-urges review of taxes; incentives for renewable energy initiatives
By Jarryl Bryan
The Guyana Manufacturing and Services Association (GMSA) is warning the government to make current, pressing issues a priority to prevent the economy from faltering and not be side tracked by preparations for the coming oil and gas sector.
Those warnings came from GMSA President Shyam Nokta, who was addressing business leaders and tax officials at the association’s business luncheon on Thursday. While oil is a lucrative natural resource, he noted that more attention and effective policies are needed in Guyana’s more traditional sectors.
According to Nokta, a four to five per cent Gross Domestic Product (GDP) growth rate is possible with the right administrative policies and corporate decisions from the private sector. He noted that this would help with job creation and putting Guyana on a strong economic footing, something the 2017 half year report showed was wanting.
“At the GMSA mid-year dinner, I spoke about our excitement about the potential for oil and gas, but also our concerns with an economy that is slowing and the urgent need to grasp their potential. We need to seek practical measures, so that the economic sectors including manufacturing and services can help drive a return to strong GDP growth.”
In his presentation, Nokta also referred to the resource curse dubbed the “Dutch disease” in his presentation to attendees. The Dutch disease can cause a reduction in the value of other exported commodities and is often blamed on the sudden development of one sector at the expense of others.
“There is much talk about how the imminent oil and gas sector will change everything in our country. That is true and that is precisely why we need to ensure we build all the institutional defences to defend against the well-known economic governance risk that oil and gas could bring.”
“But on the other hand, our economy could falter if we do not remain focus on the broader imperatives of supporting investments and job creation across all our economic sectors. We need to prepare for oil and gas, but we also need to stay the course to ensure other sectors continue to grow.”
Nokta listed some of the issues affecting manufacturers, including an unstable electrical supply; access to finance on reasonable terms; high freight costs and market access. He also called for specific interventions, including incentives and a review of taxes on industries such as forestry, for the 2018 budget.
Guyana Revenue Authority (GRA) Commissioner General Godfrey Statia was among those present and Nokta took the opportunity to refer directly to some of the tax measures also affecting growth and frustrating the business community.
“Measures such as the re-categorizing of zero and standard rated items to exempt VAT on electricity and forest products, among others, have impacted the competitiveness of our members and therefore the economy.”
“We raised these issues with Minister (of Finance, Winston) Jordan and proposed some measures. When budget 2018 is announced, we hope to see progress on priorities such as the removal of VAT on electricity, water, education, targeted assistance for struggling sectors such as forestry through the removal of VAT on forest products.”
He also called for consolidated facilities for wood products and agro products, in line with the Public Private Partnership (PPP) model. He also called for investments into renewable energy to be incentivised.
According to Nokta, manufactured products should also be given a larger share in public tenders; as well as stricter adherence to laws which ensured small businesses got at least 20 per cent in public spending when their products and supplies are procured.
Half year report
The Ministry of Finance’s half year report was released in July of this year. It had showed contractions in certain sectors, when compared to the corresponding period in 2016. The declining sectors had included sugar, livestock, forestry, mining and quarrying and even the bauxite industry.
It showed that sugar production was recorded at 49,606 tonnes at the half year and when compared to 56,645 tonnes during the first half of 2016, represented a decline of 12.4 per cent. The livestock industry also contracted by 10.9 per cent in the first half of 2017, due to heavy rainfall severely affecting production, especially in the second quarter.
The forestry industry also showed an 18.2 per cent contraction in the first six months of 2017, compared to the same period in 2016. Declining production within the forestry industry was due to structural changes in the industry.
The mining and quarrying sector contracted by 4.0 per cent, during the first half of 2017. Gold production fell by 1.7 per cent to 317,096 ounces, in the first half of 2017, compared to the same period in 2016. Also, it showed the bauxite industry declined by 11.5 per cent, as a result of reduced production of higher valued grades.
This was due to poor weather combined with mechanical issues at one of the mines. However, production of metal grade bauxite (MAZ) increased by 97,016 tonnes or 21.3 per cent, the report had stated.