Guyana 2013 PSAR€¦ · Guyana Private Sector Assessment Report Table of Contents 1) ... and organized in Guyana, in part due to the country’s large needs, and in part due to a

Guyana 2013 PSAR

January 2014 This Guyana Private Sector Assessment Report (GY-PSAR) presents an

overall assessment of private sector development (PSD) and recommendations for facilitating and accelerating private investment and growth. This report includes a summary of the main characteristics and

issues as it relates to private sector development, selection of priorities, a section on monitoring and evaluation of PSD initiatives, and finally a

section with recommendations for interventions and also for filling in data gaps. The report includes one annex with the Guyana Donor Matrix (GY-DMX).

I want to thank the support, comments and suggestions of Mark Wenner,

Tara Lisa Persaud, Sylvia Dohnert, Musheer Kamau and Sophie Makonnen. I want to thank all the people that were interviewed in Georgetown that

provided data, analysis and anecdotes and experiences that have been incorporated into this report.

2013

Carlos Elias Ph.D.

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Guyana Private Sector Assessment Report

Table of Contents

1) Introduction.............................................................................................................................. 3

2) Chapter I: Identifying market failures ..................................................................................... 4

a) Goal of PSD in the country and current programs............................................................... 4

b) Overview of the economy .................................................................................................... 6 i. The domestic economy..................................................................................................... 6

ii. The international economy ............................................................................................. 10

iii. The productive structure ............................................................................................. 13

iv. The institutions ........................................................................................................... 16

c) State of the private sector................................................................................................... 17

d) Large and fast growing sectors in the economy................................................................. 20 e) Issues for private sector development ................................................................................ 22

i. Business supportive institutions structure ...................................................................... 22

ii. Donors and other international entities .......................................................................... 33

iii. Access to finance ........................................................................................................ 38

iv. Corporate taxation ...................................................................................................... 42

v. Business environment .................................................................................................... 44

vi. Technology and innovation ........................................................................................ 48

vii. Trade and FDI policies ............................................................................................... 48

viii. Labor regulation.......................................................................................................... 50

ix. Infrastructure, communications and energy ............................................................... 51

x. Environment ................................................................................................................... 53

xi. Gender......................................................................................................................... 53

3) Chapter II: Selecting and prioritizing issues.......................................................................... 54

a) Opportunities for selective interventions to improve the business climate in Guyana ...... 55

b) Additional recommendations to accelerate private sector growth and development in Guyana....................................................................................................................................... 60

c) Action plan ......................................................................................................................... 62 4) Follow-up, monitoring and evaluation .................................................................................. 62

5) Chapter III: Conclusions and recommendations.................................................................... 63

Annex 1: Sources of information used in this report .................................................................... 65

Annex 2: Guyana Donor Matrix Report (GY-DMX) ................................................................... 66

Annex 3: Brief description of the National Competitiveness Strategy and the Low Carbon

Development Strategy................................................................................................................... 81

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1) Introduction

According to the PSAR guidelines the PSAR is: “a report meant to provide a comprehensive framework to identify market failures concerning the development of the private sector and

prioritize them in terms of their need for an urgent solution. These outcomes are the result of a process that involves the use of descriptive and analytical tools to assess the state of the private sector and the economy as a whole, as well as consulting with firms in strategic sectors of the

economy to prioritize issues. The PSAR can be decomposed in two big parts: first, it compiles and analyzes information from different sources in order to provide a snapshot of the state of the

private sector in the country, and second, it brings the information to relevant stakeholders – such as firms in the economy – to establish priorities on all the identified issues affecting further growth in the private sector.”1

According to the DMX guidelines the DMX is: “is a dynamic tool designed to improve

coordination among government, stakeholders and the donor community of PSD programs and projects in CARIFORUM countries. The DMX will identify PSD programs and projects,

including, among other, business climate reforms, macroeconomic support to governments, direct support to the private sector, and women in business initiatives and related gender mainstreaming efforts. As such it is a tool that will be used to identify, assess, and monitor PSD

programs and projects in individual CARIFORUM countries as well as sub regional programs and projects. The DMX is also meant to be used for the development of strategic partnerships,

to identify gaps and omissions, and to maximize the impact of projects through improved donor coordination.”2

The DMX guidelines note that: “The DMX and PSAR complement each other, with the DMX

providing information about past and present programs and projects in each country; and the PSAR identifying priority areas for Private Sector Development (PSD) interventions at the country or sub-regional level. The contrast between what is currently being supported by the

donor community identified in the DMX, and what should be supported identified in the PSAR, is an important input for the definition of PSD programs and projects, and for improved

coordination between government, stakeholders and the donor community.”

It is expected that donors, working together, would use this report to improve coordination and identification of larger, more comprehensive private sector projects and programs to accelerate growth across the region. Improved coordination would lead to increasing the development

impact of private sector development projects and programs while reducing transaction costs. These activities fall within larger donor coordination efforts to improve the quality and

effectiveness of development cooperation as reflected in the Paris Declaration on Aid Effectiveness of 2005, the follow-up Accra Agenda for Action of 2008 and the Busan Partnership for Effective Development Cooperation recently agreed on by donors in November

2011.

1 Guide for Private Sector Assessment Report (PSAR) in the Caribbean Countries. Version 1.2. InterAmerican

Development Bank, 2011. 2 Donor Matrix Guidelines. Draft February 2012. InterAmerican Development Bank, 2012.

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The analysis presented in this report rests on two sources of information: primary data collected during a trip to Georgetown in October 2013 that served to identify actors and PSD programs as

well as the main bottlenecks for investment and growth; and secondary data and information available from multiple sources that are referenced throughout the document. An important

contribution from this report, in addition to fulfilling the purpose of the GY-PSAR, is to identify data and information gaps. The PSAR is a long document that provides large amounts of information and priorities, but it does not facilitate its use by decision makers. For this reason

the PSAR highlights are summarized in the Executive Summary document that complements this report.

Importantly, significant analysis and actions have been taken to facilitate the expansion of the

private sector of Guyana. From this perspective, Guyana leads the region in the preparation of development plans that would improve competitiveness and that provide a clear framework within which government supports the expansion of economic activity in the country. In 2006

government published a National Competitiveness Strategy (NCS) which would guide efforts to expand economic activity and diversify the economy. Since then this ambitious strategy has

been partially implemented and has delivered some important results. Complementing this formal effort to improve competitiveness in the country, government has also published the Low Carbon Development Strategy (LCDS) that provides clear direction for the country’s future

generation and use of energy, and for the preservation of Guyana’s environmental assets. These two strategies necessarily frame the analysis presented in this PSAR and are described in this

report.

The rest of this report presents a summary of the main characteristics and issues of the economy of Guyana as it relates to private sector development, the selection of priorities including those identified by the business community, a section on monitoring and evaluation of PSD initiatives,

and finally a section with recommendations for interventions and also for filling in data gaps. The report includes one annex with the GY-DMX.

2) Chapter I: Identifying market failures

This section presents the economic background for this report and concludes that the largest

challenge for the development of the private sector is to strengthen property rights of the two sectors that are the engines of growth of the economy: mining and agriculture. The section includes an overview of the private sector, which can be characterized by many micro, small and

medium sized companies active in primary, secondary and mostly tertiary economic activities.

a) Goal of PSD in the country and current programs

The PSAR emphasizes private sector constraints for growth in agriculture and mining, the engines of the economy; and focuses on business environment gaps, such as access to credit and the gap between supply and demand of skills in the market. Additional important issues

presented in this report include the large migration of trained Guyanese nationals, in health and education in particular, and the impact of availability of labor market skills on private sector

expansion. This report may be used to identify priority actions that may be funded either by Compete Caribbean, the IDB or other donors. Importantly, the donor community is very active

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and organized in Guyana, in part due to the country’s large needs, and in part due to a history of debt reduction and forgiveness that required extensive donor coordination and negotiations with

government. The Donor Matrix (DMX) included as an annex to this report maps out programs and projects designed primarily to strengthen private sector activities.

This PSAR highlights the special characteristics of economic growth in Guyana. Guyana’s

growth has been characterized as an enigma because of stable and long periods of constant growth, decline, or stagnation. Other countries in the region reflect growth volatility as a consequence of dependence on commodity exports, or on the swings of the tourism industry that

reflects the business cycles of industrialized countries, or related to macroeconomic mismanagement mostly linked to poorly designed and implemented fiscal and monetary policies.

Guyana shares these characteristics with countries in the region, but it that does not exhibit growth volatility, and instead shows long periods of strong and sustained growth, decline or stagnation. This is a serious problem as sustained economic stagnation and decline are highly

correlated with poverty, the development of institutions such as democracy and political stability, gender issues, environmental degradation and crime and violence.

Because the economy is small, Guyana’s growth performance is highly sensitive to single events

related to politics, large investments, exogenous shocks, or policy initiatives. In the context of a very small economy, a single positive or negative event is felt throughout the economy and

determines growth, decline or stagnation. The successful period from 1990 to 1997 indicates that positive events related to the privatization program offered relevant opportunities for investment that in turn resulted in sustained and high growth. Similarly, the political disruptions

of 1998 to 2001 introduced uncertainty throughout the economy, and as such, resulted in the prolonged stagnation period that ended in 2007. Since then, Guyana is again experiencing sustained and large economic growth, mostly linked to the extraordinary performance of

international prices of gold and other minerals, but also positive external environment for rice exports—large increases in prices of Guyana’s commodities result in significant investment by

small producers.

The private sector plays an important role in this process. Some actors in the private sector play a central role in economic performance, mining and agriculture, while others are limited to adapt

to the good or bad economic context, manufacturing and services. The leading private sector actors that determine overall economic performance, the leading sectors of the economy mining and agriculture, react to incentives provided by international prices and trade conditions. When

prices and conditions are good—which was the case in the last few years as international prices of gold and more generally other minerals, but also of agricultural commodities were good—then

the private sector invested and accelerated production for export markets, and the benefits of these activities spilled over to the rest of the economy resulting in increased aggregate demand. Manufacturing and ehe service sector, which directly reacts to aggregate demand, acted as an

economic buffer that expands or contracts based on how well the economy is doing.

Government plays a central role in this process as well. Directly through the impact of government spending on aggregate demand, especially by the impact of public investment. Past

successful efforts to reduce Guyana’s very large public sector debt have had an impact on economic performance. Guyana’s experience in debt restructuring and forgiveness includes

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Paris Club renegotiations, HIPC, enhanced HIPC, and the Multilateral Debt Relief Initiative, of which the IDB share the largest burden, set the stage for a more stable macroeconomic

environment. Importantly, these actions from the international community and the government of Guyana also resulted in important reforms that, among other, increase social spending and

improve competitiveness. Recent actions and announcements from government indicate that it is committed to large investments in the near term—such as, among other, building a new Marriott hotel in Georgetown on which government already spent US$18 million, expanding the Cheddi

Jagan International Airport, and building the Amaila Falls Hydroelectric Power Plant. These investments add to the government program of the Public Sector Investment Program, with

heavy emphasis on education, health and transport, that directly fund economic activities and result in large and positive multipliers with impact on growth and employment. Importantly, government is also primarily responsible for maintaining a positive macroeconomic environment

measured by domestic and real price stability. Low inflation and maintaining a real exchange rate in equilibrium provide the appropriate incentive framework for economic expansion and

investment.

These positive factors and resulting good performance hide structural weaknesses of the Guyanese economy. These weaknesses are related to the small size of the economy, and its dependence on external factors mainly related to the demand for the few minerals and

agricultural products exported by Guyana. High concentration of exports on few raw commodities result in exposure to changes in international prices, as the prices come down, the

economy inevitably shrinks.

For this reason, it is widely acknowledge by all, government, private sector, and international donors, the need for deepening reforms that would result in the diversification of the economy, and in adding more value to Guyana’s exports. But this is not easy to do, as the experience from

many countries show. It takes time to set in motion processes that would modernize the economy. This PSAR is designed to identify priority short-term initiatives that would, over time,

modernize the economy. Successful continuation of the current good economic performance of Guyana may depend on carefully nurturing those sectors that explain success: agriculture and mining. Over time, and as a consequence of continuing the process to improve the business

climate, the economy would modernize and diversify.

b) Overview of the economy

i. The domestic economy

By 2013 Guyana had experienced over five years of positive growth resulting in nominal GDP

growth to an expected US$3,865 per capita in 2013 from US$2,507 in 2008—a 54% increase. Several factors played a role in the good performance of the country. Among the most relevant is the unusually high international prices of Guyana’s exports, especially gold. Figure 1 shows

on the vertical axis on the left annual terms of trade changes since 2008—the red line.3 For all the years since 2008 the terms of trade of Guyana have been positive, and in particular from

2008 to 2009 they experienced a 17% increase. The increase is related to overall changes in

3 Terms of trade measure the price of exports to the price of imports in the country. The terms of trade increase

when the prices of the country’s exports are increas ing, reflecting better conditions for the country and a generally

increase in welfare.

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prices of exports and imports, but in this case it was mostly related to large increases in the price of gold. Guyana benefited from a global trend in which, as a response to the international

financial global crisis, investors bought gold to preserve value of assets, away from financial assets and into real assets. Gold experienced an unprecedented period of price increases, from

US$871 in 2008, to US$972 in 2009, US$1,224 in 2010, US$1,569 in 2011 and US$1,669 in 2012.4 By October 2013 the price of gold is about US$1,311 per ounce, lower than in previous years but still high by historical standards. Although data available does not allow for the

estimation of the impact of investing in gold on overall economic performance, the Figure shows a high positive correlation between terms of trade and per capita GDP real growth, which is

presented in the blue line.

Figure 1: Guyana recent economic performance

Source: IMF Public Information Notice, No. 12/136, November 29, 2012

Improved terms of trade explains only part of the recent success of the Guyanese economy. In

addition, government over the last several years has been able to improve fiscal and monetary policies—see Table 1. These policies have provided stability to the economy, facilitating

investment and subsequent growth. More stable fiscal management and especially control of spending have stabilized total public sector debt, which was a recurrent problem of Guyana that required in the past several rounds of debt rescheduling and forgiveness by private, bilateral and

multilateral creditors. Overall public sector debt remains high at about 60% of GDP, but it is stable and in particular it is notable the reduction of domestic debt. Reducing public sector debt

from domestic sources opens space to the private sector for borrowing, but it also increases the exposure of Guyana to foreign currency. This is, however, an acceptable risk given the composition of external debt which is on concessional terms with long maturity periods. More

4 Annual average price of gold in US$. Source World Bank DataBank, Global Economic Monitor Commodities.

100

105

110

115

120

125

130

135

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

2008 2009 2010 2011 2012 2013In

dex

of

term

s o

f tr

ad

e (2

00

7 =

10

0)

Rea

l GD

P p

er c

ap

ita

(%)

Real GDP per capita Terms of trade

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conservative fiscal policy, coordinated with monetary and exchange rate policy, has resulted in single digit inflation, as the table shows. Although high by regional standards, inflation is low

and does provide a stable price framework for private sector investment. Perhaps more importantly, the Bank of Guyana has been able to accumulate significant reserves, which stand at

over 3 months of imports.

Table 1: Main macroeconomic indicators of Guyana

2008 2009 2010 2011 2012 2013

Inflation (p.a. %) 8.1 3 3.7 5 3 5.6

Public sector debt (% of GDP) 61.6 64.8 65.3 65.2 60.3 59.9

of which external 43.7 45.8 46 46.7 42.5 47.2

of which domestic 17.9 19 19.3 18.4 17.9 12.8

Gross Official Reserves (US$ million) 355.9 627.5 780 781.7 743.6 782.5

Gross Official Reserves (months of imports) 2.7 5.1 5.3 4.3 3.7 3.5


The overall favorable conditions for the country are reflected in increased investments, which are

financed by national and foreign savings. Both the public and private sectors are investing heavily since 2010. The public sector is partially financing its investments with higher savings,

while private sector investments are being financed, as expected, by foreign savings. The large size of the balance of payments current account, foreign savings, are being fully funded by the capital account and as noted in the previous paragraph, the Bank of Guyana is accumulating

reserves to meet at a minimum 3 months of imports and government debt remains stationary at about 60% of GDP, both indicating that investments are not being funded by external debt—an

issue that created problems for Guyana in the past. Of high relevance to the analysis presented in the PSAR is to note the jump in private investment. According to anecdotal evidence, given the limited information about private sector issues in general, these investments are geared towards

the gold and rice sectors and to real estate—more about this issue in the following Section (iii).

Table 2: Guyana Savings and Investment Balance (% of GDP)

2008 2009 2010 2011 2012 2013

Investment 19.0 16.5 16.8 22.7 20.4 25.4

of which private 8.4 4.0 5.7 9.5 8.7 12.8

of which public 10.7 12.5 11.1 13.2 11.7 12.6

National savings 5.8 7.4 6.8 9.1 6.3 7.8

of which private 1.4 0.2 0.5 1.2 0.7 0.5

of which public 4.5 7.2 6.3 7.9 5.7 7.3

Foreign savings 13.2 9.1 9.9 13.6 14.0 17.6


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Complementing the previous macroeconomic analysis, the PSAR presents a brief overview of fiscal accounts, and monetary and financial indicators—the external accounts are presented in

the following section (ii).

Table 3 shows the results from the central government since 2008 to the second quarter of 2011—the latest data provided by the Guyana Bureau of Statistics website. Important highlights

from the recent fiscal performance of the central government include: (i) government is not borrowing from the domestic financial sector, which as previously presented resulted in a large reduction of public domestic debt but more importantly does not crowd out private sector

borrowing; (ii) there is an upward trend related to government revenues, mostly related to better tax management for VAT collections; (iii) government savings are growing significantly, and it

is important to note the during the first two quarters of 2011 savings were almost four times higher than for the whole year in 2008; (iv) Guyana still depends heavily from external grants, although it appears that over time this source of funding is becoming less relevant; and

(v) Guyana’s public investment program relies heavily on project loans funded by external donors. As it relates to fiscal management, donors identify Guyana’s budget processes as one of

the strongest in the Caribbean—in fact according to many the country has the best budget preparation process in the Caribbean. In general, budgets are properly prepared and substantiated, and although execution and monitoring can be improved, budget preparation

provides a model for the region.5

Table 3: Guyana Central Government Finances (Guyana Dollars, million)

2008 2009 2010 2011*

Current Account

Revenue (1) 82483.9 94890.7 107806.5 61486.6

Expenditure (2) 78492 80441 86386.4 42668.1

Balance (1)-(2)=(3) 3991.9 14449.7 21420.1 18818.5

Capital Account

Total (4)=(5)+(6) 17029.1 17275.1 11820.7 3355.5

Revenue (5) 3417.5 2222.5 2325.7 406.1

External Grants (6) 13611.6 15052.6 9495 2949.4

Expenditure (7) 35941.2 46990.2 46718.7 16951.6

Balance (4)-(7)=(8) -18912.1 -29715.1 -34898 -13596.1

Overal Deficit/

Surplus (3)+(8)=(9) Overal Deficit/ Surplus (3)+(8)=(9) -14920.2 -15265.4 -13477.9 5222.4

External Financing

Total (10) = (11)+(12) (13)+(14) 14606.7 15526 12989.4 4050.4

Project Loans (11) 27375.9 20435.1 18590.7 3444.6

Other (12) -219.6 916.8 870.2 374.9

External Debt Payments (13) -1841.1 -2254.8 -3714.5 -2124

5 As a consequence of the conditions for debt forgiveness, from private, bilateral and multilateral creditors, Guyana

needed to develop a budget process that would allow for monitoring of spending. Debt forgiveness was conditioned

on funding released from debt service to be used for poverty reduction. The Poverty Reduction Strategies that were

prepared in coordination with multilateral institutions, were funded with resources that would have been used for

debt service. Social spending, as a consequence, increased. The budgets prepared by the government of Guyana

include four volumes: the statement read by the Minister of Finance in Parliament, and three additional volumes

with detailed information by government unit on spending, by project, and performance statements.

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Overseas Deposits (14) -10708.5 -3571.1 -2757 2354.9

Domestic Financing

Total (14) = (15)+(16) 0 0 0 0

Banking System Net (15) 0 0 0 0

Non-Bank Borrowing (16) 0 0 0 0

Other Financing (17) 314.1 -260.6 487.9 -9272.8

2011*= only the first two quarters of 2011. Importantly the figures for the overall fiscal result changed significantly

due to large spending commitments on salaries for the fourth quarter of the year.

Source: Guyana Bureau of Statistics, Table 7.5 Central Government Finances (Summary)

Table 4 shows selected interest rates for the financial sector of Guyana. Of relevance to this report is to note that real lending rates are in the 5-7% rate range, about the average for the

region. The interest rate nominal spread is stationary at slightly over 9%, which is also about average for the region. According to the Bank of Guyana, Guyana’s 6 commercial banks appear to be well capitalized and function properly, with the non-performing portfolio at about 5%.6

Credit to the private sector has been growing steadily for the past 10 years: 10% in 2011 and 20% in 2012. However, in spite of low lending interest rates and credit growth the banking

sector is liquid.

Table 4: Guyana selected interest rates (%)

2008 2009 2010 2011 2012 2013*

Bank of Guyana

Bank rate 6.75 6.75 6.25 5.50 5.25 5.00

Treasury Bill discount rate

91 days 4.19 4.18 3.78 2.35 1.45 1.19

182 days 4.48 4.35 3.70 2.43 1.72 1.21

364 days 4.81 4.47 3.59 2.51 1.54 1.20

Commercial Banks

Small savings rate 3.04 2.78 2.67 1.99 1.69 1.33

Prime lending rate (weighted average) 13.91 14.22 15.06 14.33 12.50 12.45

Prime lending rate 14.54 14.54 14.54 14.00 13.83 13.83

Commercial Banks' lending rate (weighted average) 12.35 12.17 11.95 11.68 11.08 11.21

Interest rate spread (commercial – small) 9.31 9.39 9.28 9.69 9.39 9.88

2013*=May 2013

Source: Bank of Guyana

ii. The international economy

Guyana’s trade and investment in frame by several international agreements, such as, among

other, CARICOM, CARICOM-Colombia, CARICOM-Costa Rica, CARICOM-Cuba, CARICOM-Dominican Republic, CARICOM-Venezuela, Argentina, Brazil, China, Turkey and Venezuela. In addition, preferential trade agreements with the E.U. Cariforum, E.U. Economic

6 Bank of Guyana. The six commercial banks include: Republic Bank (Guyana) Limited, Guyana Bank of Trade and

Industry, Bank of Nova Scotia, Demerara Bank Limited, Citizens Bank of Guyana, and Bank of Baroda.

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Partnership Agreement, U.S. Caribbean Trade Partnership, and CARIBCAN; complemented by bilateral investment agreements with China, Cuba, Germany, the U.K. and Kuwait. Importantly

for private sector expansion is Guyana’s membership of CARICOM, with headquarters in Georgetown. The relevance of the EU-ACP trade preferences agreed in Lome and Cotonou have

diminished, although it remains important for the sugar sector that still falls under the Sugar Protocol. Within this general context, this section presents Guyana’s trade and external performance.

