Category: Public sector

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Who’s left now?

Introduction
The crisis facing the world economy is leading to a fundamental rethink of the role of ideology and the place of the ‘market’ in economic development. Some twenty years ago there was triumphalism in the West following the fall of the Berlin Wall and the demise of the Soviet Union. With the announcement and celebration of communism’s death mainly by those in the West, the practitioners, politicians and academics who had at one time extolled the virtues of socialism and the egalitarian society and equal opportunities which it would bring to all individuals all went into retreat.

Now it seems that capitalism as practised by those who were the celebrants at the death of communism are experiencing their own travails which offer a rare moment of satisfaction to the tiny minority which is still skeptical of the claims made by capitalism’s chief sponsors. Among this group is Joseph Stiglitz, known for his Nobel Prize in Economics and former Senior Vice President and Chief Economist of the World Bank. In his book Globalization and Its Discontents (2002) in which he not only critiqued globalisation but also argued that developing economies are, in fact, not developing at all, Stiglitz was particularly harsh on the IMF for imposing on those economies and countries, in exchange for loans and other assistance, economic policies “that conform to textbook economics but which do not make sense for those countries.”

In praise of deficits
Suddenly in demand for speaking engagements, Stiglitz, writing in the UK Guardian a few days ago, could barely contain his enthusiasm while speaking for that minority who never ceased having some connection to the Keynesian tradition. Lord Keynes who coincidentally was born the same year that Marx died, was the British economist who published in 1936, during the depths of the Great Depression, the tome The General Theory of Employment, Interest and Money in which his theory was that when the economy is slowing and businesses are reluctant to invest, the government should take up the slack, even if this means higher deficits.

Stiglitz in the Guardian noted that the acceptance of Keynesian theory even by the right in the US offered to those who were not captivated by the power of the market and capitalism, “a moment of triumph, after having been left in the wilderness, almost shunned, for more than three decades.” He posited that what the world was now experiencing was “a triumph of reason and evidence over ideology and interests,” and that some would see this as the end of market fundamentalism, comparable to the fall of the Berlin Wall.

Where have all our socialists gone?
But what happened to our socialists, or rather all of us, when at one time we all seemed to be socialists and the UF of Peter d’Aguiar a mere anomalous nuisance? If we are to take our constitution seriously – and why should we not given that is “the supreme law of Guyana” – Guyana is a state in transition to socialism. The constitution of the ruling Peoples’ Progressive Party, which I could not find on the party’s website, is even more emphatic about the party’s ideology – it is a Marxist party. In his seminal autobiographical work, The West on Trial, the late President and founder of the party, Dr. Cheddi Jagan wore proudly his allegiance to socialism, while blaming the British-US axis of all forms of plots and misdeeds. In fact Dr. Jagan, in the Wynn-Parry Commission into the Black Friday (February 16, 1962) disturbances said he was a communist.

Burnham, who initially came to power on an anti-socialist platform which he shared with D’Aguiar, went on a nationalisation campaign that at one time saw the state controlling some 80% of the economy.

While Burnham surrounded himself with some of the most doctrinaire left-wingers in Guyana including Ranji Chandisingh, Vincent Teekah, Elvin McDavid and Henry Jeffrey, his own commitment and that of his party, the PNC, to the socialist ideology appeared to be based on political control and nothing else. He had hardly been buried when his successor Desmond Hoyte reversed most of the socialist policies and embarked on the wholesale disposal of the country’s assets and resources for which the country received little in return.

The grand retreat
When Jagan returned to power in 1992, entirely out of character he continued those policies lock, stock and barrel, maintaining with the IMF a relationship of obsequiousness while embracing an amorphous and undefined New International Economic Order that had first been raised in 1948 in Cuba. Jagan never explained to his constituents or the country his about-turn on socialism, the IMF and the West, leaving it to others to speculate whether it was due to political expediency or his own conversion.

Whatever it was, his government pursued the same free market economics and model prescribed by the IMF and accepted by Hoyte.

Even before the death of Dr Jagan, economic policy and management of the PPP government was controlled by now President Bharrat Jagdeo who had been a member of the government from its first day in office in 1992. Jagdeo’s policies, on VAT, privatisation, price controls, food production and wages, have been entirely pro-IMF and he never for one moment betrayed his own Russian training. In effect then the policies of successive governments from 1988 to the present have been a renunciation of socialism.

The WPA too had been wedded to the socialist ideal and openly supported the Bishop regime in Grenada and the Cuban revolution. A major influence on the economic philosophy of that party was no doubt its one-time leader, economist Clive Thomas, arguably the best economist this country has ever produced. The TUF remains on paper a capitalist party but its leader sees no contradiction in being often placed in the role of spokesperson for the PPP.

