Chapter 5: PRINCIPAL THRUSTS OF THE STRATEGY

October 3, 1996 DRAFT

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I. Introduction

At the close of this century of dazzling technological progress and great social and political turbulence, the phenomenon of underdevelopment is still widespread in many regions of the world. Some formerly poor nations have succeeded in thrusting themselves into the ranks of the developed countries but many have not. While some have moved forward rapidly, others have slipped back.

Practical experience and economic research have yielded many valuable lessons about strategies for development, yet in some ways development is a more complex undertaking than it was a generation or two ago. Competitive forces in world markets have sharpened, making entry for the newcomer more difficult. At the same time, flows of official development assistance have declined in real terms. Fortunately, private investment in the developing world has increased, but it tends to be concentrated in relatively few developing countries, leaving the others to face greater uncertainty about the sources of funding for their growth aspirations.

Just as on the global level, there is an increasing realisation that development at the national level is not necessarily synonymous with elimination of poverty, and that special efforts are required in that direction. There also is a growing awareness that economic growth can have deleterious environmental consequences if not managed properly, affecting the well-being of a country's own citizens and those in other countries.

In essence, the principal challenges of development today are threefold:

To generate rapid economic growth.

To ensure that the growth is not immiserating for less-fortunate groups in the population, and indeed improves their standard of living as well as that of others.

To ensure that growth is sustainable, environmentally and in other respects.⁽¹⁾

This National Development Strategy represents a systematic attempt to meet these challenges in a way that is forward-looking, creative and decidedly Guyanese. It embodies a vision of rapid development with a human face. While laying out analyses and prescriptions in the realms of macroeconomic policy and policies for the productive sectors, it also addresses frankly our most basic social problems, including concerns in the areas of health, education, housing, poverty alleviation, the role of women, and the role of Amerindians.

It puts forth new approaches in all these areas. They may illustrated by just a few examples out of many:

Increasing budgetary allocations to health and education, made possible in part by the recent debt relief.

Putting into effect an operational Amerindian development fund, sustained by a percentage of the royalties from natural resource development.

Instituting programmes of subsidies for housing rental and purchase that are targetted on families that do not have adequate means to secure decent shelter.

Reorganising our health services to drastically improve the quality of service, in part by eliminating overlapping authority from governmental agencies and instituting mechanisms to involve citizens more deeply in the oversight of health facilities.

Meeting the demands for improving national educational standards by permitting a greater role for private education, thus lessening the burden on the public schooling system and enabling it to achieve more with the resources available.

Providing a principal focus on women in labour force training and poverty alleviation programmes.

The Strategy defines both new responsibilities as well as opportunities. It places great expectations on the private business sector. At the same time it includes policies that will foster wider citizen participation in basic decisions by enabling local governments, citizens associations, labour unions, farmers' groups, cooperatives and NGOs to play enhanced roles. It seeks to devolve responsibility to its most appropriate level. It develops participatory modes of management in many areas.

Central Government will achieve greater effectiveness by concentrating its role more, in guidance and oversight, in establishing basic policies and monitoring their implementation. The period of policy stock-taking has been completed, and now privatisation is moving forward more vigorously, beginning with GEC. The new modalities of privatisation also are largely participatory. This Strategy requires the private sector to be the productive and distributive engine of the economy. Government's primary role is to establish rules of the game that all must play by, to cater to the needs of the disadvantaged and the environment, and to ensure that adequate development of infrastructure takes place.

All components of the Strategy are informed by a belief that the Government of a developing economy must exercise strong leadership. The State must constantly be alert to represent the interests of the citizenry, and it must be an effective steward of our rich endownment of natural resources. This is a powerful role but it is best exercised through instruments of policy and specialised programmes to complement the efforts of the private sector, rather than by directly managing productive processes. Frankly, Government's ability to lead in the past has been weakened by spreading itself too widely and attempting to carry out roles which do not fall within its domain of competence.

The Strategy takes a long-term view of our country's growth prospects and requirements, and the special needs of less favoured groups in society, and on that basis it establishes firm foundations for continuing improvements in the standard of living of all Guyanese. The Strategy is both broad and deep. The various chapters cover all sectors and all key topics of economic policy and social programmes, and the policies established in preliminary form in each chapter are firmly buttressed by thorough technical analyses.