Table 5: Guyana balance of payments (US$ million)

2011 2012

Current account -372.2 -394.9

Merchandise trade -641.4 -582

Exports f.o.b. 1129.1 1395.7

Imports c.i.f. 1770.5 1977.7

Net services -145.4 -232.1

Non-factor services (net) -136.1 -230.9

Factor services (net) -9.3 -1.2

Unrequited transfers (net) 414.6 419.2

Capital account 373.2 428.4

Capital transfer 30.1 29.3

Medium and long-term capita 375.4 464.1

Short-term capital -32.3 -65

Errors and omissions -16 -21.3

Overall balance -15 12.2

Financing 15 -12.4

Change in reserves (BoG) -25.4 -55

Exceptional financing (debt forgiveness/restructuring/relief) 40.4 42.6


Table 5 presents the balance of payments for 2011 and 2012. As previously noted, the large current account balance is fully funded by the capital account, and in this case related to large

transfers from the private sector in medium and long-term capital. Such as in other countries in the region, the current account is driven by large imports, which are related to domestic demand for goods and services. The small and underdeveloped manufacturing sector, but also the limited

amount of primary goods produced in the country, result in limited domestic supply of tradable goods. In many cases these goods are intermediate inputs for the mining and agriculture sectors,

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the leading sectors of the economy—an issue that will be expanded in this section. Importantly, Guyana’s large number of nationals living abroad sends back home very large, and steady,

transfers. In fact, these transfers are larger than any individual export of the country, and account for 30% of total exports. Without these transfers, the current account and the overall

external condition of the country would be unsustainable, and represent a source of risk for the future if these remittances were to drop. The current stability of the exchange rate, although with some signs of appreciation as presented in Figure 2 that according to the authorities of the Bank

of Guyana is a reflection of fundamentals in the economy, and the investments financed by private capital inflows, result in continuous accumulation of reserves by the Bank of Guyana.

Figure 2: Guyana Real Effective Exchange Rate (Index 2010=100)

Source: Global Economic Monitor, World Bank DataBank

Table 6: Guyana imports by end-use (US$ million)

Total

Consumer

goods

Fuel &

lubricants

Other

intermediate

Capital

goods Miscellaneous

2008 1,323.6 326.3 424.3 311.0 254.8 7.3

2009 1,179.4 335.9 296.7 279.1 259.2 8.6

2010 1,419.1 376.8 395.5 347.3 291.0 8.5

2011 1,770.5 417.3 573.0 376.2 396.1 8.0

2012 1,977.7 465.9 619.0 424.3 459.8 8.7


Table 6 presents Guyana’s imports by end-use. Total imports in 2012 are equivalent to about 77% of GDP, one of the highest ratios in the region. Although we do not have data that

80

85

90

95

100

105

110

115

120

125

1990 1995 2000 2005 2010

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identifies intermediate and capital imports by sector, anecdotal and production information, which would be presented in the next section, indicates that large increases in international prices

of Guyana’s exports provided incentives for investments. These investments are reflected in the large increases in intermediate and capital imports from 2011 to 2012. The table also shows

large increases in consumer goods imports, which are directly related to economic growth and its impact on aggregate demand. Finally, an issue that increases production costs in the economy is the dependence for electricity generation on fossil fuels, as noted in the large level of imports.

Guyana’s PetroCaribe deal to some extent lowers the negative impact of this fact, and as it will be shown in the next section, provided incentives for investments in the rice sector consequence

of the oil for rice agreement with PetroCaribe.

Table 7 presents Guyana’s exports since 2008, and helps explain the economic success of the country. As previously noted, gold prices have reached historical levels as a consequence of the international financial crisis. For many countries that produce gold, this favorable environment

triggered very large investments—many gold mines were reopened as the new prices made previously discarded projects profitable, and new investments were planned and executed

throughout the world. For Guyana, these investments resulted in large increases in gold production and exports. Gold exports grew over 250% from 2008 to 2012. The only other export that exhibits spectacular growth is rice, which grew 66% over the same period,

responding to the deal between Guyana and Venezuela to pay back some of the PetroCaribe debt with rice . The largest exports of the country are gold, rice, bauxite, and sugar. The first two

result from fully private sector efforts related to small producers, an issue that will be highlighted in the next section. The rapid growth of exports in these two sectors provides evidence of the potential for private sector expansion when conditions are appropriate, and also provides

evidence of future investments in these two sectors if external conditions remain favorable, and domestic conditions continue improving.

Table 7: Guyana main exports (domestic, US$ million)

Total Bauxite Sugar Rice Shrimp Timber Molasses Rum Gold Other

2008 792.4 131.1 133.4 118.0 60.0 53.8 1.8 1.8 203.7 84.4

2009 756.7 79.5 119.8 114.1 45.5 41.4 6.3 6.6 281.7 61.8

2010 873.8 114.2 101.5 151.3 43.2 48.5 6.3 5.6 346.4 56.7

2011 1,109.8 133.3 123.4 173.2 43.0 39.1 9.4 6.4 517.1 64.9

2012 1,374.3 150.8 132.1 196.2 63.9 39.0 6.2 7.1 716.9 62.0


iii. The productive structure

Guyana’s largest economic sector, such as other countries in the region, is services. About 2/3 of

value added GDP are produced for the delivery of the vast array of services necessary for the functioning of the economy. The largest service sector is retail, which has also experienced the

highest real growth from 2008 to 2012—see Table 8. Transportation and Storage and Construction are the second and third largest service sectors in the economy. This is consistent with the fact that the country is very small and does not provide incentives for the production of

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goods for domestic consumption, and as the economy expands, aggregate demand expansion is satisfied by increasing imports which are delivered to the economy through retail and

transportation services. Construction growth, although modest when measured from 2008 to 2012, appears to be accelerating in 2013 related to investments of profits from the mining sector.

Financial services, although a small share of total value added in the economy, has experienced significant growth confirming that the sector is expanding as the economy grows—another indicator is the expansion of credit to the private sector, presented in the previous section of this

report (2.b.i). ICT business process outsourcing is expanding in Guyana. Over the last several years Guyana has been hosting call centers that take advantage of low labor costs in the context

of educated labor force with English as their first language.

Table 8: Guyana Gross Domestic Product composition by sector (%)

Sector composition (% of GDP, using G$ 2006) Real

growth

2008-12 2008 2009 2010 2011 2012

GDP AT BASIC PRICES 100.0% 100.0% 100.0% 100.0% 100.0% 19.2%

AGRICULTURE, FORESTRY AND

FISHING 21.4% 20.9% 20.5% 20.0% 19.8% 10.3%

Sugar 4.7% 4.7% 4.2% 4.3% 3.8% -3.6%

Rice 2.5% 2.7% 2.6% 2.7% 2.7% 27.7%

Other Crops 5.0% 4.9% 4.8% 4.8% 4.8% 15.6%

Livestock 2.7% 2.7% 2.6% 2.6% 2.9% 25.2%

Fishing 3.3% 2.9% 3.0% 2.7% 2.9% 6.1%

Forestry 3.1% 3.1% 3.3% 2.8% 2.6% -0.5%

MINING AND QUARRYING 11.2% 10.5% 9.5% 10.8% 11.8% 25.6%

Bauxite 2.6% 1.7% 1.5% 1.9% 2.1% -5.2%

Gold 6.1% 6.8% 6.7% 7.5% 8.6% 67.8%

Other 2.5% 2.0% 1.4% 1.4% 1.1% -46.1%

MANUFACTURING 6.9% 7.0% 6.7% 6.8% 6.6% 14.4%

Sugar 1.2% 1.2% 1.1% 1.1% 1.0% -3.6%

Rice 1.6% 1.7% 1.6% 1.7% 1.7% 28.1%

Other Manufacturing 4.1% 4.1% 4.0% 4.0% 3.9% 14.5%

SERVICES 63.3% 64.1% 65.9% 65.3% 65.1% 22.6%

Electricity and Water 1.8% 1.8% 1.8% 1.7% 1.7% 13.0%

Construction 9.9% 9.7% 10.2% 10.0% 8.5% 1.7%

Wholesale and Retail Trade 12.7% 13.5% 14.3% 14.2% 14.4% 35.8%

Transportation and Storage 7.8% 7.5% 7.7% 8.3% 9.4% 43.8%

Information and Communication 6.9% 7.0% 7.1% 6.9% 6.8% 17.3%

Financial and Insurance Activities 3.6% 3.8% 4.1% 4.3% 4.7% 56.0%

Public Administration 8.9% 8.6% 8.3% 7.9% 7.6% 2.0%

Education 4.5% 4.6% 4.6% 4.6% 4.5% 19.6%

Health and Social Services 1.7% 2.0% 2.0% 2.0% 2.0% 38.4%

Real Estate Activities 1.2% 1.2% 1.2% 1.2% 1.2% 10.5%

Guyana PSAR

15

Other Service Activities 4.2% 4.4% 4.5% 4.3% 4.3% 21.1%


Compared to other countries in the region, agriculture represents a large share of total production. Guyana’s good conditions for growing rice and sugar cane, added to historical

development patterns that resulted in the specialization in growing sugar cane, are an asset and have proven in recent years to be a feasible option for continuing expansion. Importantly, rice

exports have been growing to countries in the region, and opportunities for adding value exist. For sugar, the prospects depend largely on adding value, such as making rum, one of the highlights of Guyana’s industry. Although data on employment is scarce, anecdotal evidence

suggests that large number of people are fully dedicated to the sector. The impact of good performance is therefore high as it would result in increased exports, and also would impact a

large portion of the population that in general tend to be rural and poorer than urban dwellers. As Table 8 shows, rice has experienced a 25% increase in production from 2008 to 2012.

The mining sector has also experienced high growth rates since 2008. This is the highlight of the

performance of the economy: the extraordinary success of gold miners. As Table 8 notes, from 2008 to 2012 the sector expanded by almost 68%. The responsiveness, technical, financial and managerial, of miners to high prices of gold has been outstanding. The results are presented in

Figure 3 that show how fast and strongly the sector was able to invest heavily on the extraction of gold in the country.

Figure 3: Guyana's extraordinary performance of the gold sector: production and exports

(prices in blue, left axis on both charts)

Source: Bank of Guyana, Global Economic Monitor, World Bank DataBank

These trends continue in 2013. According to the Bank of Guyana, during the first quarter of

2013 rice production increased 68.8%, gold 30.8%, and diamonds 47.9%. During the same period sugar production decreased 14.9% and bauxite production decreased 23.9%.7

7 Bank of Guyana, Quarterly Report and Bulletin, 2013 Q1 Vol. 7 No. 1.

200

300

400

500

600

700

800

800

1000

1200

1400

1600

1800

2008 2009 2010 2011 2012 2013

Gold exports (US$ million)

Gold price Gold exports

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

31,000

800

1000

1200

1400

1600

1800

2008 2009 2010 2011 2012 2013

Gold production (G$)

Gold price Gold production

Guyana PSAR

16

iv. The institutions

The Cooperative Republic of Guyana is a presidential republic. The president is elected every five years—the President is the head of the political party that wins the Parliamentary election.

President Donald Ramotar was elected in November 2011 as the head of the PPP/C party with 48.6% of votes—next elections will be held before December 2016. The Parliament is

composed by 65 seats—32 held by the ruling PPP, 26 by the PNU, and 7 by the Alliance for Change.

Of relevance to the analysis of private sector in Guyana is to note that, such as for most

Caribbean democracies, there is a vibrant political debate that is widely followed by the press. The current administration is facing strong opposition in Parliament, where it does not have an absolute majority, which creates significant delays about important national issues such as the

budget and related public investments.

A recent issue may be used to illustrate this point and its impact on private sector activities. Guyana’s Parliament has not passed anti money laundering and countering the financing of

terrorism legislation. Lack of Parliamentary action on this issue would trigger the inclusion of Guyana in the list of countries, assembled by the Caribbean Financial Action Task Force, that do not have appropriate legislation to prevent money laundering. Guyana has missed two deadlines

in 2013, and if legislation is not passed before the end of November then the country may suffer the consequences of increased transaction costs related to international flow of funds.8 By early

2014 these measures have not passed, and the Caribbean Financial Action Task Force issued a statement in November 2013 noting that: “Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not complied with

their Action Plan developed with the CFATF to address these deficiencies. The CFATF calls on its members to consider implementing counter measures to protect their financial systems from

the ongoing money laundering and terrorist financing risks emanating from each jurisdiction … Guyana must therefore pass the relevant legislation and implement all the outstanding issues within its Action Plan including 1) fully criminalising money laundering and terrorist financing

offences, 2) addressing all the requirements on beneficial ownership, 3) strengthening the requirements for suspicious transaction reporting, international co-operation, and the freezing

and confiscation of terrorist assets, and 4) fully implementing the UN conventions. Members are therefore called upon to consider implementing counter measures to protect their financial systems from the ongoing money laundering and terrorist financing risks emanating from

Guyana.”9 The business community, specially representatives of the banking sector but also most private sector institutions, fully support passing legislation and argue that lack of action would

significantly limit foreign investment and increase banking costs. Similarly, other decisions that require Parliamentary approval for budget decisions are also held back by significant political friction.

8 The potential impact of being blacklisted include, among other: potential capital flight; financial isolation from the

region; increased costs; reputational risk; and loss of confidence. 9 http://www.fatf-gafi.org/countries/d-i/guyana/documents/cfatf-ps-nov2013.html

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c) State of the private sector

Guyana’s investment - production cycles are different from other countries in the region because its outcome is mostly determined by decisions made by domestic producers, although new

prospection investments in the mining sector by multinational corporations also have an impact. In Guyana the mining and agricultural sectors are characterized by large numbers of small private producers. Gold, exporting about 50% of total exports, is extracted by a large number of

mining businesses that employ between 30-500 people and are fully owned by Guyanese nationals. The situation is similar for agriculture, where rice and sugar cane production is

completely in the hands of small farmers. Compared to other large mining exporters, such as Suriname and Trinidad and Tobago, Guyana does not have large national or multinational corporations investing in this sector.10 Guyana’s growth cycles are therefore determined by

domestic investment decisions.11

When mining and agriculture are expanding, it is because farmers and miners increase their investment and as a consequence increase production. The transmission mechanism from wealth

generated in these sectors to the rest of the economy may be summarized as follows: adequate incentives for mining and agriculture result in increased investments; which lead to increased production and exports; the investments have a multiplier effect beyond mining and agriculture,

which is amplified by the exported earnings spent or invested in the country. Importantly, aggregated demand increases as a consequence of these large resources circulating in the

economy, including those linked to the public sector in the form of higher revenues and spending. The limited industrial capacity of the country forces the import of a significant amount of goods consumed in the country. However the domestic service sector, most notably

construction and banking, directly benefits from the expansion of aggregate demand. For instance, current large investments in real estate are being funded by investments related to

owners of mining companies that seek investment opportunities for their profits.

Compared to other countries in the region, the economic structure of Guyana is also very different as there are strong linkages between the engines of growth, mining and agriculture, and

other domestic economic sectors. With the exception of large machinery and related maintenance parts required for extraction of gold, which is imported, most of goods and services are directly bought in the domestic market—tradable and non-tradable goods. These forward

and backward linkages enhance the multiplying effect of investments and spending generated by the mining and agriculture sectors, therefore the largest share of the wealth created stays in

Guyana.12

10

With the exception of the bauxite and alumina mining companies that have historically been owned by

multinational corporations . Currently the largest investments in bauxite extraction and alumina production are

owned by Rusal and Bosai, a Rusian and Chinese companies respectively. Exports of bauxite and alumina are about

10% of total exports. 11

This is an exceptional issue that characterizes Guyana. In addition to domestic investment, FDI would bring

financial resources and cutting edge technology that would increase productivity and ensure sustainable practices,

especially in gold mining. 12

For example, in Suriname the mining sector behaves as an enclave in which the extraction of minerals have weak

links to the rest of the economy. Only a few low-value added services, such as food and transportation, are bought

by multinational corporations. Technical expertise and most goods are brought into the country.

Guyana PSAR

18

In spite of the impact on growth and development of the mining and agriculture private sector in Guyana, the private sector is fragile and the incentive framework is such that companies tend to

underinvest. Because of underinvestment, companies do not modernize and practices in mining and agriculture have not changed much over time. Mining practices use obsolete extractive

technologies and in many cases miners are responsible for significant environmental damage including water pollution with high negative impact on downstream indigenous populations. Agricultural practices use labor intensive practices and farmers have not invested in mechanizing

agricultural processes. Because the economy is small, future growth prospects would continue to depend on these primary sectors. As a small country Guyana’s industry and service sector

cannot grow by focusing on satisfying domestic aggregate demand, and building the capacity to export requires specialization and investment and the existence of additional factors such as energy and skills, which take time to build up. Therefore the focus of the PSAR is in identifying

the incentives that limit the modernization of the mining and agricultural sectors, and also the growth of secondary and tertiary sectors.

The PSAR notes that underinvestment in modernizing the mining and agriculture sectors is the

result of the investment framework that does not adequate protect property rights. Investments, in technology and know-how, are not rare commodities and can be imported into the country. Similarly, agricultural investments to mechanize processes are also available in the market and

may be imported into Guyana. Moreover, both sectors matured years ago and by now should be experiencing a process of consolidation and growth, as more successful companies would buy

smaller ones in a process that have been experienced in many developing countries in Latin America. The miners and farmers interviewed during the PSAR referred to technology that would significantly increase productivity of their businesses and therefore profits, but also

showed little appetite for it. Why? The main culprit for this outcome is a generalized framework of insecure property rights that severely limits investment.

In mining small and medium scale operations have to renew land leases every year. In part this

is done by government to collect revenues because the renewal process involves paying fees to government for prospection and exploitation, as well as placing an environmental bond. It should be noted that once a plot has been granted, there is the expectation that it would be

granted again to the mining company. But because of the need to renew leases every year, miners are constrained in their investments as they cannot plan ahead for the long-term due to the

impossibility of accessing long-term financing. Gold extraction is a risky business, and the risk is amplified by the type of lease that does not provide enough legal protection to be used as collateral by banks. As a result banks do not lend to small and medium scale mining companies:

these businesses are funded by family savings and inter-company loans, and by suppliers credit that sell large equipment, such as MACORP that sells Caterpillar in Guyana.13

However, Government offers, through GoInvest, fiscal incentives to large scale mining

operations. These incentives include importation of equipment free of duties and tax holidays—small and medium size miners can only import excavators duty free. Government also facilitates

the concession of large swaths of land for prospecting and then exploitation, and these deals are offered long term. There is a large asymmetry in the investment framework for small and

13

Lending and leasing terms are not good. These machines are expensive, usually in the US$150-500 thousand

range. The maturity of the loans never exceeds 3 years, and interest rates are high, in many cases in excess of 15%.

Guyana PSAR

19

medium size miners compared to large operations. Contradictory, 100% of gold production in Guyana is the result of investments by small and medium sized miners, which would benefit

from a leveled playing field.

The incentive framework that results from insecure property rights is replicated in the agricultural sector. The sector is dominated by a large number of individual farmers leasing

small plots. For the vast majority of farmers, their plots range from 10 to 20 acres. Government has been responsible for granting these leases to individual farmers, for between 25 to 49 years. In many cases these leases are held by people that do not farm anymore but sub lease land to

active farmers—the common payment is 3 bags (each bag about 100 pounds) of rice per acre, on an average yield of 30 bags per acre, or about 10% per year. In general, small holdings do not

provide economies of scale that would grant investing in mechanizing agricultural practices. For those farmers that sub lease land, and therefore have larger plots for which mechanization is an option, the practice of subleasing land set incentives against investment. This is the case because

this practice is considered illegal. Therefore successful farmers cannot gradually consolidate plots into larger ones, and have strong incentives against investment in machinery. The limits

imposed by the land tenure system on the development of the rice sector of Guyana are severe, and condemn the sector to remain stagnant and poor without opportunity to succeed and compete.

Therefore the investment prospects of the two sectors that lead economic activity in the economy face large negative incentives related to insecure property rights. Management of public land has large negative impact on the investment in the rice and gold sectors. At low levels of property

right protection, the case of Guyana, miners and farmers would invest significantly lower levels that would be considered ideal, and as property rights increase, then investment increases rapidly. It is important to note that insecure property rights limit bank funding, and without it,

miners or farmers cannot invest in the long-run. In many cases it is not the risk aversion of the miner or farmer the constraint to invest, it is the risk aversion of the banker. As property rights

are strengthened, then bankers feel more comfortable with the risk/benefit analysis of loans, and may use collateral as an effective tool to reduce risk. Longer-term investment horizons would result in more attention paid to environmental issues, such as deforestation and water

contamination, real issues for the mining sector, but also to agriculture that uses pesticides and fertilizers. Longer-term horizons would also result in using modern technologies for gold

extraction, moving away from dredging and pumping, alluvial mining, and the negative impact that this practice has on the environment. Farmers and miners investing in more advanced technologies would be able to increase productivity, with significant benefits to them and more

generally the country.

The status quo of property rights in the country is mainly the result of historical reasons in which land has been owned by government with limited access by the private sector—this is an issue

common to other countries in the region. Modernizing land-tenure and property rights more generally would require significant changes in legislation and current practices, a process that

would probably take time to mature. This report suggests that intermediate steps may be taken to facilitate the expansion of investments in agriculture and mining by improving property rights in these sectors, especially by strengthening and lengthening current land leases to make them more

secure to the eyes of the banking sector. As noted in this report, the banking sector offers limited

Guyana PSAR

20

funding to agriculture and mining because of the perception of high-risk of these operations, and in general do not consider land as acceptable collateral.

In general, detailed information about the composition of the private sector is limited.

Significant data exists and is held by institutions that represent the private sector. They have lists of companies, description of management structures and in some cases more detailed

information about issues of relevance—a complete description is provided in this report in the following sections. For example the Small Business Bureau collects information about their members, including size of business, number of employees and sector. The Guyana Chamber of

Commerce and Industry executes surveys asking their members their opinion about relevant issues in the economy—called the Attitudinal Survey. However, the information is not

consolidates and is fragmented. There is no information that would permit for a more detailed description of the private sector in the economy. The analysis of private sector issues would benefit from investing in filling in the following information and data gaps:

A mapping of private sector activities by sector

A mapping of financial sector products available to the private sector—such as banking

services on factoring, secured transactions, discount of letters, long-term lending terms and options, stock exchange bond issue conditions, credit ratings of people and companies

A mapping of trade-related information relevant to companies in selected sectors for selected market—such as phytosanitary and other food safety concerns, standards and

certification, trading mechanisms and timing, costs

A complete description and analysis of labor markets

A complete description and analysis of the tax system

A complete description and analysis of registries, real estate and movable property

A complete mapping of licensing requirements by sector

A complete mapping of bottlenecks for private sector development

d) Large and fast growing sectors in the economy

As previously noted during the first quarter of 2013 rice and gold production continue to lead economic activity in Guyana. As noted ICT and call centers are growing businesses with potential expansion and high value added—Qualfon specializes in back office support and has

offices in the U.S., Philippines, Mexico, Costa Rica and China, in addition to Georgetown Guyana. Qualfon employs over 1,700 people in Guyana, and is investing in building a new 800-seat call center in Providence, which may include building a call center campus with an Arts and

Culture Center, an accredited university, and a medical service facility, and potential expansion to up to 5,000 seats. According to Qualfon management, operating costs in Guyana are 10%

lower than in the Philippines, and 30% lower than in Costa Rica. To identify other sectors that may also be growing fast, this report uses the information collected by the Bank of Guyana on the loans provided to private sector individuals and firms. This information excludes informal

activities, which are reported to be high in Guyana, and activities that do not have access to the banking sector—such as gold. In spite of its limitations, Table 9 presents a detailed list of

sectors and subsectors that provide some relevant information about growth and potential for the future.

