Private Sector Commission
157 Waterloo Street
North Cummingsburg, Georgetown
Tel No: 225-0977, 225-5347, 225-5339 Fax: 225-0978
Website: www.psc.org.gy E-mail: [email protected]
Speech by PSC Chairman, Mr. Ramesh Dookhoo, to a Ministry of Foreign Affairs Seminar on
Development and Diplomacy on Wednesday July 27, 2011
I have noted that the theme of this seminar is “Development and Diplomacy” and I think it is appropriate that
this opportunity should be taken to remind our diplomats of the key role that they play in selling our country
abroad and in generating foreign investment for our country. Our diplomats are in the vanguard of our
development thrust and should be thoroughly briefed on the role that they play in our economic well-being.
The majority of Guyana’s trade agreements result from being a CARICOM member. As one would expect the
benefits that accrue to Guyana through CBI and CARIBCAN agreements accrue to all members.Thus it may be
difficult to capture market share for products from Guyana that compete with similar Caribbean products.
High transport costs impact on us negatively in this regard.
It is somewhat ironic that CARICOM, the prime structure relied upon by Guyana to negotiate trade deals is
actually the body standing in the way of Guyana negotiating FTA with Brazil.
I have been asked here today, however, to address you on the subject of the role of the private sector in
development. It is not so long ago that the state reigned supreme in most developing countries, where it was felt
that government was the catalyst for development and that state-owned companies were well poised to have a
transformative impact upon the economy. Many developing countries flirted with socialist policies in an
attempt to better the lot of their people and it was felt that capitalist policies were responsible for poverty.
We must take the role of our diplomatic missions a little further than putting some products in a glass case at the
reception desk at the Guyanese Embassy. We have to educate our diplomats to be able to market the Country.
Unasur.
Potential for Guyana`s exporters
There is no doubt that the region desperately needs further economic integration. However, there are
many political and economic differences between the members that must be resolved before there can
be any reasonable expectations of trade benefits. For example, some members are embroiled in serious
border disputes. Some members are pursuing more protectionist polices while fellow members seek to
open their economies. In other words, astute Guyana exporters seeking opportunities from UNASUR
are thinking longer term. From a trade perspective, any immediate or even medium term results as a
result of Guyana`s participation in UNASUR can be viewed as optimistic thinking.
Potential for Expanding Trade Between Guyana and Brazil
As already stated, Guyana and Brazil are on a seemingly pre-destined path to become closer trading
partners. Without question, there is a political dimension to the deepening of a trade relationship that
involves a small country and its big neighbour. There is a striking similarity between the Guayana
Brazil relationship now and the Canada USA relationship prior to the signing of a FTA and then the
NAFTA. It can be stated decades after the fact that Canada was not swallowed up culturally,
politically or economically by its neighbour to the south. Lessons learned in the Canadian context are
useful to an analysis of the present Guyana Brazil relationship.
Following a visit to Lethem and Brazil, the PSC has signed a Bilateral Cooperation Agreement with
Brazil’s businesses to trade goods and tap into 200-plus tourists who transit through the border states
of the neighbouring country daily. Guyana and Brazil will explore a number of steps such as: the
possibility to establish a duty-free zone that will be managed by both countries; develop a strategy to
market Guyana’s goods; train local businesses on how to do business in the Portuguese-speaking
territory; and, introduce measures to reduce the language barriers.
Specific activities to be undertaken under the agreement include:

identifying additional preference list items, with measures being explored to ensure that these
meet Brazil’s health and phytosanitary standards;

examining the development of a duty-free zone (increased trade and other ties between the two
countries have been on the rise since the commissioning of the Takutu Bridge, which links the
two countries. It is averaged that more than 4,000 vehicles cross the bridge daily, with the
figure tripling on weekends.);

researching the potential for rice farms in the area,

discussing the construction of the Linden/Lethem Road, thereby creating the means for Brazil
to transit to transit its goods
Guyana’s private sector, through the PSC has taken positive measures to accelerate the pace of export
growth with Brazil. In this undertaking, it has the full support of the government.