Joining the clubs
For the political parties that were in government, the retreat from their ideological roots was no doubt shaped by developments in a world in which not to have the IMF stamp of approval or to be excluded from the WTO was like being an outcast. Market fundamentals reigned supreme and quietly everyone ceased being a socialist. Indeed, it would be difficult to find any leading member of the PPP – and here I distinguish it from the government – who would publicly describe themselves as a socialist. The PNC under Robert Corbin has lost not only its ideology but direction too, the WPA is peripheral as a force in politics in Guyana while the AFC is, so far as it can be labelled, very pro-market.

Cost and benefits
This column is not setting out as a value judgment on the economic model or policies which we followed at the behest of the IMF.

Nor does it suggest that there were not pluses and benefits from that relationship, however imbalanced. Perhaps both the post-Burnham PNC and the PPP needed an external force to bring investments and financial discipline to the country.

Many of the concessions and debt write-offs the country enjoyed were made possible by our allegiance to the IMF.

If the rules of accounting applied to the government, those write-offs would have been brought into its accounts as revenue, and it is partly those concessions that have made possible the substantial increases in expenditure on social services.

What is often not recognised or admitted, however, is that some of the debt write-off we have received had nothing to do with the IMF or the government, but rather stemmed from the fact that we were among a group of poor countries identified for such concessions.

Those policies have also had their cost. The resources of the country are now under external control and ownership. These foreign companies receive generous tax and other concessions under agreements which in many cases have not been subject to parliamentary approval or made available to the public. And in this regard the Asian wood giant Barama is an instructive example.

That company has reported losses for every one of twenty years while having enjoyed some of the most generous tax and other concessions imaginable. It is not only that those concessions have been costly to the revenue of the country, but they have made our domestic producers uncompetitive. With the various bauxite deals with RUSAL and BOSAI not available to the public, where is the political or public pressure to ensure that the deals are equitable and in the national interest?

One of the criticisms that can be made of the IMF-led policies is that while the national statistics may appear impressive and some Guyanese have seen marked improvements in their standards of living and a few have even reaped immense benefits, a large number of Guyanese still prefer to take their chances elsewhere. The figures show that tens of thousands of Guyanese have chosen to migrate legally or otherwise to seek jobs in just about any country they can enter. In the process, remittances have become one of our largest foreign currency earners and a major factor in any economic analysis. Public sector wages, and indeed wages in segments of the private sector as well, are cruelly low, made worse by a tax system that favours the self-employed and the shareholder over the wage earner.

Time to rethink
The crisis facing the market-oriented economies is causing a major rethink of some of the most sacred tenets of free markets and financial liberalisation. Primed as we are on the daily feed on US television we are aware of the embarrassing manner in which leaders of the US private sector trek to Congress begging for help. Make no mistake, the position in Europe and Asia is no different. When the turmoil is over and the dust has settled, the financial system, the housing and mortgage industry and the auto industry which have been responsible for much of the growth in many of the countries will have ended up in state ownership. While we privatise, they nationalise. That is not only a reversal over what took place for the greater part of the last twenty years, but a total contradiction of the free market. During all of this, the IMF seems to have gone into self-imposed silence.

Even after Guyana ceased being an IMF supervised country some two years ago, the government continued to follow the policies which the IMF imposed on us for so long that we seemed not to know there was an alternative or option. We are fortunate that we are not as vulnerable as some of the other Caricom countries, which because of a higher level of financial integration and tourism in particular, are already feeling the effects of the global storm. But make no mistake – we are not immune. Trinidad and Antigua are cutting back on construction and that will affect us directly. How do we reabsorb those Guyanese workers who may be forced to return home? For us the effects may be less immediate and also less harsh. But affect us it will.

Next week, we will look to see if there is anyone ‘left’ to help shape our response to the new reality brought about by the turbulence.

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Half year economic performance

The Guyana economy has performed reasonably well during the first half of the year according to Dr. Ashni Singh, Minister of Finance, and there is cautious optimism about the domestic economy for the rest of the year. This is according to the mid-year report presented to the National Assembly by the Minister on October 27, 2008. However, anyone with a serious interest in the economy and concerned about the several important omissions contained in the mid-year report should read the report in conjunction with the half-year report done by the Bank of Guyana and published on the bank’s website.

Driven by improved performances in agriculture, mining, engineering and construction, and services, the economy recorded a 3.8 per cent GDP growth during the first half of 2008, but still a sharp decline from the 5.8 per cent growth in the corresponding period of 2007. The Bank of Guyana – using that well-known oxymoron – reports that the manufacturing sector recorded negative growth, due partly to the high cost of inputs − fuel and imported raw materials, challenges to which the sector is no stranger.

