dollar spent on servicing the external debt. The significant debt relief Guyana received since 1996 has now reduced the debt service burden of the country. Significant amount of funds were released for social services, yet the country is still a mediocre growth performer. The point is the debt burden as an excuse ought not to be made for the mediocre performance over the past 10 years.

From a current account balance perspective, Guyana has the second most severe average deficit for the review period – minus 16.4% compared with the highest of minus 21.9% for the EC Currency Union. Remember, the current account balance measures how well the country is doing vis-à-vis the rest of the world.

Figure 1: Macroeconomic indicators – averages for the period 1999 to 2008

200908219GDP [2]

Table 2 reports average FDI inflows for the period 1999 to 2007 (note FDI data for 2008 are not available yet in WDI). Again I calculated the average over the period to make a comparison. It should be noted I could not obtain FDI data for the EC Currency Union as a whole. However, I am able to report this data for the following members – Antigua and Barbuda, Dominica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. Guyana received more FDIs than two countries on the list – Dominica (US$24,762,317) and St. Vincent and the Grenadines (US$ 56,814,033).

Figure 2: Foreign Direct Investments (FDIs) – averages for the period 1999 to 2007
200908219FDI [3]

Conclusion
Once we strip away the PNC alibi and compare Guyana to its global peers of small open economies – which face the same global shocks – there is not much to shout about and celebrate. Also, as we saw last week “slow fiah, mo fiah” could not have been the only factor contributing to the post-1997 economic downturn.

You can send comments to: tarronkhemraj@gmail.com
17 Comments (Open | Close)

17 Comments To "The Jagdeo 10 year economic report card"

#1 Comment By Seopaul Singh On August 19, 2009 @ 7:58 am

Tarron Khemraj wrote:
“The indicators I have chosen are fundamental to the stability and well-being of a country. However, in order to perform a meaningful analysis of the President’s 10 years in office it requires that I compare the variables with other similar small countries like Guyana. I have chosen several sister CARICOM countries… In other words, policy matters in my analysis. For instance, our policy makers at Office of the President (OP) have constantly failed to grasp the purpose of IMF and World Bank policies which they follow like model students without a second thought (Yes, did the Leninists at Robb Street ever once ask the OP planners where is the industrial strategy?)” All of this is cheap pot shots at the President.
In reviewing the Ten Years of President Bharat Jagdeo’s Tenure, Tarron Khemraj did an astute analysis of the GDP Rate of Earnings between the years 1999 to 2008, but unwittingly sought to show the slow ‘anemic’ progress Guyana made over that period compared Guyana with, of all Countries among others in CARICOM, Barbados and Bahamas. What did all of this have to do with the President’s performance by the way? The relevant variables are there.
He slotted into his years of relief, the Debt Burden erased in 1996, to show a sort of impact on the debt-service relief on the overall performance of the Economic Sector of Guyana. This was good and bad for his otherwise frugal analysis. What was the idea behind bringing in 1996? It is clear he intended to show that relief had impacted the average indebtedness of the country somewhat more positively.
Tarron further noted, “These economies take world prices rather than make prices. First, the economies are all susceptible to global shocks and harsh world price conditions. Second, one country, Suriname, also suffered from significant floods like Guyana. Other Caribbean Islands like Jamaica and Grenada suffered immensely from the destruction by hurricanes. Third, these economies have a similar British historical legacy.”
What the analyst did not zero in on were the horrendous economic impact of the three major floods which rocked Guyana in 1996, 2005 and 2006. I am convinced that Suriname was not so adversely affected not according to the ECLAC Report on Guyana. Do not lump Guyana in the basket of misfortunes (global shocks) with others and tell us Suriname and Fiji were similarly affected.
We the readers also need to know what were the significant setbacks on the economy of the 1997-98 civil disturbances lead by the PNC after Mrs. Jagan’s election victory and the racial strife which ensued; and the 2002 East Coast Blockades by “Freedom Fighters” who were also politically motivated. May be as an Economist he is not required to compare these to the Fiji Civil Disturbances.
Added to this we still did not get the picture of the intermittent strikes in the Sugar Industry over those years and the losses the nation suffered as a result, not to mention the loss of the European Market. The Geographic variables would also spotlight a definite form of impact on the economy.
Could the analyst give us the details of the losses which affected the overall average over the years analyzed? Apart from the cyclic flooding The unseasonable Weather patterns account for hundreds of Millions of Dollars losses to Rice farmers yearly. This is needful data to understand the issue of Disaster Preparedness and National (Economic) Development.
I am no economist just a layman who wants to know in the economic equation how the losses to the nation set back the GDP average over the those years in question directly, and the succeeding years which were also adversely affected starting from 1996 as he had to refer to that year.

