Development Watch – Tarron Khemraj

Each year Guyana’s position in the world is made known by indices and data put together by global organizations such as the IMF, World Bank, Transparency International, The Economist Intelligence Unit, United Nations and others. Some are released without much media attention and rebuttals from the government. One index in particular that comes in for much vilification from the government and some of its supporters is Transparency International’s (TI) corruption perceptions index (CPI). The disparagement of the index comes because Guyana appears to be doing poorly relative to its peers in CARICOM, coming out only ahead of Haiti. As was reported last December, Guyana slipped further in the 2013 ranking.

By definition it is a perception index since corruption often is not recorded on the books. As I have written in the past, we have to observe the assets of politicians when they enter government plus the known pay and expenses they incur. We have to observe the policy choices of politicians to infer how serious they are about combatting corruption. Some folks, and politicians in the government, might be tempted to conclude that perception is not reality. This conclusion, however, is far too dismissive of the index. Like all endeavours in data collection, there will be measurement errors. However, the errors are not unique to Guyana. All 177 countries/territories ranked in the index face similar measurement biases, derived from the methodology used to calculate the index. No one at Transparency International wakes up in the morning to say let me give Guyana a bad index number. All countries face the same scaling and standardization methodology.

The index number for a particular country is calculated by sampling experts, business executives, academics and other knowledgeable persons in the home country. It could also come from official domestic surveys from non-governmental organizations. The experts are asked the same questions in Guyana as would be the case in Barbados (the least corrupt in CARICOM) or Norway, the country where each citizen is now a de facto millionaire because of the value of its sovereign wealth fund. The perceptions of the various individuals are assigned with a number. Some experts will over estimate corruption (perhaps they are anti-government) and some will underestimate (perhaps they are pro-government). Some experts will give a number equal to the average (the fair experts). There is also scaling or standardization of the data by calculating the mean and standard deviation. In other words, the errors are mostly cancelled out by the time the number is reported or standardized so that Guyana can be compared with other countries. Errors might remain, but the same holds for other countries. As far as I am aware, the experts sampled in each year are randomly drawn and can change from one year to the next. The implication here is errors are randomly distributed, thus adding credibility to the index.

Scholars at the World Bank have also developed a corruption perception measure that is broader than TI’s. The index is part of the World Bank’s Global Governance Indicators (GGI). They measure corruption in the private and public sector, while TI’s CPI focuses only on government corruption. One study I have seen found a very high degree of positive correlation between the World Bank’s measure and that of TI. The implication here is there is substantial stability between the two measures in spite of differences in methodology and sources.

It is of course possible for Guyana’s government to improve its corruption perception in the eyes of its own people and those abroad. Members of the government must first realize that the index is rooted in solid statistical techniques which do not have anything personal against Mr Jagdeo, Dr Luncheon, Mr Rohee or President Ramotar. I would therefore take the opportunity to point out a few things the Ramotar administration can do to improve Guyana’s standing in the world of nations. As a general rule, the government would want to establish credibility in governance; and moreover, credibility in policy choices and actions. Indeed, perceptions – right or wrong – are formed based on the actions of the government.

Therefore, here is a non-exhaustive list of things the government can do to vastly improve its image. (1) Tell Guyanese who is the secret investor in the Marriott. (2) Justify the economic rationale for the proposed eight-gate airport terminal. What is the connection between the government and the contractor? (3) Why no serious airline outside of Caribbean Airlines is willing to fly to Guyana? (4) Give the people local government elections so that there can be turnover of local officials.

This reduces the criticism that the local bodies are infiltrated by local party officials. (5) Sign the fourth local government bill so that people can see that the government is serious about devolving power and economic management to locals (the government can certainly shut me up here!). (6) Rescind the radio licences distributed to friends and family of the government. The government has lost revenues here. (7) Explain the connection between Mr Ed Ahmad and Mr Jagdeo. (8) Explain and justify the asset accumulation of Ministers and government officials since 1992. Recall, income + allowances minus expenses must add up to total assets. Displayed assets in terms of houses are only one part of total assets.

(9) Explain to the country why the particular engineering firm was given the contract to build the Skeldon factory.  (10) Make NICIL more transparent and ensure its books are audited on time. A change in the leadership there will also silence those accusing the government of being corrupt. (11) Remove the obvious conflict of interest in the Auditor General’s office. (12) Establish an independent Procurement Commission. (13) Strengthen and make the office of the Ombudsman functional. (14) Make the land distribution to developers more transparent. (15) Clarify the sources of cash flows into the Consolidated Fund. (16) Why are well-established investors from the advanced economies not investing in Guyana? (17) Why does the government do business with firms in countries where bribing an official is part of corporate governance? For example, American law makes it is illegal for its companies to pay bribes abroad. Indeed, some companies are fined (Alcoa recently) and executives are prosecuted (Wal-Mart). (18) Why no major drug trafficker has been prosecuted or jailed in Guyana? How can the United States and Ghana find Guyanese drug dealers and not Guyana? (19) What is the status with the large quantity of gold smuggled out of Guyana? (20) Why was a private militia used to fight crimes during the 2002 to 2006 crime wave instead of serious police reform? What’s the quid pro quo between the government and the private gunmen who were connected to the underworld?

Corruption is a serious problem and a drag on economic development. Indeed resource rich economies – highly susceptible to graft and kickbacks – tend to grow fast in the short-term. The problem is whether they can actually develop into a cohesive society in the long run. No doubt some associates of the PPP have already started to observe that some countries that have poor governance records also have high GDP growth. It will be a big mistake if they extrapolate this tendency to a divided society like Guyana. Corruption by the ruling elites, elected mainly by an ethnic vote bank, engenders distrust and further entrenches inequality, which, in turn, feeds back to even more corruption and distrust.

Comments:

tkhemraj@ncf.edu