2008.11.16_Chart1
Source: Bank of Guyana Half-year report 2008

Revenue and expenditure
On central government revenue and expenditure, the mid-year report presents some interesting information. Value-added and excise taxes were budgeted to increase by 12.8% from the $36.7 billion collected in 2007 to $41.4 billion in 2008. For the half-year actual collections amounted to $17.8 billion (43% of full year) compared with the $17.1 billion collected last year. On a period by period comparison these collections represented a marginal increase in value-added tax to $11 billion from $10.2 billion, although excise tax collections declined to $6.7 billion from $7 billion.

Internal revenue collections amounted to $19 billion in the first half of 2008 compared with $17.4 billion collected last year. The bulk of such revenue comes from a handful of companies, including the commercial banks, telecommunications companies and Banks DIH, DDL and DEMTOCO. Despite the many unincorporated businesses, the self-employed category pays less than one billion dollars in taxes, or just about 15% of the taxes paid by the employed persons.

While both reports indicate significant growth in key sectors, tax revenues have not risen correspondingly and one is left to wonder whether this is a case of generous tax concessions or continued tax evasion within key sectors.

But it is in relation to expenditure that the picture is particularly interesting. And while the Minister in his report did not discuss the table which contains several errors, it must now be a matter of speculation why only 38% of the full year budget has been expended in what the table itself describes as key sectors. Particular attention is drawn to the Health,

Infrastructure and Agriculture sectors where only 41%, 27% and 33% respectively, have been spent in the first half of the year. Are we going to see a mad and irresponsible rush to spend during the second half of the year, simply because the money has been allocated?

2008.11.16_Table1

Debt
The mid-year report deals very inadequately with external debt and omits completely any information on domestic debt which has been rising alarmingly over the past several years. The Bank of Guyana Report shows the stock of government’s domestic bonded debt increasing by 7.6 per cent, while its external public and publicly guaranteed debt rose by a whopping 16.8 per cent from end-June 2007.

The outstanding stock of government domestic bonded debt, which consisted of treasury bills, debentures, bonds and the CARICOM loan, amounted to G$74,223 million, an increase of 7.6 per cent from end-June 2007 and 7 per cent from end-December 2007 balance. The increase from one year earlier reflected the expansion in the stock of outstanding government treasury bills at end-June 2007.

Over the year July 1 2007 to June 30, 2008, the stock of outstanding public and publicly guaranteed external debt rose by 18.2 per cent to US$774 million. This increase reflected disbursements of US$45 million by the Inter-American Development Bank and the delivery of US$44 million credit by the Venezuela Petrocaribe agreement.

Employment
This very critical economic and social indicator once again fails to attract the attention of the Minister and again recourse has to be had to the Bank of Guyana Report which by its own admission is not based entirely on hard data. One has to wonder why the government continues to refer to labour surveys but yet the Ministry of Finance seems unable or unwilling to deal with the issue. While indicating that preliminary data indicated that public sector employment remained relatively stable, the Bank of Guyana reports some decline due primarily to factors such as resignation and retirement of employees.

The Bank of Guyana reported that while “data on private sector employment are sparse, there are indications that the growth sectors recorded higher levels of employment.” It went on to state that the mining, distribution as well as the engineering and construction sectors seem (emphasis mine) to be associated with increased employment.

It is interesting how the Bank of Guyana and the Ministry of Finance are so sure of the performance of the various sectors of the economy but cannot establish similarly reliable numbers on employment.

Inflation
Inflation has been one of the most disputed and massaged variables in the Guyana economy. Both reports indicate a 5.8% rate of inflation but again the Bank of Guyana is more informative even if no less controversial. The Minister of Finance attributes the increase mainly to food items, identifying cereals and cereal products as the principal contributors which are unlikely to be the main concerns of the average consumer. In fact in a typical food basket done monthly by Ram & McRae, Chartered Accountants, the price increase in food items over the six month period was 10.2%, compared with the Bank of Guyana figure for the food group of approximately 9%.

Conclusion
While the date on the Minister’s report is shown as September 12, in fact it was presented to the National Assembly on October 27, repeating a pattern of wrong dating by this Minister. Despite the additional time he took in presenting his report, the Minister chose not to address the serious global economic issues that surfaced in the third quarter, nor did he treat in any serious way his duty under the law to include in the report a list of major fiscal risks for the remainder of the fiscal year, together with likely policy responses that the government proposes to take to meet the expected circumstances.

