Guyana’s underground economy accounts for $188B
– Dr. Clive Thomas
June 1, 2015 | By KNews | Filed Under News, Source
Based on a study he conducted over the period 2001 to 2008, prominent local Economist, Dr. Clive Thomas has found that the underground economy yields a size of approximately $188B or US$940 million.
He said that the new administration, A Partnership for National Unity plus the Alliance For Change (APNU+AFC) really needs to concentrate a lot of its efforts towards this worrying area, so as to demonstrate its commitment towards reducing corruption.
He explained that Guyana’s underground economy refers to corrupt transactions that are prohibited by law and/or are undertaken by unauthorized providers. It has two main drivers: tax evasion and regulatory non-compliance.
The Economist said that operators, ranging from individuals to highly organized criminal enterprises such as those trafficking narcotics, persons, arms and gold.
Economist Dr. Clive Thomas
While he appealed last week for the new administration to make efforts to recover public assets stolen during the rule of the People’s Progressive Party (PPP), he is also calling for an investigation into billions worth in procurement frauds which occurred under the previous administration.
He estimated that the public procurement frauds, which took place under the PPP, amount to about $140billion. This he said was calculated from estimates provided by none other than Guyana’s former Auditor General, Anand Goolsarran in Part 11 of a series on public financial management.
He said too that government needs to also place special attention on two other areas of significant illegality and corruption in Guyana, which generate massive economic hemorrhaging; namely, illicit capital flight and the criminal underground economy.
Dr. Thomas explained that in Guyana, Illicit capital flight refers to assets, whether legally obtained or otherwise by residents, which are intentionally transferred, smuggled, or sent abroad without the knowledge of the Guyana Revenue Authority and other oversight authorities.
These he said are not generally intended to yield proceeds that will be returned to the country. Because these transactions are illegal, they are kept secret. “Therefore, when capital flight occurs, the capital disappears from Guyana’s financial/asset records, even though it might turn up in records elsewhere.”
He told Kaieteur News, while discussing his thoughts on the subject, that he firmly believes that this has occurred by the billions under the PPP/C and stressed that as the new government pursues all its forensic audits, this aspect should also be given attention.
“During the 1980s and 1990s, capital flight was widely acknowledged as a major problem confronting Guyana. During the 2000s however, it has been barely referenced by the Authorities. During that time, capital flight resumed with a vengeance. This took place because the previous ruling political elites promoted collusion, through mutually-supporting networks, with criminal endeavours seeking to evade the regulatory and oversight functions of the state,” Dr. Thomas said.
He added, “As I have argued elsewhere, this presently constitutes the starkest reminder of the ongoing criminalization of the state…”
While the drivers of the collusion between state officials and criminal operators were too many for him to mention, Dr. Thomas cited some of the key ones: the realization of the gains from crime, ranging from individual raiding of state coffers to the transfer of organized crime proceeds, the evasion of political and economic uncertainty and most importantly, fears caused by bad governance.
The Economist said that these drivers reveal that illicit capital flight is deeply intertwined with other criminalities such as procurement fraud, money laundering and the criminal underground economy.
He then made reference to data accumulated from two international sources responsible for annual tracking and reporting on aspects of global capital flight, including Guyana. One is the United Nations, and the other is the Global Financial Integrity (GFI) founded in 2006.
Dr. Thomas noted that for the years, 2010-2012, Guyana’s illicit financial flows had averaged US$443million or about $90billion. Although these flows do not fully account for total capital flight, he said that they provide an order of magnitude for that sum.
He said that by any standard, this is a humongous amount that has risen rapidly during the 2000s. “Retrospectively, the2010-2012 average compares to US83 million back in 2003.This had doubled to US$173million by 2006, and doubled yet again by 2010 to US$575million. The recorded growth in capital flight therefore, has been explosive during the 2000s,” he added.
The new government he said, if committed to good governance, should carefully milk this potential windfall for the benefit of Guyana’s poor and hither to powerless.