#2 Comment By Joe On August 19, 2009 @ 11:15 am

SS for a layman you offer an awesome counter argument. I like the presentation by TK rather than those produced by the government that presents fancy GDP graphs and other economic indicators in total isolation of other external factors.

That kind of information is good for the local bean counters, but a tally clerk can do that. One for me, one for you and so on and so the economic forecast looks great,until the people ask “what about us” Oops, sorry folks we forgot, listen next harvest season you will be inculded, promise, and remember you are the true heroes of the economy so keep up the good work.

Joe.

#3 Comment By Evan Thomas On August 19, 2009 @ 12:00 pm

Terron, given your limit of 1,200 words, I suggest you present your analysis instead on some seeming ‘antidotes’. It takes away from your essay and it looks devoid of sufficient evidence. Leave that for the blogs; there you can use those pieces to satiffy the likes of the Seopaul Singhs.

And to Seopaul: I prefer Disaster Management and Economic Development. This is where the realtionship is located. In Guyana’s case then the question becomes a matter of Business Continuity Planning (BCP). Disaster prepardeness is a part of BCP.

#4 Comment By Seopaul Singh On August 19, 2009 @ 12:46 pm

Hi Joe, Thanks for the compliment.

#5 Comment By tkhemraj On August 19, 2009 @ 1:55 pm

Seopaul Singh: “In reviewing the Ten Years of President Bharat Jagdeo’s Tenure, Tarron Khemraj did an astute analysis of the GDP Rate of Earnings between the years 1999 to 2008, but unwittingly sought to show the slow ‘anemic’ progress Guyana made over that period compared Guyana with, of all Countries among others in CARICOM, Barbados and Bahamas. What did all of this have to do with the President’s performance by the way? The relevant variables are there.”

MY RESPONSE: it is important to compare Guyana with other small economies. That is normal research procedure in economics. It also allows us to isolate relevant variables – in my case the policy failures. Of course, the President does not influence what goes on in Barbados or Botswana (that’s the whole point for using them as a context). Of course, we could also use the PNC’s 28 years as a benchmark. I have done that in previous columns and the government people do that all the time. Guyanese however also need to see how the country fares vis a vis other small developing economies. It is time the Guyanese masses start asking these questions.

Seopaul Singh: “what the analyst did not zero in on were the horrendous economic impact of the three major floods which rocked Guyana in 1996, 2005 and 2006. I am convinced that Suriname was not so adversely affected not according to the ECLAC Report on Guyana.”

MY RESPONSE: This would require finding out the average rail fall for both countries and for the said periods. Perhaps you are right that Suriname was not affected to the extent as Guyana. But what if the rain fall levels are the same? Could the difference in impact be attributed to the fact that the infrastructure in Paramaribo is better maintained? Could Suriname have done more to change the production structure of the economy that they are not affected to the extent as Guyana? In other words, could the difference in performance be attributed to policy choices? These questions deserve further analysis.

Seopaul Singh: “We the readers also need to know what were the significant setbacks on the economy of the 1997-98 civil disturbances lead by the PNC after Mrs. Jagan’s election victory and the racial strife which ensued; and the 2002 East Coast Blockades by “Freedom Fighters” who were also politically motivated. May be as an Economist he is not required to compare these to the Fiji Civil Disturbances.”

MY RESPONSE: Please note there is continuity in the different columns. Last week I addressed this issue. However, it is important when making global comparisons to use similar countries. I think Fiji faced ethnic conflicts, it is a bi-communal society, and it still has plantation mode of production.

Anyhow, on the issue of civil disturbances see the following: [4]

#6 Comment By tkhemraj On August 19, 2009 @ 2:02 pm

I need to make one comment about the article that I should have clarified. That is, the intention of providing the level of per capita GDP was not to suggest that the Jagdeo Presidency should have achieved that same level as some of these economies were ahead in level of per capita GDP by the time Jagdeo came to power. It would be unfair to suggest that. The levels were provided to show the context of the slower growth of the more developed economies like Barbados and the Bahamas. The latter economies would have already achieved some level of maturity and therefore could grow slower than Guyana.