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Curbing corruption: The Corruption Perception Index – conclusion

Introduction
Today we conclude this three-part article arising out of the publication of the 2008 Corruption Perception Index of Transparency International which ranked Guyana at a lowly 126 out of a total of 180 countries surveyed, with a score of 2.6 out of 10. No one can say whether the ranking is correct in the strict sense. That would require knowledge of the other countries surveyed or assume an unerring degree of consistency in the process across all of them. What we can say, however, is that the methodology and sources meet the reliability and credibility test, and any government serious about the image of the country ought to take the perception very seriously.

No one needs to be convinced that corruption and its sidekick, bad governance, have developed in Guyana into a culture of impunity fuelled by an unacceptable level of public tolerance. Inconsistent with its boasts of achievements in rooting out corruption, the government fiercely resists any demand for public scrutiny and readily attacks anyone who questions its decisions and actions. Corruption finds shelter in opacity and over- centralisation of power, non-transparency in major financial dealings and contracts, absence of accountability, and excessive red tape in government departments − conditions that exist here.

Many-headed hydra
There is no longer any question whether there is corruption, but only the extent and cost. One columnist described the situation as a “kleptocracy,” a term applied to “a government that extends the personal wealth and political power of government officials and the ruling class at the expense of the population.” Corruption takes many forms and the cases are legion. It can be the straight bribing of politicians and officials to the extension of concessions, contracts and benefits to those in power. It can take the form of scholarships and plum jobs for relatives of those in power, advisory positions for party officials and all kinds of personal benefits for the politicians. All of these have a real cost to the economy and explain why despite all the tax write-offs and excessive taxation on the backs of the poor our per capita GDP is a mere US$1,000.

Compare Guyana with the African island of Mauritius, which at its independence in 1968 was more dependent on sugar than Guyana was. Its per capita GDP was a mere US$200 and its future gloomy at best. Forty years later, despite the absence of oil or mineral resources and having to import most of its food and energy, the country has a diversified economy and enjoys a per capita GDP of US$7,000. It was rated at 41 on the TI Index and is considered the top African country in the Doing Business Series of the World Bank.

Cost and cancer-effect
Corruption costs the treasury, but also the ordinary person and as one friend wrote to me in an e-mail, “Corruption is not just a morality abstraction. It can and does indiscriminately hurt persons, groups, organisations, communities and nations in concrete and practical terms. For example, the untutored motorist who has corruptly paid for their driver’s licence ‘under the table’ is really a lethal weapon that may be heading your way. And every time you pay for a public service which is nominally available without cost, you obviously and unnecessarily diminish your disposable income and your child may have to do, at least temporarily, without a school book.”

Parts one and two of this article showed that instead of the government taking action to curb corruption, it has dismantled, emasculated and politicised key institutions with the result that corruption goes undetected and unpunished. The question is why is there an absence of outrage at the failure of the government to deal with corruption, and whether it has now gone out of control?

It may be that we have been so accustomed to corruption that it is now part of one’s existence, part of doing business in Guyana. It is also cancerous as businesses find it necessary to adopt corrupt practices to compete. It may also be that corruption takes so many forms that it may not be immediately seen for what it is. The country failed to see the creation of Pradoville, the Cabinet Outreach to get Amerindian votes for the 2006 elections and the virtual abolition of the Office of the Ombudsman and the Integrity Commission either as themselves corrupt practices or the facilitators of corruption. Not even the emasculation of the Audit Office, the abuse of the Lotto and NICIL funds and the misuse of state funds for personal benefits arouse any attention these days.

Tackling the problem
For there to be any real war on corruption requires political will and personal and institutional commitment, all of which seem in very short supply. Threats by the President to deal with corruption and to bring the perpetrators to justice are almost a monthly joke. The PPP/C came to power with a pledge to deal with corruption and its own manifestos may offer some solutions. Here are some of its pledges:

1.  Its 1997 Manifesto pledged to have a Freedom of Information Bill approved in the 1997 Parliament.

2.  In 2006 it promised, among other things, to:

i)  introduce fiduciary oversight reforms that will give greater oversight responsibilities to parliament to monitor executive programmes;

ii)  to reform and strengthen the Integrity Commission to carry out its functions of holding public officers to account;

iii)   strengthen the Audit Office; and

iv)  work with Parliament to establish the Procurement Commission.

As Business Page has shown over the past weeks, the government has not only failed to deliver but has gone into reverse, even as its political control has increased.

