Hard times ahead
...sees major role for trend-setting IPED By Abigail Kippins
Guyana Chronicle
October 30, 2001

UNITED States Ambassador to Guyana, Mr. Ronald Godard yesterday cautioned that this country will need strong economic leadership to weather some hard times ahead.

At the 15th annual general meeting of the Institute of Private Enterprise Development (IPED) in Georgetown, Godard said such leadership will help Guyana lay the groundwork and seize real opportunities available to it in the future.

"Already in a serious slowdown, the September 11 terrorist attacks have had a chilling effect on (world) economic activity. Air travel has been hard hit and tourism has dropped off precipitously, visiting real disaster on the economies of many of your Caribbean neighbours.

"Guyana was already facing a bad year for economic growth with world market prices for its major exports down and the problems associated with the elections earlier in the year", he noted.

Godard said new foreign investors have largely shied away following political unrest and while there has been major progress with political dialogue, it will take a while for political stability, that major foundation block for sustained economic growth, to be perceived abroad as firmly in place in Guyana.

In this light, he pointed out that IPED, in addressing the problems of the poor, has a particularly important role to play.

Godard was among President Bharrat Jagdeo, Prime Minister Sam Hinds, British High Commissioner, Mr. Edward Glover, other diplomats and business persons at the meeting at Le Meridien Pegasus Hotel in Kingston.

IPED, recognised as the leading small and micro business financing institution in the region, reported an 11.25 per cent increase in profits last year from the previous year.

It made a surplus of $90M last year in contrast to $80.043M in 1999, and at the same time cautiously made a decision to create progressive allocation for risk coverage, Chairman, Mr. Yesu Persaud reported.

He said despite many constraints, the institute funded 5,455 small, medium and micro loans valued at $739.7M and in the process sustained and created about 9,000 jobs.

Clients' contribution to the Gross Domestic Product at the current market price is 1.38 per cent, which translates to the value added to the economy of more than $1.8Bln, Persaud reported.

"IPED has made a significant contribution to the economy of Guyana, not only in terms of Gross Domestic Product growth, but also in creating jobs, especially for unskilled and semi-skilled workers, and fostering and encouraging the development of entrepreneurial skills in the micro and small sectors of the economy", Godard observed.

He noted that as the Government prepares its poverty reduction strategy, it will be depending on IPED to help reduce poverty, especially since the text, reviewed yesterday, specifically assigns a major role to the institute in the development and expansion of small businesses and cottage industries.

"The Government of Guyana obviously recognises IPED's success in utilising internally generated funds and the resources provided by the United States Government and other donors", Godard remarked.

He said IPED has come a long way and the U.S. government, in its association with IPED in 1986, provided an initial sum of almost US$950,000 from the PL 480 food aid programme to be used for loans and to acquire a building. Between then and 1993, through the same programme, IPED received more than US$8M.

Through the United States Agency for International Development (USAID) Economic Growth programmes, the U.S. also provided technical assistance and training to the management and staff of IPED and Godard said this was to ensure the institute has the necessary technical and management capability to respond to the needs of its clients and the changing business and economic climate.

"Following on USAID's technical assistance and training, we gave a further grant of US$340,000 to IPED last year to be used solely for loans to micro entrepreneurs", the ambassador reported.

He, however, charged that as IPED's Board of Directors consider the future of the organisation, it should take into account trends in the region toward economic integration.

"IPED, along with Guyana's other institutions, are at crossroads. In the short to medium term, we are facing major challenges within the current economic order, but in the future we are facing major changes in the very nature of that economic order," Godard told the meeting.

He added, "I firmly believe that economic integration will bring, as it has to other regions, greater prosperity to all of the western hemisphere's family of nations, including the Caribbean. I am convinced that IPED will be at the cutting edge in financing the development of non-traditional exports and service which may be the key to success in an expanded western hemisphere market".

The diplomat said with commercial barriers set aside, Guyana can become a major gateway between North and South American economies, being uniquely geographically situated between Brazil, the world's 10th largest economy, and the U.S., the world's largest economy.

He also explained how the Free Trade Area of the Americas (FTAA) can be beneficial to countries like Guyana.

In his remarks, President Jagdeo reiterated this position and in outlining the Government's commitment to participate in the FTAA, noted that there are numerous opportunities that can be created by it.

He pointed out that for any country to be successful, it has to pay careful attention to the evolving external economic environment, especially in the areas of trade and finance.

The President added that if care is not taken, overnight decisions can lead to many economic and social dislocations.

"...but the first point is that we do not have a strong private sector, we have a growing private sector...how can you effectively compete with (countries) like the U.S...?", he asked.

He said while Guyana needs to take advantage of the FTAA opportunity, it needs help from the larger countries in the hemisphere.

The President also said recommendations coming out at the final consultation of the Poverty Reduction Strategy Paper include increased access to resources for small businesses and improvement in the environment within which small businesses operate - an institutional and legislative environment.

He said the Government already has a draft small business law, which will hopefully be tabled in this session of Parliament, and will change the procedures for small companies to be registered, give them special tax benefits and work towards setting up a special supportive institution for their development and other measures.

President Jagdeo congratulated IPED on its work over the years, noting its tremendous contribution in various forms to the development of the country and to people's lives.

He said the institute could count on the Government's support, noting that the administration has been pushing for a private sector development bank and through discussions has already given potential bankers some commitment as to the tax benefits they will enjoy.

"I am hoping that by the first quarter of next year, this private sector development bank will be active in Guyana and focus on giving long-term loans with significantly low interest rates...", the President said.

He said this would add to what IPED is doing and there may not be competition.

IPED, based at South Road, Georgetown, has also been contributing in the area of training and last year taught more than 2,000 micro and small entrepreneurs in all aspects of running a business.

The institute offers training, accounting, managerial and technological services to institutions and organisations and according to Persaud, as a national development institution, it continued to provide effective and timely access to high quality integrated financial services for development of micro enterprises and small businesses.

The number of micro entrepreneurs serviced by IPED is growing at a fast rate, Persaud said, with women representing about 80 per cent of micro entrepreneurs since the inception of the institute 15 years ago.