Frequent blackouts, political crisis, major obstacles to doing business in Guyana – IDB report 

May 18, 2023 News

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Kaieteur News – The unstable political climate and unreliable power supply are seen as the major obstacles to doing business in Guyana, the Inter-American Development Bank said in its Caribbean Economics Quarterly review titled: “Caribbean Economics Quarterly.”

For years Guyanese have struggled with frequent power outages and despite billions of dollars in investments at the Guyana Power and Light (GPL) nothing has changed. The government has embarked on an ambitious gas-to-energy project, which Vice President Bharrat Jagdeo said will solve the electricity woes. Yet to date no financial and/or any feasibility study for this project, which involves approximately 25km of on-shore pipeline, has been provided to the nation despite repeated requests for the same. Budget documents indicate the government is looking to borrow from the US Exim Bank GY$134 billion (US$646 million) for the project, raising further concerns about the country’s debt record.

Only recently the Public Utilities Commission (PUC) reported that  GPL has continuously failed to achieve majority of its Operating Standards and Performance Targets (OSPTs) – despite those targets being way below industry norms and ‘nearly met’ the other targets.  According to the document seen by this publication, PUC Order 1 of 2023 which is a review of GPL’s performance in 2022, painted the agency in a grim light for only achieving four of the eight standards and targets.

For System Average Interruption Frequency Index (SAIFI), the Commission stated that this standard is to limit the average number of outages which consumers received during the reporting year. For the year 2022, the target was set at 90 outages. GPL failed this standard as it was revealed that for last year there were a total of 94 outages.

It was explained that from data collected by the company, it was revealed that the main reason for the high number of customer outages, were as a result of feeder and transmission line trips and increased planned maintenance. As it relates to the System Average Interruption Duration Index (SAIDI), the intent of this standard is to limit the duration of outages experienced by consumers during the year. For the year 2022, the target set was 95 hours; however, the average duration of outages experienced by consumers during the year was 96 hours. As such, this standard was not met by GPL.

Top six obstacles

Meanwhile, according to the IDB review in Guyana, the top six obstacles to doing business were electricity, tax rates, skilled labour, collateral requirements for loans, interest rates on loans, and customs and trade regulations.  The bank said a  total of 64% of firms cited electricity as either a major or very severe obstacle to doing business, while 47% cited customs and trade regulations. In contrast, for the Caribbean overall, electricity remains a challenge, but not the main one, as 49% of firms identified it as a major or very severe obstacle.

Regionally, the three most significant obstacles were collateral requirements for loans, identified by 63% of surveyed firms, followed by customs and trade regulations (59%), and skilled workers (59%).

“The greatest divergences between Guyana and the region are in the categories of political environment and electricity, which are identified as more serious obstacles in Guyana, while collateral requirements, customs and trade regulations, and labour regulations are reported as more serious obstacles in the region,” the bank stated.

The bank said some obstacles appear to have become more serious recently in Guyana. It said in comparing the survey results between 2014 and 2020, electricity, tax rates, skilled workers, collateral requirements, interest rates, customs and trade, and land have been reported to be major and very severe obstacles by a larger share of surveyed firms. “Electricity continues to be a significant challenge, as it was reported as an obstacle by more than 60% of firms in both surveys. Similarly, there has been little variation across the surveys in the obstacles reported in customs and trade, the political environment, and corruption. However, there has been significant variation in areas such as collateral requirements, land, and skilled workers, with almost 30%
more firms identifying collateral and 20% more firms identifying access to land as an obstacles. This result is not surprising in the context of a booming economy, considering the high levels of

capital inflows,” the IDB reported. The bank noted that increased business opportunities demand higher levels of credit and skilled workers, while at the same time property values have increased, making access to land more difficult.

Internet Connectivity 

In the area of connectivity services, the bank reported that a higher share of firms in Guyana reported having power interruptions, but fewer reported mobile and internet service interruptions compared to the Caribbean average. It said that in 2020, 79% of surveyed firms in Guyana reported experiencing power service interruptions over the last year compared to 70% in the Caribbean. However, only 15% of firms in Guyana reported having mobile phone connection interruptions, compared to 32%, and 40% reported having internet service interruptions compared to 56% in the Caribbean.

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• Bharrat Jagdeo, Caribbean Economics Quarterly, feasibility, Guyana Power and Light (GPL), Inter-American Development Bank

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