The parliamentary opposition chairs the Public Accounts Committee but the PNCR which holds the chairmanship seems to have run out of ideas, energy and capacity to make a real impact. The AFC failed to win government support for a Freedom of Information Bill in Parliament and it and the PNCR have not been effective enough in asking searching questions in the National Assembly that would help to expose and reduce the level of corruption.

That leaves us with ‘civil society,’ which however defined, has shown little or no interest in stemming corruption. For all its feigned complaints about corruption, the private sector is willing to ask for and accept concessions which it knows smack of corruption and which compromise their independence. Beneficiaries themselves of goodies from the government, they are recycled into various forms and on successive days they are members of this or that commission or body, then the next they are in religion and the next, part of the EPA coalition. As a result civil society is so weak that even when it extracts a commitment from the government as in the aftermath of the Lusignan Massacre, it could and did nothing when the President broke his promise to have the outstanding constitutional commissions set up by May, 2008.

In the course of this article I have called on key members of civil society to play their part in cleaning up corruption in their own areas. Significantly this included the Integrity Commission that has been disgraced as much by the politicians as by the Commissioners. A similar call was made to the Gecom commissioners but that too has been ignored. Hopes then are receding and the fear is that things will get even worse.

Conclusion
This may be a last chance for the so-called ‘silent majority’ to find its voice and get involved in the fight against this cancer. Entering the public debate, pushing for resuscitation of the powers of the Office of the Ombudsman, mobilising public support against corruption, demanding accountability for public funds and lodging complaints when approached for bribes are all actions that the lowliest among us can take, so the excuses that we cannot change the situation are just that: a copout. Advocacy in the form of sustained pressure from civic groups and private sector organisations for fundamental reform of how government runs its business can be effective and save the country billions. For starters I would support the recommendation of the friend from whose e-mail I quoted above that we have a country chapter of Transparency International appropriately structured and populated. Any interest anyone?

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Curbing Corruption – The Corruption Perception Index – part 2

Introduction
In introducing this subject last week Business Page sought to explain how Transparency International, the international non-governmental organization, compiles its annual Corruption Perception Index. For the benefit of readers who may have missed it, the 2008 Index ranks Guyana at a lowly 126 out of a total of 180 countries surveyed, with a score of 2.6 out of 10. As we indicated last week, in this second part, we turn our attention to why and how the attitude of the Government reflected by the cavalier statement of Dr. Luncheon that the Government would work in the same mode not only contributes to the perception of corruption but quite likely to actual corruption in Guyana.

For the purpose of this article we will look at the performance of the relevant political structure, the propriety, accountability and transparency of public spending, procurement, executive behaviour, the capacity and independence of the oversight mechanisms established to identify, punish and prevent corruption such as the Audit Office, the Public Accounts Committee and the Integrity Commission as well as the role and contribution of civil society. What we see is a depressing tale of resigned powerlessness and apathy to corruption and impropriety from top to bottom – from the way key provisions of the Constitution continue to be ignored with impunity at the level of the presidency, the routine demands for bribes and kickbacks by police and customs officials whose boss in defeat and frustration appealed to the public not to give his staff any more bribes, to the minibus driver who must perforce give a $1,000 to the traffic cop.

Party accountability
Let us look first at our political arrangements. Governments come out of political parties but these must be the only members’ organisations where there is no financial accountability and where members are not given access to even basic financial information, let alone formal reports. There is a curious fascination about the sources of their income, the identity of the select few who control their cash and how the income and expenditure are accounted for. So embedded is this absence of controls and financial accountability and so normal is it that parties behave as though accountability does not exist and that there is no expectation among members for any form of reporting. This can allow the financing of political parties by drug dealers and tax cheats to go unnoticed and the buying of favours for the donors, to be returned in one form or another including “immunity” in their tax affairs. This danger is particularly evident at general elections time when huge funds seem to come from nowhere while our Elections Commissioners seem unconcerned that the relevant law is out-of-date and used as an excuse for totally ignoring it. It is unlikely that any of the commissioners would dare to suggest that the law be updated and enforced. The possibilities for financial lawlessness and what the PPP/Civic 1992 Manifesto referred to as “dishonest electoral practices” and corruption are therefore endless. To call for proper legislation would be an invaluable national service which a GECOM Commissioner can render this country.

It should not be a surprise therefore that the attitude evident in the administration of the party finances is often carried over into public office. But even if we were to consider political parties outside of the pale of accountability – which they ought not to be – what about the rest of the country including most importantly those with the power to raise taxes from the people and the duty to spend it in a fiscally responsible and financially transparent manner? That duty includes waging “war against corruption which has seeped into every corner of our national life and is destroying the morals and morale not only of the corrupt but of all our people” – to use the words of the PPP/Civic 1992 Manifesto. That war requires an adequate institutional framework with reasonably capable and honest persons operating a system that has sufficient checks and balances including strong oversight and regulatory bodies. Absent these, the door is wide open for abuse and corruption.

