Latest update October 18th, 2024 12:59 AM
Mar 02, 2011 Features / Columnists, Peeping Tom
I wonder whether during the opening of the Demerara Bank Limited Branch at Diamond whether the Chairman of that bank, Mr. Yesu Persaud, was ruing the fact that he spoke before the President.
It seems that every time he does this he ends up getting a lecture. The last time this happened was at the formal launching of a daily newspaper.
Then Mr. Persaud had lauded the principals of the company for negotiating a good deal, a reference to the concessions that were granted to the parent company of the newspaper.
When it was his time to speak, the President peppered his presentation with criticism of some of the comments made, even going as far as urging the Head of the Privatization Unit to run-off a seminar about the country’s tax laws.
As things turned out, it was the government that needed the lecture since it was forced to rush to the National Assembly to regularize the concessions that were made, the first time under the PPP administration that a government was forced to go to the parliament so as to ensure that the concessions it granted to the company in question would not be deemed illegal.
On Monday last, Mr. Persaud was more circumspect. He spoke about the need to improve the investment climate and alluded to developments in the region.
If he presumed that the President would not have made a rejoinder he was wrong. The President did, and reminded all that doing business in the Caribbean is not as rosy as it is made out to be.
The President is right. It is not an easy task for a Guyanese to establish a business in the Caribbean. Had that been the case most of the Guyanese investors would have done because we have just as rich and good entrepreneurs as there are in those islands.
But the President also needs to be reminded that doing business in Guyana is also not easy at all. Bureaucratic red tape and procrastination is still the order. Try applying for a piece of state-owned land; try having a transport passed within one month, and try seeking to obtain a registration of a tax clearance in a matter of days. It simply does not happen here. But true, also, it does not happen.
The banks also do not make it easy.
While the President boasted about the decline in the lending rate from 38% to 11%, he must know that even 11% is a globally uncompetitive rate for capital. And the President must be told – in case he did not know- that only the big investors, huge investors, are fortunate to obtain 11% of commercial terms. In most instances the rates are above 14%.
It is cheaper to borrow overseas, but that too has its problems, and if there is anything that the government can do to increase investment in Guyana, it is to reduce the spreads within the banking sector.
The average savings rate is below 4%; banks are being used as safety deposit boxes because the interest on savings is way too low. Yet when you go to borrow from these same banks that are offering at best 3% on savings, they are demanding 15-18% interest for loans. And the explanation is that the requirements of the financial regulations of the country mean that reserves have to be kept, which means that the banks have to lend at the rates at which they do.
This of course is not preventing almost all the banks from raking in hundreds of millions of dollars each year. So while the interest rates are high and the savings rates are low, the banks are raking in the profits.
But who gives a damn that the small man has to pay prohibitive rates of interest? Who cares a hoot that the pensioners no longer look forward to ascertaining the interest on their accounts because whatever figure is put there will be lower than the carfare that it took to go and find out the interest accumulated.
The banks are expanding in Guyana. This is a sign of a booming.
When the banking sector spreads it is a sign of confidence. But even if more banks were not established, it would hardly make a difference to them because banks rarely lose money. Even in the hard guava season in Guyana, the banks made money.
Today because things are looking up, they are making even more money. So the quarrel should not be about which country is easier to invest in.
It should be about ensuring that banks are not just about profits, but also about ensuring fair interest rates for the savings and low interest rates on loans.
October 1st turn off your lights to bring about a change!
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