Although the performance of local firms in Guyana, as measured by sales growth, is the highest in the Caribbean, power outages cost them more than their counterparts in the region, while the percentage paid in bribery is also the highest in the region, a new Inter-American Development Bank (IDB) study has found.
The study, titled “Constraints Affecting Guyana’s Private Sector: Survey Results,” was uthored by Guyanese economist Sukrishnalall Pasha, along with Elton Bollers and Mark Wenner of the IDB, who found that not only does it take longer for firms to access an electrical connection compared to their counterparts in the region (104 days compared to an the average of 62 days) but local firms also are subjected to more power outages, with longer durations.
Additionally, the study said that while only a few firms indicated that they were expected to pay a bribe for various government services, those who said they did estimated the cost as 4% of their annual sales figure.
This percentage is “significantly higher than the regional average of 1.8 % and the highest in the Caribbean,” the report explains. It notes that the cost of bribes is relatively higher for businesses in sectors such as machinery and equipment (25 % of annual sales), fabricated metal products (11.7% of annual sales), and wholesale (10 % of annual sales)
The services to which bribes were attached included securing an operating licence, electrical connection, telephone connection, import licence, water connection, and construction permit.
Specifically, 1.9% of firms reported that they were expected to pay a bribe to obtain an operating licence; 1.7% for an electrical connection; 1.7% for a telephone connection; 1.7% for an import licence; 0.8% for a water connection; and 0.8% for a construction permit. Based on the survey, approximately 6.7% of the firms indicated they were expected to pay a bribe to obtain the contract, while 3.3% claimed they were expected to pay a bribe to tax officers.
Significantly, though few identified as having paid bribes themselves, 34.45% of firms said they viewed corruption as a major obstacle, while 43.7% considered it a very severe obstacle.
Additionally, local tax rates were ranked by local firms as a significant obstacle to their operations. The report posits that this is due to Guyana having one of the highest corporate tax rates in Latin America and the Caribbean and it notes that some studies have found that the high tax rates motivate businesses to operate in the informal sector.
Unlike with the supply of power and corruption, there is no comparison presented of the tax rates in various Caribbean countries nor is there a comparison of the impact of tax rates as a constraint.
Data for the study was sourced from the 2014 IDB Study of Productivity, Technology and Innovation (PROTEqIN) in the Caribbean.
The PROTEqIN survey targeted 1,680 respondents drawn from Latin American and Caribbean Enterprise Surveys (LACES) 2011. It aimed to provide feedback from enterprises that participated in the previous round of surveys in 2011 and to capture additional information on firm performance, finance, gender of ownership and management, use of productive development programmes, and issues related to management style, innovation, and crime.
However, some of the Guyanese enterprises in the PROTEqIN final sample were not canvassed for LACES 2011.