#7 Comment By Evan Thomas On August 19, 2009 @ 3:50 pm

Editor, I still look to see my blog on this piece, the comments are fair and hope you publish it.

#8 Comment By Gerhard On August 19, 2009 @ 4:02 pm

Mr. Seopaul Singh while I am not in agreement with what you have said, I still tip my hat to you and I hope the Ghost-writers Club (GC) can learn from you.

The Gov’t’s writers, going under names such as Elizabeth Daly, Kimberly James, Erica Smith and now Todd Morgan simply go into personal attack mode and avoid addressing anything in a substantial manner. On the other hand, you use your real name and you attempt to deal with the issues under discussion.

I did not get a chance to respond to you in the discussion on my last letter because I was caught in the interior for a few days. What was supposed to be a one day trip ended in disaster for me because of the deplorable condition of the GT to Lethem road. The only thing I can say right now, is that us younger politicians, Raphael Trotman included, have enough time ahead of us to prove ourselves.

Anyway, please keep it up – it doesn’t matter that we don’t see eye to eye, but civil discourses are much needed in this time of high tensions.

#9 Comment By Cummins On August 19, 2009 @ 4:49 pm

I read two different viewpoints here on Guyana’s economy. Khemraj seems to think that it is policy failures by the government that is causing the economic stagnation; Seopual seems to think that Guyana is a very unlucky country where external(and internal) events, both manmade and natural, always affect its economy more than anywhere else.

I see Khemraj’s data and have no reason to dismiss them. Seopaul, can you prove to me and others that Guyana suffered the most on the list in question and under the period of consideration? I am interested in seeing DATA such as disaster relief expenditures as a percentage of the national budget, independent estimates from reputable bodies of the total economic loss caused by these events as a percentage of the GDP and how these values stack up against the countries on this list and for the same period. My thinking is that if these values were not recorded and are not available then the event was considered negligible. If the values are available then they must show substantial difference among the countries on the list for your argument to hold weight. In the absence of this data or if the data among the countries is changing in the same way(reason and assumptiom why similar geography/economies are used) one can conclude, like Khemraj did, that the economic shocks were on a similar (or lesser) scale hence need not be used in comparative analysis.

One of the things that frustrate me is the way the government always finds an event to blame for bad times in Guyana even without attaching an economic impact estimate for that event from some independent source. One would think that if major events are the norm in Guyana, as Seopaul is suggesting, then the government would want to budget for them and take the necessary steps to prepare for these events so that when they do come along the country is better prepared to absorb the shock . Nobody there is taking responsibility for anything that happens so either way the government is at fault. I know Seopual doesn’t think like that because he knows that working here in the states requires that the arguments you make be supported by evidence for it to make sense and for the people around take you seriously

#10 Comment By Seopaul Singh On August 19, 2009 @ 6:13 pm

In economic analyses we are fed with the same process as in comparing the behavoir of human beings. The assumption in such comparisons is that (though apologetocally acknowledged) the same conditionalities prevail in which the humans live.
Analysts seek desperately to fit all countries into a similar mold for the sake of applying common factors as measurements. This is grossly misleading regardless of the details which are common. The variables may be uneven or winding into different paths, which are not so easily straightened by the methodologies applied in economic analyses.
Every country is a ‘beast’ with its unique behavorial characteristics, its gamut of geographic conditions, its Physical / Relief structures, its colonial heritage , its Developmental history , its Political fragmentation, its ethnical/ cultural enclaves, its nationhal Academic / Technological achievements, its patriotism, its cohesion and collaboration etc. etc.
We are yet to find a Plitician who has been able to forge a more complete Union or unism of a Nation. Policies are therefore often onesided or more appropriately opposed by the otherside. So developmental goals are sidetracked and sometimes sabotaged.
So taken individually, we may be surprised by the Gigantic Strides we made as we weigh in our achievements compared to our own failures. It is like competing with the Joneses. Let every nation extol their own virtues and revel in their own successes.
We often have to stand back and agree with the view “Oh he has come a long way” as we reflect on a bungling youth as he approach manhood. This is by no means infering that President Jagdeo is so referred to, but for the analysts let the variables in each country determine their individual triumphs.

