Mr. Chairman,

I wish to thank the Small Business International Institute of Morris Brown College for inviting me to participate in this forum in which the topic of trade and investment in the Caribbean region is being discussed.

What I propose to do in my presentation is to give you an idea of the opportunities that exist for investment, and for the expansion of small businesses in Guyana. I will also outline the prospects that are present for persons and business organizations wishing to participate in existing trade opportunities in the country.

Economic Background

For the benefit of those who have not yet managed to do much research on Guyana, I must take you on a brief tour of the country. Guyana is a country of 83,000 square miles and has a population of just about 750,000, made up of the descendants of people of Africa, India, China, Europe and the original Amerindian people. Roughly 90 percent of our people live along a narrow, low coastal strip of rich agricultural land bordering the Atlantic ocean. Almost 80 percent of our higher interior territory is covered with rich tropical rain forests in which are located scattered villages of Amerindians who make up roughly 5 percent of our people. This interior is highly underdeveloped and communication is very difficult due to an almost total absence of all-weather roads. Over the past five years, however, foreign firms have been granted lucrative mining and lumber concessions in that area which is extremely rich in natural resources.

Guyana's economy depends mainly on agriculture and mining. Sugar and rice are responsible for roughly half of our export earnings. Bauxite production, even though it has declined over the past twenty years, also plays an important role in the economy. Of late, gold production has taken on great prominence. Hardwood furniture, lumber, tropical fruits and vegetables and also fish and shrimp have been finding more and more markets in the Caribbean and North America. The country's unspoiled tropical rain forests and magnificent rivers and waterfalls have boosted eco-tourism, and the tourism sector, while still small, is showing steady progress.

What does the economy look like? Guyana operates under a totally free-market economy. Since 1991, there has been a steady upturn and growth rates have averaged more than 6 percent annually since then. During 1994, the real GDP grew by 8 percent, in 1995 by just over 6.5 percent, and so far for this year it is at 6.1 percent. This admirable performance was the result of a combination of factors including the progress made in the restoration of the infrastructure and the productive capacities of key industries such as rice, gold, lumber and sugar, and also in the construction sector where substantial investments enabled expansion in output and exports.

Wages and salaries for public sector employees were 30 percent higher in 1993 than at the end of 1992. Increases were given in 1994, 1995 and also this year. Nevertheless, the problem of low salaries remains as one of our major setbacks.

Incentives for the Private Sector

In Guyana, there is the forging of a definite relationship between the business community and the Government with the aim of improving the living conditions of the people.

At present, too, the Government is developing an environment to honor its commitment of having the private sector as the main engine of growth. Since 1992 several legislative enactments including the new Companies Act have been brought into force. These have made it easier for companies to expand their capital base and have facilitated the transfer of public shares to the private sector. In addition, the Government zero rated consumption tax on key machinery equipment and material in the productive and construction sectors.

In addition, the licensing regime has been liberalized; there is a free market in foreign currency; and price controls have been removed. The Government is working along with the World Bank to standardize future investment incentives; the labor market is competitive and there is a stable political climate. To facilitate the foreign investors, an investment unit known as the Guyana Office for Investment (GO-INVEST) was created in September 1994. This body advises the foreign investors on business opportunities, answers queries, and facilitates the setting up of enterprises.

The private sector is expressing growing confidence in the investment policy of the Government. In 1995, two private commercial banks were established, and the local private sector has invested over US$120 million in various economic sectors. Much of this is in the areas of agriculture, notably rice, and also in transportation, construction and services. Many Guyanese living outside of Guyana have invested relatively heavily in these areas.

Encouragement to Small Businesses

Much of the local investment is concentrated in small businesses. Let me deal with this aspect. Small enterprises in Guyana are generally owner-managed, employing between 1 - 25 persons. They utilize less than 4,000 square feet of manufacturing space, and less than 10 acres of agricultural land. On average, they have annual sales of less than $5.5 million per annum (US$39,000). Their average investment in equipment is less than $3.5 million (about US$25,000). Historically, activities of such scale encounter a multitude of problems among which micro-financing, infrastructure and incentives feature prominently.

The Government of Guyana, in recognizing the pivotal role that small businesses can play in the nation's development thrust, has been addressing the major hindrances with a view toward assisting small enterprise development. In this regard, it has recently established a committee to advise on policy formulation for small enterprise development. This committee comprises leading private sector businessmen, NGOs, financial institutions and government functionaries.

Additionally, the Government has been giving substantial support, both financial and technical, to the Institute of Private Enterprise Development (IPED) which specializes in providing financial, technical and managerial support services through training and counseling to small enterprises.


Let me expand a little on the role of the Institute of Private Enterprise Development in encouraging small businesses in Guyana.