Since the 1990’s, however, there has been an increasing realization of the role that the private sector can play in
growth strategies and of the power of the private sector to transform the lives of poor people. The
transformation from state-dominated to market-oriented economies has led to increased growth in many
transitional economies including in Latin America and the Caribbean as well as here in Guyana.
Research by the Inter American Development Bank reveals that 90% of all economic activity in Latin America
and the Caribbean is generated by the private sector as are nine out of every ten jobs. The private sector
provides both investment and innovation and, in many instances, the primary sources of innovation are small
and medium enterprises.
Which brings me to the opportunities available under services in the EPA:
For services as a percentage of total exports, Guyana has one of the lowest averages amongst
CARICOM countries. However, because the EPA has also opened up investment opportunities in
CARICOM countries in the services sector, Guyana can use these provisions to attract investment.
There is an immediate opportunity for Guyana to strengthen its capabilities in: business services
(accounting, architecture and engineering); computer and related; research and development;
environmental services; management consulting; maritime transport; entertainment; and, tourism. It
should be of interest to EU firms in these sectors to invest in Guyana now in order to get in on the
ground floor as Guyana’s oil and gas, hydroelectric, construction and agricultural sectors all are
starting to emerge at the same time.
Investment promotion in these subsectors will benefit Guyana in terms of transfer of technology,
creation of jobs and improving the quality of products and services. The EU is a significant outward
investor, with 9 EU members ranking in the top twenty leading outward investor economies. Therefore
a properly managed relationship with the EU should create viable investment attraction opportunities
for Guyana.
The EPA has specific provisions for EU market liberalization in these subsectors: tourism; ecommerce; courier; telecommunications; financial services; maritime transport; and, cultural and
entertainment services. These are the EU service sector export market opportunity areas for Guyana
companies.
In addition, temporary entry for independent professionals and contractors has been liberalized as
follows:
Sectors Liberalized by the EU for Temporary Entry by Independent Professionals (self-employed
persons)
1) Legal advisory services in respect of international public law and foreign law (i.e. non-EU law)
2) Architectural services
3) Urban planning and landscape architecture services
4) Engineering services
5) Integrated Engineering services
6) Computer and related services
7) Research and development services (see complete list at link provided above)
Sectors Liberalized by the EU for Temporary Entry by Contractual Services Suppliers from
CARIFORUM (employees of services firms)
1) Legal advisory services in respect of international public law and foreign law (i.e. non-EU law)
2) Accounting and bookkeeping services
3) Taxation advisory services
4) Architectural services
5) Urban planning and landscape architecture services
6) Engineering services
7) Integrated Engineering services (see complete list at link provided above)
There has also been increasing recognition of the role of the private sector as an engine for social and economic
development by the developed countries who have been adjusting their aid policies in light of this recognition.
Just last month, the UK’s Department for International Development, DFID, launched a paper setting out their
approach to the private sector and a public commitment to enhancing and expanding their work with the private
sector. Their goal is cooperation to achieve development goals and to put the private sector at the centre of
generating opportunities and prosperity for poor people in developing countries. They have identified three
areas in which work needs to be done:
1) Creating a vision for the private sector’s contribution to development,
2) Complementing this vision with an understanding of the private sector’s own vision, and
3) A deeper understanding of which types of engagement between public agencies and the private sector
contribute most effectively and cost-effectively to growth and poverty reduction.
This view of the role of the private sector was endorsed by the UK’s Secretary of State for international
Development, Mr. Andrew Mitchell, who stated that “It is business which holds the key to tackling global
poverty since the private sector creates jobs, goods and services.”