Guyana PSAR

21

Table 9 shows that the largest demand for credit from commercial banks in 2012 was for the service sector, followed by manufacturing, agriculture and mining. The largest sub sector,

measured by credit, is distribution followed by construction and rice paddy. Measured by credit growth, the largest sub sectors were education, molasses, and electricity although these three

borrow very little and these results are probably biased by a few large transactions. Beyond these three, the fastest growing credit was for forestry, paddy, sugar cane, construction and health. It is important to note that for agriculture the amounts lent are very small, for example

rice paddy in 2012 was about US$25 million, most of which go to fun relatively large milling and related rice operations. Most farmers do not have access to commercial bank lending, and

have to rely on family funds, or on other sources.

Table 9: Guyana commercial banks' loans and advances to the domestic private sector, by

sector (G$ million)

2008 2009 2010 2011 2012

Growth

2008-12

Agriculture 3,934.10 5,086.90 6,755.20 9,617.90 11,331.70 188%

Sugarcane 593.8 1,333.40 1,695.00 2,338.10 2,558.30 331%

Paddy 1,133.70 1,818.30 2,682.10 3,865.60 5,163.00 355%

Other farming 91.7 55.2 66 114.9 291.9 218%

Livestock 741.3 597.5 930.6 1,219.90 1,401.10 89%

Forestry 112.1 105.6 163.3 586.7 602.8 438%

Shrimp and other fishing 1,261.70 1,176.90 1,218.10 1,492.80 1,314.70 4%

Mining and Quarrying 1,674.30 1,505.80 2,582.00 2,806.10 4,247.40 154%

Bauxite 0 0 0 0 0 0%

Other 1,674.30 1,505.80 2,582.00 2,806.10 4,247.40 154%

Manufacturing 11,658.50 10,441.80 12,861.30 16,674.90 22,213.80 91%

Timber and sawmilling 2,125.70 1,656.90 1,613.30 1,385.80 1,979.10 -7%

Other construction and engineering 2,964.60 2,645.00 4,108.90 7,167.90 9,056.40 205%

Sugar molasses 1.1 0.8 290.7 564.7 21.5 1855%

Rice milling 2,852.40 1,538.00 1,399.80 1,605.50 3,317.60 16%

Beverages, food and tobacco 1,372.90 1,654.00 2,178.60 2,691.60 3,795.20 176%

Textiles and clothing 77.9 61.8 78.3 143.6 192.1 147%

Electricity 17.5 11.7 59.8 68 172.5 886%

Other manufacturing 2,246.50 2,873.60 3,131.80 3,047.80 3,679.40 64%

Services 23,880.70 25,074.80 28,687.70 35,468.30 44,486.50 86%

Guyana PSAR

22

Drainage and irrigation 20.5 13.1 6.9 17.6 4.5 -78%

Transportation 2,356.90 2,452.20 3,014.80 3,329.70 3,698.30 57%

Telecommunications 80.2 63.7 98.4 221.7 195.6 144%

Entertaining and catering 1,873.90 1,959.00 2,914.60 2,891.80 3,383.40 81%

Distribution 14,605.70 13,849.30 17,287.40 21,556.20 26,398.60 81%

Education 24.7 23.6 218.7 472.1 850.5 3343%

Health 266.2 337.2 490 663.1 1,043.90 292%

Professional services 684 781.6 1,015.10 1,207.90 1,287.10 88%

Other services 3,968.60 5,595.20 3,641.80 5,108.10 7,624.70 92%


The information available for the analysis of private sector activities does not allow for a more

detailed identification of expanding businesses. This is an issue that may merit collecting specific information about these pre selected sub sectors to understand their real potential for

expansion and the barriers that may be slowing down the process.

e) Issues for private sector development

This section presents detailed analysis of PDS bottlenecks clustered around the following issues: business supportive institutions structure, donors and other international entities, access to finance, corporate taxation, business environment, technology and innovation, trade and FDI

policies, labor regulation, infrastructure communications and energy, environment, gender, and other. A recurrent problem for the analysis of private sector development initiatives in Guyana is lack of reliable information, therefore in all cases the report provides as much factual

information as possible including complete references. When subjective assessments have been made those are also clearly identified in the report, usually with recommendations for investing

in primary data collection and analysis.

As much as possible the analysis is presented comparing Guyana to the following countries: Puerto Rico, Jamaica, the Dominican Republic, Suriname and Haiti. The selection of these

countries follows the presentation of the World Bank Ease of Doing Business Report for Guyana 2013.

i. Business supportive institutions structure

Guyana has many public and private institutions that directly or indirectly focus on the expansion of private sector activities. The country, compared to other countries in the region, has a well-

developed framework for growth and development that has been presented to the general public and that over time has been implemented. The framework is provided by the National

Competitiveness Strategy and the Low Carbon Development Strategy. These two strategies guide government policy as it relates to private sector growth, and are summarized in this section. Three public institutions are also analyzed and presented in this report, GoInvest, the

investment promotion agency of Guyana, the Competitiveness Unit that was designed to implement the National Competitiveness Strategy, and the Small Business Bureau which

Guyana PSAR

23

supports the development of small businesses. In addition to these public institutions, this report also describes private sector institutions that represent the private sector in Guyana: the Private

Sector Commission, the Consultative Association of Guyana Industries, the Georgetown Chamber of Commerce, the Guyana Chamber of Commerce and Industry, the Guyana

Manufacturing and Services, the Tourism Association, the Guyana Gold and Diamond Association, the Guyana Rice Development Board, and the Guyana Tourism Authority.

The list of participants and issues is very large and does not necessarily correspond to the size of the economy. To some extent there is “over representation” as too many actors play too many

roles, in many cases overlapping as the companies and their representatives are members of several institutions. Fragmentation and overcrowding are a problem as the private sector cannot

speak with one voice, and diverging agendas do not help move forward important reforms. This is an issue that would be presented as a recommendation for stronger coordination between private sector actors in Guyana, later in this report.

National Competitiveness Strategy (NCS) and the NCS Unit. Launched in 2006 after significant consultations, this strategy is an ambitious attempt to improve competitiveness—a description of the NCS is included as an annex to this PSAR.14 The strategy includes 245 actions

designed to improve competitiveness, are measurable, and increase rankings of the country, especially in the World Bank Ease of Doing Business surveys. The NCS actions are divided into

core policies, sector policies, strategic sub sector policies, and overarching enablers. Core policies focus on improving the business climate, and include competition and consumer protection, infrastructure, human resources and access to finance. Sector policies focused on

actions that would facilitate the expansion of economic activities in the sugar, rice, and non-traditional agricultural products, and tourism. Strategic sub sectors were identified as those that could help diversify the economy into promising businesses in its infancy or yet to develop, in

fruits and vegetables, aquaculture and forestry. Finally, overarching enablers focused on how to implement the NCS and on the public-private arrangements that would be necessary for taking

concrete actions with support from all relevant actors.

It is common for many countries, and actors within countries, to prepare comprehensive strategies. It is not common to follow through on them. Guyana is an exception as the NCS was

used by government to develop an implementation plan, which was supported by an IDB loan, the Support for Competitiveness Program that facilitated the creation of the National Competitiveness Strategy Unit empowered to implement the strategy. The NCS also received

significant support from other donor funded projects, such as the Agricultural Support Services Program, the Agricultural Diversification Program, and the Guyana Trade and Investment

Support.15 Because of these efforts, the NCS by 2013 can show concrete results: 57 out of the 245 actions proposed in the plan have been completed, 83 are at late stages of completion, and

14

Guyana National Competitiveness Strategy. Enhancing National Competitiveness. A National Competitiveness

Strategy for Guyana. Government of Guyana in Partnership with the Private Sector. 15

IDB US$26.65 million loan Support for Competitiveness Program approved in 2006; IDB US$22.5 million loan

Agricultural Support Services Program approved in 2004; DFID £1.3 million grant Guyana Agricultural

Diversification Program; USAID two phases of grant funding for the Guyana Trade and Investment (US$7.6 and

US$7.3 million).

Guyana PSAR

24

72 are at early stages of implementation.16 Some of the most relevant actions completed include: the Secretariat of the Competition Commission was created to serve as a consumer protection

agency that would implement the 2011 Consumer Protection Bill; implementation of the Value Added Tax (VAT) and Excise Regime; lowering the Corporate Income Tax from 45% to 40%

for commercial companies and from 35% to 30% for non-commercial companies, still high by regional standards but improving; the Commercial Court is functioning providing services for dispute resolution; using real estate for collateral lending from commercial banks and more

generally facilitating the development of land and property markets; and passing legislation and the establishment of a Credit Bureau, CreditInfo, that started functioning in September 2013.

In spite of the partial success of the implementation of the NCS, much remains to be done. As

noted the NCS Unit, which has been leading the implementation of the strategy, was funded by an IDB loan. This project is at late stages of execution and resources have been almost exhausted. Moving forward, the work done by the NCS Unit should be continued. Importantly,

the impact of actions taken on the expansion of economic activity is difficult to assess due to lack of data and baselines. This is an issue that should be considered in moving forward with

additional support to the NCS Unit.

Low Carbon Development Strategy (LCDS).17 Approved in 2010, this document commits Guyana to implement a sustainable, low carbon, development strategy that specifically protects

forests, water and more generally biodiversity—a description of the LCDS is included as an annex to this PSAR. The strategy, and the current agreement for its implementation with Norway, recognizes the opportunity cost of exploiting Guyana’s large rain forest and related

assets. The implementation of the Low Carbon Development Strategy (LCDS) commits Norway to pay Guyana annual installments based on performance criteria linked to preserving its rain forest. The initial package is worth US$250 million for five years, starting in 2009, which would

be paid out of a World Bank administered trust fund named Guyana REDD-Plus Investment Fund (GRID).

The LCDS notes that Guyana’s pristine forests are its most valuable asset, about 16 million

hectares. These forests have valuable timber, minerals, and may be transformed into agricultural land, which the LCDS estimates may bring an annual economic value of US$580 million to the

country. The cost of these actions, however, is large as the services provided by the forests are high in bio diversity, water, and carbon sequestration. The LCDS notes that these environmental services provided to the world, now for free, could be as high as US$40 billion per year.

Therefore, the cost to the world of not counting with Guyana’s environmental services is very large, but the direct opportunity cost to Guyanese people is also large. The challenge is to

internalize the opportunity cost of the environmental services provided by Guyana’s forests to the world. The government of Norway through the REDD+ funding mechanism is an attempt to do that.

16

National Competitiveness Strategy. Monitoring and Evaluation Review: 2006-2012. May 31st

2102. National

Competitiveness Strategy Unit. 17

A low-carbon development strategy. Transforming Guyana’s economy while combating climate change. Office

of the President, Republic of Guyana. May 2010.

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The resources received from the trust fund would be invested in seven priority projects/issues: (i) the Amaila Falls hydroelectric project; (ii) accelerating Amerindian land titling; (iii) funding

the Amerindian Development Fund; (iv) expanding fiber optic infrastructure; (v) provide micro finance; (vi) establishing a Centre for Bio-Diversity and Low Carbon Development; and

(vii) monitoring, reporting and verification systems for the LCDS.

There is no formal connection between the NCS and the LCDS, however, they somewhat complement each other—see the annex for a description of both. The current priorities of the LCDS have significant impact on competitiveness, and therefore on private sector growth,

especially in recognizing the need for more energy at lower cost (priority i); property rights (priority ii); modernizing infrastructure (priority iv); and expanding credit (priority v).

Moreover, as it relates to agriculture and mining, the implementation of the LCDS would have an impact on these two sectors that are generally characterized by lack of sustainable practices: fertilizers and pesticides over use in agriculture, and deforestation and water/soil pollution for

mining. These are important issues that would need to be addressed in the near term as Guyana continues to simultaneously implement the NCS and the LCDS.

GoInvest. The Guyana Office for Investment is a public institution that promotes private sector

investment. Modeled after similar institutions throughout Latin America and the Caribbean, GoInvest channels interest in investing in Guyana by providing information, sponsoring trade

shows, and facilitating the processes for investors. GoInvest has prioritized the following sectors:

Agriculture & Agro-Processing- Includes seafood & aquaculture, processing (fruit juice

concentrates and pulp, vegetable flour), fresh fruits & Vegetables, Livestock (poultry, beef, mutton, pork & goat meat, INPUTS (seeds, fertilizers), Machinery & Equipment, Sugar Cane & Rice

Light Manufacturing- Textiles & Garments, Pharmaceuticals, Building & Construction, Packaging

Services- Financial, Medical, Environmental, Transportation, Retail/ Commercial, Housing, Fashion, Music & other Entertainment, Machining

Energy- Includes Petroleum & Gas Exploration, Solar Power, Hydro Power, Bio-fuels, Bio-diesel, Wind Power, Cogeneration from Rice Husk/ Bagasse & Biomass Power

Tourism- Resorts/ Hotel, Restaurants, Recreation (Cruise ships, yachting, bird watching, fishing),Tour Operators

Wood Products- Downstream Wood Processing( flooring, decking, moulding, doors,

shingles dimensional lumber, furniture, plywood & veneers

Information & Communication Technology- Includes Business Process Outsourcing

(BPO), Call Centres (inbound/outbound), Software Development, Medical & Legal Transcription

Mining - some mining projects, laboratories and machinery

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GoInvest facilitates investment in these priority sectors by providing significant incentives for investing in Guyana. General incentives include:18

Exemption from Customs Duty on most plant machinery and equipment, raw materials

used in manufacturing

Exemption from Customs Duty and zero VAT on raw materials and packaging for

manufactures that export 50% or more of their products

Unlimited carryover of losses from previous years

Accelerated depreciation of plant and machinery for approved activities

Full and unrestricted repatriation of capital, profits and dividends

Benefits of double taxation treaties with the U.K., Canada, Kuwait and CARICOM

Exception from Customs Duty and zero VAT on items approved under an Investment Agreement between the government and the business

Removal of taxes on equipment used for generating electricity from non-traditional or

renewable sources for both household and commercial purposes

Exemption from Excise Tax on items approved under an Investment Agreement between

the government and the business

Zero rate VAT on exports

Tax holidays

Figure 4: GoInvest distribution of projects by sector, 2013

18

GoInvest has a contract template used for all sectors. We did not have access to this template, and the information

provided in this list comes from the press as reported in the FIEL inception report.

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Source: GoInvest presentation to the Cross Border Agriculture Investments in the Caribbean meeting

Although detailed information about the results of this institution are somewhat limited, there are

some indicators that point towards success. Figure 4 shows the distribution of projects facilitated by GoInvest by sector. The largest sectors that have attracted investments in the country are

agro-processing, services, wood products, and light manufacturing. Figure 5 shows that the majority of investments were related to small projects. A highlight of the work of GoInvest is the investment by Interamericana Trading Corporation (ITC), a Barbados corporation with multi

sector investments throughout the region, that in February 2010 signed a Memorandum of Understanding for investing in the Large Scale Integrated Farm Project in the Rupununi

Savannahs. ITC created Santa Fe Inc. as a Guyanese affiliate, and was granted fiscal concessions for investments in growing rice, soya beans and cow peas, in addition to cattle, sheep and goats. Longer term plans call for additional investments in aquaculture, fruits and

grains—maize and sorghum. Santa Fe employs about 60 people, that farm 1,000 acres of rice using zero tillage technology, and has invested in mills and silos.

Some people interviewed noted that, in spite of the template approved by Parliament detailing

the incentives for investing in Guyana, GoInvest and government discretionary approach to identifying investments puts domestic businesses at a disadvantage. In addition, it was noted that

GoInvest does not make decisions or provide licenses, it coordinates the actions of other government units and facilitates processes. Some criticize GoInvest for being slow, or for not being able to deliver needed licenses—importantly GoInvest is a facilitator, and helps firms that

want to invest in Guyana get required permits and licenses. Some of these criticisms should be addressed as this institution continues to expand.

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Figure 5: GoInvest distribution of projects by size, 2013


Small Business Bureau (SBB). The Small Business Act, passed in 2004, resulted in the

creation of the Small Business Bureau and the Small Business Council. The SBB offers support for the development of small businesses, and offers services such as training, export workshops, formal registration, and trade shows. Through the SBB, small businesses can grow and become

successful commercial institutions. Priority areas, in the context of the Low Carbon Micro and Small Enterprise Development Project (LCMSEDF), include farming, processing, aquaculture,

eco-tourism, business process outsourcing and bio-ethanol. The SBB is a young institution, it only started operations on June 1st 2010.

Importantly the SBB collects information about businesses. In efforts to collect information and facilitate the formalization process of small businesses, the SBB keeps a database. The database

includes, as of October 2013, 6,756 businesses of which about 2,500 have been validated as active businesses—a number of businesses are not active because they have closed or were

improperly registered in the SBB. According to data collected, small businesses consider the following as their largest constraints:19

Access to affordable finance, specifically relating to monies for working capital,

equipment purchase and expansion to existing business premises—this is a recurrent

19

Data provided by the SBB.

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issue for formal firms in Guyana, one that triggers focusing on access to finance by expanding the financial options including factoring, leasing and secured transactions

Inability to source packaging materials, especially for the manufacturing sector in the form of bottles, seals and corks

High transportation costs for farmers to transport goods from other regions to region four

A general lack of understanding of managing cash flows, and preparing basic financial

analysis

The database offers good information that should be expanded. Currently, about 73% of registered businesses employ less than 5 people, 22.3% between 5 and 15, and 4.7% more than

15. Most firms only sell their goods and services to the domestic market, only 15% report selling to the Caribbean, and only 3.8% selling beyond the Caribbean. Inputs are mostly bought from domestic suppliers, although 24% report buying directly from non-domestic suppliers.

Table 10 provides the distribution of firms by sector in the SBB database.

Table 10: Small Business Bureau firms by sector, 2013

No. Priority Sectors Total

1 Agriculture 702

2 Agro-processing 160

3 Apiculture 21

4 Aquaculture 16

5 Handicraft 375

6 Internet Services 66

7 Mining 1

8 Poultry 47

9 Tourism 33

10 Transportation Services 220

Other Services

1 Auto repairs 15

2 Auto Supplies 13

3 Beauty Salons 33

5 Beverage Distributors 14

4 Book Store 7

6 Car wash 9

7 Catering Service 7

8 Clothing 27

15 Clothing and accessories 39

9 Confectionaries 37

10 Construction Materials 5

11 Cosmetolgy 36

12 Education 7

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16 Foams manufacturing 9

17 Food Snackette 57

18 Furniture Stores 26

19 Furniture Rentals 3

21 Grocery Shop 68

22 Home Décor 6

23 Stationery 13

24 Jewellery 19

25 Lumber Yard 9

26 Management Consultancy 5

27 Money Trasfers 1

28 Pharmacetical 19

29 Photo Studios/ Services 14

30 Refridgeration Services 9

31 Restaurants/cafes 39

32 Sewing & Tailoring 18

33 Shipping Service 2

34 Variety Stores 123

35 Wholesale & Retail Trading 170

Source: Small Business Bureau

Private Sector Commission (PSC). Established in 1992, it is the senior institution that

represents the private sector in Guyana, and plays a central role as representative of private sector interests to government, unions and civil society. The priority areas for support of private

sector growth include: promote projects with high value added; facilitate exports and investment; collect and share information about the private sector; improve governance and security; facilitate the development of alliances, domestic and international, for the expansion of private

sector activities; and build up skills and retain them in the country.

Important actions sponsored by the Private Sector Commission include: collaboration with the Council for Technical and Vocational Education and the Board of Industrial Training, submitting

proposals to the University of Guyana to restructure curriculum so that students would have the skills demanded by private sector; supported the agenda of the NCS, in particular those activities that would improve transportation, ports, creating a single window automated processing system,

improving the business climate and increasing the supply of energy at lower costs than now. Proposals to government presented by the PSC in 2013 that succeeded include: lowering

property tax rates to zero for individuals owning less than G$40 million and the personal income tax rate was reduced to 30%.

The PSC announced to pursued three projects that they consider priorities for 2013: (i) the

creation of a development bank, and preliminary discussions with the World Bank IFC, the European Investment Bank and Venture Capital companies indicate initial interest in this new financial institution; (ii) the creation of an international trade arm of the PSC, that would give the

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private sector a better position to represent their interests in international trade negotiations and agreements; and (iii) the establishment of a CARICOM private sector group, that would

represent the interests of the private sector at the highest level of CARICOM negotiations.

Georgetown Chamber of Commerce and Industry (GCCI). Established in 1890 it is the oldest private sector organization in Guyana, and its membership includes businesses from all

sectors and sizes. The GCCI has an active program that includes the presentation of the “Agenda for Action: Top 20 Barriers to Guyana’s Competitiveness.” The agenda includes:

Ensuring political and economic stability

Enacting local government reform and administering elections—noting that Guyana has not held local government elections in 17 years

Improving the tax system—noting high rates

Encouraging investments and the use of alternative sources of energy

Transforming the University of Guyana and expanding training and educational opportunities—to meet the needs of the private sector

Implementing comprehensive security sector reform—as a proposal to lower crime

Establishing a development bank

Ensuring more transparency and accountability in the management of the public and private sectors

Enacting urgent commencement of the public procurement commission (PPC) and the inclusion of private sector concessions to the mandate of the PPC

Resolving Guyana’s skills challenge—noting the mismatch between skills supplied and demanded in the market

Providing a balanced, efficiently managed regulatory protocol and framework

Establishing a culture of market innovation, research and development

Accelerating the process of information and communication technology liberalization to make Guyana competitive—opening up the market for communications

Building modern infrastructure

Making Guyana a magnet for foreign direct investment

Building a globally competitive manufacturing sector

Enacting modern intellectual property laws

Accelerating the implementation of the NCS

Strengthening the commercial court

Strengthening foreign economic diplomacy

The GCCI uses extensively survey tools to identify the needs of their members and their opinion

with respect to issues of relevance to the private sector. In 2012 they executed a survey, a needs assessment, to collect information about their membership. The main finding of the survey is that 77.1% of the members point to tax reform as the most important policy issue. Trade

relationships of members are extensive and include trading processed manufactured food goods, machinery, agriculture chemicals and products, tires, spare parts, hardware materials, clothing

among many more. As previously noted, the small size of the economy does not allow for the creation and growth of a domestic manufacturing sector. The survey also reveals significant trade in services, with Guyanese companies buying the following services: accounting and audit,

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tax and other related services, multimedia, insurance, risk management and other consultancy, ocean freight, shipping and logistics, and security. An important finding is related to skills

needed, but scarce, in the market. According to the survey businesses find it difficult to find skills related to: customer service, human resources, sales, and accounting and finance. Most

businesses use web-based applications, however the main tool for marketing is word of mouth.