In addition to providing a solid basis for our development efforts for many years to come, it is a document that Guyana can present to the international community and through which Guyana can take a leadership role in directing international assistance to our priority areas and in support of our own policies. Now Guyana has an accurate compass for controlling its own destiny.

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II. Basic Themes of the Strategy

There can be no doubt that to achieve our ultimate goal of people-centred development, we need to pursue rapid growth -- the main source of employment creation -- at the same time that we intensify our endeavours to alleviate poverty. We need to improve our population's access to basic social and economic services, and we need to encourage participation by all segments and sectors of society.

Achieving rapid growth above all means increasing productivity. All over the world increases in productivity are the basis for the survival and prosperity of industries and natural resource-based sectors. If in spite of dedicated efforts an industry persistently incurs in losses, then well-designed programmes must be implemented for relocating the labour in other lines of production and providing the associated training. That is the only viable route to improvements in the standard of living of workers and their families.

Guyana is committed to economic growth, as the only way to realise the most basic aspirations of our population, but it also is committed to equitable growth. There are two basic approaches to poverty alleviation. One is temporary subsidies to enable the lower income groups to have access to sufficient amounts of food and other basic necessities, and the other is creation of an economic environment that will enable them to secure those necessities through exertion of their own abilities. The latter is the course that this Strategy has chosen to emphasise, although the former

approach is a necessary complement in the interim, until the income-earning capacities of the poor are expanded sufficiently.

In the long-run the aim is clear: the strengthening of economic self-reliance, the eradication of poverty at its roots, rather than policies which necesitate continuing handouts to relieve poverty.

Our development path also must be characterised by the three kinds of sustainability discussed in Chapter 2: fiscal, institutional and environmental. Quick fixes in these areas are doomed to failure, with damaging consequences.

We are an economy rich in natural resources, and those sectors can be expected to continue to expand, but a narrowly based growth path is risky, and the desired level of social and economic development cannot be attained on the basis of a few primary products alone. We need to diversify our economy and to develop our own new specialisations that will be internationally competitive and enduring. It is essential that we continuously improve productivity in all sectors.

Above all, we need to strengthen our base of human resources and mesh human resource development with Guyanas vast natural resources. Among other measures, this means improving education and other social infrastructure, providing higher public sector wages, and giving more emphasis to training programmes for the labour force. Improvements in these areas will help us retain our most talented people and induce some who have left to return.

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III. Principal Orientations of the Strategy

Chapter 2 develops the Strategy's broadest objectives and the policy conditions, or principles, that must govern the growth process.

For this Strategy, the road to achieving those national objectives is demarcated by both strategic orientations and sectoral and macroeconomic policies. The sectoral policies are quite specific and in some cases are stated in extensive form, but nevertheless they will have to be complemented with detailed implementation programmes. The strategic orientations themselves also have a macroeconomic, or economy-wide, dimension, and a sectoral, or topical, dimension.

At an economy-wide level, the strategic orientations or keys to rapid growth for Guyana are three-fold: export growth, savings mobilisation, and education and training. Expressed in the terminology of economics, this signifies expansion of markets for our products, mobilisation of the necessary financial capital, and improvement of our base of human capital. We need to improve the resource base for production (financial capital from savings, and qualified labour) and to widen the outlets where our products are sold. All three orientations are indispensable elements of a successful growth strategy. On a world scale, the countries that have grown most rapidly in recent decades are those which are export-oriented, characterised by high savings rates, and possessed of high levels of literacy and other educational attainments.

A broader statement of strategic orientation of education and training is human resource development. This concept embraces additonal emphases such as adequate health care, housing and water and sewerage services; creation of employment opportunities; elimination of the barriers that women face in the workplace and home; programmes for Amerindian development that satisfy their own cultural imperatives; and the like. This is the sense in which human resource development is promoted in this Strategy, but improved education and training may be singled out as the sine qua

non without which the other aspects of human development can occur only slowly if at all. In the most general sense, the concept refers to the need to mesh human resource development with Guyana's vast endowment of natural resources, so that economic management of the latter leads to maximum benefits for the former.

