Guyana’s Private Sector has to look itself in the mirror and become part of the solution

Jun 22, 2015 Letters

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Dear Editor,
Much has been recently reported about a business slowdown in Guyana which began during the election cycle and has not changed since the election of the new government. Some analysts seek glee in stating it is because the new government does not have an economic plan. Others see the slowdown as a natural multiplier effect of the dramatic drop in gold prices and the associated impact it has on the economy. Still others argue it’s the effect of the Anti-money Laundering Bill and the squeezing of the underground economy of drugs, money laundering and other well-known nefarious activities.
Our remittances are almost 20% of GDP; Dr. Clive Thomas states the underground economy is 60% of GDP; VAT is 16%; corruption and the raping of Guyana is a significant percent of GDP.
Not discussed are the underlying strategic factors which impact Guyana’s economic ascendancy. Central to this is the role of the Private Sector in Guyana’s economic trajectory. In reality, the Private sector must take more responsibility for the country’s economy and also must be honest in both their capacity, their competitiveness and their expectations. An excellent example has been in the area of Amaila Falls.
While the Private Sector endorses this project they have been economically dishonest in their arguments. Surely, would the Private Sector in Guyana invest in the building of Amaila Falls?
Strongly recommended by this author is the need for the Private Sector to perform a SWOT analysis on itself and to create a private Sector National Strategic Plan in which the Government is seen as one of the stakeholders.
I would recommend the private Sector use Peeping Tom’s article of January 27, 2015 entitled “A Baby in the world of Giants” for self-analysis”and I quote “The local private sector is not up to the task of developing Guyana. It is too miniature, mired in small-mindedness, short of entrepreneurial and risk-taking drive, and ineffectual in mobilizing resources for large-scale investments.
It suffers from high capital rents, infrastructural constraints, poor labour productivity, transportation and communication inefficiencies, poor domestic demand, and an inability to penetrate foreign markets amongst a host of other limitations too numerous to mention.
While there have been improvements in all of these areas over the past years, Guyana is hobbling towards the goal of a strong and, dynamic private sector with the talent, skills and wherewithal to move the economy into another gear.
While over the past few years there has also been a phenomenal increase in the number of small businesses that have sprung up, very few of these are providing exportable. Most are servicing the domestic market with the result that for every one new business formed, another is most likely to go bust sooner or later.
The private sector in Guyana does not have the resources or the risk-taking ability to drive growth forward in the future. It is doing well for the moment and can justifiably be considered the engine of growth, given its overall contribution to GDP output”.
There must be a changing role for the Private Sector
Sustainable development is a marathon and not a sprint. These words of Colin Powell, Former Secretary of State of the USA should be a motto for Guyana. It has also been often stated the Private Sector is the engine of growth with the Government creating the enabling environment of legal, regulatory and fiscal frameworks for economic development and sustainability.
Guyana is a low middle income resource-driven country whose main exports are gold, bauxite, sugar, rice, forestry products and seafood. Guyana is therefore a “brown” economy. Brown growth is economic development that relies heavily on fossil fuels and does not consider the negative side effects that economic production and consumption have on the environment. Richly endowed in natural resources and having a strategic geographical location as the bridge between the Caribbean to South America, Guyana’s GDP has recently been more heavily weighted towards an expanding services sector.
Resource driven economies have succeeded when six elements are present: (1) building the institutions and governance of the resources sector; (2) developing infrastructure; (3) ensuring robust fiscal policy and competitiveness; (4) supporting local content; (5) deciding how to spend a resource windfall wisely; and (6) transforming resource wealth into broader economic development.Guyana is struggling with most of these areas.
In order for the Private Sector to become the true “engine of growth” and a co-development partner with the Government, it has to re-engineer itself. It has to become more visionary, more inclusive, more strategic and more aligned with national development goals. A sober analysis of the Private Sector would reveal several characteristics.
First, the Guyana private Sector it is a relatively young Private Sector which has been operating in a free enterprise mode for less than 30 years.Second, the Private Sector is technologically unsophisticated having never gone through an industrial revolution primarily because European and particularly colonial powers decided Guyana would be a cheap raw producing export country.
Third, the Guyana Private Sector is comprised of very small companies with profits less than US$10 million except for the mainly monopoly positioned and vertically integrated third generation family owned businesses. Guyana has no multinational companies; no true international companies but has many resellers of global brands. It has a few large export focused extractive foreign owned companies which provide very little skills transfer; technology transfer or high paying jobs for local nationals  or true sustainable  development.
Fourth, access to capital is one of the major constraints to Private Sector development and growth in Guyana. The reality is that access will continue to be a fundamental issue until other structural and institutional arrangements are simultaneously addressed.
