REPORT #131 Nov 1999

Produced by the Belize Development Trust

by Nigel Avilez

What are the keys to national economic success? Why are wealthy countries rich, and why are poor countries poor?

On Sunday night, ABC's John Stossel did an interesting report tackling these questions. Stossel's report analyzed the United States, India, and Hong Kong, as well as several other countries of varying degrees of affluence and poverty, and he concluded that successful economies had policies that allowed for businesses to progress while poor countries were poor primarily because government, through taxation and bureaucracy, hindered progress.

India, for example, was poor because its government, through highly inefficient systems, made it difficult for businesses to start up.

For example, according to the report, a power company wanted to provide electricity to businesses in India. The company's assistance would have been welcome in India because government's supply of electricity was unreliable and businesses that needed consistent power were seriously set back because of it.

Anyway, the electric company went through India's procedures to start operating a business, and after about two years, the company was still waiting to hear back from the Government about whether its application had been approved.

During that period, an Indian factory that had received a order to manufacture cloth for the Japanese market had to close down because government's power supply was not consistent enough to operate

In closing down, the Indian company had to lay off about 400 workers. This in a country where he poor people are among the most destitute of the world's poor.

Stossel said that the situation that befell the Indian factory was not an isolated case. There have been investors lining up to enter the country but government bureauracy, for the most part, have kept them out.

For example, when the US based company, Kentucky Fried Chicken, wanted to get into India, its request became a serious issue of government debate. In a country where many are destitute and people die of starvation, the government was strongly against KFC entering the land because of questions about whether the fast food was healthy.

Stossel's report, to contrast, then looked at Hong Kong, an affluent Chinese dependent, which was, until 1997, a dependent of Britain.

Unlike in India, where new applications to open businesses would be stacked with all the old applications that were yet to be looked at, Hong Kong allowed people to open a business the same day they file an application. To prove it, Stossel, in one day, opened a business to sell ABC memorabilia.

His business wasn't successful, but the point he got across was that people who have a brilliant business idea would absolutely not be hampered by Government bureaucracy. Hong Kong's economy was about getting things done, and its success has been the fruit of that philosophy.

In India, poverty has been attributed to government involving itself too much in the nation's economy. In Hong Kong, the economy's success has been attributed to government keeping out of the economy, and making it free.

In Belize, I'm certain we'd be classified as one of those nations held back by government through taxation and bureaucracy. We've been held back by these systems that don't allow for progress - systems that perhaps benefit government through their generation of revenues in the short-term, but seriously hinder the nation's development over the long-term.

A few months ago, I wrote an article explaining that the reason why Belizeans were spending serious money in Chetumal was because they were understandably trying to get the most for their money. Belizean businesses have been gouging people, and when that happens, people will choose to go elsewhere, I said.

After the article, Hofius' gen- eral manager wrote a letter say- ing that Belizean businesses were hardly making a killing and the prices they were charging were to meet the heavy taxes levied on them.

The GM does have a point, and a strong one.

If government wants to encourage Belizeans to buy at home, it must help to create an atmosphere where our business sector is able to operate with more freedom from. burdensome taxes.

Until that happens, bright business ideas will have difficulty getting off the ground, businesses that should skyrocket will continue to wallow in marginal success, and big businesses won't experience anything near the success that they should. In each case, Belize loses big.

An important point about the ABC report was that when the Indian government leaders were questioned about what Stossel felt were "stupid" economic policies, the leaders were convinced that their government's system (which has been shown to be woefully inefficient) was the best.

And so India's government, the very institution designed to develop the country, has interfered so much that it has hindered progress. This will no doubt have further serious ramifications as the nation with the fastest growing population is destined to continue on its path to further poverty.

In Belize, we're lucky because we can learn from others' examples. What seems to be a universal truth is that economies will flourish when they are free.

When governments start running this, "red taping" that ' heavily taxing the other, it is a direct stunting of national development.

The Belize economy simply needs to be free, and our businesses and people need to be facilitated to a point where they can help to run the country and not be run down by it.

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