Guyana’s open economy lauded
By Mark Ramotar
March 20, 2007
GUYANA has one of the most open economies in the Caribbean with little or no market access and national treatment restrictions on foreigners wanting to invest here, according to the findings of a new study officially released yesterday.
The detailed study by the Guyana Trade and Investment Support (GTIS) project in collaboration with the United States Agency for International Development (USAID) and the Ministry of Foreign Trade and International Cooperation, also said Guyana has a vibrant and growing services sector, one that is bigger than official estimates show.
The final report of the study, ‘Guyanese Services: Opportunities for Increased Economic Growth and Trade Liberalisation’, was officially released during a simple ceremony at the Foreign Services Institute, Ministry of Foreign Affairs in Georgetown.
With the exception of a few industries, the study found that there are “no limitations” on national treatment of foreign investments.
The report also noted that foreigners are given the “same treatment” as domestic investors in purchasing and leasing land, and this is provided for in the Constitution of Guyana and the Status of Aliens Act.
The study also found that Guyana has legislation in place that ensures that foreigners can invest here and be treated on the same equitable and fair basis as domestic investors.
Alluding to the Investment Act of 2004, the most important piece of legislation which governs investment in Guyana, it said the Act provides for legal protection for investment; increases the predictability, stability and transparency of the legal regime for investment; promotes the development of international best practices regarding investment; and streamlines the existing procedures for investment.
The Act also ensures that:
** the principles of ‘market access’ and ‘national treatment’ are practices on an equitable basis between local and foreign investors
** investors can invest in all fields of lawful economic activity
** investments can be made in existing enterprises either wholly-owned or joint ventures
** private investments are guaranteed by the government
** expropriation can only take place as permitted under the laws of Guyana, promulgated on a non-discriminatory basis and providing for fair and prompt compensation.
According to the findings of the study, investor contracts in Guyana are sector-specific, investors are not required to source locally, there is no export requirement, and foreign exchange is not rationed in proportion to exports and there is no national ownership or technology transfer requirements.
The study also noted that Guyana’s Companies Act is being revised to allow for harmonisation at the level of the Caribbean Community (CARICOM), and this revision will allow for community treatment of CARICOM Single Market and Economy (CSME) firms.
With regards to incentives for investors, the study found that Guyana has across-the-board investment incentives that include flat business tax rate, tax holidays, waivers of customs duties, export tax allowances, unrestricted repatriation of capital, dividends and profits as well as additional incentives.
It was noted that these incentives are available equally to local and foreign investors and others based upon specific criteria: unlimited carryover of losses from previous years, full and unrestricted repatriation of capital, profits and dividends and benefits of double taxation treaties with the United Kingdom, Canada and CARICOM countries.
The study also found that in Guyana, investors are granted waivers of duty and consumption tax on machinery and equipment and tax holidays are granted to the Information Communication Technology (ICT) sector.
The Finance Minister, however, maintains final discretion over which investors receive corporate tax exemptions, it said.
It was noted, too, that all importers and exporters, domestic and foreign, must register for a Customs registration number from the Guyana Revenue Authority (GRA) Customs and Trade Administration.
Despite this favourable investment climate and open economy, the study found that foreign investment in the services sector is low, and urged the Guyana Office for Investment (GoInvest) to continue to attract investors, particularly in key infrastructure areas and look to new business opportunities created by the CSME.
At the launching ceremony, GTIS representative Ms. Ann Casanova said the report on the findings of the study will help inform decision making by government trade negotiators on possible commitments that can be made in the overall services sector.
She said that in May 2006, GTIS received a request from the Guyana Government through the Ministry of Foreign Trade and International Cooperation, requesting technical assistance to “provide focused technical support to inform and guide the participation of the government in external negotiations on services”.
This activity, she said, was undertaken against a backdrop of Guyana’s active participation in the current external trade negotiations at the World Trade Organisation (WTO), the CARIFORUM-EU Economic Partnership (EPA) and the CARICOM-Dominican Republic Free Trade Agreement.
According to her, GTIS was asked to review the extent to which services could be liberalised across multiple negotiating theatres.
“The service sector is larger than official estimates report at 46% of GDP but these figures do not capture some of the largest contributors to services such as business and professional services and ICT,” Casanova told the small gathering at the launching.