The GCCI also collects information about their members attitudes toward relevant current issues in the country—the attitudinal survey. The 2013, only the second survey executed, finds that in general GCCI members are optimistic about future prospects, over 91% of respondents noted

that their companies made profits in 2012, and 87% rated business activities as strong. The major obstacles for doing business are keeping good employees (42%), high tax rates (31%), and

high cost and unreliable supply of energy (22%). Government efforts to support business is rated well, with over 60% of respondents characterizing it as moderately to very supportive. However, corruption is also perceived as a problem. Politics are a concern, as 83% of respondents noted

their lack of satisfaction with the performance of Parliament. The most important public investments, according to respondents of the survey, are the Amaila Falls hydroelectric power

plant, the Lethem road, interior roads construction and improvements, building a recycling plant, and maritime ports upgrades.

Consultative Association of Guyana Industries (CAGI). Established in 1962, the CAGI

represents the interests of employers in labor disputes with unions. It is a member of the Private Sector Commission, and takes the lead on labor policy and industrial relations. Members represent most sectors in the economy, including shipping, transport, trade, mining,

manufacturing, forestry, construction, insurance and banking among other. A recent issue that required the support from CAGI was changing legislation to establish a 40-hour work week replacing a 48-hour work week, a reduction of 8 hours per week. This issue created opposition

from private sector representatives as they would have to pay a 50% over regular salary, as regular over time, to workers that work on Saturday. This issue was not resolved and the current

40-hour week is enforced in Guyana.

Guyana Manufacturing and Services Association (GMSA). Established in 1963, groups manufacturing and services economic groups, including textiles, pharmaceuticals, construction

materials, financial, health, environmental, transportation, trade, entertainment, and education among other. The largest group measured by sales is beverages, that is actively searching for opportunities to penetrate regional markets.

The GMSA has identified issues and interventions that would facilitate the expansion of the

manufacturing sector in Guyana:

Cost of energy and unreliable supply

High trade transaction costs, related to customs delays for import and export transactions.

The GMSA proposes accelerating the implementation of the Single Window Automated Processing System

Promotion of private sector investments and public private partnerships in maritime and air infrastructure, transportation logistics and warehousing

Creating a development bank

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Comprehensive review of existing mechanisms to facilitate investments in manufacturing

Increasing the range and quantity of fiscal and financial incentives

Enforce laws that prohibit trade of smuggled goods

Application of mandatory incentives/disincentives to ensure compliance with Quality Assurance and Reliability Standards

Implementation of a continuous Labor Market Intelligence Survey to gauge occupational skill demand and supply. Development of competency based entrepreneurial skills

training in the education system. Introduction of a National Training Levy and establishing a skills bureau

Facilitate the transformation from sole traders to partnerships with local and foreign

partners

Expand the use of ICT to the manufacturing sector

Providing financial assistance to micro, small and medium enterprises

Facilitating closer collaboration for research and development

Guyana Gold and Diamond Miners Association. This association represents the interests of small miners that are responsible for 100% of gold extraction in Guyana. They directly employ about 15,000 people, and many more indirectly through service providers in air, water and land

transportation, security, food, equipment and maintenance. Their largest challenge is access to capital, an issue already presented in the previous section of this report.

Guyana Rice Development Board (GRDB). Established in 1995, the GRDB promotes the

development of the rice industry, facilitates research, and engages in promotional activities. The GRDB estimates that about 10,000 families are dedicated to the production of rice, with about 105 privately owned rice millers. Counting direct and indirect services related to the rice

industry, the GRDB estimates that about 100,000 people, or 14% of the population, is involved in growing and trading rice in Guyana. Such as with mining, the most relevant issue for the

expansion and modernization of the industry is access to finance, an issue already presented in the previous section of this report.

In addition to the private and public institutions presented in this section, there are other that represent other productive sectors of the economy, but that are small or represent small sectors.

Among those the most important small sectors is tourism. Guyana Tourism Authority (GTA). Created in 2002 as a statutory body, the GTA promotes the development of the tourism industry

in Guyana. The main responsibilities of the GTA include: monitoring and regulating the supply of tourism services, collecting data, providing specialized training, design and implement marketing strategies, and improving transportation services. Tourism and Hospitality

Association of Guyana (THAG). This is the association of hoteliers, resort owners, travel agents, restaurant owners, jewelry and craft shops owners, and transportation services. THAG

organizes owners of hotels, restaurants, and transportation services to provide tourism packages to visitors to Guyana.

ii. Donors and other international entities

Because of the past events that required significant efforts from the donor community and private

sector to provide debt rescheduling and forgiveness to Guyana, the international community is

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well organized in support of government. In particular, the effort related to HIPC and enhanced HIPC that triggered the creation of poverty reduction strategies that channeled support from the

international community to the country along well-defined issues and projects, resulted in a cohesive approach by donors. As previously mentioned in this report, these efforts also resulted

in good planning capacity by government, that as noted has the best budget process in the region. Government takes the lead in organizing the donor community and assigning them areas of support.

In this general context, the following paragraphs describe the work programs of the largest

international donors working in Guyana.

InterAmerican Development Bank (IDB). The IDB is the largest donor in the country, with an active program of loans, technical cooperation, studies, and technical advice to government. As

previously noted in this report, the IDB was instrumental in supporting government efforts to implement the NCS, and also in the establishment of Guyana’s credit bureau, CreditInfo. These

two actions may be the largest contribution by any donor, in recent years, to facilitate the expansion of private sector activities and to diversify the economy.

As noted, government defines the parameters of the relationship with the IDB and suggest areas in which the Bank may support government. These parameters are formalized in the IDB

Country Strategy with Guyana. The last strategy was prepared for the period 2012-2016, and focuses IDB activities on the following priority areas: sustainable energy, natural resources

management, private sector development, and public sector management. The expected lending program to Guyana is US$82.4 million for the 2012-2016 period, that may increase to US$103.2 million if the country lends less on concessional terms. This is a very small amount of resources

compared to the needs of the country, however, according to the authorities and IDB representatives the value added of interventions is mostly related to the transformational

characteristics, not so much about the amounts disbursed—such as the presented examples of the implementation of the NCS or the establishment of a credit bureau.

The IDB work program to support private sector development follows on previous government efforts to increase competitiveness and innovation. According to the IDB the outcomes of

actions that they would fund would: improve the business climate by providing incentives for reducing the informal sector, increase access to credit by developing a framework for secured

transactions, and retain skilled labor; improve the regulatory capacity to enforce standards; and facilitate the adoption of modern production technologies and promote exports and diversification.

Caribbean Development Bank (CDB). The CDB is funding the construction of community

roads and improving the west coast Demerara road. The loans would fund the rehabilitation and maintenance of 240 roads across a number of communities, and improve 30.7 kilometers of

highway – Vreed-en-Hoop to Hydronie section of the road and to finance school road safety education program. These are very large loans, for Guyana and for the CDB, with US$16.4 million and US$32.2 million respectively.

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The European Union. The E.U. provides significant grant funding in the context the Guyana Country Strategy Paper 2008-2013 and the Poverty Reduction Strategy Paper 2011-2015

(PRSP), and the appropriations of the E.U. 10th EDF NIP, which add to €55.4 million. The E.U. objectives in Guyana may be summarized as: (i) addressing economic and environmental

vulnerabilities; and (ii) promoting social cohesion and combating poverty. The country strategy identifies two priority areas: contributing to Guyana’s sector policy on coastal management, and macroeconomic support for the implementation of the Poverty Reduction Strategy.

The PRSP formally recognizes the importance of growth for poverty reduction. The policies that

would promote growth include: maintaining a sound macroeconomic framework; providing a business friendly environment for private sector growth; continued modernization of the

traditional sectors; emergence and growth in new sectors; and ICT-cross cutting policy to support growth and development.

World Bank. The work program of the World Bank in Guyana includes two loans designed to

improve teacher education, and to strengthen the University of Guyana science and technology. These operations focus on improving tertiary education. The UG Science and Technology Support, US$11.4 million, is designed to improve education quality, rehabilitate infrastructure,

and improve management.20 Important activities to execute within this operation include: updating science curricula and funding research in science areas that impact the implementation

of the LCDS. The project was approved in 2011 and become effective in December 2012. There are no preliminary results to date.

The project appraisal document provides significant description and analysis of the main issues that the University of Guyana faces, and focuses on the four faculties of science and technology.

Of interest to private sector expansion is to improve the local capacity to assess climate change impact on the country’s main economic infrastructure. The University of Guyana has identifies a

need to improve the following areas: GIS and remote sensing, climate change modeling, hydrology, ground water management, alternative energy, agriculture resource management, forestry, natural resources management, food and nutrition, and biodiversity inventory. This is

an initiative that merits follow up and additional support, if needed, from the donor community.

USAID. The work program is designed to address issues in health, economic growth, and democracy and governance. The focus of activities on to facilitate growth are in four sectors:

wood products, aquaculture, agribusiness and ecotourism. USAID recently funded two projects with an impact on private sector expansion.

The Guyana Trade and Investment I&II was a designed to maximize Guyana’s competitive advantages and increase non-traditional, value-added exports in Wood Products, Aquaculture,

Agribusiness, and Tourism. According to Carana, the consulting company hired to execute this project: “GTIS II was a four-year, $7.3 million program designed to maximize Guyana’s

competitive advantages and increase non-traditional, value-added exports in four primary sub-sectors: Wood Products, Aquaculture, Agribusiness, and Tourism. The project implemented a market-led approach to strengthen targeted sub-sectors and worked with foreign investors,

20

http://www.worldbank.org/projects/P125288/ug-science-technology-support?lang=en&tab=overview

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strategic buyers, and anchor firms in Guyana to invest in new capacity, technology, and standards.

The GTIS project’s market-led approach became the preeminent development model for Guyana.

With the exception of forestry, the GTIS project built new promising sectors with the capability of diversifying Guyana’s economy from the bottom up. The direct results of GTIS work included

$2.8 million in new investments, $9.78 million in additional sales, and more than 170 new or enhanced jobs, based on environmentally sound value chain development strategies. GTIS placed particular emphasis on leveraging additional funding from the donor community and

leveraged a total of $1.85 million in donor contributions. In the ecotourism subsector where advertising is of vital importance to promote a new destination, GTIS leveraged over $6.5

million in articles, advertisements, and television shows on the country’s heretofore little known attractions.

These results are best seen on the ground where skepticism and pessimism have been replaced

with vision and progress, where leading rice farmers in the country have promoted and invested in aquaculture, ecotourism lodges are booked two to three years in advance, multinational forestry companies have made substantial investments in Guyana, and Israeli agriculture experts

have introduced cutting-edge farm management techniques.”21

Skills and Knowledge for Youth Employment (SKYE) Project is funded within President Obama Caribbean Basin Security Initiative (CBSI) partnership. It is design to provide young people

with market skills so that they may enter and stay in the workforce. According to the U.S. Embassy in Georgetown, “The work readiness training transfers a set of basic employability skills, knowledge, and behaviors essential to the success of young people as entry-level workers

or entrepreneurs. These skill sets were identified as priorities by Guyana’s employment sector. The curriculum, adapted to the Guyana employment context, is designed to provide young

Guyanese with the foundational skills and knowledge necessary to become healthy, productive employees and community members. This training is one of several program elements to assist youth to gain the self-confidence necessary to find and sustain employment.”22 The program

targets at-risk youth between the ages of 15 and 24, mostly males school dropouts that have been identified through the juvenile justice system. In total the program would train about 1,500 in

reigon 4, 6, 9 and 10.

The Skills and Knowledge for Youth Employment (SKYE) project in seeks to strengthen youth’s access to justice and equip youth with market-driven skills and attitudes to improve their ability to transition to the workforce. SKYE will target a total of approximately 600 youth beneficiaries

who do not have the necessary education, skills and behaviors for integration into the workforce; many will be school dropouts and/or involved in the juvenile justice system. SKYE will also

provide capacity building support to local partner organizations, as well as relevant government ministries and the court system. SKYE will work in four regions, which were selected for their high populations of vulnerable youth, high crime areas, and high rates of unemployment.

21

http://www.carana.com/projects/regions/projectsbyregionworldwide/132 22

http://georgetown.usembassy.gov/pr121312.html

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UNDP. UNDP supports Guyana with grant funding to strengthening the institutional capacity of government in the following areas: to increase access to energy services, electricity or cleaner

fuels in rural areas; increase individual and institutional capacity for planning Sustainable Land Management (SLM) at the national and regional level; protect biodiversity through the

implementation of valuation methodologies, payment of environmental services; strengthen capacity to collect, analyze and disseminate key economic and social data, and to support completion of Millennium Development Goal and Poverty Reduction Strategy; strengthen

capacity within the Ministry of Finance to plan, manage and implement, aid effectively according to the 2005 Paris Declaration on Aid Effectiveness.

These projects play an important role is trying to fix one of the main problems for the analysis of

private sector development in the country: lack of reliable information. This project follows on two other UNDP funded initiatives: the DISSC (Development of Institutional Social Statistics Capacities) Project which developed tools (PETRs), training materials, and advisory support

services to improve the effectiveness and efficiency of statistics and M&E Systems; and the MDGs Support Project, which is expected to track progress of the MDGs.

The project would facilitate the analysis of interventions and their impact on key social and

economic targets, mostly performed by the Economic Policy Analysis Unit in the Ministry of Finance.

Canadian International Development Agency.23 CIDA does not have a country-to-country

program, but the country benefits from the Caribbean Regional Program. Through the regional program, CIDA has approved grants for social entrepreneurship, basic education, and economic capacity development. According to CIDA, the C$2.6 million grant Economic Capacity

Development, executed by Natural Resources Canada “This project builds on achievements accomplished in a previous project called Environmental Management and Capacity

Development. It is community- and private-sector-oriented. It aims to support the poorest segments of Guyana's population, namely the rural poor and hinterland populations. The goal of the project is to promote private-sector-led economic growth that provides sustainable

livelihoods and reduces poverty. Improvements to the health, skills, and economic opportunities of miners and the men, women and families in selected communities living near mining

operations are also targeted through this project.”24

The resources are distributed among the program has already achieved results: the construction of a plant nursery for the communities of Mahdia and Isseneru provides services that enhance agricultural practices and address gender issues. Produce is sold to miners that work in adjacent

areas, therefore ensuring a steady and reliable source of income.

Department For International Development (DFID, U.K.). DFID £1.3 million grant was provided in the context of the Guyana Agriculture Diversification Program, and is designed to

expand aquaculture, tilapia, and no-traditional agriculture exports, such as sweet peppers, hot peppers and butternut squash. The program, implemented by the consulting firm Carana, would

23

CIDA is now the Department of Foreign Affairs, Trade and Development (DFATD). 24

http://www.acdi-cida.gc.ca/cidaweb/cpo.nsf/vWebProjSearchEn/8066249DB2400EE9852572F700373024


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create about 1,000 new jobs. This program follows on USAID funded Guyana Trade and Investment.

iii. Access to finance

This is an issue that was frequently mentioned during interviews as having significant impact of private sector expansion. The common criticism from private sector leaders is that the banking sector is too liquid and does not provide enough lending to new businesses, therefore limiting

investment and growth. The bankers response to this criticism is that they assess risk and use collateral, exclusively real estate, to make decisions on lending to all businesses, and that the

result of this process is the portfolio of loans to the private sector that is growing faster than the economy. Therefore, lending is expanding but is not satisfying all the demand for loans. Structural barriers, such as availability of registries for movable property and legal frameworks

for use of financial instruments and limited property right for miners and farmers, impose restrictions on lending to some clients, which are those that need funding but cannot get it from

the banking system. This issue has resulted, as previously noted in this report, for suggesting the need for a development bank that would fill in the gap—we will return to this issue at the end of this section. This section presents an analysis of commercial banks’ assets and addresses some

of the main issues related to access to finance in Guyana.

Table 11 shows that by May 2013 commercial banks held 33% more excess reserves than required by regulations of the Bank of Guyana—currently at 12%. Over time, as the economy

expands and the banking sector grows, excess reserves have also increased, from 15% in 2011 to 22% in 2012. This issue was frequently mentioned by private sector representatives noting that, in their opinion, the banks were too conservative in their lending practices. This issue, however,

is more complicated and requires a better overview of portfolio of assets of banks.

Table 11: Guyana commercial banks indicators of liquidity (Guyana Dollars, million)

Required

reserves

Actual

Reserves Surplus/Deficit

%

required

reserves

2011

(December) 33,007.4 37,873.2 4,865.9 15%

2012

(December) 37,466.3 45,541.5 8,075.2 22%

2013 (May) 38,538.2 51,336.6 12,798.4 33%


Table 12 provides the distribution of bank assets among the major portfolio classes. In general,

over the last three years about 1/3 of the portfolio of the banking sector is in loans to the private sector; about 1/5 is allocated to government debt; and the balance distributed among assets related to foreign transactions, assets held in the Bank of Guyana, and other. The decision of

how to allocated assets among these asset classes is based on assessing risk in the context of maximizing returns to shareholders. The table shows the outcome of this process, noting that

over time credit to the private sector has steadily increase: 22% from December 2011 to May 2013. For the same period, overall asset of the banking sector increased 18%. According to the bankers interviewed, the traditional characteristics of the banks and their clients limit the

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expansion of credit to the private sector. In particular, they note that large and consolidated businesses, especially in the service sector but also some in manufacturing, are the preferred

clients as they have had long-term relationships with them. A long-standing problem in Guyana, partly resulting from its small size, is the high concentration of loans on few businesses—by the

end of the first quarter of 2013 the exposure to the top 20 borrowers is about 15.9% compared to total loan portfolio.25 New businesses, however, find it difficult to borrow in part because of the current structure of the banking system, but also because in many cases they lack appropriate

collateral. Currently, the regulatory system is biased towards using only real estate as collateral, and in general the banking system has limited supply of financial products such as leasing,

factoring and used of movable property as collateral—secured transactions. In addition to these issues, the most promising sectors of the economy, mining and agriculture, have insecure property rights over land, making it very difficult for traditional commercial banks to lend to

these sectors—this issue will be expanded in the next section of this report.

Table 12: Guyana Assets of commercial banks

Total assets

Foreign

sector

Public

sector

Non-bank

financial

institutions

loans

Private

sector

loans &

advances

&

securities

Bank of

Guyana Other

2011

(December)

GY$

million 328,165 53,126 77,508 31 94,238 41,055 62,206

% 100.0% 16.2% 23.6% 0.0% 28.7% 12.5% 19.0%

2012

(December)

GY$

million 378,123 64,086 72,971 359 112,969 48,899 78,836

% 100.0% 16.9% 19.3% 0.1% 29.9% 12.9% 20.8%

2013 (May)

GY$

million 385,934 55,663 84,169 682 115,167 55,689 74,563

% 100.0% 14.4% 21.8% 0.2% 29.8% 14.4% 19.3%


Therefore, it is correct the observation that the banking system is excessively liquid and that banking practices may be too conservative. Moreover, the banking system may not be providing

services to small and medium enterprises, which desperately need funding but that are also high risk for the banking sector, and in many cases lack appropriate collateral. From the bankers’

perspective, it is also true that their mandate is to maximize returns to shareholders, and to assess risk as best they can given poor information available to assess loan applications.26 They note that a solid and well capitalized banking sector is an asset, and that they provide adequate

services to the majority of established business in the country, which are responsible for most of production and employment.

25

Bank of Guyana. Quarterly Report. March 2013. 26

Guyana has recently started the process to rate businesses and individuals. The newly created credit rating

agency, CreditInfo Guyana, will provide information that would facilitate risk assessment of loan applications. As

of now, the agency is in its infancy, it was launched in September 2013, and it is expected that in the coming 18

months some businesses and individuals would be rated, and that banks would start using that information for

approving loans.

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In essence, both sides on this issue are correct, but the problem remains as many small and medium size businesses lack appropriate access to finance. This report identifies this issue as

one of the most important limiting factors for the expansion of private sector activities, and the main recommendations of the report are focused on how to maintain the strength of the sector,

and at the same time expand services to more clients, especially in mining and agriculture.

Importantly, the Executive Opinion Survey of the World Economic Forum notes that private sector representatives do not identify access to finance as one of the most problematic factors for doing business—only 5.4% of respondents note that this is the most important issue, with 8 other

factors taking precedence. Table 13 shows that Guyana’s financial market performs well, especially on ease to access to loans (ranking 45 out of 148 countries), and access to venture

capital (ranking 38 out of 148 countries). Other financial indicators presented in the table note the soundness of banks and low cost of financing among other. It should be noted, however, that these results are biased towards those businesses that do have access to finance, which as

previously noted face a completely different environment compared to small and upcoming ventures.

Table 13: Guyana WEF GCI ranking on financial market development

Source: 2013-2014 Global Competitiveness Report, Guyana Country Profile

The World Bank Ease of Doing Business Report presents a less rosy view of access to credit in

Guyana, and ranks the country 167 out of 185 countries and the worse compared to comparator countries—see Figure 6. Unlike the WEF GCI report that is based on executing a survey asking respondents their opinion about how difficult it is to get credit, the Ease of Doing Business bases

its rankings on four sets of measurable indicators: strength of legal rights, depth of credit information, public registry coverage, and private bureau coverage. Guyana ranks poorly in all these areas.

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Figure 6: Guyana ease of getting credit

Source: 2013 Ease of Doing Business, Guyana Country Profile

Of relevance to this report is to compare Guyana’s legal rights, for borrowers and lenders, to other countries in the region. Figure 7 shows that Guyana underperform the region in legal

rights as it relates to collateral and bankruptcy and their impact on access to credit. Importantly, in Guyana movable property cannot be used as collateral for bank transactions and there are no

registries for movable property.

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Figure 7: Guyana legal rights strength for borrowers and lenders27


iv. Corporate taxation

Tax rates are too high and limit investment and expansion of private sector activities, and probably are responsible for high level of informality, discretionary granting of fiscal incentives,

and the general perception of corruption in the country. According to the Executive Opinion Survey, the two most problematic factors for doing business in Guyana are corruption (19.7% of

27

According to the WB Ease of Doing Business methodology: “The data on the legal rights of borrowers and

lenders are gathered through a questionnaire administered to financial lawyers and verified through analysis of

laws and regulations as well as public sources of information on collateral and bankruptcy laws. Questionnaire

responses are verified through several rounds of follow-up communication with respondents as well as by contacting

third parties and consulting public sources. The questionnaire data are confirmed through teleconference calls or

on-site visits in all economies.” http://www.doingbusiness.org/methodology/getting -credit

http://www.doingbusiness.org/methodology/getting-credit

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respondents) and tax rates (11.7% of respondents).28 Compared to comparator countries, Guyana’s taxes are only lower than in Haiti and Jamaica—see Figure 8. The indicators used to

determine Guyana’s ranking in ease of paying taxes include the number of payments per year (35), the number of hours per year that are required to fill in tax forms (263 hours), and the tax

rate as a percentage of profits (36.1%).

