Is Guyana’s manufacturing sector dying? Pt 8…Opposition Leader recommends energy concessions, special tax rates to help locals

Aug 25, 2016 News

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To improve the competitiveness of local manufacturers, former President and Leader of the Opposition, Bharrat Jagdeo suggests that energy concessions and special tax rates should be implemented.

Jagdeo made this remark yesterday during a press conference at his party’s headquarters. He was asked to comment on the state of the economy, where local traders are importing manufactured commodities which can be made in Guyana.
According to Jagdeo, the manufacturing sector in Guyana is at a severe disadvantage. He said that the cost attached to production is one of the major challenges facing entrepreneurs. Cost relating to electricity supply to factories, particularly, was pointed out by the politician.
He said that during his party’s tenure it had attempted to bring the cost down for electricity through the implementation of hydropower-derived electricity. Jagdeo said that for years he had been trying to find out the subsidy scheme as it relates to power supply employed by Trinidad and Tobago and Suriname.
The wisdom behind this approach, he explained, was having cognizance of the fact that Guyana shares the same market with its Regional counterparts. He said that his government had realised that in those countries the electricity is heavily subsidised.
This, Jagdeo said, places Guyanese manufacturers at a severe disadvantage in what is to be a Common Single Market and Economy (CSME) since Guyanese cannot compete regionally. This is so since the cost per unit sold by a Guyanese would be higher.
The former Head of State said that the government of Trinidad and Tobago had admitted last year to offering subsidies to its local manufacturers. He stressed the point that this is a more significant issue which needs to be addressed, rather than the current administration trying to comply with a provision under the Revised Treaty of Chaguaramas (RTC)’s Common External Tariff (CET). The provision Jagdeo referenced stipulates that certain items, particularly raw materials, imported by manufacturers are now subjected to being taxed.
Jagdeo said that incentives are important and as such, duty free concessions would play a big role in cutting costs. However the implementation of the CET, he said will reduce the impact of concessions.
On a previous occasion, Jagdeo had said that his party allowed tax exemptions on these items using the Customs Act. According to him, doing so was not a breach of the Treaty, but simply an application of domestic law for the benefit of local manufacturers.
This was done so as to process the necessary inputs into the sector. Jagdeo took the position that if Guyana is being asked to comply with the list of ineligibles as highlighted in the RTC, then the other member states of CARICOM should justify the subsidies which they grant their manufacturers. He posited that for full compliance to be promoted, then it must come as a whole and not partially.
The Guyana Manufacturing and Services Association (GMSA) had said that the imposition of tax on ineligibles will result in manufacturers paying more for imported raw materials. This will inevitably lead to consumers paying higher prices for certain commodities, thereby reducing their competitiveness in the market.
Jagdeo said yesterday that Guyana will never be one of the large manufacturing nations of the world, but insisted that creative ways must be found to deal with the issue. He believes that Minister of Business Dominic Gaskin should use the opportunity now to open up a full debate on the matter, recognizing that persons will take various positions on the issue.
He went a step further to mention freight and Information Communication Technology (ICT) as other issues which need to be considered regarding the exportation of products as well as increasing productivity.
He said that emphasis on ICT will address the issue of training. Jagdeo reminded that the Board of Industrial Training had embarked on a programme to produce more skilled people.
Further on his list of suggestions, Jagdeo also argued that granting special tax rates can encourage competitive manufacturing. He admitted that taking this step would see the coalition government going a step further than his administration.
According to him, this special tax rate would be given to persons who produce similar items locally which are currently being imported.
A recent article published by this newspaper revealed that certain traders are importing rice from Pakistan, Roti from Suriname, Sweet Tamarind, Coconut water and Tamarind Candy Balls from Thailand, Plantain Chips from Jamaica and Cane Juice from Canada. All of these commodities are native to Guyana.

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