US envoy concerned at `lingering ambivalence' to foreign investment -urges reform in Customs system By Andrew Richards Stabroek News May 26, 1999 Globalisation has the power to bring Guyana unprecedented prosperity but the country needs to equip itself with the right tools to take advantage of the changing world economy or risk being left behind. This view was expressed by US Ambassador to Guyana, James Mack, during his address to members of the Private Sector Commission (PSC) at Le Meridien Pegasus Hotel yesterday. He was speaking on the occasion of the PSC's annual luncheon. Mack urged that measures be put in place to promote private investment in Guyana which, he said, is one of the main tools to create increased wealth in the country. The US Ambassador expressed concern over what he described as a "lingering ambivalence" in Guyana towards foreign investment. "Here in Guyana, foreign investors cannot be beckoned to bring their business to Guyana; only to be greeted by bureaucratic regulations that tie them into knots or face unrealistic expectations...It's not worth their time," Mack stated. The US Ambassador called on the leaders of the main political parties to be united in their support for the free market. He exhorted them to be consistent to the rule of law and unwavering in their commitment to the rights of all foreign and local investors. Mack said Guyana will have to work twice as hard to convince prospective investors that it is safe to invest here. He urged that major steps be taken now by Guyana in order for it to win in the increasingly globalised economy. The US Ambassador recommended that an investment strategy which focuses on an investment code be implemented. He noted that the code will require the revision of existing laws. "One of the worst things for the prospective investor to find is an environment where the government rules seem arbitrary, unpredictable, and non-transparent," Mack declared. Investment opportunities in Guyana are hurt by investment laws which create further unpredictability by giving government officials broad latitude in deciding who gets tax holidays, customs exemptions and other key concessions, the US Ambassador said. He pointed out that in June, 1997, the government of Guyana began working on an investment strategy and, additionally, a revenue impact study was done to see how the revenues could affect proposed strategy. But these studies have not been discussed with the private sector, he said. Mack extended the services of USAID to provide technical assistance for round table talks between the private sector and government to review the two studies and begin working towards an investment code. He also offered to provide resources from USAID to assist government to translate an agreed upon investment strategy into an investment code. Mack urged reform in the Customs and Excise system where he stated that the inconsistency there is anathema to both the foreign and domestic private sector. He cited the ordeal of an investor, Case Timbers Ltd, where millions of dollars worth of equipment still lies on the wharf after two years because government failed to work out an agreement with the investor on duties and taxes owed. This episode has cost Guyana jobs, taxes and served as a deterrent to potential investors, he said. Mack stated that the Guyana government needs a customs regime that is honest and consistent and this will require a considerable investment in human resources. Higher wages should be paid in the customs department which will attract competent people who will then have to be trained and be provided with the required tools to perform effectively, Mack recommended. He alluded to the turnaround in Peru where the customs system was revamped, causing revenue to be doubled in one year. The US Ambassador said another area to be looked at is the high taxes and tariffs being imposed upon importers. "It fosters a greater respect for the rule of law when a fair rate is vigorously enforced, rather than an unreasonable rate being widely evaded and circumvented," Mack stated. Touching on the issue of land reform, Mack described the task of finding and purchasing land as "unaccountably difficult". He said Guyana's property system has grown into an intimidating tangle with an obsolete legal framework, outmoded zoning concepts, and an inefficient bureaucracy. Mack stated that government ownership of huge tracts of land is strangling the real estate market and driving property prices so high that many businesses cannot afford them. The US Ambassador also declared that "another badly needed initiative" is the revamping of the judicial system in Guyana. Noting that the judiciary is a crucial element for keeping the commercial system operating properly, Mack declared that it must be able to function without political interference. The government needs to devote enough resources to hire more judges and to pay them higher salaries, he said. The administrative systems in the courts also need to be streamlined, he added. Moving on to organised labour, Mack pointed out that union leadership must be sober and responsible in its advocacy for workers' rights. "Labour groups need to realise how easy it is in a globalised economy to drive away investors with unreasonable demands not based on sound economics and productivity gains," he told the gathering. Finance Minister, Bharrat Jagdeo; PSC's Chairman, Yesu Persaud; and Executive Member, Clifford Reis, also spoke briefly at the luncheon. A © page from: Guyana: Land of Six Peoples