Private-sector investment in Guyana low-IDB

Apr 23, 2019 News

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By Kiana Wilburg
When compared with the rest of the region, the Inter-American Development Bank (IDB) has found that private sector investment levels in Guyana are relatively low. In fact, the IDB pointed out that private investment as a share of GDP is 8.3 percent, compared to the Latin America and the Caribbean regional average of 16 percent.
The financial institution made this known in one of its latest reports titled, “Country Infrastructure Briefs: Caribbean Region.”
The document was prepared by several consultants. They include Elton Bollers, Zubin Deyal, Victor Gauto, Kimberly Waithe, and Allan Wright.
Speaking to the challenges affecting private sector investment, the Bank said, “The infrastructure stock is inadequate to support delivery of public services or facilitate private sector growth. The country’s transportation infrastructure (roads, airports and seaports) requires substantial improvements to support the growth of the private sector.”
It continued, “The energy sector also hinders private sector development. Guyanese firms report high energy costs as a major obstacle to business operations (Compete Caribbean, 2014).
In fact, in the World Bank’s 2019 Doing Business report, Guyana’s rank dropped from 126th to 134th, mainly due to a significant decline in the score for electricity…”
The Bank also noted that Guyana underperforms relative to countries in the region on telecommunications as measured by United Nations technology indices. Elaborating further on the telecommunication woes in Guyana, the Bank said, “The government faces important challenges to incorporating telecommunications into its public administration.
In 2018, the United Nations e-Government Development Index (EGDI) ranked Guyana 124th out of 193 countries, placing it in the ‘Middle EGDI’20 group. Additionally, Guyana ranks 140th on the United Nations e-participation index (EPI), which measures citizens’ engagement through information technologies in policy and decision-making, highlighting limitations in promoting access and inclusion.”
The IDB added, “This places the country in the ‘Middle EPI’ group. The public sector’s low productivity is in large part explained by relatively low automation, meaning that civil servants still work predominantly with paper documents and files, which hinders transparency and accountability and contributes to inefficiency.”
The financial institution posited that it is therefore not surprising that business persons’ perception of government efficiency is more negative than the average for commodity-exporting small economies.
While productivity-enhancing developments such as roads, logistics, and energy are delayed, the IDB said that the private sector will continue to face uncertainties that are detrimental to investment and job creation.
In this regard, the IDB said that one of the areas of greatest priority is improving the energy sector by expanding the distribution of electricity, improving the quality of service, and moving away from relatively costly heavy fuels towards cleaner resources such as natural gas and renewable sources of energy.
It said that efficiency improvements could contribute to reducing the relative cost of electricity in the long term, which would significantly contribute to enhancing private sector competitiveness.
In the energy sector, the Bank noted that the government has articulated its objectives in the “Update of the Study on System Expansion of the Generation System 2018,” which models growing electricity demand and proposes several options to fill that demand based on natural gas and renewable sources of energy.
Further to this, the Bank said, “Guyana is committed to environmentally sustainable economic growth, and the recent discovery of petroleum reserves has allowed for the possibility of continuing to use and improve its electrical transmission system during the transition to cheaper and cleaner sources such as natural gas and before phasing in renewable energy options…”
RECOMMENDATIONS
Going forward, the IDB made several recommendations which it believes would lend to boosting private sector investment levels.
With respect to the energy sector, the IDB called for the diversification of the energy matrix while noting the government’s intention to shift power generation from heavy fuels-based sources, potentially towards natural gas and renewable sources of energy such as mini hydroelectricity, biomass, wind and solar sources, to supply electricity in the most economical and reliable way.
The IDB said, too, that there needs to be an increase in private sector participation in the energy sector. It stressed that transparent and publicly available guidelines for the development of open tenders to encourage private sector participation are needed to set the path for optimal and economical expansion of the generation system in Guyana.
Along this line, the Bank called for the establishment of policies to ensure sustainable electricity provision in rural Guyana to foster development in interior communities.
With respect to water and sanitation, the Bank made it pellucid that there needs to be a strengthening of the Guyana Water Incorporated (GWI) to reduce its reliance on government support and improve information availability and quality.
It said that ongoing support to GWI’s route towards self-sustainability, through efficiency improvement, consolidation of the governance structure of the sector, and expansion of the potable water supply as well as wastewater collection and treatment should continue.
Further to this, the IDB said that supporting Guyana’s access to climate financing to improve drainage infrastructure is needed.
On this front, the Bank noted that climate change has impacted the coastline drainage system, which has aged and has become unreliable.
“Hence, policy intervention in the drainage sector should focus on supporting the Government in accessing climate financing for resilient infrastructure (e.g., sea defense), increasing knowledge through means such as a geo-referenced asset database to guide maintenance activities, and modelling of the surface and underground water systems.”

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