Economist calls for loans with better interest rates for local companies to create competitiveness

May 03, 2022 News

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– says current stance goes against local content law

By Renay Sambach

Kaieteur News – In 2021, Guyana passed its local content legislation, which caters for locals getting first preference in the country’s oil and gas sector.

The Local Content law is intended to regulate the way companies operate in Guyana’s oil and gas sector; employ persons, buy services and the way that they procure goods.
However, local companies accessing loans from the banking sector with reasonable interest rate have been hindering their competitiveness in the oil and gas sector.
In order to fully recognise the benefits that will accrue from local content, Richard Rambarran, local economist and executive member of the Georgetown Chambers of Commerce and Industry (GCCI), recently stated that local companies need better and cheaper access to finance to create competitiveness in the oil and gas industry. He also stated that he believes the current stance goes against the local content law.
Rambarran’s remarks were forthcoming while he was a guest on Kaieteur Radio’s, Guyana’s Oil and You programme, which focused on the topic, “Key mechanisms for maximizing our oil economy.”
In fact, he stated that the aforementioned needs to be done, in order to create a level playing field among companies vying in Guyana’s oil and gas sector.
When questioned on GCCI’s stance on the issue of local companies’ access to loans with reasonable interest rates from the banking sector. Rambarran responded by stating that the issue is of grave importance and more light needs to be shed on it.
“We have discussed in the chamber of commerce, and I will say this because it’s something that we feel very strongly about, we have discussed that there cannot be a successful local content regime that helps to lift the standards of MSMEs [Micro Small Medium Enterprises] in Guyana, without improvement to access the finance for those same MSMEs,” he added.
In giving his reason, the economist stated that in order to gain entry into the sector, the person must have to bring something to the table. He stated whether it be logistical construct, administrative framework, landscape knowledge or something else.
However, Rambarran added that when it comes to the technical work of the oil and gas sector or other types of work to support the oil and gas industry, a Guyanese would need access to finance, but more importantly access to cheap finance. He highlighted that the aforementioned will help Guyanese be more competitive in the sector.
“It is no small secret that Guyana is by virtue of the prevailing conditions, not as competitive as some other countries,” he said. Rambarran then explained that it is for that reason that in 2006, the National Competitiveness Council and other institutions that helped to drive the competitiveness of the economy were created.
He reiterated that access to finance has been one of those bugbears to the local private sector that has really restricted the competitiveness.
Rambarran added, “To answer the question very cleanly or very bluntly, there cannot be absolute success of the local content legislation without cheap and better access to finance. It is just something that absolutely has to occur.”
According to him, if that does not happen, Guyana runs the risk of the local private sector being unable to compete with regional and international counterparts.
The economist listed several measures that would help bridge the gap. He believes, for instance, that there must be financial sector development, financial expansion, financial deepening, more institutions, more complex instruments being offered and instruments that cater for what is happening within the modern development of Guyana.
He also called for a revision of the schedule guidelines that the Bank of Guyana (BOG) issues.
“Think about the interest rate, for example, that an enterprise here would have to face here versus an enterprise, maybe let’s take Trinidad, versus an enterprise in Trinidad,” he explained.
Rambarran added that the difference in differential alone in the interest rate and the nominal amount that will accrue from the differential in the interest rate alone is enough to wipe out profitability for a local company – which in turn will render the local company uncompetitive.
In closing, Rambarran stated that there is need for improvement, and he highlighted that based on his assessment, it does go against the spirit and intent of local content.
As such, he said, “So it is something that needs to evolve and evolve rapidly if we are to have full recognition of the benefits that will accrue.”

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