Fifth, a fundamental ethnic imbalance structurally exists in the Guyanese business community. Amerindian and African Guyanese play no significant role in the economy for many historical and political reasons.
Key to re-engineering itself is the creation of its own holistic growth vision.Over the last 30 years, the Private Sector in Guyana has had to operate within the frameworks of the Economic Recovery Program (ERP); the Poverty Reduction Strategy Paper (PRSP); the National Development Strategy (NDS); the Low Carbon Development Strategy (LCDS) and the Competitiveness Strategy (CS).
In all of the above referenced Government driven plans, the Private Sector has played second or third fiddle. The NDS, for example, the plan with the most direct involvement of the Private Sector, there has been no concerted effort by the Private Sector to ensure it was implemented. Rather there has been opportunistic strategies employed by several large companies to entrench their monopolistic tendencies. The Guyana 21 Plan which was a blueprint for sustainable national development was an integral part of the NDS and would have transformed Guyana and the private Sector. It would have made Guyana the Singapore of Latin America serving the huge 200 million plus Brazilian market primarily through a road and freight railway services to Brazilian companies; a deep water harbour; an expanded airport located away from the current limitations of the current airport, a free enterprise zone; several bridges strategically located across Guyana to provide the necessary infrastructure for sustainable growth and which would have opened up much more productive agricultural lands to make Guyana the breadbasket of the Caribbean. Recently Brazil, as a member of BRICS, is now engaged in establishing a BRICS
Key to the Private Sector becoming the “engine of growth “is a significant improvement in national competitiveness. Guyana’s National Competitiveness Strategy has three essential components: core policies, sector policies and policies targeting strategic sub-sectors of activity. The core policies are geared towards improving competitiveness across most sectors of the economy to generate a business-friendly investment climate. Yet, Guyana has been bleeding human capital which is the single greatest issues associated with competitiveness
The Private Sector has to become more proactive in creating national development. Climate change is a serious threat. The invasion of Guyana by economic citizens also has to be factored in. The Guyanese Private Sector has to pursue different strategies from the past. It can immediately seek to do six important actions.
The first is its internalization of the Low Carbon Development Strategy and the development of strategies by leading Guyanese companies to lead the charge in these sectors and to be the drivers of export diversification.
Secondly, the Private Sector has to develop a process within which they can work with the Government of Guyana to reconcile and integrate the LCDS development pathway of 2008 with the National Development Strategy (NDS) of 2006.
The second challenge is the need for the Private Sector to become the “engine of growth” in Guyana. To do so, the Private Sector must focus on (1) product and export diversification (2) innovation and entrepreneurship (3) adopting new modern technologies to achieve competitive advantage, and (4) visioning and seeing CSME partnerships and the need for clusters as necessary prerequisites for global competitiveness. For innovation and the introduction of more technology, STEM or Science, Technology, Engineering and Mathematics are the foundation. This means there is a need for a different alignment of these topics in the school system and more Private Sector government dialogue in these areas.
Guyana’s LCDS is also about global warming, climate change mitigation and adaptation. This is the second goal and Guyana is pursuing this goal using REDD+ to prove its LCDS model to the world. One of the seventeen projects is the Cunha Rehabilitation Project Climate which will help to address flooding. (Appendix A). Climate change is a major threat to Guyana’s development as Guyana is very vulnerable to flooding and extreme weather patterns. Georgetown, the capitol of Guyana, is located 2 meters beneath the sea level of the Atlantic Ocean. In 2005, for example, Guyana lost approximately 60% of is GDP because of heavy rainfall which flooded Georgetown and the East Coast.The Caribbean Climate Change Community Center has also projected severe impacts on Guyana and Caribbean islands in the next 30 years .Guyana’s exposure to climate change is therefore a very significant risk to its development, brown or green, if this exposure to floods is not scientifically and politically well managed.
CSME
To this noble task, let us now unreservedly, commit our Party and ourselves”.For example, the Caribbean Single Market and Economy (CSME), the flagship of the Caribbean Community, will create a single economic space which will allow for the more efficient utilization of regional resources and provide access to a market of over 14 million consumers. It will also encourage international standards of production, enforced by the Caribbean Regional Organization for Standards and Quality. In time, Guyana will have increased access to capital, skills, and other inputs from across the region and the strengthening of the legal framework to facilitate the pooling of CARICOM resources will enable Guyana and all the Community to be more effective in international negotiations. This environment will provide the platform to enable Guyana and all the Community to integrate effectively and competitively with the rest of the global economy through creating the conditions to enable our goods and services to compete and win in both intra-regional and extra-regional markets.2
Companies in Guyana need to become more focused on export and product diversification. To do this Guyana, it must focus on (1) product and export diversification (2) innovation and entrepreneurship (3) adopting new modern technologies to achieve competitive advantage, and (4) visioning and seeing itself as a CSME businesses.
The Private Sector in Guyana has to look at itself in a mirror and become part of the solution.
Eric Phillips

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