By Joel Bhagwandin
THERE was a highly anticipated debate between the undersigned and economic adviser to the Opposition Leader, Elson Lowe, which was to be held on a popular social media platform (the Guyanese Critic) that has close to some 300,000 followers, on October 6th, 2022. The one-on-one debate was in the making for three weeks prior wherein Lowe confirmed his participation even up to the day before the event.

Disappointingly, Elson Lowe called in at the time the show was scheduled to go live (7pm), only to state that he had an emergency and could not attend the debate. Nonetheless, the moderator decided to proceed with the show without him and used the opportunity to solicit my response to some of Lowe’s contention on the Dutch disease as well as his counter proposals to some of the government’s economic policies.

Suffice it to state that Elson Lowe holds a very critical portfolio of national importance wherein he is the economic adviser to the Opposition Leader, who is a constitutional office holder. Lowe’s failure to participate in the public debate, therefore, is a disservice to the people of Guyana and, more importantly, their (the Political Opposition) constituents.

While I was extremely disheartened at Lowe’s no-show, I was not surprised. In fact, my fear was that if Lowe conducted a simple google search, he would have stumbled upon a wealth of articles and letters in the public domain that I have authored pertaining to the subject matter and a variety of economic and finance issues in Guyana. Had he done so, which I rather suspect he did, there is no way he could have confidently participated in a live debate with this author and more so be able to credibly defend his so-called economic counter proposals.

This article is intended to document my responses to Elson Lowe’s argument on the Dutch disease as well as his counter proposals on a few economic related matters, which, by virtue of his portfolio as stated earlier, by extension, are those of the Political Opposition.

WHAT IS THE DUTCH DISEASE?
The parodical Dutch disease refers to the adverse effects on manufacturing of natural resource “discoveries”. Specifically, when a country experiences a resource boom due to a tradable resource discovery and/or to an increase in a resource price, it normally undergoes a real appreciation of its exchange rate and, as a result of rising wages, a relocation of some of the labour force to the resource sector. A real appreciation reduces the international competitiveness of other tradable sectors because resource-based exports crowd out commodity exports produced by those sectors (Krugman, 1987). The country faces the risk of a de-industrialisation process.

This phenomenon, known as the “Dutch Disease”, first drew attention in the late 1950s when natural gas discoveries in the Netherlands eventually hurt the competitiveness of the Dutch manufacturing sector.

ELSON LOWE’S ARGUMENT
Lowe argued that the midyear economic outcome for the period January to June 2022 confirmed that there are signs of the Dutch disease. The basis of Lowe’s contention was the contracted growth recorded in the manufacturing sector, and three out of six sub-sectors in the agriculture sector.

BHAGWANDIN’S ARGUMENT
However, Lowe ignored completely, the positive overall growth in the agriculture sector, the construction and services sector also recorded positive growth and the positive growth in the non-oil economy altogether. The economic performance for the half year period 2022 is demonstrative of the positive outcome of the economic policies, timely interventions, the allocation of financial resources towards infrastructure development, economic diversification, and transformational development projects implemented through the national budgets of 2020, 2021 and 2022.

More importantly, it is not necessarily the contraction of the non-oil subsectors that is cause for much concern, because the contraction is merely derived as a consequence of a number of factors. For example, (1) as a direct or indirect result of economic policies implemented by the government; (2) the consequence of non-action by government or counterproductive and / or contractionary / regressive policies; (3) operational issues; and (4) external shocks stemming from the global economy.

In this case, the contraction of the manufacturing sector and the other agricultural subsectors were not attributed to the outcome of government action or policies, per se, rather they were attributed to inclement weather for the agriculture subsectors, and external factors (rising cost for input materials and a fall in demand) in the case of the manufacturing sector.

The Dutch disease typically occurs when the government does nothing, by way of policy intervention, and investment in the other sectors, viz-à-viz, implementation of a robust economic diversification agenda, and structural transformation of the economy to prevent the occurrence of the Dutch disease.

That said, had there been a continuation of the type of policies by the previous administration during 2015–2020, then the Dutch disease would have been undoubtedly inevitable.
In fact, the previous administration’s economic policy philosophy was evidently and arguably regressive and contractionary in nature–that is to say, creating an environment that was counterproductive for the expansion of the other non-oil sectors of the economy. There was also no substantive investment in public infrastructure, no economic diversification programme, or any transformational projects.

To substantiate the foregoing contentions, the following were the results of the economic performance attributed to the contractionary type and regressive policies of the previous administration during their five-year tenure in government (2015 – 2020) and another five-year tenure in Opposition, prior, when they had the majority of seats in the National Assembly, thus controlling the National Assembly. The government at that time was deemed a minority government (2011-2015):

? The major non-oil sectors (agriculture, forestry, fishing, mining and quarrying, and services sector) experienced stronger growth during 2009-2014, than during the period 2015– 2020. Cumulatively, these sectors underwent a loss of $130 billion in productive output from their 2009 position, by the end of 2020.
? Export earnings from sugar, bauxite, molasses, timber and plywood, incurred a cumulative loss of another $107 billion for the period 2015-2020 relative to 2009-2014.
? Total loss in export earnings and productive output from the non-oil economy during this period amounted to a whopping $237 billion or US$1.14 billion.
? Budgetary allocations towards the economic services sector declined by 10 per cent in 2016, 27 per cent in 2019, which rebound in 2020 with an increase of 24.46 per cent, 25.31 per cent in 2021 and 27 per cent in 2022.
? Capital expenditure which accounted for 40 per cent of total budget during the pre-2015 period, declined to a low of 20 per cent of the total budget during the 2015 – 2019 period.
> The Bank of Guyana foreign exchange (FX) reserve weakened from five months import cover in 2009 to less than three months by the end of 2020.
> The exchange rate depreciated by 2.25 per cent during the period 2009-2014. Conversely, the exchange rate depreciated by 3.84 per cent during 2015-2020.
> The exchange rate in 2009 was $203.9, as of HY 2022 exchange rate was $206.92 (when the rate goes below $200, thus implying an appreciation against the dollar) that would be considered a sign of the Dutch disease feature.
> Credit to the private sector recorded strong growth of 114 per cent during 2009 – 2014, compared to weaker growth of 21 per cent during 2015 – 2020.
> Growth of private sector deposits in the banking sector during 2009 – 2014 averaged 14 per cent annually, conversely, weaker growth during 2015– 2020 was recorded which averaged a low of three per cent annually.
> Non-performing loans in the banking sector stood at seven per cent of total loans in 2014 and 11 per cent in 2020.
GRAPHS AND ILLUSTRATIONS

Credit to the private sector by 114 per cent during the period 2009 – 2014, conversely, weaker growth was attained of 21 per cent during 2015 – 2020.

The exchange rate depreciated by 2.25 per cent during 2009-2014, and 3.84 per cent during 2015 – 2020