Increasingly, the donor agencies are becoming more committed to this view of the private sector as having a
central role to play in combating global poverty. The UK’s Overseas Development Institute sees the path for
the future as a collaboration between businesses, government and donor agencies - a new model of
development. The challenge, as the ODI sees it, is how governments can establish a policy framework and
business environment to promote well-functioning competitive markets for transformative and sustainable
economic growth. This recognition of the role of the private sector has also been endorsed by the European
Commission which, in January of this year, sponsored a study which pointed at ways in which the potential of
the private sector for job creation and income generation to fight poverty could be harnessed. The World
Economic Forum has since stated that “government must keep out of the way and focus on providing an
enabling environment.”
In Guyana, the recognition of the need for collaboration between government and the private sector
resulted in the formulation of a joint development strategy, called the National Competitiveness
Strategy, between the government and the Private Sector Commission in May of 2006. The goal of
this Strategy is to involve the private sector in policy formulation to create an enabling environment in
which business can flourish and generate economic growth. This partnership has resulted in the
creation of several Public-Dialogue Dialogue bodies on which the Private Sector Commission
participates as an equal partner of the government in prescribing measures to improve the
competitiveness of the economy. The measures are all aimed at facilitating and enhancing the role of
the private sector in the economy. While the private sector has grown rapidly and now dominates the
economy there is much room for its further growth and the National Competitiveness Strategy
provides the medium through which the sector can further catalyse growth.
The National Competitiveness Strategy partnership has crystallized the relationship between the
government and the private sector though there was some collaboration before on means of enhancing
the business environment. The private sector had, for instance, long complained that the playing field
for incentives was not level and that there was not a legal framework outlining what level and type of
incentives were allotted to different industries and sectors. The result of this was that, in 2003, the
Fiscal Amendments Act was passed which provided for more predictability and fairer rules for all
businesses. The private sector had also complained for years that there was a need for legal protection
of both foreign and local investment. They also wanted the right to divest land and to properly
repatriate dividends. In response to these concerns, the comprehensive Investment Act was passed in
2004.
The first major policy development of the National Competitiveness Strategy was the introduction of
the Value-Added Tax. The business community and international development community had had
concerns that the general tax regime was too complex, and also had concerns about the consumption
tax, which it was felt was too unwieldy and outdated. The private sector also had concerns that
corporation taxes were too high and lobbied for lower rates of taxation. The introduction of the VAT
brought a more simplified tax regime. Recently too, in Budget 2011 after tireless ground work and
persistent advocacy by the Private Sector Commission, corporate taxes were reduced from 35% to
30% for non-commercial companies, and from 45% to 40% for commercial companies.
To enhance competition among businesses in Guyana and to ensure fair competition, the Competition
and Fair Trading Act was passed in 2006 and a Competition Commission was established. A new
Consumer Affairs Bill has also been recently passed which will transform the name of the
Commission to the Competition and Consumer Affairs Commission.
The National Competitiveness Strategy has also outlined a programme for the diversification of
Guyana’s economy. New sectors which have been identified to complement the existing sectors are
tourism, agro-processing and information technology, to name the most important. These new sectors
are skill intensive and require more technical competence than the traditional sectors such as
agriculture and mining. The National Competitiveness Strategy is geared towards improving the
enabling environment for business and in so doing is in keeping with the modern approach to the
function of government in development. The Strategy encompasses improvements in the legislative
framework as well as in development of infrastructure and in the streamlining of the operations of the
various monitoring and facilitating bodies.
The role of the private sector in catalysing growth is also being recognized by the government as it
seeks to involve the private sector in the creation of infrastructure which heretofore had been the
province of government. An example of this is the Public-Private Partnership, or PPP, which led to
the construction of the Berbice Bridge. This was built by the government using direct funding by the
private sector and reflects a growing worldwide trend towards such means of creating costly
infrastructural works.