She also noted that of all new jobs GoInvest is attracting, 50% are in the services sector although they are not reported as such.
Casanova also underscored the importance of trade negotiations as a useful tool to drive development of the Guyanese services industry further.
Trade negotiations in services raise awareness about the importance of the sector and encourage the development of increased opportunities for Guyanese services exports, she said.
Presently, there is much confusion as to what is a services trade and there is limited recognition of the critical role services play in the economy.
The study has identified challenges which impede further growth and opportunities for development, and said a services development strategy will help attract new foreign investment and identify opportunities in markets abroad.
According to the report, business and professional services, especially legal, accounting, architectural, engineering and nursing are already actively engaged in exports and represent the largest share of service providers in terms of companies operating in the sector.
It said this is a sector with experience and interest in expanding exports abroad, however, they seek domestic regulation to overcome some reservations about competing with non-residents in Guyana.
The report made reference to the fact that modern day travel and the internet have revolutionised the way business is conducted today, since it is now easier than ever for the resident of one country to physically or electronically cross the border into the jurisdiction of another and consume or produce a service, or establish a business that supplies services.
The report also noted that the revolution in transportation and communications has led to an increase in services that are bought and sold across borders and it has also led to the need to think differently about how services are traded.
Casanova, highlighting some of the findings of the study, pointed out that “Guyana has been quietly operating with a vibrant and growing services sector”.
She, however, believes that Guyana needs to move away from doing too many studies, to acting and implementing the recommendations in the numerous studies already completed.
“Quite honestly, I think Guyana has been over-studied...so let’s not do any more studies; let us just go out there and start implementing the recommendations in those studies.”
Among the principal findings of the study, as outlined by Casanova in power-point format, are:
** the services sector is bigger than official estimates show
** the services sector is already engaged in international trade – but it is not ‘labelled’ as international services trade
** services are creating jobs – 2,201 in 2005 – but not classified as services and account for probably closer to 50% of Guyana’s GDP and 50% of all new jobs
** Guyana is very open to business and investment, but lacks legislation in some key areas such as architecture and engineering.
The report also said that while the making of commitments in services will not automatically open the flood gates of increased flow of investment here, these send a message that Guyana is open for international business.
Alluding to the lack of, and difficulty with obtaining proper or official data, the report highlighted the need to strengthen collection of economic data noting that improved data is necessary for policymakers, Guyana’s private sector, investors, donors and academia to assess the broad and sector-specific impact of liberalisation.
This will help stakeholders better understand emerging issues and their relevance to CARICOM, as well as identify opportunities for economic diversification and growth.
The report also noted that in 2005, distribution, transportation and communication, engineering and construction, rent and dwelling, financial services and other services accounted for 32.8% of Guyana’s GDP. In 1995, the same services accounted for 22% of GDP, a 10% increase in 10 years.
The report also noted that in 2005, transportation and communication at 11.3% accounted for the largest share of reported services, followed by engineering and construction at 6.2% and distribution and rent dwellings tied at 4.7%.
The report said 65,321 men and 44,496 women were employed in the services sector in 1997. The dominant services sectors for male employment were Construction (16,183); Trade/Repairs (24,001); Transport and Communication (13,477); Other social services (2,969) and Education and Training (2,020).
The study also revealed that the dominant services sectors for female employment were Trade/Repairs (21,369); Hotel/Restaurant (3,119); Transport and Communication (2,755); Finance/Insurance (2,118), Renting business (2,335), Education/Training (7,106) and Health and Social Work (3,880).
The report estimated that there are about 1,094 companies and 23,711 employees engaged in the services sector in Guyana.
The study also found that professional services in Guyana are largely unregulated and draft legislation has been prepared and tabled but lacks political support and domestic passage.
Limited foreign competition is also found in Guyana and these are mostly in the engineering services with the presence of Trinidadian, Chinese and Indian companies.
The study indicated that there is a “pronounced loss” of nurses who are migrating to other countries, while nurses from India are brought in as a counterbalance.
It also found that there is a healthy domestic and international competition in the courier services sector here and with regards to services in the tourism sector, the study noted that in 2005, there was an increase in the visitor arrivals to Guyana with tourism generating about G$35M in exports that year.