An accommodating business environment is one that encourages business efficiency and incentivizes innovativeness and increased productivity, two key sustainable development factors. A more productive private sector is a more competitive private sector and in the long-term will create more jobs and generate more tax revenues, allowing for increased public expenditure in health, education, security, maintenance of infrastructure and other critical services. On the other hand, a deprived business environment inhibits the conduct of legal business activities and reduces the likelihood of a country reaching its economic potential in terms of productivity, growth and development.
Recent years have seen a notable effort to reform the local business environment. Notwithstanding the complex interrelated factors that shape this environment, Government recognizes the need to remove constraining factors and bolster positive ones in order to boost private sector development at all levels.
This article therefore seeks to identify the major challenges faced by the business sector and to highlight the key reform measures being undertaken by the Ministry of Business which are deemed compulsory for the creation of an accommodating business environment.
Open markets permit firms to develop, enhance standards and import relatively cheaper raw materials and supplies. Furthermore, trading across borders also forces firms to interact with customs services and trade regulations, obtain import and export licences and organize transport services.
Prior to 2015, the processing of import and export licences by the Ministry of Business took an average of two days. Today this process is completed within twenty–four hours due to efficiency improvements at the Ministry. But this is only the beginning.
Following its own analysis of the World Bank’s Doing Business Reports in the area of Trading Across Borders, the Ministry of Business is placing significant emphasis on the design and implementation of an Electronic Single Window (ESW) platform for trade transactions in Guyana. This project, upon completion, will revolutionize Guyana’s trade transactions by enabling a trader to make a single online submission and have all the necessary “paperwork” automated within minutes, for final retrieval and/or clearing at the wharf.
The Ministry is excited about the progress thus far to make ESW a reality in Guyana. The source of funding has already been identified and Guyana is currently collaborating with the Inter-American Development Bank to complete preparatory work. (The Single Windows System was covered in the May 11, 2018 SN article)
Guyana’s large informal business sector poses a serious threat to its formal private sector, through unfair competition at all levels. While data on informal businesses is not widely available, the Ministry has recognized that geographical disparities in the provision of Government services in Guyana may be contributing to the problem, by making it difficult for businesses in certain regions to conform with legal requirements.
As such, the Ministry established two business registration hubs in Lethem and Mahdia in 2017, and will seek to establish an additional four in 2018. This allows businesses of all sizes to register with the Commercial Registry each year in a timely and cost effective manner and thereafter operate legitimately. The impact of this initiative is best appreciated when one considers that for decades, the only option for businesses in Regions 8 and 9 to get registered was to travel all the way to Linden or the Essequibo Coast respectively, make an application, pay a fee, return home and then travel there again one week later to complete the transaction.
Business confidence in the local economy is an area around which there has been considerable speculation. The Ministry of Business has even been asked about intended solutions to address the reported loss of business confidence as suggested anecdotally. While careful analysis of data on relevant indicators does not support these suggestions, the Ministry believes it is important for Government to understand the mood of the local business community and has conceptualized a Business Confidence Index (BCI) which will assess the level of optimism or pessimism that business managers feel about their businesses’ prospects in the prevailing economy. A report on the index will be produced annually and will form the basis for other business environment reforms.
One of the major obstacles to the growth and development of the business sector in Guyana, is the difficulty in accessing finance for new or expansion projects or for bridging loans to sustain operations over short periods. Part of the issue relates to limited risk assessment systems being used by financial institutions. This was partly addressed in 2016 when the Government supported the use of credit reporting in Guyana through an amendment to the Credit Reporting Act which authorized banks to share credit information with a credit bureau without customer consent and mandated them to do.
Further, the Ministry of Business in collaboration with the Inter-American Development Bank and Ministry of Legal Affairs, is developing a Secured Transaction Regime (covered in April 27, 2018 SN article) which would also help to create a favourable credit environment.
While these reform measures are just a small part of the plans and work of the Ministry of Business, the Ministry remains committed to the creation of an efficient and accommodating business environment and this is articulated in our 5-year strategic plan (http://www.business.gov.gy/downloads/). It will continue to engage businesses, large and small, to promote inclusive and sustainable growth within the context of Guyana’s Green State Development Strategy.