Promises and delivery
It seemed for a while that these minimum requirements were recognised and that serious steps would be taken to address the problems. The 1992 Manifesto provided an excellent framework and statement of commitment. These were followed by changes to the national Constitution and some new laws. The changes have turned out to be more cosmetic than real and many consider that the cost and impact of corruption now is higher than it was fifteen years ago. Year after year, the Constitutional requirement that all public moneys be paid into the Consolidated Fund has been ignored in respect of the Lotto Funds which seem to be available for utilization at the President’s pleasure, since he has no such authority in law. Instead of taking remedial action, the Government has found another avenue for similar non-accounting and questionable spending. And that is in respect of the substantial sums collected and spent by the Privatisation Unit from privatisation and rentals of public property.

Recognising that the Government over a sustained period has been the largest procurer of goods and services, and that any control of corruption requires a strict regime of oversight of the procedures to ensure that procurement is done in a “fair, equitable, transparent, competitive and cost effective manner”, the revised Constitution makes provision for an independent, impartial Public Procurement Commission to be appointed by the President. Not only has this not been done but the Parliament has passed not one but two Procurement Acts placing procurement under a political head and rendering the Commission effectively redundant.

Integrity
Like with procurement so with integrity. Two Acts have failed to do the trick (no pun intended) and from its outset the Integrity Commission has been a failure if not a farce. We recall the wife of a later discredited Minister being appointed a commissioner by the Government but even more ludicrous the information is that the Chairman or ex-Chairman Bishop Randolph George resigned but that his resignation was not accepted by the President. It seems that the Commission is non-functional or at best dysfunctional with a membership that inspires no confidence and that seems to have no accountability other than to the President who has supervisory authority over the Commission. Indeed the Act allows the President to step in and request information from declarants and to publish their names and to hold formal enquiries. Given the scope of this legislation, covering as it does members of the National Assembly, the judiciary, public officers, local government officers, presidential advisors etc., it is incredible that there is no report of the Commission or the President publishing the fact that a person has failed to file his declaration under the Act, or of the Commission having held, since its establishment a single inquiry into any person. And is it a “nancy story” that no one has ever been charged with the new offence created by the Act of failing to account for their assets?

It would be an act of integrity if Bishop George, a respected man of the cloth and one who contributed to the return to democratic elections, would tell the nation what really is going on. Incredibly, calls to the Commission’s office are referred to the Office of the President!

Financial oversight
Then there is the Public Accounts Committee (PAC) of the National Assembly with the principal task of doing follow-up work on the report of the Audit Office. A leading member of that Committee has lamented the limited powers of the PAC but the public can legitimately ask whether that body does enough not only within its limited authority but whether it is sufficiently aggressive in pursuing its mandate. The combination of an Audit Office with the range of weaknesses identified above and a PAC without the expertise or the power to compensate for those weaknesses increases the risk of corruption succeeding without detection.

The two major executing entities for accounting for and overseeing public expenditure are the Audit Office and the Accountant General’s Department. The weaknesses in these outfits were long recognized but sixteen years after the Government pledged to the nation and the voters to strengthen the Audit Office and the Accountant General’s Department, these remain as starved of resources as they ever were while yet being called upon to manage and supervise vastly larger sums of money. After all these years, the Accountant General’s Department cannot control bank accounts of billions of dollars and the financial statements that it submits for audits are incomplete and in many cases incorrect.

Business Page of August 31 and September 7, 2008 highlighted some of the glaring weaknesses in the Audit Office including being understaffed by persons who are under-qualified, with serious problems of professional independence, glaring conflicts of interest and consistent failure to meet its constitutional mandate for reporting to the nation within a defined timeframe. Its 2006 report speaks as much about its own inadequacies as it does about the public finances of the country. Years after, it is still to publish its report on the money that was received and disbursed on the 2005 Flood and there are concerns that the same is happening with the 2006 Cricket World Cup accounting. If the Audit Office is so handicapped that it is several years in arrears in respect of several of its statutory obligations, when will it detect any occurrences of fraud and corruption? And if it has to spend its time on what in a normal situation would be regarded as basic such as bank reconciliations, it will not have time even if it had the other resources to deal with the serious control issues. The Office seems to lack the competence, independence or the confidence to scent corruption and there has been not a single case over the past several years of the Audit Office pursuing any incident of corruption of its own initiative.

