Posted on

Too much Talk about Socialism!


Governments in SVG have rarely been hamstrung by ideology. If anything, they have been pragmatic, doing what seems appropriate at the time. Their attitude is well summed up in a remark made by Deng Xiaoping, the leader who changed mainland China’s economic system. He pointed out that it does not matter whether the cat is black or white, once it catches mice. While some Governments in SVG may have talked socialism, this has not prevented them trying to promote the private sector.

It is easy to identify the many ways in which the private sector in SVG is being fostered. Simply by maintaining law and order, the Government is promoting the private sector. If you think this is not important, try setting up a business in a country where people are constantly rioting or where acts of terrorism are the order of the day.

A legal system with judges, lawyers, police and prisons prevails here. Property rights can be upheld and contracts enforced. Again, if you take this for granted, think about what happens in the drug trade. Trafficking in drugs is illegal, so if a man steals your weed or fails to honour his agreement to supply it, you cannot take him to court. The drug dealers have, therefore, had to evolve their own system of settling disputes. They shoot one another. This is precisely what the private sector would have to do if we did not have a functioning legal system.

SVG is not only in the Eastern Caribbean Central Bank (ECCB), but these days plays a leading role in it. Without the ECCB, we would not have a stable currency and without a stable currency, the private sector would find it very difficult to operate. Similarly, without the roads, ports and airports and other infrastructure provided by the Government, where would the private sector be?

Law and order, a stable currency and infrastructure are all prerequisites for a functioning society. Additionally, however, specific concessions have been made to encourage private sector development. The private sector is entitled to duty free imports of plant, machinery and in some cases raw material for manufacturing and similar enterprises. They are also entitled to tax holidays on the income derived from these enterprises. The man who conceptualized all this was Sir Arthur Lewis, the St Lucian who won the Nobel Prize for economics. He argued that in the Caribbean in the forties and fifties, there were a lot of unemployed and underemployed labour, and if we gave these incentives, the private sector would develop viable manufacturing industries. It did not quite work out like that in the West Indies. In Singapore, however, many of Sir Arthur’s ideas were adopted and they worked for that country.

Milton Cato, of blessed memory, raised the incentives for private sector development in SVG to a new level. He set up the Development Corporation to provide loans and factory space for the private sector. Many people did not pay their rents nor did they repay their loans so the Development Corporation collapsed under a mountain of bad debts.

In the agricultural sector, there have been similar concessions. Farmers do not pay income tax. They can import farm equipment, including a pickup, free of duty. The Arrowroot Board and the Banana Board were set up to help private farmers sell their crops. They also provided farmers on credit with fertilizer, pesticides and other inputs. These Boards also collapsed with Government having to take over millions of dollars of their debt.

Over the years, Government has conducted every type of land reform. Plantations have been bought and distributed to small holders. Plantations have been bought and operated as plantations by the Government. And then Government went back to acquiring plantations and dividing them up. Today SVG is a land of minifundia, with 72% of the holdings being less than five acres in size. With such small holdings our agriculture sector cannot compete with the large mechanized flat- land farms of Latin America and elsewhere. The most realistic prospect is that our farmers are able to produce food for the domestic and regional market.

Incentives similar to those granted to manufacturers have also been offered to the tourist industry. Here there has been some success with Mustique, Canouan, Palm Island and some small establishments on Bequia and on the mainland. Even without incentives, the retail sector, supermarkets and the like, as well as the fast food business, appear to be going hell for leather. It all seems to suggest that the factors at work are natural resources and size of the domestic market. Where we have natural resources such as sea, sunshine and remote islands, we have succeeded in attracting private foreign investment for the tourist industry. The new airport should facilitate this even more. Where the domestic market is large enough, as it is for supermarkets and fast food restaurants, local entrepreneurs emerge to take advantage of the opportunities.

In sum, our development or, lack of it, seems to have little to do with ideology. It arises more from lack of natural resources and a small domestic market.

The present Government has continued to provide concessions. So much so that the IMF has time and again pointed out that concessions cost the Government millions of dollars every year and this makes it difficult, not to say impossible, to balance the recurrent budget. They have recommended that the concessions be cut back.

All this has not prevented the Government from setting up Invest SVG to promote private sector development. Whether we call it Invest SVG or the Ministry for the Private Sector will make little difference. A rose by any other name smells just as sweet.