Guyana Observer News

Inadequate enforcement of laws stymie foreign investment in Guyana : US Report

Tuesday, 17 August 2010

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The United States has found that the Government of Guyana publicly encourages foreign direct investment and has a strong track record of attracting government-to-government development assistance but attracting private sector investment is poor. This is according to the latest Economic and Commercial Newsletter published which has stated that recent developments, however, could lead to large investments in coming years in the hydroelectric and petroleum sectors. The report notes that while sufficient legislation exists in Guyana to enable foreign investment in the country, its implementation and enforcement is often inadequate. It is pointed out that where legislation does exist, the lack of regulations generally inhibits their effective implementation.

“An ongoing U.S. Millennium Challenge Corporation Threshold programme seeks to improve fiscal management through VAT collection and streamlined business registration.”
The report drew reference to the World Bank and International Finance Corporation Report “Doing Business 2010” ranked Guyana 101 out of 183 countries.
It is said that the indicators that were used to compute Guyana’s overall ranking were starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.
As an example, the process to start a business in Guyana is challenging…An entrepreneur can expect to go through eight procedures requiring an average of 34 working days total in order to launch a business…Similarly, the time to build a warehouse involves 11 procedures (including obtaining licenses and permits, completing required notifications and inspections, and obtaining utility connections) and 133 days.”
It is pointed out that to enforce a contract some 36 procedures are required with an expected timeline of 581 days to complete the process.
The Economic Review of the US which is published by the US Embassy said that in assessing Guyana’s competitiveness, the 2009 World Economic Forum publication, “The Global Competitiveness Report 2009 to 2010” ranked Guyana 104 out of 133.
It said that the report, “identified the following as the most problematic factors for doing business in Guyana: tax rates, crime and theft, corruption, poor work ethic in national labour force, access to financing, inadequately educated workforce, tax regulations, inefficient government bureaucracy, inadequate supply of infrastructure, inflation, policy stability, government instability, foreign currency regulations, poor public health and restrictive labour regulations.”
Guyana’s economy is listed as 48.4 percent free, according to The Heritage Foundation publication “2010 Index of Economic Freedom”, which makes Guyana the world’s 153rd freest economy out of 179 countries.
Guyana is also ranked 27th freest economy out of 29 countries in the South and Central America/Caribbean region where countries average 59.7 percent, and its overall score is well below the global average of 59.4 percent.
Guyana does not rank strongly in any of the 10 categories of economic freedom and is slightly above the world average only in labour freedom and monetary freedom.
The reports state that Guyana’s average economic growth over the past five years has been only about three percent.
“Guyanese face substantial constraints on their overall economic freedom…Property rights are protected only erratically under a weak rule of law, and corruption is a problem in all areas of government…According to the Heritage Foundation the biggest barrier to development is “Guyana’s oversized government, with expenditures exceeding half of GDP.”
The report says that significant restrictions on foreign investment have been addressed only marginally, and these restrictions, combined with an inefficient bureaucracy, substantially undermine the entrepreneurial environment.

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