Figure 8: Guyana ease of paying taxes


Guyana may improve in almost all categories that are used by the Ease of Doing Business report

to gauge Guyana’s performance in ease of paying taxes—see Figure 9.

28

2013-2014 Global Competitiveness Report, Guyana Country Profile

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Figure 9: Guyana comparison of tax and administrative burden


v. Business environment

Overall results from the WEF GCI Report show that Guyana’s efforts to improve the business environment are paying off and may be measured by improvements in the ranking over the years.

The last GCI rank has Guyana ranked 102 out of 148 countries, an improvement from 109 in the previous years. Much work remains to be done, however. Figure 10 shows the results from the last Executive Opinion Survey that identifies the most problematic factors for doing business as:

corruption, tax rates, inefficient government bureaucracy, inadequate supply of infrastructure and crime and theft.

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Figure 10: Guyana most problematic factors for doing business


In this section this report focuses on the institutions that facilitate private sector development and growth. Figure 11 shows that Guyana has strong institutions in burden of government

regulation, efficiency of legal framework in challenging regulations, transparency of government policy making, and ethical behavior of firms—among more. The country could improve performance in the following: reliability of police services, favoritism of decisions of

government officials, irregular payments and bribes, and in strengthening auditing and reporting standards. In all of these indicators the country ranks poorly.

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Figure 11: Guyana's institutions for private sector growth


Overall, Guyana ranks below the regional average in ease of doing business, but better than comparator countries Dominican Republic, Suriname and Haiti—see Figure 12. Areas in which

Guyana lags include: getting electricity, registering property, getting credit, paying taxes, and resolving insolvency. The country does comparatively well in dealing with construction permits, protecting investors, trading across borders, and enforcing contracts—see Figure 13.

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Figure 12: Guyana ease of doing business


Figure 13: Guyana business environment


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vi. Technology and innovation

As previously noted in this report Guyana is at the early stages of becoming a hub for the provision business process outsourcing (BPO) services. Qualfon, the first company that is

providing these services in Guyana, employs over 1,700 people in the country and has plans for large expansion in the near term. Guyana offers an educated labor force that speaks English as a

first language at competitive prices, factors quoted by investors when deciding where to invest.

Successful expansion of BPO services would require complementary investments in ICT and more generally in research and development. According to the WEF GCI Guyana needs to

invest in mobile broadband technology—see Figure 14. More generally, the country needs to take advantage of the opportunity offered by BPO services.

Figure 14: Guyana technological readiness—the first column denotes the score, and the

second the ranking


This report suggest that an assessment of the specific needs of BPO and complementary services

is performed. This assessment would identify infrastructure and knowhow gaps that should be filled to take full advantage of investments in BPO. The experience from other countries indicates that a concerted effort to facilitate the expansion of the service sector requires the

participation of public and private actors. From this perspective, a program similar to the WB that is focusing on science issues at the University of Guyana may be developed with an

emphasis on ICT.

vii. Trade and FDI policies

As previously noted in this report Guyana welcomes foreign direct investment, and prospective projects are channeled to GoInvest. Importantly, Guyana offers significant fiscal incentives for prospective businesses—the list of these incentives was presented in a previous section in this

report.

In this section this report focuses on how easy is it to trade in Guyana. Figure 15 notes that Guyana’s trade environment is positive when compared to other countries in the region, only the

Dominican Republic has better performance than Guyana.

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Figure 15: Guyana ease of trading across borders


An important indicator is the cost to export per container—see Figure 16. Over time the cost per container has remained constant at about US$730, comparing favorably with the region average.

According to the WB Ease of Doing Business, it takes 7 documents and 19 days to export. Importing costs a bit more, US$745 per container, and takes more effort and time: 8 documents and 22 days. Although Guyana compares well with other countries in the region, this is an area

that could be improved, especially given the opportunities for exporting agricultural goods to the region.

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Figure 16: Guyana cost to export (US$ per container)


viii. Labor regulation

Guyana has ratified all 8 fundamental conventions of the ILO—freedom of association (C087 and C098), forced labor (C029 and C105), discrimination (C100 and C111) and child labor

(C138 and C182).29 This provides a good framework for setting the incentive framework for labor markets. According to people interviewed, the legal framework for labor markets is good in the country, with acceptable flexibility for hiring and firing. The work week was recently cut

to 40 hours, an issue that created some friction between unions and private sector representatives. This issue, however, is not high in the agenda for reforms. The country also enforces a minimum

wage of GY$202 per hour. Sub-contracting is common practice and used to bypass regulations on full time employment. Unionization, such as in all countries in the region, is falling and stands at about 30%. As usual in the Caribbean, labor issues are subject to significant tripartite

negotiations.

Figure 17 confirms this assessment. According to the WEF GCI, Guyana ranks well in most indicators of market efficiency. In particular hiring and firing practices and flexibility of wage

determination. A puzzling result presented in the GCI report is that the capacity to retain talent is very good, which is inconsistent with anecdotal evidence that shows large numbers of

Guyanese migrating abroad, especially teachers and nurses. This issue merits additional analysis as it may be that for selected skills there are good conditions that provide incentives to stay in the

29

http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:10011:0::NO::P10011_DISPLAY_BY,P10011_CONVEN

TION_TYPE_CODE:1,F

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country, and that for other sets of skills, there are less incentives and those are the ones that migrate. This would indicate an interesting segmentation in the labor market, with some skill-set

earning high returns on education, and another very low returns on education.

Figure 17: Guyana labor market indicators of efficiency—the first column denotes the

score, and the second the ranking


ix. Infrastructure, communications and energy

The most relevant issue for Guyana is the supply and cost of electricity. Figure 18 shows that

the country ranks poorly in quality of ports, airports, and electricity. Of these, most of the representatives of the private sector identified high cost and unreliable supply of electricity as the most important factor that slows down the expansion of private sector activities, especially for

manufacturing. According to people interviewed, most medium and large manufacturing industries use electricity generated by diesel generators, which are reliable but very expensive to

run.

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Figure 18: Guyana WEF CGI indicators of infrastructure—the first column denotes the

score, and the second the ranking


Figure 19 shows that Guyana is the worst performer compared to comparator countries, ranking

148 out of 185 countries in the Ease of Doing Business report. For a business to get electricity in Guyana, it needs to follow 7 procedures, wait 109 days and spend the equivalent of 542% of per capita income. Cost of electricity is among the highest in the world, with costs of that average

US$ 39 cents per kwh.30 31 As previously noted in this report, supply of electricity is a priority for the expansion of the private sector, and has been prioritized by government that is pursuing

building the Amaila Falls hydroelectric power plant.

30

http://www.caribbean360.com/index.php/news/guyana_news/776625.html#axzz2lamji3xb 31

India and China have one of the lowest costs of electricity, at US$ 8 cents per kwh; Canada, Russia and the U.S. is

about 11 cents; and Brazil 17 cents. Denmark has the highest cost per kwh, about 41 cents, very close to Guyana.

http://cleantechnica.com/2013/09/30/average-electricity-prices-around-world/

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Figure 19: Guyana ease of getting electricity


x. Environment

Arguably the largest asset of the country is its endowment in natural resources. Guyana is a small country sparsely populated that has recognized the importance of maintaining its natural

endowments and has found a viable alternative to ensure its preservation. The Low Carbon Development Strategy and the funding that has been agreed with the government of Norway provides an example to other countries that also share the characteristic of Guyana. The LCSD

and related Norway support has already been presented in this report.

xi. Gender

Such as with the environment, gender issues and how to address them are important for government and civil society in Guyana. The Constitution explicitly provides for equal rights to

men and women in all spheres of political, economic and social life. Moreover, it incorporates provisions of the “Convention on the Elimination of All Forms of Discrimination against

Women” and the “Inter-American Convention on the Prevention, Punishment and Eradication of Violence against Women.” Political representation of women in Parliament is mandated by law establishing that 33% of candidates on the slates of political parties must be women. According

to the U.S. 2010 Human Rights Report written by the Bureau of Democracy, Human Rights and Libor of the U.S. State Department,

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A recent issue with impact on gender equality is the support for the work of the Women and Gender Equality Commission that promotes women’s rights and gender equality in Guyana. The

third report prepared by the Commission and presented to Parliament in August 2013 recommends, among more, designing sensitization programs to be implemented for trafficking in

persons and sexual offences, creation of a policy on sexual harassment in the workplace and a review of the building code to include provision for access to persons with disabilities.

Data on gender issues is not easy to find for Guyana. The World Bank Enterprise Survey of 2010 notes that women are underrepresented in top management, however, compared to Latin

America and lower middle income countries, women participate more in ownership of firms—see Figure 20. The E.U. 2008-2013 country strategy quotes female to male labor participation at

35% and 42% in 1990 and 2002 respectively, but additional information on participation of women in the labor force is not available.

Figure 20: Guyana women in management and ownership

Source: World Bank Enterprise Survey 2010

3) Chapter II: Selecting and prioritizing issues

This section presents the priority PSD issues which have been identified throughout this report, and a proposal for a PSD plan to be implemented in the short-term that would complement

several PSD processes that are currently in preparation and in execution in Guyana.

a) Opportunities for selective interventions to improve the business climate in Guyana

Identified constraint Suggested goal Proposed outcome Specific actions Comments/background

Insecure property rights

Insecure property rights

for miners and farmers

Land property registered and

used as collateral for bank

lending to mining and

agriculture companies or

individuals

Increased investment by

miners and farmers in

modernizing productive

practices and increasing

productivity. Significant

increase in production and exports

Lower impact of productive

practices on the environment,

especially in the mining sector

and in the hinterland

Compilation of studies

prepared in the last 10 years

with emphasis on mining and

agriculture. With that

information: prepare an action

plan that would result in

providing secured and long-

term property rights and

modern registration of property for farmers and miners

This is not a full-blown reform

of property rights in the

country. This is a focused

effort on strengthening the

property rights of farmers and miners

Design a program that would

ensure sustainable practices for

small producers, especially

addressing issues of

deforestation and water/soil

pollution

The cumbersome system of

assigning property rights in

Guyana has been extensively

analyzed over the years and it

has been summarized in many

reports. For this reason it is

not necessary to add more

studies to identify the

problems.

This effort would require a

change in the framework for

how property is treated and

valued in Guyana. Now

government has a monopoly

over land, resulting in an

inefficient system of land

distribution that is

characterized by poor

transparency and discretion.

However, this system has been

in place for many years, and to

replace it would require

political support, always difficult in Guyana.

From this perspective, it is best

to follow a phased approach

that would emphasize initially

a solution, partial?, to property

rights over land by miners and farmers

Limited access to Expansion of credit to the Increase of the lending Survey banks to find extent of

financial services provision for

It is important to note the

growing frustration of private

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finance

Access to finance is

limited to large and

established businesses

and individuals.

Young, small and

medium size businesses

find it difficult to access

finance services from

the banking sector for

working capital. All

firms, young and

established, cannot

access long-term

financing for capital

investments on good

terms.

In addition, lending

almost always requires

real estate collateral

that in many cases

greatly exceeds the

amount of loans

provided. The banking

system does not use

modern financial

services such as leasing,

factoring and secured

transactions

private sector

Introduction of lending

instruments that are not

collateralized by real estate,

using leasing, factoring and secured transactions

Introduction of long-term

instruments for funding capital

investments of small, medium and large enterprises

portfolio of banks

Suggested measurable outcomes:

Total credit to the private sector (% of GDP

Total share of credit to small

and medium enterprises of

total credit to the private sector

(% of total credit, number of

firms)

Quality of the portfolio (non-

performing portfolio as a % of total portfolio)

Nominal and real, passive and

active, interest rates

Maturity of the portfolio, by

type of lending instrument, in

months

leasing, factoring and secured

transactions (# of banks

offering the service, # of

clients and types of clients

(small, medium and large enterprises) using the service

Review of bank regulations to

allow for the expansion of financial services

Develop leasing and factoring

services to be provided by the

banking sector

Creation of registries for

movable property required for

the provision of secured

transactions services. Initial

focus on agriculture and commerce

Training for bankers on how to

design and implement

appropriate programs to create

and expand leasing, factoring

and secure transactions services

Leverage the newly created

CreditInfo, Guyana’s first

credit bureau, and facilitate its

expansion and use by the banking sector

Prepare a proposal to facilitate

the financing of businesses in

Guyana by Guyanese nationals

sector leaders with the banking

system “lack of response” to

their financial needs—an issue

widely recognized as the WB

Ease of Doing Business ranks

Guyana 167 out of 185

countries in 2013. According

to private sector leaders, banks

have excess liquidity that

could be put to more

productive uses. However,

from the bankers’ perspective,

they argue that their lending

policies maximize returns to

shareholders and balance risk

and return, given the structure

of the economy and financial

regulations, including a 12%

reserve requirement.

Many private sector leaders are

supporting the creation of a

“development bank” that

would fill in the lending gaps

that exist in the market. The

creation of a development

bank in Guyana would, as in

many small countries in Latin

America, create incentives for

rent seeking, and would add to

the contingent liabilities of government.

It is therefore important to

highlight that the solution to

the shortcomings in the

provision of financial services

should be addressed by

strengthening the banking

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that live abroad. Such as in

other countries in the region,

the large number of Guyanese

living abroad may be

interested in funding

opportunities in Guyana.

These experiences may inform

the creation of a similar program for Guyana

Design a program of

guarantees to be used for the

expansion of credit to the

private sector with emphasis

on small and medium sized

enterprises

sector, and by facilitating its

expansion

Limited access to

finance—micro and small credit

Limited access to

finance by individual

entrepreneurs that need

micro or small loans to

grow

Expansion of credit to the

private sector by increasing

access to finance to individual

entrepreneurs, with a focus on

rice producers and traders in

urban areas

Increase of credit to the private

sector’s segment of individual

entrepreneurs

Suggested measurable outcomes:

Micro credit to the private

sector (number of loans,

amount)

Terms of the micro loans (size,

maturity, grace periods, interest rates)

Prioritized sectors: rice and

commerce

Map out the business of micro

credit institutions such as

IPED. Analyze and review

their best practices, identify

assets and liabilities of their

approach

Facilitate the expansion of

current institutions that provide

micro credit—cooperatives

and other institutions such as

IPED that specialize in the

provision of micro and small

loans

There is an active non-banking

system in Guyana that

provides small loans to farmers

and traders. These institutions

have several years working in

Guyana and have accumulated

significant experience in the

market, and have brand

recognition and a stable client

base. The expansion of their

markets would have a large

impact on access to finance to

micro and small loans

High tax rates and

link to the informal sector

The WEF GCI 2013-

Increased investment by the

private sector as a consequence of lower tax rates

Increased formal employment, private sector investment

Review the tax system with the

purpose of eliminating

discretion and leveling the

playing field. Lower tax rates

and increase tax yields by

The IDB and other multilateral

organizations have extensive

experience in reforming tax

systems--cleaning tax

registries, increasing tax yields

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2014 report notes that

high tax rates is the

second most important

issue reported by the

Executive Opinion

Survey—the most

important is corruption.

This fact is confirmed

by information from the

WB 2013 Guyana

Doing Business Report

that ranks Guyana 118

out of 185 for the tax rate, at 36% of profits

Tax rates and excessive

government regulation

have an impact on the

size of the informal

sector. By all accounts

the informal sector is

very large in Guyana,

but real estimates are

not available

Expansion of the formal

private sector as a consequence of lower tax rates

Measurable outcomes:

Baseline: WB Doing Business

Report tax rate as a % of profits (36% in 2013)

Estimates of informal private

sector activities

expanding the number of tax payers

Methodologies used to

estimate the informal sector

vary and in most cases the

confidence on results is low.

In spite of methodological

constraints, the information

about the size and

characteristics of the informal

sector are important indicators

for Guyana. It is therefore

advisable to prepare desk

studies with national

accounts/tax registries related

to VAT collections, among

other, that would provide a

baseline for the size and

composition of the informal

sector.

among other. Information

provided by the IDB indicates

that some work in this area is

being facilitated by the WB

and USAID--strategic

partnerships,

http://www.iadb.org/en/mapam

ericas/guyana/strategic-

partnerships-in-

guyana,5916.html. However,

no information about this

initiative exists in the WB or

tUSAID web pages.

High cost of electricity

Increase energy generation to

facilitate the expansion of

private sector activities,

especially of industry

Lower prices of energy (kWh)

to region averages, and

significant reduction in CAIFI,

SAIDI and SAIFI indicators

Increased industrial output

Currently the country is

debating investments in one

large hydroelectric power plant

in Amaila Falls. Political and

technical issues is preventing

this project from moving

forward

An option to analyze is to shift

gears to smaller, less visible,

expensive and risky projects

that would also produce

hydropower. According to the

Guyana Energy Agency the

country has the potential to

It is not clear the extent to

which alternative hydropower

sites have been identified and

the technical analysis has been

performed. If initial estimates

are correct, then Guyana has

many hydropower sites that are

worth considering. This

approach is fully consistent

with the commitment of

government to the LCDS

http://www.iadb.org/en/mapamericas/guyana/strategic-partnerships-in-guyana,5916.html




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produce about 7,600MW,

many of which are related to

small to medium sized

hydroelectric power plants.

A review of the better projects

would make a contribution as

it would divert attention from

the highly contentious Amaila

Falls project, and may result in

the selection of several small

ones which could be executed

in the near-term

National

competitiveness unit

work is winding down

Continue improving Guyana’s

competitiveness Productivity increases

Consolidate the national

competitiveness unit into a

permanent institution.

GoInvest could incorporated

the assets of this executing

unit, strengthening the

executive capacity of GoInvest

The National Competitiveness

Strategy, prepared by the

National Competiveness Unit,

considers improvements to

infrastructure (roads, air and

sea/river). The unit was

financed by an IDB loan,

which is in the final stages of

execution. The work of this

unit should be continued and

maybe

b) Additional recommendations to accelerate private sector growth and development in

Guyana

Strengthen the policy framework for the development of the rice and gold sectors in

Guyana. These two sectors lead economic activity in the country, however, as previously noted, insecure property rights have a negative impact on investment and growth. The problems that

these sectors face go beyond property rights, and their importance merit the design of policies that are designed to facilitate their expansion and development.

For agriculture former President Jagdeo has formulated a proposal for the development of agriculture within CARICOM. Known as the Jagdeo initiative, that would prioritize agricultural

production and set the stage for future agribusiness developments that would result in significant regional and extra regional trade. By 2015 the initiative proposes to: “make substantial

contributions to economic development, social and environmental sustainability; have a transparent regulatory framework at national and regional levels, that promotes, attracts and facilitates capital and investments; have significantly transformed its processes and products

and stimulates innovation and entrepreneurship; and enable the region to achieve an acceptable and stable level of food security.” Moreover, the initiative identifies ten constraints that limit

the growth of the sector: limited financing, outdated and inefficient health and safety standards; inadequate research and development; fragmented and disorganized private sector; inefficient land and water management systems; deficient and uncoordinated risk management systems;

inadequate transportation; weak and non-integrated information systems; weak market linkages; and lack of skilled workers.

This approach is particularly appropriate for Guyana, one of the largest countries in the region

with a strong agricultural sector. It could be the foundation for the development of a long-term policy that solely focus on the sector, with emphasis on the role of the private sector and on reducing the barriers that slow its growth and development.

Similarly, a mining development policy framework that introduces appropriate incentives for the

expansion of the mining sector in Guyana would set the stage for new and higher investments in the sector. Issues of relevance include leveling the playing field for domestic miners. The issues

related to property rights, as noted in the previous section, are the priority but are not the only ones. The mining sector is a high risk business that requires significant initial investment. In general, the sector would benefit from policies that facilitate these initial investments with the

following facilities, among other: tax deductions allowed for failed investments, appropriate depreciation schedules for equipment. Additional factors that would be included in a policy

framework for the mining sector include: skills development, social and environmental issues, and modernization of extraction practices.

Leveled playing field for investments. The issues presented about the mining and agricultural

sectors also affect other sectors in the economy. Current practices to facilitate private sector development are appropriate and should be encourage. However, strengthening the capacity of GoInvest by ensuring that incentives apply evenly to all participants, regardless of sector, size or

nationality, would provide equal ground for all market participants. In particular GoInvest

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template for investments should be used as a benchmark for the expansion of private sector activities in the country. The use of public private partnerships could be expanded—more on

this issue in the next recommendation. In essence, clear, common and transparent investment incentives should apply to all.

Reassess PPP policy and the role of the private sector. Currently government has committed

to the development of large projects that are considered priorities for the country: the Marriott Hotel in Georgetown, expanding the Cheddi Jegan International Airport, building a specialty hospital and building the hydroelectric power plant at Amaila Falls. These projects fit for public

private participation, and in some cases government has started negotiations with relevant private sector partnert—for the Marriott Hotel. These projects offer the opportunity to develop a

framework for public private partnerships in Guyana. Such as in other countries in the region, the infrastructure gap in Guyana is wide and cannot be filled with public investment. Other countries in Latin America, most notably Peru, are using PPP to bring in the private sector and

fund large infrastructure projects.

The Peruvian authorities recognize the infrastructure gap and the fact that the public sector does not have the resources to fill it on its own—the investment gap in Peru is estimated at US$88

billion for the period 2012-2021.32 For this reason, government announced its intention of working with the private sector using Public Private Partnerships. The Peruvian authorities put

up for bid these infrastructure projects-in airports, ports, urban transportation metro lines, energy transmission lines, mining developments, telecommunications, agricultural irrigation among others. The procurement process for infrastructure projects requires a bidding process with well-

defined rules. Interested companies buy bidding documents, and then present proposals. The process generally involves four steps: a project is announced and bidding documents are sold to any company that wants to participate; interested companies present their proposals in three sets

of documents: technical and financial qualifications (called envelope 1), their technical proposal (called envelope 2), and their economic proposal (called envelope 3).

Because government has recognized that they cannot fully fund these investments, all infrastructure projects are Public Private Partnerships (PPP). For some investment projects

government would make a financial contribution; for the rest, the majority, government would grant a 20-40 year concession to the winner of the bid without making any financial contribution.

In general, projects with low rates of financial return would be enhanced by a financial contribution from government to provide incentives for private companies to participate in the bidding process—for example rural electrification projects tend to have low financial rates of

return. Projects with high returns are expected to be fully funded by the private sector company selected during the bidding process, and the company makes money from the concession

contract. Guyana may benefit from a similar approach, which would bring in needed investments in

infrastructure without adding fiscal pressure to the budget. Guyana has the experience of the PPP for the construction and operation of the Berbice Bridge. The bridge is managed by the

Berbice Bridge Company Inc. (BBCI), on a version of a PPP with significant government participation in financing this project. Government may also build on this experience.

32

Asociación para el Fomento de la Infraestructura Nacional (Afin).