The Institute of Private Enterprise Development (IPED), developed through the initiative of the private sector, has been enjoying great successes. Since its establishment a few short years ago, it has helped to create over 7,000 small business entrepreneurs and about 25,000 jobs.

Last year the Institute financed 3,029 projects valued at G$611 million. Small businesses accounted for 1,011 projects valued G$506 million and the micro-business sector for 3,029 projects valued at G$104 million. The bulk of the loans went to the agricultural sector, G$478 million, but general manufacturing, G$52 million, and mechanical engineering and other workshops and related service activities, G$80 million, also benefitted.

The Institute has received funds from the USAID/PL 480 program, the Canadian High Commission, the British High Commission, the Inter-American Development Bank and the European Investment Bank. By last year, the Institute had become self-supporting and made a surplus of G$83, up from G$58 million the previous year. As part of its services, it also provides borrowers with training in managerial, accounting and other areas.

The micro sector is of particular interest. The principle involved in this sector is that the grassroots entrepreneurs band themselves into groups of five and cross-guarantee each other to acquire loans from the Institute. The sector is strictly monitored and the Institute's counselors spend a major part of their time in assisting and supervising these entrepreneurs. This is worth the effort since it helps people from the grassroots to develop their business acumen and become self-supporting entrepreneurs of their communities. Some of these entrepreneurs have advanced to medium-sized businesses employing 20-30 persons, some of which export to CARICOM and elsewhere. This is exactly the kind of enterprising spirit Guyana needs - the nurturing of a positive attitude that Guyanese can develop themselves instead of continually relying on foreign assistance.

Incentives for Small Businesses

Coupling onto the work of the Institute for Private Enterprise Development, the Government has been instrumental in getting the Bank of Nova Scotia to establish a scheme through which small entrepreneurs can access finance (up to $0.5 million) without collateral. Two other banks have also recently established schemes aimed at providing export financing to small enterprises.

The Government has also restructured its fiscal incentive regime to support small businesses. No longer is an investor required to submit a detailed project proposal in order to qualify for tax exemptions of essential machinery, equipment and raw materials. These are now granted across the board to all categories of productive activities. Despite this, small businesses still encounter problems with the incentive regime as there still exist administrative bottlenecks within the administering regime.

The Government has also been addressing the areas of training and development of the infrastructure to support small enterprises. Special industrial parks are being established to provide developed lands at affordable rates. Further, areas cited as depressed economic zones enjoy a particular regime which is beneficial to the small investors.

Assistance has also been provided by the Government in areas of training for small enterprises, harnessing international support where necessary. For example, specialized seminars with assistance from international agencies are conducted from time to time.

It is interesting to note that recent estimates suggest that small enterprises have generated approximately $1.6 billion in assets within recent years.

Available Preferential Trade Arrangements

But all is not rosy for the investor in Guyana. While the Guyana Government actively encourages investment in the country, it recognizes that the requirements of infrastructure must be met, and continuously strives, in conjunction with international financial institutions, to upgrade the roads, water and power supplies which are needed. At present, projects to upgrade these areas of infrastructure are already in operation. At least two new industrial sites are also being prepared to accommodate new productive enterprises.

Telecommunications services, which have been privatized, have expanded over recent years. Seaport and airport facilities are also currently being upgraded.

The Government of Guyana is actively encouraging businesses which are geared particularly toward the export market to take advantage of the preferential trade arrangements of which it is a beneficiary.

As a Caribbean Basin Initiative country, as a CARIBCAN beneficiary (CARIBCAN is a CARICOM-Canada agreement which provides preferential treatment for certain products from CARICOM exported to Canada), and as an ACP signatory of the Lome Convention, Guyana enjoys duty-free access to the US, Canadian and European Community markets for a wide range of its exports.

In addition, under an agreement between Guyana and Venezuela, and a multilateral agreement between Venezuela and CARICOM, Guyana has a special relationship with neighboring Venezuela in the areas of trade and investment.

The Government of Guyana is moving ahead with the privatization of a number of State-owned companies. Foreign investors are invited to examine Guyana's privatization proposals and be part of the process, either as independent purchasers or as partners with the local private sector.

The country's development and investment thrust is also focused on the policy of sustainable development of its natural resources. Guyana recognizes that greater use of its natural resources could serve to generate increased foreign exchange earnings and assist in greater real growth in the economy. As a consequence, the establishment of industries which exploit and develop our natural resources is particularly encouraged. It must be emphasized, however, that exploitation of Guyana's natural resources should be done in accordance with principles of sustainability so as to provide guaranteed access to these resources and, at the same time, maximum protection of the environment. It must be done in accordance with the nation's Environment Action Plan.

Foreign investors are urged to seek out the business opportunities that are present in Guyana and to participate in them for the mutual benefit of both themselves and the Guyanese people.

Thank you.