Custom
There is such helplessness over corruption in the Customs and Trade Administration that its head is now appealing to the public to help in curbing corruption there. That statement is an indictment of the entire GRA and directly Colonel Ramsarup whose appointment was considered by many as usurpation of the role of the GRA Board by the President. The public waits with bated breath to see what action the Government will take to deal with the Department.

It would be unfair to hold public servants entirely responsible as the failures of their political bosses are in many cases worse. Why is the Minister of Finance not held accountable when he consistently fails to present to the National Assembly his half-year report within the sixty days deadline? The President is allowed to handle hundreds of millions of dollars without any authority whatsoever and creates for himself the supervisory responsibility over persons accountable only to him. The bloating of the number of ministries and departments, appointments and salaries outside the public service rules and an explosion of positions in the Office of the President create huge problems of adequate supervision and opportunities for corruption.

Large part of the problem
Add to all of these major institutional weaknesses, the Government’s willingness to pass legislation tailor-made for the President’s friend and to facilitate plea bargaining by its supporters, the belief that the Government is not at all serious about corruption gains credibility and sympathy. On the other hand the Government has strongly resisted calls for a Freedom of Information Act which it promised in its 1997 Manifesto and arrogates unto itself complete ownership and control of the state media and resources which it had promised to open. Not only has the Government shown a serious breach of faith but this complete control over activities and information on their conduct has dangerous implications for corruption since any government would be reluctant to embarrass itself over any corruption involving those near and dear to its political heart.

The problem is that by his style and obsession with micro-management, everything including allegations of corruption, the latest example being Fidelity/GRA and wastage (the Bridge) has to wait on the President. The trouble for us here is as the evidence shows the President is a large part of the problem.

Next week we will look for some solutions.

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Curbing Corruption – The Corruption Perception Index

Introduction
Not unexpectedly, the Government has taken issue with the ranking accorded Guyana in the Transparency International (TI) Index for 2008 announced late last month. Of a total of 180 countries surveyed, Guyana was ranked 126 with a score of 2.6 out of 10, the worst score of all the countries in the English-speaking Caribbean. In describing as flawed the methodology through which the organisation comes up with its information, Cabinet spokesman Dr. Roger Luncheon gives the unmistakable impression that he may not have adequately informed himself of the extensive processes employed by TI in the compilation of the Index. Dr. Luncheon offered nothing more for his conclusion than that the report could be the product of the interviewees as “persons of an anti-government stance or who are not employed by government”.

One may regard this as suggesting that the persons employed by the Government including those who run the drivers’ licence process, the ubiquitous traffic cop or the incorrigible customs officer as the paragons of honesty, defenders of the moral soul and supporters of the government, a view that is unlikely to be shared by an overwhelming majority of Guyanese. In fact the very definition of corruption used in the TI and other international indices is an assessment of the persons “employed by the government”, including all its political appointees – high, low and in-between. Effectively dismissing the report and all those who share its conclusions in varying degrees, Dr. Luncheon complacently noted that Government continues its work in the same mode. That attitude of “we don’t care” perhaps explains why Guyana has actually slipped three places over the previous year and why, despite the country being the most heavily taxed in the region, there is not more to show for those taxes.

Definition
The corruption index measures the perceived levels of corruption among public officials and politicians based on different expert and business surveys by responsible and well-placed organisations. That system would not allow and would quickly eliminate the Jean-Louis type who according to a letter in Stabroek News of Thursday October 9, obtained his information from an “obvious lady of the night”. A columnist is not allowed to speculate on the basis for the conclusion about the lady.

The rest of this and next week’s column will explain how the Index is constructed and why and how the attitude of the Government reflected by the cavalier attitude of Dr. Luncheon not only contributes to the perception of corruption but quite likely to actual corruption in Guyana. Those persons who are perceived as engaged in corruption would no doubt find comfort in Dr. Luncheon’s comments as an endorsement of their conduct and an invitation to continue their unacceptable behaviour. We will look at the performance of the relevant political structure, the propriety, accountability and transparency of public spending, procurement, executive behaviour, the capacity and independence of the oversight mechanisms established to identify, punish and prevent corruption such as the Audit Office, the Public Accounts Committee as well as the contribution of civil society. Let us briefly look at the organisation itself.

The organisation
TI is a non-partisan, non-governmental organisation based in Germany. It has chapters in some 100 hundred countries but it does not undertake investigations on single cases of corruption or expose individual cases. It is interesting to note that efforts to set up a group in Guyana were unsuccessful and met with a resigned apathy that nothing will change – so much for the vaunted civil society. TI is financed from private sources and by international and regional institutions. It is best known for the CPI but it also publishes an annual Global Corruption Report, a Global Corruption Barometer and a Bribe Payers Index.