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c) Action plan

The PSAR methodology calls for the preparation of an action plan for the implementation of the main recommendations. This is appropriate for many countries in the region that do not have a

well-structured institutional framework to support an agenda for reforms for private sector growth and development. This is not the case for Guyana. As noted, Guyana’s NCS and LCDS, and the institutions that implement them and monitor its results, are the ones that should continue

taking the lead. Ideally, the NCS Unit should take the recommendations presented in this report and if appropriate include them in their work program.

4) Follow-up, monitoring and evaluation

The PSAR/DMX includes the definition and creation of databases for future monitoring and

evaluation of results of both instruments. These instruments are powerful tools for the selection of priority interventions to support PSD, as well as for the coordination of ongoing and future programs and projects. Importantly, the suggestions presented in this report would be

incorporated into the work program of the NCS Unit, if considered appropriate. In this context, Table 14 suggests indicators that may be used to monitor the actions presented in this report. It is important to note that the NCS Unit already has a system that monitors implementation of

initiatives—as noted the NCS has 245 specific actions. Therefore the intention of this table is to complement the methodology and monitoring process already in place, not to replace it.

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Table 14: PSAR monitoring indicators

Purpose of the PSAR Indicator Output Outcome

Overall characteristics of the

economy in relation to PSD

General macroeconomic indicators, such as total and

private sector real growth, inflation, total and private

sector employment, private sector exports as a

percentage of total exports

X

Competitiveness indicators as presented in the World

Economic Forum Global Competitiveness Index and

the World Bank Ease of Doing Business Reports

X

Collect primary data on businesses that provide goods

and services to multinational corporations in the

energy sector—sales, exports, number of employees

X

Identification of PSD priorities Short selection of PSD priority areas that merit

support from the donor community X

Increased focus on PSD support

from the donor community Average size and number of programs and projects X

Identify duplication and overlapping

initiatives to improve efficient

private sector support by the donor

community

Number and amount of programs and projects that

duplicate or overlap initiatives X

Number and amount of programs and projects that

have been merged/consolidated X

Number and amount of new multi-donor efforts in

areas in which duplication or overlapping had been

identified

X

Identify omissions and gaps in

donor supported programs that need

to be filled to accelerate private

sector development

Number and amount of new programs and projects

that have been identified as omissions and gaps in the

DMX report

X

Number and amount of new multi-donor efforts in

areas identified as omissions and gaps in the DMX

report

X

5) Chapter III: Conclusions and recommendations

This Guyana Private Sector Assessment Report (GY-PSAR) presented an overall assessment of private sector development (PSD) and recommendations for facilitating and accelerating private

investment and growth. It is important to clarify that important PSD initiatives are currently supported by government and stakeholders in Guyana. The objective of this report is to respectfully contribute to the process to accelerate growth and development, not to compete or

upstage any existing PSD effort. Guyana’s National Competitive Strategy provides an excellent framework for private sector expansion and growth, which is complemented by government’s

Low Carbon Development Strategy. These two combine to offer the most comprehensive framework for development in the region. Moreover, the NCS Unit has played a central role in the implementation of the NCS and complementary activities. For these reasons, the proposals

presented in this document should result in complementary actions to those already in place, and

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hopefully this report would provide sufficient support for the continuation of the NCS Unit work in Guyana.

Recommendations in addition to those already presented in this report are all related to filling in

data gaps identified during the preparation of this report.

Data and information gaps:

A mapping of private sector activities by sector

• A mapping of financial sector products available to the private sector—such as banking services on factoring, secured transactions, discount of letters, long-term lending terms and

options, stock exchange bond issue conditions, credit ratings of people and companies

• A complete description and analysis of labor markets

• A complete description and analysis of the tax system

• A complete description and analysis of registries, real estate and movable property

• A complete mapping of licensing requirements by sector

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Annex 1: Sources of information used in this report

The following are the main sources of information used for this report. Data was collected from the Guyana Bureau of Statistics, the Bank of Guyana, and the World Bank DataBank Databases.

Additional documents from many private sector organizations were also used, especially those from the Consultative Association of Guyana Industries, GoInvest, the Guyana Competitiveness

Unit, Guyana Invest Magazine, Georgetown Chamber of Commerce and Industry, Guyana Manufacturing and Services Association, IPED, the Ministry of Trade, the Private Sector Commission, the Small Business Bureau, and THAG.

Government of Guyana. 2006. Enhancing National Competitiveness: A National Competitiveness Strategy for Guyana. Government of Guyana in partnership with the Private Sector. Georgetown.

Government of Guyana. 2010. A low-carbon development strategy. Transforming Guyana’s

economy while combating climate change.

Delegation of the European Commission. 2008. Country Strategy Paper and National Indicative Programme for the period 2008-2013.

Fundacion de Investigaciones Economicas Latinoamericanas. 2013. Productive development

policies for Guyana: the land of many waters. Inception report and work plan.

InterAmerican Development Bank. 2012. IDB Country Strategy with the Cooperative Republic of Guyana 2012-2016. InterAmerican Development Bank, Washington D.C.

International Finance Corporation. 2010. Guyana Country Profile 2010: Enterprise Surveys.

International Finance Corporation. 2013. Economy profile: Guyana. Doing Business 2013.

Smarter regulations for small and medium-size enterprises.

International Monetary Fund. 2011. Guyana: 201 Article IV Consultation—Staff Report, supplement, public information notice on the Executive Board Discussion and Statement by the

Executive Director for Guyana. IMF Country Report No. 11/152.

Nathan Associates. 2007. Guyana Economic Performance Assessment. Publication produced by Nathan Associates Inc. for review by the United States Agency for International Development.

World Economic Forum. 2013. The Global Competitiveness Report 2013-2014: Full Data Edition is published by the World Economic Forum within the framework of the Global

Competitiveness and Benchmarking Network. World Economic Forum, Geneva.

World Trade Organization. 2009. Trade Policy Review: Report by the Secretariat Guyana Revision.

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Annex 2: Guyana Donor Matrix Report (GY-DMX)

Description of local stakeholders

Guyana has many public and private institutions that directly or indirectly focus on the expansion of private sector activities. The country, compared to other countries in the region, has a well-

developed framework for growth and development that has been presented to the general public and that over time has been implemented. The framework is provided by the National Competitiveness Strategy and the Low Carbon Development Strategy. These two strategies

guide government policy as it relates to private sector growth, and are summarized in this section. Three public institutions are also analyzed and presented in this report, GoInvest, the

investment promotion agency of Guyana, the Competitiveness Unit that was designed to implement the National Competitiveness Strategy, and the Small Business Bureau which supports the development of small businesses. To these public institutions, this report presents

the most relevant private sector institutions that represent the private sector in Guyana: the Private Sector Commission, the Consultative Association of Guyana Industries, the Georgetown

Chamber of Commerce, the Guyana Chamber of Commerce and Industry, the Guyana Manufacturing and Services, the Tourism Association, the Guyana Gold and Diamond Association, the Guyana Rice Development Board, and the Guyana Tourism Authority.

The list of participants and issues is very large and does not necessarily correspond to the size of the economy. To some extent there is “over representation” as too many actors play too many roles, in many cases overlapping as the companies and their representatives are members of

several institutions. Fragmentation and overcrowding are a problem as the private sector cannot speak with one voice, and diverging agendas do not help move forward important reforms. This is an issue that would be presented as a recommendation for stronger coordination between

private sector actors in Guyana, later in this report.

National Competitiveness Strategy (NCS) and the NCS Unit. Launched in 2006 after significant consultations, this strategy is an ambitious attempt to increase competitiveness.33 The

strategy includes 245 actions that are designed to improve competitiveness, are measurable, and increase rankings of the country, especially in the World Bank Ease of Doing Business surveys.

The NCS actions are divided into core policies, sector policies, strategic sub sector policies, and overarching enablers. Core policies focus on improving the business climate, and include competition and consumer protection, infrastructure, human resources and access to finance.

Sector policies focused on actions that would facilitate the expansion of economic activities in the sugar, rice, and non-traditional agricultural products, and tourism. Strategic sub sectors were

identified as those that could help diversify the economy into promising businesses in its infancy or yet to develop, in fruits and vegetables, aquaculture and forestry. Finally, overarching enablers focused on how to implement the NCS and on the public-private arrangements that

would be necessary for taking concrete actions with support from all relevant actors.

33


Strategy for Guyana. Government of Guyana in Partnership with the Private Sector.

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used by government to develop an implementation plan, which was supported by an IDB loan, the Support for Competitiveness Program that facilitated the creation of the National

Competitiveness Strategy Unit empowered to implement the strategy. The NCS also received significant support from other donor funded projects, such as the Agricultural Support Services Program, the Agricultural Diversification Program, and the Guyana Trade and Investment

Support.34 Because of these efforts, the NCS by 2013 can show concrete results: 57 out of the 245 actions proposed in the plan have been completed, 83 are at late stages of completion, and

72 are at early stages of implementation.35 Some of the most relevant actions completed include: the Secretariat of the Competition Commission was created to serve as a consumer protection agency that would implement the 2011 Consumer Protection Bill; implementation of the Value

Added Tax (VAT) and Excise Regime; lowering the Corporate Income Tax from 45% to 40% for commercial companies and from 35% to 30% for non-commercial companies, still high by

regional standards but improving; the Commercial Court is functioning providing services for dispute resolution; using real estate for collateral lending from commercial banks and more generally facilitating the development of land and property markets; and passing legislation and

the establishment of a Credit Bureau, CreditInfo, that started functioning in September 2013.

In spite of the partial success of the implementation of the NCS, much remains to be done. As noted the NCS Unit, which has been leading the implementation of the strategy, was funded by

an IDB loan. This project is at late stages of execution and resources have been almost exhausted. Moving forward, the work done by the NCS Unit should be continued.

Low Carbon Development Strategy (LCDS).36 Approved in 2010, this document is a statement of Guyana’s approach to sustainable development, in particular to the protection of

forests and a commitment to a low carbon development. The strategy, and the current agreement for its implementation with Norway, in essence leverages Guyana’s large rain forest assets and

recognizes, and values, the opportunity cost of deforestation. The implementation of the Low Carbon Development Strategy (LCDS) commits Norway to pay Guyana annual installments based on performance criteria linked to preserving its rain forest. The initial package is worth

US$250 million for five years, starting in 2009, which would be paid out of a World Bank administered trust fund named Guyana REDD-Plus Investment Fund (GRID).

The resources received from the trust fund are being invested in seven priority projects/issues:

(i) the Amaila Falls hydroelectric project; (ii) accelerating Amerindian land titling; (iii) funding the Amerindian Development Fund; (iv) expanding fiber optic infrastructure; (v) provide micro

finance; (vi) establishing a Centre for Bio-Diversity and Low Carbon Development; and (vii) monitoring, reporting and verification systems for the LCDS.

34




US$7.3 million). 35


2102. National

Competitiveness Strategy Unit. 36


of the President, Republic of Guyana. May 2010.

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There is no formal connection between the NCS and the LCDS, however, they complement each other. The current priorities of the LCDS have significant impact on competitiveness, and

therefore on private sector growth, especially in recognizing the need for more energy at lower cost (priority i); property rights (priority ii); modernizing infrastructure (priority iv); and

expanding credit (priority v).

GoInvest. The Guyana Office for Investment is a public institution that promotes private sector investment. Modeled after similar institutions throughout Latin America and the Caribbean, GoInvest channels interest in investing in Guyana by providing information, sponsoring trade

shows, and facilitating the processes for investors. GoInvest has prioritized the following sectors:

Agriculture & Agro-Processing- Includes seafood & aquaculture, processing (fruit juice

concentrates and pulp, vegetable flour), fresh fruits & Vegetables, Livestock (poultry, beef, mutton, pork & goat meat, INPUTS (seeds, fertilizers), Machinery & Equipment,

Sugar Cane & Rice

Light Manufacturing- Textiles & Garments, Pharmaceuticals, Building & Construction,

Packaging

Services- Financial, Medical, Environmental, Transportation, Retail/ Commercial,

Housing, Fashion, Music & other Entertainment, Machining

Energy- Includes Petroleum & Gas Exploration, Solar Power, Hydro Power, Bio-fuels, Bio-diesel, Wind Power, Cogeneration from Rice Husk/ Bagasse & Biomass Power

Tourism- Resorts/ Hotel, Restaurants, Recreation (Cruise ships, yachting, bird watching, fishing),Tour Operators

Wood Products- Downstream Wood Processing( flooring, decking, moulding, doors, shingles dimensional lumber, furniture, plywood & veneers

Information & Communication Technology- Includes Business Process Outsourcing (BPO), Call Centres (inbound/outbound), Software Development, Medical & Legal

Transcription

Mining - some mining projects, laboratories and machinery

GoInvest facilitates investment in these priority sectors by providing significant incentives for

investing in Guyana. General incentives include:37

Exemption from Customs Duty on most plant machinery and equipment, raw materials used in manufacturing

Exemption from Customs Duty and zero VAT on raw materials and packaging for manufactures that export 50% or more of their products

Unlimited carryover of losses from previous years

Accelerated depreciation of plant and machinery for approved activities

Full and unrestricted repatriation of capital, profits and dividends

Benefits of double taxation treaties with the U.K., Canada, Kuwait and CARICOM

37

GoInvest has a contract template used for all sectors. We did not have access to this template, and the information

provided in this list comes from the press as reported in the FIEL inception report.

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Exception from Customs Duty and zero VAT on items approved under an Investment

Agreement between the government and the business

Removal of taxes on equipment used for generating electricity from non-traditional or renewable sources for both household and commercial purposes

Exemption from Excise Tax on items approved under an Investment Agreement between the government and the business

Zero rate VAT on exports

Tax holidays

Figure 22: GoInvest distribution of projects by sector, 2013

Source: GoInvest presentation to the Cross Border Agriculture Investments in the Caribbean

meeting

Although detailed information about the results of this institution are somewhat limited, there are some indicators that point towards success. Figure 5 shows the distribution of projects facilitated

by GoInvest by sector. The largest sectors that have attracted investments in the country are agro-processing, services, wood products, and light manufacturing. Figure 6 shows that the majority of investments were related to small projects. A highlight of the work of GoInvest is

the investment by Interamericana Trading Corporation (ITC), a Barbados corporation with multi sector investments throughout the region, that in February 2010 signed a Memorandum of

Understanding for investing in the Large Scale Integrated Farm Project in the Rupununi Savannahs. ITC created Santa Fe Inc. as a Guyanese affiliate, and was granted fiscal concessions for investments in growing rice, soya beans and cow peas, in addition to cattle,

sheep and goats. Longer term plans call for additional investments in aquaculture, fruits and

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grains—maize and sorghum. Santa Fe employs about 60 people, that farm 1,000 acres of rice using zero tillage technology, and has invested in mills and silos.

Some people interviewed noted that, in spite of the template approved by Parliament detailing

the incentives for investing in Guyana, GoInvest and government discretionary approach to identifying investments puts domestic businesses at a disadvantage. In addition, it was noted that

GoInvest does not make decisions or provide licenses, it coordinates the actions of other government units and facilitates processes. Some criticize GoInvest for being slow, or for not being able to deliver needed licenses. Some of these criticisms should be addressed as this

institution continues to expand.

Figure 23: GoInvest distribution of projects by size, 2013


Small Business Bureau (SBB). The Small Business Act, passed in 2004, resulted in the

creation of the Small Business Bureau and the Small Business Council. The SBB offers support for the development of small businesses, and offers services such as training, export workshops, formal registration, and trade shows. Through the SBB, small businesses can grow and become

successful commercial institutions. Priority areas, in the context of the Low Carbon Micro and Small Enterprise Development Project (LCMSEDF), include farming, processing, aquaculture,

eco-tourism, business process outsourcing and bio-ethanol. The SBB is a young institution, it only started operations on June 1st 2010.

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Importantly the SBB collects information about businesses. In efforts to collect information and facilitate the formalization process of small businesses, the SBB keeps a database. The database

includes, as of October 2013, 6,756 businesses of which about 2,500 have been validated as active businesses—a number of businesses are not active because they have closed or were

improperly registered in the SBB. According to data collected, small businesses consider the following as their largest constraints:38

Access to affordable finance, specifically relating to monies for working capital,

equipment purchase and expansion to existing business premises

Inability to source packaging materials, especially for the manufacturing sector in the

form of bottles, seals and corks

High transportation costs for farmers to transport goods from other regions to region four

A general lack of understanding of managing cash flows, and preparing basic financial

analysis

The database offers good information that should be expanded. Currently, about 73% of

registered businesses employ less than 5 people, 22.3% between 5 and 15, and 4.7% more than 15. Most firms only sell their goods and services to the domestic market, only 15% report selling to the Caribbean, and only 3.8% selling beyond the Caribbean. Inputs are mostly bought

from domestic suppliers, although 24% report buying directly from non-domestic suppliers. Table 10 provides the distribution of firms by sector in the SBB database.

Table 15: Small Business Bureau firms by sector, 2013

No. Priority Sectors Total

1 Agriculture 702

2 Agro-processing 160

3 Apiculture 21

4 Aquaculture 16

5 Handicraft 375

6 Internet Services 66

7 Mining 1

8 Poultry 47

9 Tourism 33

10 Transportation Services 220

Other Services

1 Auto repairs 15

2 Auto Supplies 13

3 Beauty Salons 33

5 Beverage Distributors 14

4 Book Store 7

6 Car wash 9

38

Data provided by the SBB.

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7 Catering Service 7

8 Clothing 27

15 Clothing and accessories 39

9 Confectionaries 37

10 Construction Materials 5

11 Cosmetolgy 36

12 Education 7

16 Foams manufacturing 9

17 Food Snackette 57

18 Furniture Stores 26

19 Furniture Rentals 3

21 Grocery Shop 68

22 Home Décor 6

23 Stationery 13

24 Jewellery 19

25 Lumber Yard 9

26 Management Consultancy 5

27 Money Trasfers 1

28 Pharmacetical 19

29 Photo Studios/ Services 14

30 Refridgeration Services 9

31 Restaurants/cafes 39

32 Sewing & Tailoring 18

33 Shipping Service 2

34 Variety Stores 123

35 Wholesale & Retail Trading 170

Source: Small Business Bureau

Private Sector Commission (PSC). Established in 1992, it is the senior institution that represents the private sector in Guyana, and plays a central role as representative of private

sector interests to government, unions and civil society. The priority areas for support of private sector growth include: promote projects with high value added; facilitate exports and investment;

collect and share information about the private sector; improve governance and security; facilitate the development of alliances, domestic and international, for the expansion of private sector activities; and build up skills and retain them in the country.

Important actions sponsored by the Private Sector Commission include: collaboration with the Council for Technical and Vocational Education and the Board of Industrial Training, submitting proposals to the University of Guyana to restructure curriculum so that students would have the

skills demanded by private sector; supported the agenda of the NCS, in particular those activities that would improve transportation, ports, creating a single window automated processing system,

improving the business climate and increasing the supply of energy at lower costs than now.

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Proposals to government presented by the PSC in 2013 that succeeded include: lowering property tax rates to zero for individuals owning less than G$40 million and the personal income

tax rate was reduced to 30%.

The PSC announced to pursued three projects that they consider priorities for 2013: (i) the creation of a development bank, and preliminary discussions with the World Bank IFC, the

European Investment Bank and Venture Capital companies indicate initial interest in this new financial institution; (ii) the creation of an international trade arm of the PSC, that would give the private sector a better position to represent their interests in international trade negotiations and

agreements; and (iii) the establishment of a CARICOM private sector group, that would represent the interests of the private sector at the highest level of CARICOM negotiations.

Georgetown Chamber of Commerce and Industry (GCCI). Established in 1890 it is the

oldest private sector organization in Guyana, and its membership includes businesses from all sectors and sizes. The GCCI has an active program that includes the presentation of the “Agenda

for Action: Top 20 Barriers to Guyana’s Competitiveness.” The agenda includes:

Ensuring political and economic stability

Enacting local government reform and administering elections—noting that Guyana has

not held local government elections in 17 years

Improving the tax system—noting high rates

Encouraging investments and the use of alternative sources of energy

Transforming the University of Guyana and expanding training and educational

opportunities—to meet the needs of the private sector

Implementing comprehensive security sector reform—as a proposal to lower crime

Establishing a development bank

Ensuring more transparency and accountability in the management of the public and

private sectors

Enacting urgent commencement of the public procurement commission (PPC) and the

inclusion of private sector concessions to the mandate of the PPC

Resolving Guyana’s skills challenge—noting the mismatch between skills supplied and

demanded in the market

Providing a balanced, efficiently managed regulatory protocol and framework

Establishing a culture of market innovation, research and development

Accelerating the process of information and communication technology liberalization to

make Guyana competitive—opening up the market for communications

Building modern infrastructure

Making Guyana a magnet for foreign direct investment

Building a globally competitive manufacturing sector

Enacting modern intellectual property laws

Accelerating the implementation of the NCS

Strengthening the commercial court

Strengthening foreign economic diplomacy

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The GCCI uses extensively survey tools to identify the needs of their members and their opinion with respect to issues of relevance to the private sector. In 2012 they executed a survey, a needs

assessment, to collect information about their membership. The main finding of the survey is that 77.1% of the members point to tax reform as the most important policy issue. Trade

relationships of members are extensive and include trading processed manufactured food goods, machinery, agriculture chemicals and products, tires, spare parts, hardware materials, clothing among many more. As previously noted, the small size of the economy does not allow for the

creation and growth of a domestic manufacturing sector. The survey also reveals significant trade in services, with Guyanese companies buying the following services: accounting and audit,

tax and other related services, multimedia, insurance, risk management and other consultancy, ocean freight, shipping and logistics, and security. An important finding is related to skills needed, but scarce, in the market. According to the survey businesses find it difficult to find

skills related to: customer service, human resources, sales, and accounting and finance. Most businesses use web-based applications, however the main tool for marketing is word of mouth.

The GCCI also collects information about their members attitudes toward relevant current issues

in the country—the attitudinal survey. The 2013, only the second survey executed, finds that in general GCCI members are optimistic about future prospects, over 91% of respondents noted that their companies made profits in 2012, and 87% rated business activities as strong. The

major obstacles for doing business are keeping good employees (42%), high tax rates (31%), and high cost and unreliable supply of energy (22%). Government efforts to support business is rated

well, with over 60% of respondents characterizing it as moderately to very supportive. However, corruption is also perceived as a problem. Politics are a concern, as 83% of respondents noted their lack of satisfaction with the performance of Parliament. The most important public

investments, according to respondents of the survey, are the Amaila Falls hydroelectric power plant, the Lethem road, interior roads construction and improvements, building a recycling plant,

and maritime ports upgrades.

Consultative Association of Guyana Industries (CAGI). Established in 1962, the CAGI represents the interests of employers in labor disputes with unions. It is a member of the Private Sector Commission, and takes the lead on labor policy and industrial relations. Members

represent most sectors in the economy, including shipping, transport, trade, mining, manufacturing, forestry, construction, insurance and banking among other. A recent issue that

required the support from CAGI was changing legislation that established a 40-hour work week, replacing a 48-hour work week. This issue created opposition from private sector representatives as they would have to pay a 50% over regular salary, as regular over time, to workers that work

on Saturday. This issue was not resolved and the current 40-hour week is enforced in Guyana.