#11 Comment By Roger Williams On August 20, 2009 @ 3:52 am

I am not sure that the complimant was warranted … given some of the apologist nature of your observations.

When you say ” …What the analyst did not zero in on were the horrendous economic impact of the three major floods which rocked Guyana in 1996, 2005 and 2006. I am convinced that Suriname was not so adversely affected not according to the ECLAC Report on Guyana. Do not lump Guyana in the basket of misfortunes (global shocks) with others and tell us Suriname and Fiji were similarly affected … ” you are avoiding the more realistic position.

Perhaps your time would be better spent answering age-old questions resuscitated by Lall Kumar Ramsingh in the SN of January 7 (“If So Much Money Has Been Spent on Drainage, Why Is It Not Working?” ( [5] ).

Apart from the indictment the story provides itself, Hackett’s comments below on that page further illustrates the “strange explanations” being given to these developments regarding flooding rather than the more reasonable one: a stunning abdication of good policy in favour of … greed!

#12 Comment By Cummins On August 20, 2009 @ 10:46 am

Wow!!!………This is quite a move from your first blog Mr. Singh. Originally it was about economic policy analysis now it is about the evolution of a country and mankind. As you try to make a case against the established methods of economic analysis I suggest that you present your paper to the various bodies rather on this blog site.I am sure the guys here have no power to change those methods. You do sound like a very smart guy so I can’t understand what got you caught up in this mess. I know you are better than this blog suggest.

The three points you should take away from this discussion are:

i) Government should be making good economic policies at all times

ii) Government policies should prepare a country to absorb shocks, especially when they happen as often as you and others suggest they do in Guyana.

iii) Government is responsible, no matter what, for the country’s economy and should be held accountable. They can’t just past this off to somebody else or an event.

#13 Comment By Gerhard On August 20, 2009 @ 10:46 am

Well said Mr. Singh. Indeed, no one can dispute that there has been progress. Only yesterday my father was regaling me at the excellent treatment he received at the Licence Office, and he always tells how well he is treated at the Georgetown Hospital (I am sure you too will be shocked at the responses this statement might elicit from some of the hardcore PPP bloggers here, though of course, you will understand that these services are not gracious favours). My father, a long time supporter of the PPP (since 1946) is now with the AFC, having followed me there.

The issue my friend, is not that nothing has been done, but that we could have done better. Substantially so in my humble opinion. Further, to people like my dad and I who have known the PPP for most of our lives, what the PPP has become since the death of Dr. Jagan is too much to bear.

You can email me at any time Mr. Singh: [6]

#14 Comment By tkhemraj On August 20, 2009 @ 11:29 am

Seopaul: your point is well taken. However, very clever economists have utilized a method known as multiple regression analysis with suitable instruments to address your concern.

Once you have controlled for all the variables in your model, use the relevant instrument (s), and you have a well-behaved residual, then the analysts have a decent model.

As these columns are developed into a book manuscript,I am sure some of these concerns will be addressed in more detailed academic format. At this point I see no reason why Guyana should not be compared with its global peers of small open economy.

In my opinion, the PNC alibi stop flying a long time ago!

#15 Comment By Roger Williams On August 20, 2009 @ 11:43 am

This is another example of the apologist rhetoric … almost resembling intellectual gibberish … that Seopaul Singh has degenerated to.

Focus, man … address the details …

A crisis of leadership and credibility attends to a hapless Jagdeo. He has singlehandedly squandered 17 years of international and local goodwill on the altar of … greed!

We can only appreciate the stunning incompetence, or the criminal irresponsibility, associated with various iterations of the greed scenario by reading efforts like Tarron Khemraj’s above.

#16 Comment By Griot On August 20, 2009 @ 7:02 pm

Can you summarise this in plain english for us? Would it sound something like “The PPP has done better than the PNC did”?

#17 Comment By Somdat On August 21, 2009 @ 10:54 am

Tarron: Excellent analysis. I am particularly happy with the discussions. Regarding Mr.Seepaul’s concerns about other variables which I think from a mathematical point of view he means confounding variables that could affect the outcome, he should rest assured that not only multiple regression techniques would easily address this concern, but we can also tell to what extend any variable of interest contribute to an outcome. Of course, some people would never be satisfied even with established methodologies. Best!

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