In immediate terms, promoting human resource development will require increased budgetary allocations to health and education, higher Public Service wages, and more emphasis on training programmes for the labour force.

At a more specific and sector level, the strategic orientations would include the following emphases:

1. Monetary stability and improved financial intermediation. These are prerequisites for increasing savings mobilisation, thereby allowing us to become less dependent on external financial sources in the future. All rapidly growing economies in the developing world have been characterised by high rates of domestic saving.
2. Macro policy and investment programmes that are conducive to export expansion. Our domestic market is so limited that exporting is the only route to rapid growth. Many export industries tend to be quite labour-intensive, so the benefits to the population of export growth are direct and immediate. Monetary and exchange rate policies need to be adapted to the priority of export expansion.
3. A participatory economy. Promotion of small enterprises, greater community participation in managing social and physical infrastructure, participatory divestitures. This orientation is essential for making the economy more responsive to the needs perceived by the people of Guyana.
4. Greater efficacy in poverty reduction. Better targeting of subsidies on the poor and emphasis on enhancing the assets of the poor, including their human capital, agricultural land, and access to bank financing for micro-enterprises.
5. Strengthening public finances. Creating a broader revenue base from existing classes of taxes and fees; levying higher royalties on natural resources; instituting more effective revenue collection. This is an absolutely essential condition for moving forward, as it creates the basis for supporting many vital programmes at an enhanced level.
6. External debt relief and appropriate debt management. Restructuring bilateral and multilateral debt to bring its servicing within Guyanas realm of possibilities, and managing both external and domestic debt in an effective way. Considerable progress has been made on this front recently, but it will continue to be assigned a priority.
7. Enhanced transparency of the policy framework. Putting in place an improved property registry system, an improved investment code, public auction procedures for natural resource concessions, and other improvements designed to increase the simplicity, clarity and efficiency of public sector management of the economy. These measures are vital in order to increase investors' confidence in Guyana, send clear and positive economic signals to our producers, and improve the efficiency of our economy. In practical terms, this orientation also means providing increased security of land tenure in agricultural areas, through making leaseholds longer in term and freely transferable, and through accelerating the rate of conversion to freehold for farmers who have worked the land a specified length of time.
8. Leading role of the private sector. The principal source of economic growth in the future undoubtedly will be the private sector. To advance the potential of the private sector for creating employment and raising incomes, efforts must be made to remove unnecessary and burdensome regulations and to privatise enterprises that would be more productive in private hands. By the same token, simplifications of the taxation and customs regimes and increased transparency of the policy framework will encourage more private sector investment.
9. Sustainable management of natural resources. Improved management of fisheries resources, improved policy for forestry concessions (including lengthening the time horizon of the concessions), a clear mining policy, and continued research on sustainable forest harvesting practices. It is essential to strengthen the Government's ability to oversee and manage the concessions and resource bases in these areas.
10. A cleaner, safer environment. Making the Environmental Protection Agency operational as quickly as possible, modernising the legislative and administrative framework for the environment, putting into effect the system of protected areas, and establishing a foundation with an internationally-funded endowment for supporting the protected areas.
11. Improved productive infrastructure, for both domestic activity and international trade. This area is becoming a bottleneck to future growth and urgently needs improvement.
12. Development of an entrepot centre and an export processing zone. These two initiatives will help diversify the economy, thus better protecting it from economic downturns, and they will be especially effective in creating new sources of employment. Accordingly, they are assigned a high priority in the Strategy. Guyanas geographical location lends itself to a role in entrepot trade as well as other kinds of trade.
13. Institutional strengthening. Making national and local institutions more effective and viable in the long run. Reforming Public Service and regional government, strengthening GFC, GGMC and the Fisheries Department in their oversight roles, providing self-sustaining sources of finance for local governments, solving the institutional coflicts and overlaps inthe provision of health services, decentralising D&I management for all but the main canals, and like measures in several other sectors.
14. Strengthening the unity of our nation. This very basic orientation refers to integrating the whole population more fully into the development process, enhancing linkages between sectors and groups, and improving the geographical dimension of communications. Examples include introducing more distance-learning techniques, improving the regional referral system in health care, improving road transport and air links to the hinterland, and incorporating Amerindians more fully into the development process whilst respecting their choices of culture and lifestyle.