TI has objectives that should be shared by any Government committed to transparency and accountability including:

•  Improving access to and the disclosure of public information,

• Enabling citizens, legislatures, journalists and investigators to ‘follow the money’;

• Cleaning up public procurement and sanctioning violators,

• Maximising development resources and ensuring better public services;

• Strengthening institutions of oversight and engaging civil society,

• Enabling parliament, auditors and civil society to demand accountability;

• Harmonising donor activity to prevent abuse.

Despite its recent origin – about fifteen years – TI is credited for its contribution in putting the topic of corruption on the world’s agenda. International Institutions such as the World Bank and the International Monetary Fund now view corruption as one of the main obstacles for development, whereas prior to the 1990s this topic was not broadly discussed. TI also played a vital role in the introduction of the United Nations Convention against Corruption and the OECD Anti-Bribery Convention.

The Index
The Index is not compiled by some individual or group dropping into the country and speaking with a few disgruntled individuals and feeding that information into some computer that has a bias against Guyana.

Nor does the report measure the extent of corruption among the population as a whole. As the website of TI pointedly notes while the Index identifies Somalia at the very bottom of the ladder in 2008, that does not mean that Somalia is the ‘world’s most corrupt country’ or that Somalians are the ‘most corrupt people’. All it takes for a country to be very corrupt is a few powerful politicians and officials perpetrating corruption on the rest of the population. But that is small comfort to Guyanese who are mocked by their Caribbean brethren as the most corrupt people in the Commonwealth Caribbean.

All sources measure the overall extent of corruption (frequency and/or size of bribes) in the public and political sectors. Evaluation of the extent of corruption in countries is done by country experts, non resident and residents. In the CPI 2008, these were: Asian Development Bank, African Development Bank, Bertelsmann Transformation Index, Country Policy and Institutional Assessment (CPIA), Economist Intelligence Unit, Freedom House, Global Insight and Merchant International Group. Additional sources are resident business leaders evaluating their own country. The exact definition of “corruption” may vary but they all agree touch directly or indirectly on the misuse of public power for private benefit, for example bribing of public officials, kickbacks in public procurement, or embezzlement of public funds while some including the Asian Development Bank, the CPIA and the World Bank ask for ineffective audits, conflicts of interest, policies being biased towards narrow interests, policies distorted by corruption, and public resources diverted to private gain.

To be assessed and included in the Index required that a country have at least three surveys and assessments. Indonesia and India, now among the fastest growing countries in the world, had the largest number with ten while a small number had just three. It is tempting to state that Guyana’s low rating results from having only four surveys and assessments but that is also true of all the CARICOM countries which received much more favourable ratings, and of scores of other countries some of which received lower and others higher ratings. St. Lucia, St. Vincent and Dominica rated 21 and 28 and 33 respectively had three such surveys and assessments while Barbados rated 22 had four, Suriname and Trinidad and Tobago both rated 72 had four each and Jamaica rated 96 had six. While the CPI has been tested and found by both scholars and analysts as a reliable measurement tool of perceptions of corruption, that reliability differs across countries. The higher the number of sources and smaller the differences in the evaluations provided by the sources, the greater the reliability in terms of the countries’ score and ranking.

Perception and reality
It also means that if all the surveys and assessments were conducted using the same interviewees, errors can indeed creep in and no doubt some of that does take place. But that is also true of the other countries in the Caribbean some of which are infinitely smaller than Guyana. In any case perception does matter and as the cliché goes, perception becomes reality. For the Guyanese that perception is reinforced when it supports empirical evidence and reckless disregard by those in authority.

While investors would include a country assessment in making their investment decisions, that assessment includes a strategy for dealing with public officials who have a reputation – deserved or not – as being corrupt. Careful investors including those who are bound by home country laws on bribes paid to officials abroad are usually reluctant to become involved in countries perceived as corrupt. We lose those investments to start with. For the determined who consider Guyana as a destination anyway, a cost for corruption including bribes and kickbacks is factored in which can result in the investment also being ruled out.

At a practical level, corruption has a direct cost. Some commentators estimate that procurement costs may be higher than they should be in the range of 10% to 20% as bids are inflated to take account of bribes and contributions to political causes. Where the corruption takes place in the revenue collecting agencies the amount of tax lost is absolute and direct so that those who bring in suitcases of commercial material paying not to the state but to corrupt customs officers, the effect is direct and total. Then there is the metaphysical and what corruption does to the soul of the nation and the impact on the morality of the people but that is perhaps outside the scope of this Page.

To be continued