The private sector in Guyana contributes to the reduction of poverty in two main ways. In the first
instance, by harnessing production and creating jobs, the private sector contributes directly to
economic growth and the reduction of poverty. Secondly, taxes paid to the government enable the
provision of social services which spur true development as broadly measured by socio-economic
indicators such as education levels and mortality rates. In Guyana, income taxes paid by the private
sector can be used as a proxy for the burgeoning importance of the sector to the economy. In the year
2000, for example, income taxes paid by the private sector amounted to some $8 billion. By 2010 this
sum had grown to over $21 billion. This resulted from both increasing productivity of the sector as
well as substantial expansion of the sector itself.
The role of the private sector in enhancing development in Guyana is further recognized in the
government’s Poverty Reduction Strategy since one of the pillars upon which the strategic framework
for the medium term vision is being built is the “re-engineering of business practices within the public
sector to complement private sector growth”. The government also commits itself in the Strategy to
pursue policies that will create substantial space for the private sector to invest. The Strategy states
that the government is committed to work with the private sector in infrastructure development,
development of the human resource base and modernisation, restructuring and diversification of the
economy in order to forge a productive and meaningful public-private partnership.
It is clear that the recognition by the government of the private sector as the main catalyst for growth
and development spurs the government to implement policies geared towards expansion and growth of
the private sector itself. This has been accompanied by the tacit encouragement of private investment
– particularly Foreign Direct Investment. The facilitating agency, GOINVEST, which was set up to
guide and assist investors to navigate the official channels for establishment of businesses has been
handling an increasing number of investment agreements each year. In 2010, GOINVEST facilitated
more than 300 investment agreements and 228 companies were granted concessions.
Investment by private sector operatives has grown by leaps and bounds and, while there has continued
to be heightened interest by investors in such traditional areas as mining, increasing investment has
been taking place in such new areas as communications infrastructure. The latter development has
been leading to job creation in the ICT sector, particularly through the establishment of call centres
which has thus far led to some three thousand jobs. Conservative estimation suggests that the number
of new jobs in the ICT sector could double within the next three years. Large scale mining is also
taking hold and, with the price of gold continuing to rise steeply on the world market, it is expected
that more large conglomerates will seek to establish large scale mining operations in Guyana.
While most sectors of the economy continue to grow at a fairly rapid pace, manufacturing has
remained sluggish due to the high cost of energy in Guyana. It has even been suggested that Guyana
may bypass the manufacturing stage of growth and become a service-oriented economy. The problem
of high energy cost is being addressed however by the planned introduction of hydropower. This is
particularly crucial since one of the new growth paths identified for Guyana is agro-processing. Given
Guyana’s abundance of agricultural products, agro-processing is the next logical step for export-driven
growth but this will require a reliable affordable energy source.
Prospects for economic growth, which has remained constant over the last five years, are favourable
and the seeds of such growth are being sown with the constant flow of investment, especially Foreign
Direct Investment. The transformation of economic growth into true development will however
depend heavily on government policy and the use to which the fruits of growth are put. There is a real
need for even more collaboration between the government and the private sector to ensure that the
gains of the economy are channeled into poverty reduction and development. An emphasis on
education is one of the ways in which this transformation can occur. There often exists in Guyana a
dichotomy between the needs of industry and the products of the education system though some effort
is being made to address this by consultation with business on the curricula of Technical and
Vocational Training establishments. There is much more however that needs to be done to provide the
private sector with the steady and reliable set of skills that are required. With the ICT revolution that
is being created by investment in ICT infrastructure will come the need for a population that is
technologically savvy. This is being partially addressed by a government plan to provide low income
families with computers.
In the modern world, and in market-oriented economies, development is directly related to the
performance of the private sector and, even as aid agencies become increasingly aware of this fact, so
must the governments of developing countries. Many of these have tried socialist-oriented policies
only to find that their attempts to distribute the economic pie resulted in smaller shares for all. In
Guyana efforts to facilitate the growth of the private sector have been commendable but much needs to
be done to remove the stumbling blocks to investment which remain.
Thank you.