Guyana Manufacturing and Services Association (GMSA). Established in 1963, groups manufacturing and services economic groups, including textiles, pharmaceuticals, construction

materials, financial, health, environmental, transportation, trade, entertainment, and education among other. The largest group measured by sales is beverages, that is actively searching for

opportunities to penetrate regional markets.

The GMSA has identified issues and interventions that would facilitate the expansion of the manufacturing sector in Guyana:

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Cost of energy and unreliable supply

High trade transaction costs, related to customs delays for import and export transactions. The GMSA proposes accelerating the implementation of the Single Window Automated Processing System

Promotion of private sector investments and public private partnerships in maritime and air infrastructure, transportation logistics and warehousing

Creating a development bank

Comprehensive review of existing mechanisms to facilitate investments in manufacturing

Increasing the range and quantity of fiscal and financial incentives

Enforce laws that prohibit trade of smuggled goods

Application of mandatory incentives/disincentives to ensure compliance with Quality

Assurance and Reliability Standards

Implementation of a continuous Labor Market Intelligence Survey to gauge occupational

skill demand and supply. Development of competency based entrepreneurial skills training in the education system. Introduction of a National Training Levy and establishing a skills bureau

Facilitate the transformation from sole traders to partnerships with local and foreign partners

Expand the use of ICT to the manufacturing sector

Providing financial assistance to micro, small and medium enterprises

Facilitating closer collaboration for research and development

Guyana Gold and Diamond Miners Association. This association represents the interests of small miners that are responsible for 100% of gold extraction in Guyana. They directly employ

about 15,000 people, and many more indirectly through service providers in air, water and land transportation, security, food, equipment and maintenance. Their largest challenge is access to

capital, an issue already presented in the previous section of this report.

Guyana Rice Development Board (GRDB). Established in 1995, the GRDB promotes the development of the rice industry, facilitates research, and engages in promotional activities. The GRDB estimates that about 10,000 families are dedicated to the production of rice, with about

105 privately owned rice millers. Counting direct and indirect services related to the rice industry, the GRDB estimates that about 100,000 people, or 14% of the population, is involved

in growing and trading rice in Guyana. Such as with mining, the most relevant issue for the expansion and modernization of the industry is access to finance, an issue already presented in the previous section of this report.

In addition to the private and public institutions presented in this section, there are other that

represent other productive sectors of the economy, but that are small or represent small sectors. Among those the most important small sectors is tourism. Guyana Tourism Authority (GTA).

Created in 2002 as a statutory body, the GTA promotes the development of the tourism industry in Guyana. The main responsibilities of the GTA include: monitoring and regulating the supply of tourism services, collecting data, providing specialized training, design and implement

marketing strategies, and improving transportation services. Tourism and Hospitality

Association of Guyana (THAG). This is the association of hoteliers, resort owners, travel

agents, restaurant owners, jewelry and craft shops owners, and transportation services. THAG

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organizes owners of hotels, restaurants, and transportation services to provide tourism packages to visitors to Guyana.

Description of the donor community

Because of the past events that required significant efforts from the donor community and private sector to provide debt rescheduling and forgiveness to Guyana, the international community is well organized in support of government. In particular, the effort related to HIPC and enhanced

HIPC that triggered the creation of poverty reduction strategies that channeled support from the international community to the country along well-defined issues and projects, resulted in a

cohesive approach by donors. As previously mentioned in this report, these efforts also resulted in good planning capacity by government, that as noted has the best budget process in the region. Government takes the lead in organizing the donor community and assigning them areas of

support.

In this general context, the following paragraphs describe the work programs of the largest international donors working in Guyana.

InterAmerican Development Bank (IDB). The IDB is the largest donor in the country, with an

active program of loans, technical cooperation, studies, and technical advice to government. As previously noted in this report, the IDB was instrumental in supporting government efforts to implement the NCS, and also in the establishment of Guyana’s credit bureau, CreditInfo. These

two actions may be the largest contribution by any donor, in recent years, to facilitate the expansion of private sector activities and to diversify the economy.

As noted, government defines the parameters of the relationship with the IDB and suggest areas

in which the Bank may support government. These parameters are formalized in the IDB Country Strategy with Guyana. The last strategy was prepared for the period 2012-2016, and focuses IDB activities on the following priority areas: sustainable energy, natural resources

management, private sector development, and public sector management. The expected lending program to Guyana is US$82.4 million for the 2012-2016 period, that may increase to US$103.2

million if the country lends less on concessional terms. This is a very small amount of resources compared to the needs of the country, however, according to the authorities and IDB representatives the value added of interventions is mostly related to the transformational

characteristics, not so much about the amounts disbursed—such as the presented examples of the implementation of the NCS or the establishment of a credit bureau.

The IDB work program to support private sector development follows on previous government

efforts to increase competitiveness and innovation. According to the IDB the outcomes of actions that they would fund would: improve the business climate by providing incentives for

reducing the informal sector, increase access to credit by developing a framework for secured transactions, and retain skilled labor; improve the regulatory capacity to enforce standards; and facilitate the adoption of modern production technologies and promote exports and

diversification.

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Caribbean Development Bank (CDB). The CDB is funding the construction of community roads and improving the west coast Demerara road. The loans would fund the rehabilitation and

maintenance of 240 roads across a number of communities, and improve 30.7 kilometers of highway – Vreed-en-Hoop to Hydronie section of the road and to finance school road safety

education program. These are very large loans, for Guyana and for the CDB, with US$16.4 million and US$32.2 million respectively.

The European Union. The E.U. provides significant grant funding in the context the Guyana Country Strategy Paper 2008-2013 and the Poverty Reduction Strategy Paper 2011-2015

(PRSP), and the appropriations of the E.U. 10th EDF NIP, which add to €55.4 million. The E.U. objectives in Guyana may be summarized as: (i) addressing economic and environmental

vulnerabilities; and (ii) promoting social cohesion and combating poverty. The country strategy identifies two priority areas: contributing to Guyana’s sector policy on coastal management, and macroeconomic support for the implementation of the Poverty Reduction Strategy.

The PRSP formally recognizes the importance of growth for poverty reduction. The policies that would promote growth include: maintaining a sound macroeconomic framework; providing a business friendly environment for private sector growth; continued modernization of the

traditional sectors; emergence and growth in new sectors; and ICT-cross cutting policy to support growth and development.

World Bank. The work program of the World Bank in Guyana includes two loans designed to

improve teacher education, and to strengthen the University of Guyana science and technology. These operations focus on improving tertiary education. The UG Science and Technology Support, US$11.4 million, is designed to improve education quality, rehabilitate infrastructure,

and improve management.39 Important activities to execute within this operation include: updating science curricula and funding research in science areas that impact the implementation

of the LCDS. The project was approved in 2011 and become effective in December 2012. There are no preliminary results to date.

The project appraisal document provides significant description and analysis of the main issues that the University of Guyana faces, and focuses on the four faculties of science and technology.

Of interest to private sector expansion is to improve the local capacity to assess climate change impact on the country’s main economic infrastructure. The University of Guyana has identifies a

need to improve the following areas: GIS and remote sensing, climate change modeling, hydrology, ground water management, alternative energy, agriculture resource management, forestry, natural resources management, food and nutrition, and biodiversity inventory. This is

an initiative that merits follow up and additional support, if needed, from the donor community.

USAID. The work program is designed to address issues in health, economic growth, and democracy and governance. The focus of activities on to facilitate growth are in four sectors:

wood products, aquaculture, agribusiness and ecotourism. USAID recently funded two projects with an impact on private sector expansion.

39

http://www.worldbank.org/projects/P125288/ug-science-technology-support?lang=en&tab=overview

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The Guyana Trade and Investment I&II was a designed to maximize Guyana’s competitive advantages and increase non-traditional, value-added exports in Wood Products, Aquaculture,

Agribusiness, and Tourism. According to Carana, the consulting company hired to execute this project: “GTIS II was a four-year, $7.3 million program designed to maximize Guyana’s

competitive advantages and increase non-traditional, value-added exports in four primary sub-sectors: Wood Products, Aquaculture, Agribusiness, and Tourism. The project implemented a market-led approach to strengthen targeted sub-sectors and worked with foreign investors,

strategic buyers, and anchor firms in Guyana to invest in new capacity, technology, and standards.

The GTIS project’s market-led approach became the preeminent development model for Guyana.

With the exception of forestry, the GTIS project built new promising sectors with the capability of diversifying Guyana’s economy from the bottom up. The direct results of GTIS work included $2.8 million in new investments, $9.78 million in additional sales, and more than 170 new or

enhanced jobs, based on environmentally sound value chain development strategies. GTIS placed particular emphasis on leveraging additional funding from the donor community and

leveraged a total of $1.85 million in donor contributions. In the ecotourism subsector where advertising is of vital importance to promote a new destination, GTIS leveraged over $6.5 million in articles, advertisements, and television shows on the country’s heretofore little known

attractions.

These results are best seen on the ground where skepticism and pessimism have been replaced with vision and progress, where leading rice farmers in the country have promoted and invested

in aquaculture, ecotourism lodges are booked two to three years in advance, multinational forestry companies have made substantial investments in Guyana, and Israeli agriculture experts have introduced cutting-edge farm management techniques.”40

Skills and Knowledge for Youth Employment (SKYE) Project is funded within President Obama Caribbean Basin Security Initiative (CBSI) partnership. It is design to provide young people with market skills so that they may enter and stay in the workforce. According to the U.S.

Embassy in Georgetown, “The work readiness training transfers a set of basic employability skills, knowledge, and behaviors essential to the success of young people as entry-level workers

or entrepreneurs. These skill sets were identified as priorities by Guyana’s employment sector. The curriculum, adapted to the Guyana employment context, is designed to provide young Guyanese with the foundational skills and knowledge necessary to become healthy, productive

employees and community members. This training is one of several program elements to assist youth to gain the self-confidence necessary to find and sustain employment.”41 The program

targets at-risk youth between the ages of 15 and 24, mostly males school dropouts that have been identified through the juvenile justice system. In total the program would train about 1,500 in reigon 4, 6, 9 and 10.

The Skills and Knowledge for Youth Employment (SKYE) project in seeks to strengthen youth’s

access to justice and equip youth with market-driven skills and attitudes to improve their ability to transition to the workforce. SKYE will target a total of approximately 600 youth beneficiaries

40

http://www.carana.com/projects/regions/projectsbyregionworldwide/132 41

http://georgetown.usembassy.gov/pr121312.html

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who do not have the necessary education, skills and behaviors for integration into the workforce; many will be school dropouts and/or involved in the juvenile justice system. SKYE will also

provide capacity building support to local partner organizations, as well as relevant government ministries and the court system. SKYE will work in four regions, which were selected for their

high populations of vulnerable youth, high crime areas, and high rates of unemployment.

UNDP. UNDP supports Guyana with grant funding to strengthening the institutional capacity of government in the following areas: to increase access to energy services, electricity or cleaner fuels in rural areas; increase individual and institutional capacity for planning Sustainable Land

Management (SLM) at the national and regional level; protect biodiversity through the implementation of valuation methodologies, payment of environmental services; strengthen

capacity to collect, analyze and disseminate key economic and social data, and to support completion of MDGRs, PRSRs, and the new PRSP; strengthen capacity within the Ministry of Finance to plan, manage and implement, aid effectively according to the 2005 Paris Declaration

on Aid Effectiveness.

These projects play an important role is trying to fix one of the main problems for the analysis of private sector development in the country: lack of reliable information. This project follows on

two other UNDP funded initiatives: the DISSC (Development of Institutional Social Statistics Capacities) Project which developed tools (PETRs), training materials, and advisory support

services to improve the effectiveness and efficiency of statistics and M&E Systems; and the MDGs Support Project, which is expected to track progress of the MDGs.

The project would facilitate the analysis of interventions and their impact on key social and economic targets, mostly performed by the Economic Policy Analysis Unit in the Ministry of

Finance.

CIDA. CIDA does not have a country-to-country program, but the country benefits from the Caribbean Regional Program. Through the regional program, CIDA has approved grants for

social entrepreneurship, basic education, and economic capacity development. According to CIDA, the C$2.6 million grant Economic Capacity Development “This project builds on achievements accomplished in a previous project called Environmental Management and

Capacity Development. It is community- and private-sector-oriented. It aims to support the poorest segments of Guyana's population, namely the rural poor and hinterland populations.

The goal of the project is to promote private-sector-led economic growth that provides sustainable livelihoods and reduces poverty. Improvements to the health, skills, and economic opportunities of miners and the men, women and families in selected communities living near

mining operations are also targeted through this project.”42

The resources are distributed among the program has already achieved results: the construction of a plant nursery for the communities of Mahdia and Isseneru provides services that enhance

agricultural practices and address gender issues. Produce is sold to miners that work in adjacent areas, therefore ensuring a steady and reliable source of income.

42



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DFID. DFID £1.3 million grant was provided in the context of the Guyana Agriculture Diversification Program, and is designed to expand aquaculture, tilapia, and no-traditional

agriculture exports, such as sweet peppers, hot peppers and butternut squash. The program, implemented by the consulting firm Carana, would create about 1,000 new jobs. This program

follows on USAID funded Guyana Trade and Investment.

Recommendations to improve PSD-related information systems and monitoring and evaluation of results

Poor follow up of projects. In general projects are not designed considering

sustainability of funded actions. Larger and more focused projects would address this problem.

Monitoring and evaluation of projects need to be strengthened. Larger and more

focused projects would benefit from the establishment of monitoring and evaluation systems. Such systems are generally characterized by the definition of baselines of

relevant indicators, the definition of targets over time, and the use of evaluations for the modification during project execution and the definition of follow up projects.

List of projects by donor—attached in MS Excel and MS Access formats.

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Annex 3: Brief description of the National Competitiveness Strategy and the Low Carbon Development Strategy.

Description of the National Competitiveness Strategy (NCS)

Launched in 2006 after significant consultations, this strategy is an ambitious attempt to improve competitiveness.43 The strategy includes 245 actions designed to improve competitiveness, are

measurable, and increase rankings of the country, especially in the World Bank Ease of Doing Business surveys. The NCS actions are divided into core policies, sector policies, strategic sub

sector policies, and overarching enablers. Core policies focus on improving the business climate, and include competition and consumer protection, infrastructure, human resources and access to finance. Sector policies focused on actions that would facilitate the expansion of economic

activities in the sugar, rice, and non-traditional agricultural products, and tourism. Strategic sub sectors were identified as those that could help diversify the economy into promising businesses

in its infancy or yet to develop, in fruits and vegetables, aquaculture and forestry. Finally, overarching enablers focused on how to implement the NCS and on the public-private arrangements that would be necessary for taking concrete actions with support from all relevant

actors.

The NCS was designed to achieve the following objectives: to attain the highest rates of economic growth; to eliminate poverty, to achieve geographical unity; to attain an equitable

geographical distribution of economic activity; and to diversify the economy. The strategy identified constraints to development in the following factors:

Politics and race, noting the divisive nature of politics—an issue that has continued to

play a central role in the implementation of the strategy since 2006. The NCS clearly notes that the division of politics along ethnic background limits reaching “a meeting of the minds” and on the contrary it results in “confrontation of every sort and form has

been the norm.” The NCS calls for overcoming the historical political pattern, and that a number of decisions are made based on objective discussions and consultations

between the two largest political parties. Such as in 2006, by 2013 this issue continues to significantly influence the capacity of stakeholders to come together in support of a program designed to increase competitiveness

Guyana’s infrastructure is poor, especially its road connectivity between the coastal region and the interior—the NCS notes that by 2006 only 19% of the total road network

of the country were primary roads, and 21% were feeder roads linking coastal agricultural areas to the primary road network. Because of these facts, production costs

increase, it is not easy to exploit natural resources, communication between the coast and the interior results in a de facto division of the country in two, it is not easy to invest in the interior, and low population density in the interior may bolster territorial claims

by neighboring countries

43


Strategy for Guyana. Government of Guyana in Partnership with the Private Sector. The NCS may be found in

www.sndp.org.gy/nds

http://www.sndp.org.gy/nds

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Public utilities provide limited and expensive coverage. Electricity rates are high, and

the service is poor characterized by frequent outages that forces private firms to buy diesel generators. Communications coverage is also limited limiting the capacity of the country to modernize

The education system has deteriorated, and does not provide skills demanded in the market, and in many cases highly educated professional migrate abroad because of

better paying jobs offered in neighboring countries. Education in science and technology, including technical and vocational training, and business and administration is not good. According to the NCS shortage of qualified human capital is the most

severe constraint to social and economic development

The country heavily depends on the production and export of few unprocessed

commodities in mining and agriculture—gold, bauxite, rice and sugar

Current institutions are obsolete and do not facilitate development—policy making, land

registration and distribution, judicial system

The country does not attract investment on a regular basis. In part this is the result of

the complex political environment and the policies that promote investment, which tend to be unclear

In this context, the NCS proposed a strategic approach built on a multi-pronged approach:

The strategy has been informed by two basic considerations. First, that we could

considerably assist in removing the scourge of racism from our land, if we developed and put into practice inclusive systems of governance in which all would feel that they have a

stake, in which all would know that they are involved, and in which there were established both procedures and penalties to ensure transparency and accountability. Second, that a considerable degree of harmony would prevail in our country if we were

able to formulate and implement social and economic policies which would lead not only to significant economic growth, but also to the widest distribution of the benefits of such

growth among the population, no matter in what district they are located, and to what racial group they belong.

Accordingly, the first prong of the strategy has been crafted to ensure that the practices

that are followed by all future governments of Guyana are as inclusionary, participatory, accountable and transparent as possible. This imperative applies to the regional and

local governments, as well as to the central administration.

The strategy’s second prong, which is inextricably linked to the first because the one

cannot succeed in the attainment of ethnic harmony without the existence of the other, lies in the domain of macro-economic policy and economic management, and is multi-faceted. It includes (i) reforming the tax system (by eliminating some taxes, reducing

others, introducing a more effective and equitable tax, and simplifying taxation procedures). Through this, it is intended to increase the quantum of investment in

Guyana, and to provide incentives for investors both to engage in new ventures and to operate in economically depressed areas; (ii) formulating an investment strategy and code both to encourage financiers to invest in the country, and to spell out clearly the

terms and conditions under which they would be required to operate; (iii) establishing a one-stop investment agency to expedite and facilitate the actual investment process in

Guyana; (iv) enhancing the efficiency both of the country’s revenue collection agencies

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and of those institutions that are charged with procurement, with other forms of expenditure, and with their monitoring; and (v) designing systems that would focus

particularly on trade promotion, and on mobilising our economy to export more. In this regard, one aspect of the strategy is the establishment of two Export Promotion Zones.

It cannot be over-emphasized that this macro-economic strategy, while containing vital elements for the propulsion of the growth of the economy, is designed to achieve such

growth while, at the same time, maintaining low inflation rates, and external viability. The promotion of financial stability remains the primary objective of monetary policy.

We attach the highest importance to the third element of the Strategy, which is the

establishment of a road network throughout the length and breadth of Guyana over the next ten years. We have put forward a transport infrastructural strategy which, if

followed, will result (i) in the rehabilitation and modernisation of the coastal roads, and the placement of bridges across the Supenaam, the Essequibo, the Demerara and the Berbice rivers; (ii) in the construction of an up-to-date north-south road from

Georgetown to the Takutu; (iii) in the building of a series of roads connecting both the coastal road and the north-south highway with all the regions and villages in this

country; and (iv) in the establishment of a number of strategic highways linking Guyana with the rest of the Americas, through Brazil, Venezuela and Surinam. Although this road network will contribute to the attainment of all of the NDS’s objectives, it will

particularly assist in the penetration of our interior, in the opening up of new lands for a wide variety of economic activities, and in the facilitation of eco-tourism. Above all, it

will contribute immensely to the social and physical unification of Guyana.

Essential components of this third element of the Strategy are the construction of two

deep water harbours in the Berbice and Demerara rivers, the improvement and extension of Timehri and Ogle Airports, and the rehabilitation of many of the country’s interior airstrips.

The fourth element in the Strategy is devoted to the role which Information Technology can play in the modernisation of Guyana. Considerable importance is attached to this

aspect of our development, for we see the new approaches in IT as affording our country the opportunity to circumvent the beaten paths of development, and to leap-frog, so to

speak, into the 21st century. The formulators of the NDS see Information Technology as one of the important means of improving our capacity to govern our country and to manage our economy, to increase our competitiveness, to attract investors, to market our

products and diversify our production, to enhance the efficiency of our social services and, most important, to acquire knowledge and develop our human capital.

Because our telecommunications system has been identified as one of the main obstacles to the development of this sector, the first strand in this element of the strategy is the rationalisation and liberalisation of the telecommunications sector.

Other strands in the IT strategy include (i) the reform of the Public Utilities Commission (ii) the full computerisaton of the Public Service, beginning with the ministries,

departments, and institutions that are responsible for finance, education and health; (iii) the utilisation of IT in the process of education, and in the provision of health services at

all levels; (iv) the establishment of Internet linkages between the University of Guyana and institutions of learning in other parts of the world; (v) the forging of linkages with expatriate Guyanese in order to utilise them as part of the Guyanese work force, even

though they may be resident abroad; (vi) the provision of fiscal incentives to encourage

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the establishment of computer-based services; (vii) the fixing of deadlines for the full computerisation of various sectors of the economy; and (viii) the setting up of public

centres to provide access to computers and the Internet for those not fortunate enough to possess the necessary equipment.

The fifth prong is focussed primarily on the enhancement of our social services and, through this process, on the eradication of poverty, and the improvement of our

productivity. Over the next decade or so, the Strategy envisions the expenditure of significant proportions of our financial resources to provide universal access to educational and health facilities at all levels, and in all places. In addition to increasing

the number of physical structures throughout the country, from which these services will be offered, particular attention will be paid to ensuring that the necessary teaching

materials, medical equipment and medicinal supplies are available. The imperative of having in place adequate cadres of trained teachers and qualified health workers has also been provided for in this prong of the Strategy. In particular, the difficulty of

persuading a significant number of trained public servants to work in the hinterland has been acknowledged, and incentives are provided in the Strategy to encourage them to do

so.

The need for the provision of adequate shelter for Guyana’s population in general, but especially for those in the lower-income bracket, looms large in the Strategy. Not only

are specific fiscal incentives provided to the private sector and to the commercial banks to encourage them to engage either in the financing or in the actual construction of

houses for the poor, and for those who now exist in depressed areas, but the distribution of land, free of charge, to the very needy, is also prescribed.

Strategies have also been evolved in our poverty eradication drive, for the provision of

micro-credit to small and medium scale entrepreneurs in the agricultural, manufacturing, and service sectors.

This description of what may be termed the social element in this NDS is not exhaustive. What are presented here are the barest bones of a more comprehensive attack on those

social factors which contribute to the debilitation of our society.