The ways in which these strategic orientations support each of the objectives and policy conditions is fully articulated in the Strategy, thereby giving the document an integral focus and providing greater support for the achievement of each objective and policy condition.

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IV. The Relation between Strategic Orientations and the Strategy's Goals and Constraints

Each of the strategic orientations gives rise to specific goals in this Strategy, and each one also helps to satisfy more than one goal or policy constraint (policy principles). To conclude this Chapter, the multi-faceted relationship between strategic orientations on the one hand, and goals and policy constraints on the other, is set out in schematic form in Table 5-1 below. Brief comments to clarify the nature of the interrrelationships follow the table.

National goals & constraints on the development process: Strategic orientations:	Economic Growth	Poverty allev.	Basic needs	Democratic and participa. society	Environ. sustain.	Fiscally sustain.	Institut. sustain. (1)
Key to growth: human resource development (2)					.	.
Key to growth: export promotion		(3)	.	.	.	.	.
Key to growth: savings mobilisation		.	.	.	.	.	(4)
Monetary stability, improved financial intermediation		.	.	.	.	.
Macro policy, investments for exports			.	.	.	.	.
Participatory economy	(5)	.	.		.	.
Poverty alleviation programmes	.			.	.	.	.
Strengthened public finances	(6)	(7)	(7)	.	(8)
External debt relief		.	.	.	.	(9)	(9)
Enhanced policy transparency		.	.	(10)	.	.	(11)
Leading role of private sector		.	.	(12)	.	.
Sustainable mgt. of natural resources	(13)	.	.	.		.	(14)
Policies for cleaner, safer environment	.	.	(15)	.		.
Improved productive infrastructure		.	.	.	.	.	(16)
Entrepot centre & export processing zone		(17)	.	.	.	.	.
Institutional strengthening
Strengthening the unity of Guyana	.				.	.

Examples and notes on the mechanisms that link strategic orientations to goals and constraints:

(1) Examples of policies to promote greater institutional viability include reforming Public Service, strengthening GFC and GGMC in their oversight roles, providing self-sustaining sources of finance for local governments, solving the institutional conflicts and overlaps in the provision of health services, decentralising D&I management for all but main canals, and like measures in several sectors.

(2) Education is one of the three keys to growth but is included in the general rubric of human resource development.

(3) Export promotion also contributes to poverty alleviation because most export products are employment-intensive.

(4) The policies for savings mobilisation contribute to strengthening the country's financial institutions. It should be noted that successful savings mobilisation requires a stable macroeconomic environment.

(5) A more participatory economy also contributes to growth by better mobilising small enterprises, community organisations, and the private sector in general.

(6) Strengthened public finances contribute to growth by permitting the Government to play its role in the economy more effectively.

(7) Strengthened public finances allow more resources to be devoted to alleviating poverty and meeting basic needs.

(8) Strengthened public finances allow more resources to be devoted to protecting the environment.

(9) External debt relief also contributes to poverty alleviation, meeting basic needs, and a cleaner environment, through freeing up more fiscal resources. It strengthens government institutions by allowing them to play their roles more effectively.

(10) Enhanced policy transparency encourages individual initiative and therefore promotes greater citizen participation in the economy.

(11) Clearer rules of the game contribute to strengthening all institutions in society.

(12) Assigning a leading role to the private sector decentralises decision-making in the economy.

(13) Sustainable management ensures that resources like fisheries stocks and forests continue to be available to support growth.

(14) Sustainable management of resources is achieved in part by strengthening the institutions charged with their stewardship.

(15) Basic needs include access to pure drinking water.

(16) Part of the process of improving infrastructure is improving its institutional management.

(17) An entrepot centre and an export processing zone will be important sources of new employment.

1. Chapter 2 develops the theme of sustainability, incorporating fiscal and institutional dimensions.