However, the main means of alleviating poverty lies, in the final analysis, in the

nurturing of an enabling environment which would lead to the creation either of jobs or of job opportunities. This thrust is subsumed by the strategies set forth in the section devoted to tax reform and economic management, by our strategy to enhance the quality

of our institutions, and by our proposals for land reform, for example.

One last point in regard to the measures presented for the alleviation of poverty: many of

the prescriptions are location specific in the sense that particular geographical areas are identified either for the provision of incentives, for example, or for the construction of

housing schemes, rural roads, or schools and health centres.

As has been discussed in an earlier section of this chapter, one of the major constraints

to our development is to be found in the inadequacy, irrelevance, and obsolescence of many of our government institutions. Accordingly, the sixth plank in the overall Strategy has been the reform of our public sector institutions. Each of these has been examined in

the various sectoral chapters, and specific strategies have been put forward for their improvement. This approach has been followed not only in the social, but also in the

production sectors.

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A special element of the Strategy, the seventh prong, is directed to such factors as the

role of the family in the process of social and economic development, and to the importance of gender considerations in all our social and economic activities. These cross-cutting, but integral, aspects of our socio-economic development are examined with

the main objective of ensuring that they are taken into account in the formulation and implementation of policies, no matter what particular subject or sector is being catered

for. Specific procedures and policies are put forward for improving the quality of the lives of both the Guyanese family (infants, youths, parents and the elderly) and the women in our society. Perhaps the most important strand in the strategy, however, is our

recognition that matters of gender must not be considered as mere appendages to other aspects of development. On the contrary, they must be "main-streamed" and must

influence all our decisions.

Eighth, it has been emphasized that the conservation of Guyana’s environment should be the prime consideration in the Strategy. The imperative of conserving our ecosystems and

our other natural resources pervades our document and is repeatedly stressed. The chief problem that is envisaged in this area is the reconciliation of economic development with

the necessity of conserving the environment. Accordingly, prescriptions are made for the environmental monitoring and control of all of our social and economic endeavours. The importance of sustainably utilising all our resources is, also, carefully delineated.

Ninth, there is a prong of the strategy that relates particularly to Amerindians. It recognises that theirs is a specially disadvantaged group and, accordingly, it makes

detailed prescriptions for their development. These include the demarcation and distribution of land; the preservation of their culture; the improvement of the quality of

their training and education at all levels; the improvement of their health facilities; and the general social and economic development of the areas which they inhabit. The Strategy pays particular attention to the facilitation of the participation of Amerindians

in the main-stream of Guyanese society while, at one and the same time, ensuring the sanctity of their culture and traditional ways of life.

And finally, a strategy has been devised to implement the NDS. Apart from financing its implementation from government revenues, and from the normal multilateral and

bilateral sources of financing, great dependence is placed on the involvement of private sector financiers even in the construction and repair of road, bridge, and port infrastructure. Specifically, it is strategised that we would enter into a build, operate and

transfer ownership (BOT) and build, operate, own (BOO) arrangements with potential investors. In return for their services and finances, these investors will either be allowed

to charge tolls, or be recompensed for their expenditure by being given the opportunity to utilise our natural resources, or by being paid in cash over a specific period, or through combinations of all these methods.

The obtaining of critical masses of personnel effectively to negotiate with potential investors; to design, build and monitor the construction of the infrastructure that it is

planned to establish; to formulate developmental policies and strategies and to oversee their implementation; to increase productivity in the agricultural sector; to enhance our manufacturing capacity and capability; and to ensure that our forests are sustainably

developed, and that our mineral wealth is exploited for our benefit will be extremely difficult, especially during the early years of the NDS when, although a massive amount

of training and education is projected, the trained persons will not yet be available for

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the various tasks. Therefore, a strategy has been put forward which would rely (a) on the provision of technical assistance by international and bi-lateral agencies, (b) on the

remigration of expatriate Guyanese, (c) on the utilisation of the skills and knowledge of non –resident Guyanese; and (d) on the hiring of personnel, from whatever source, if

their expertise is considered essential to our progress. A strategy for general migration, as our economy grows and develops, is also put forward.


used by government to develop an implementation plan, which was supported by an IDB loan, the Support for Competitiveness Program that facilitated the creation of the National

Competitiveness Strategy Unit empowered to implement the strategy. In 2007 the IDB loan, for US$27 million hybrid project with funds to be disbursed for policy decisions by government complemented by a traditional investment loan, was designed to support the implementation of

the NCS within the Ministry of Tourism, Trade and Commerce. The Program’s specific objectives were to help strengthen the institutions for public-private dialogue on competitiveness

and to help improve the business environment for private investment and export development. The NCS also received significant support from other donor funded projects, such as the Agricultural Support Services Program, the Agricultural Diversification Program, and the

Guyana Trade and Investment Support.44

By 2007 the National Competitiveness Center had re-evaluated the NCS and identified 8 priority areas to improve competitiveness: improving access to finance, especially for small and medium

size enterprises; promoting exports; reducing red tape for international trade; establish a program of guarantees for small businesses; reform the tax system; streamlining business registration; liberalizing the telecommunications sector; and improving corporate governance.

Because of these efforts, the NCS by 2013 can show concrete results: 57 out of the 245 actions proposed in the plan have been completed, 83 are at late stages of completion, and 72 are at early stages of implementation.45 Some of the most relevant actions completed include: the Secretariat

of the Competition Commission was created to serve as a consumer protection agency that would implement the 2011 Consumer Protection Bill; implementation of the Value Added Tax (VAT)

and Excise Regime; lowering the Corporate Income Tax from 45% to 40% for commercial companies and from 35% to 30% for non-commercial companies, still high by regional standards but improving; the Commercial Court is functioning providing services for dispute resolution;

using real estate for collateral lending from commercial banks and more generally facilitating the development of land and property markets; and passing legislation and the establishment of a

Credit Bureau, CreditInfo, that started functioning in September 2013.

44




US$7.3 million). 45


2102. National

Competitiveness Strategy Unit.

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The evaluation prepared for the period 2006-2012 of the implementation of the NCS summarizes its findings as follows:

• While the international composite indicators suggest that there is room for improvement

in certain areas, many of the ongoing reforms within the areas of Trade Transactions, Competition Policy, Corporate Governance and Ease of Doing Business are certain to influence

future assessments of Guyana’s business and competitiveness indices by addressing many of these concerns.

• The national indicators of NCS impact reflect generally positive results – with the

majority of indicators moving in the right direction. Of particular achievement are the indicators of macroeconomic stability, and those reflecting an increased role for private investment and expanded trade. Those in need of attention relate to the cost of importing and

exporting, and the availability of domestic credit to the private sector.

• NCS implementation itself also shows steady progress, with an upturn in progress since 2009. Overall, out of the total of 245 NCS actions, 57 (or 23%) have been completed; 83 actions

(or 35%) are in the late stages of completion; 72 actions (or 29%) are in progress but at early stages of completion; 30 actions (or 12%) have progressed little since 2006; whilst only 3 actions (1%) are deemed no longer to be relevant, or else have been superseded by other

activities. This means that 58% of the NCS is either complete or in the late stages of progress, and 87% of the NCS has been completed or is in some stage of progression.

• The greatest rate of sectoral implementation is among the ‘Core Policies’, which include

‘Incentive Policies’ and ‘Supply Side Policies’: 29% of these actions have been completed, 30% are in progress at late stages, 25% in progress at early stages; only 5% of actions have progressed little. The results for ‘Sector Policies’ (which include traditional economic sectors

such as Sugar, Rice, Forestry, Mining and Tourism) are similarly good.

• There has been more limited progress in the ‘Strategic Sub-Sector Policies’, which include the new sectors Guyana is attempting to diversify into, such as aquaculture, agro-

processing, contract manufacturing and non-traditional fruits and vegetables. It is not surprising that progress is slower in such areas since re-orienting the economy and developing new competitive advantages is a longer-term process. Of the Strategic Sub-Sector actions, 13%

are complete, 49% are in progress in late stages, 15% are in progress at early stages; while 21% of actions have progressed little.

• There have been many positive developments in policy areas intrinsic to economic

competiveness, though not captured by the original NCS actions. The NCS structure has nonetheless adapted itself to these developments, and many of them have been handled through

the NCS process. These policy areas are: ICT, corporate governance, trade transactions, and energy.

• There have been many other positive competitiveness- related developments emanating from Guyana’s newer national strategy, the Low Carbon Development Strategy - especially in

the areas of energy, ICT, forestry and infrastructure.

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And recommended:

• The NCS should be updated for 2012 onwards and it’s institutional and policy focus should be consolidated and integrated into Guyana’s newer (and currently more project- based)

national strategy, the LCDS. An alternative NCS structure would see the NCSU being re-located to the Office of the President (OP), where it can work collaboratively within a more

comprehensive and economy-wide LCDS structure in order to coordinate institutional reforms which will support the emerging energy, environmental and industrial sectors.

• The updated NCS process must more consciously and strategically aim to create

‘clusters’ in certain selected sectors in order to create employment through up- and downstream linkages. Such an effort can help to facilitate complementary growth dynamics in selected agro-processing and manufacturing sectors. The Kenyan cut flower industry (see Annex

2) provides an example of what such a productive cluster would look like.

• NCS stakeholders must seek ways of mainstreaming the focus and aims of the NCS into ongoing policy-making circles – so that the NCS (or its equivalent) is retained as a prime driver

of public-private dialogue. Particular attention must be given to the National Competitiveness Council (NCC) structure and the Cabinet sub-committee on Trade and Investment.

• Once stakeholders have evaluated the findings of this report, the next exercise that needs to be carried out is the development of a new list of actions central to the competitiveness of

Guyana’s new economic position. This list needs to be based on those actions identified by public and private sector as being those cross-sectoral reforms most crucial for supporting

Guyana’s development path from 2012 for the next 5 years. This list should then be prioritized, costed and scheduled.

• The Government Of Guyana must give particular attention to how progress made within the externally- funded projects which have supported the NCS – such as the Support for

Competitiveness Programme (SCP), the Agricultural Support Services Programme (ASSP), the Agricultural Diversification Programme (ADP), and Guyana Trade and Investment Support

(GTIS) etc. – can be consolidated so that the activities piloted within those projects can grow and be sustained. For example, where Feasibility Studies have been conducted, it is essential to follow-up swiftly on the findings of those reports. The NCSU remains the prime agency for

coordinating this process.

• In the short term, stakeholders must concentrate on implementing the 29% of NCS actions which are only in the early stages of progress and the 12% of actions which are still

considered by stakeholders to be essential to the Guyanese economy and yet have progressed little. These are detailed in Section 6 of the report.

• Stakeholders must further build on the public-private linkages which have been so

successful during the early stages of NCS activity. Particular examples are in the areas of Infrastructure and Information and Communication Technology (ICT).

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• Stakeholders must consider how better use can be made of cross-agency dialogue in order to reach the most strategic and efficient development outcomes.

• There must be better data collection and dissemination, if stakeholders are to be able to

monitor Guyana’s progress effectively. For example, there is a current lack of publicly available data on non-traditional production and exports – a key indicator of Guyana’s diversification

success; and on disaggregated labour market information. Information in this latter area could inform the public and private sector of Guyana’s specific training and development needs.

An indication of measurable progress of the implementation of the NCS is provided by the WEF

GCI and the WB Doing Business Index. The following reflects how Guyana has performed as measured by these two publications, as presented in the 2006-2012 evaluation of the implementation of the NCS:

In the Global Competitiveness Index (GCI), Guyana’s ranking has remained fairly constant

between 2007 and 2011, falling just one place from 108 to 109. Breaking down the 12 pillars, it is possible to see where progress has been made, and where it has lagged.

In the ‘Institutions’ pillar, Property Rights (up from 113 in 2007 to 110 in 2011) and the Ethical

Behaviour of Firms (100 to 91) registered moderate improvements; while the Strength of Auditing and Reporting Standards (98 to 79), Efficiency of Legal Framework (121 to 93), and Efficacy of Corporate Boards (98 to 56) registered vast improvements.

In the ‘Infrastructure’ pillar the Quality of Overall Infrastructure (from 100 in 2007 to 84 in 2011), the Quality of Roads (78 to 76), the Quality of port Infrastructure (110 to 101), and the Quality of Air Transport Infrastructure (115 to 100) and Telephone Lines (73 to 67) all showed

steady improvements; while there is room for improvement in the Available Seat Kilometres (118 to 135) and Quality of Electricity Supply (114 to 115) indicators.

In the ‘Macroeconomic Stability’ pillar, Government surplus/deficit (from 128 in 2007 to 62 in

2011) and Inflation (89 to 68) registered vast improvements; while there is room for improvement in the National Savings Rate (120 to 131) and Interest Rate Spread (114 to 124).

In the ‘Higher Education and Training’ pillar, the Quality of the Educational System (from 82 in 2007 to 56 in 2011) and the Local Availability of Research and Training Services (124 to 93)

both registered improvements.

In the ‘Goods Market Efficiency’ pillar, the Intensity of Local Competition (from 104 in 2007 to 79 in 2011), the Extent of Market Dominance (111 to 95), the Burden of Customs Procedures

(128 to 107), the Effectiveness of Anti-monopoly Policy (110 to 97), and the Extent and Effect of Taxation (122 to 79) all registered significant improvements; while there is room for improvement in the Total Tax Rate indicator (59 to 68), the Number of Procedures Required to

Start a Business (from 44 in 2008 to 78 in 2011), the Time Required to Start a Business (from 92 in 2007 to 98 in 2011), and the Trade-weighted Tariff Rate indicator (98 to 99).

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In the ‘Financial Market Sophistication’ pillar, there is room improvement in the Ease of Access to Loans (remaining at 104 between 2007 and 2011) and the Restriction on Capital Flows (from

56 in 2007 to 71 in 2010).

In the ‘Technological Readiness’ pillar, there is room for improvement in the Laws Relating to ICT, which moved from 121 in 2007 to 123 in 2010. This is expected to be improved through the

E-Transactions and Telecommunications reform which are currently being worked through Parliament (see Section 5a-XXII).

Finally, in the ‘Market Size’ pillar, there is room for improvement in the Foreign Market Size

indicator, which moved from 118 to 132.

In the Doing Business Index (DBI), Guyana has made good progress, rising from a ranking of 133 in 2006, to 113 in 2011.

Breaking down the index by composite indicator, we can see that the Starting a Business ranking fell from 78 in 2007 to 87 in 2012; in spite of the fact that the Time (in days) to Start a Business

fell from 46 to 26 days, and the Cost (as % of income per capita) of Starting a Business fell dramatically from 104.1% of income per capita, to 14.6%.

The Dealing with Licenses/construction Permits ranking rose dramatically from 74 in 2007 to 28

in 2012, largely because the Cost (% of income per capita) fell from 355.7% to 17.5%. However, highlighting the inconsistency of the DBI, the Time (in days) for dealing with licences

increased from 133 days to 195 days.

The Registering a Property ranking fell from 52 in 2007 to 104 in 2011, largely because of the increase in the numbers of days it takes to register – this increased from 34 in 2007 to 75 in 2011. Nonetheless, current and ongoing reforms to the Deeds Registry are attempting to deal

with this issue, and the next ranking should register an improvement.

The Getting Credit ranking should be the most concerning, as it shows that Guyana has not improved significantly from a low baseline ranking – falling from 159 in 2007 to 166 in 2011.

The Protecting Investors ranking has dramatically improved from 151 in 2007 to 79 in 2011; in

spite of the fact that none of the indicators (the Extent of Disclosure, the Extent of Director Liability, the Ease of Shareholder Suits Index, and the Strength of Investor Protection) appear to have moved over the same period.

The Paying Taxes ranking has improved somewhat between 2007 and 2001, rising from 121 to 115 – largely as a result of the fall in the number of hours per year taken to pay taxes, from 288 hours to 263 hours, and a fall in the tax rate as a percentage of profits – from 39% to 36%.

The Trading across Borders ranking represented an area of improvement - and many of the

current reforms within the Trade Transactions Action Plan (see Section 5b-I) will further address some of these issues. The ranking rose from 155 in 2007 to 82 in 2011, in spite of the

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increase in the cost of importing and exporting a container – which increased from US$530 to US$745 for importing and from US$530 to US$730 for exporting.

The Enforcing Contracts ranking rose from 122 in 2007 to 73 in 2011, even though the cost (as a

% of the claim), the number of days to enforce, and the number of procedures all remained fairly constant over the same period.

Finally, the Closing a Business ranking registered little improvement between 2007 and 2011,

falling from 131 to 138. This is an area that has only started to have been given attention within the NCS structure since around 2011, but improvement is expected to be forthcoming.

In spite of the partial success of the implementation of the NCS, much remains to be done. As

noted the NCS Unit, which has been leading the implementation of the strategy, was funded by an IDB loan. This project is at late stages of execution and resources have been almost exhausted. Moving forward, the work done by the NCS Unit should be continued. Importantly,

the impact of actions taken on the expansion of economic activity is difficult to assess due to lack of data and baselines. This is an issue that should be considered in moving forward with

additional support to the NCS Unit.

Low Carbon Development Strategy (LCDS).46 Approved in 2010, this document commits Guyana to implement a sustainable, low carbon, development strategy that specifically protects forests, water and more generally biodiversity—a description of the LCDS is included as an

annex to this PSAR. The strategy, and the current agreement for its implementation with Norway, recognizes the opportunity cost of exploiting Guyana’s large rain forest and related

assets. The implementation of the Low Carbon Development Strategy (LCDS) commits Norway to pay Guyana annual installments based on performance criteria linked to preserving its rain forest. The initial package is worth US$250 million for five years, starting in 2009, which would

be paid out of a World Bank administered trust fund Guyana REDD-Plus Investment Fund (GRID).47

The LCDS notes that Guyana’s pristine forests are its most valuable asset, about 16 million

hectares. These forests have valuable timber, minerals, and may be transformed into agricultural land, which the LCDS estimates may bring an annual economic value of US$580 million to the country. The cost of these actions, however, is large as the services provided by the forests are

high in bio diversity, water, and carbon sequestration. The LCDS notes that these environmental services provided to the world, now for free, could be as high as US$40 billion per year.

Therefore, the cost to the world of not counting with Guyana’s environmental services is very large, but the direct opportunity cost to Guyanese people is also large. The challenge is to internalize the opportunity cost of the environmental services provided by Guyana’s forests to

the world. The government of Norway through the REDD+ funding mechanism is an attempt to do that.

46


of the President, Republic of Guyana. May 2010. 47

REDD+ stands for Reduced Emissions from Deforestation and Degradation, a mechanism agreed by the parties to

the United Nations Framework Convention on Climate Change (UNFCCC).

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The key agreement between Norway and Guyana is related to limiting deforestation. The challenge for Guyana is to promote sustainable gold extraction, which has increased significantly

as prices of gold had skyrocketed, limiting the level of deforestation. It is difficult to monitor the deforestation rate, an issue that causes some friction between supporters of the LDCS,

stakeholders and miners. Verifying the rate of deforestation has brought significant problems between Guyana and Norway, in part due to the difficulties related to objectively measure deforestation. For this reason since 2013 the memorandum of understanding between the parties

does not include verification of deforestation, and instead it calls for independent assessments—it is unclear the extent to which these assessments would bind the disbursement of funds in the

future.

According to the LCDS:

REDD+ payments can enable Guyana’s economy to be realigned onto a low-carbon development trajectory. Guyana can generate economic growth at or in excess of projected Latin

American growth rates over the coming decade, while simultaneously eliminating approximately 30 percent of non-forestry emissions through the use of clean energy. To achieve this, Guyana must:

• Invest in strategic low carbon economic infrastructure, such as: a hydro-electricity plant at

Amaila Falls; improved access to arable, non-forested land; and improved fibre optic bandwidth to facilitate the development of low-carbon business activities.

• Nurture investment in high-potential low-carbon sectors, such as fruits and vegetables,

aquaculture, business process outsourcing and ecotourism.

• Reform existing forest-dependent sectors, including forestry and mining, where necessary, so that these sectors can operate at the standards necessary to sustainably protect Guyana’s forest.

• Expand access to services and new economic opportunity for Amerindian communities through

improved social services (including health and education), low-carbon energy sources, clean water and employment which does do not threaten the forest.

• Improve services to the broader Guyana citizenry, including improv ing and expanding job prospects, promoting private sector entrepreneurship, and improving social services with a

particular focus on health and education.

Guyana received funds from its agreement with Norway over the LCDS. The money transferred to Guyana was between US$30 to 42 million in 2010, and US$30 to 64 million in 2011, with

additional funding in 2012 and 2013. As of March 2013 the trust fund accrued more than US$100 million, with total disbursements of about US$10 million—for institutional strengthening of the Office of the President and the Guyana Forestry Commission.

The resources received from the trust fund would be invested in seven priority projects/issues: (i) the Amaila Falls hydroelectric project; (ii) accelerating Amerindian land titling; (iii) funding the Amerindian Development Fund; (iv) expanding fiber optic infrastructure; (v) provide micro

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finance; (vi) establishing a Centre for Bio-Diversity and Low Carbon Development; and (vii) monitoring, reporting and verification systems for the LCDS. As noted, investment in this

projects is still pending.

Connection between the NCS and the LCDS

There is no formal connection between the NCS and the LCDS, however, they somewhat complement each other—see the annex for a description of both. The current priorities of the LCDS have significant impact on competitiveness, and therefore on private sector growth,

especially in recognizing the need for more energy at lower cost (priority i); property rights (priority ii); modernizing infrastructure (priority iv); and expanding credit (priority v).

The LCDS would provide a framework for the continued implementation of the NCS. According to the 2006-2012 evaluation of the NCS, this would be the intention of the authorities as they continue to define policies for the country. In some cases this is already happening. For

example, rural electrification projects would play a central role in both the expansion of coverage, private sector investment, and lowering the demand for fossil fuels. More generally, the Energy Strategy Group is working on the identification of key projects with significant

impact on energy: the Amaila Falls hydroelectric generation project, the Skeldon co-generation plant, the Lethem Power Company, the wind power energy strategy and the Turtuba

hydroelectric generation project.

The NCS and LCDS also overlap on sectoral issues, such as forestry. In 2011 government created the Guyana Forestry Commission, in the Ministry of Natural Resources and Environment. The GFC consulted on areas regarding REDD and the GFC's submission to the

World Bank Forest Carbon Partnership Facility and its Readiness Preparation Proposal for 27 communities. The GFC has also been receiving support and institutional strengthening for other

REDD/LCDS- related actions, such as: emissions trading; Gap analysis; License Verification; National Forest Inventory; Lesser Used Species; and Recovery and Utilization. The GFC plays a central role in the development of business opportunities on the forestry and tourism sectors.

Tourism is also a sector in which the NCS and LCDS intersect. An idea for a project, inspired

by efforts of the Trinidad and Tobago government, would promote investments from Guyanese nationals living abroad. These investments would promote sustainable tourism to the country,

within the mandates of the LCDS. Additional efforts are also under consideration, such as a “Visit Guyana” and “Clean Up Guyana” campaigns, which would simultaneously have positive impact on the environment and generate business opportunities in tourism.

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