Saturday, Jul 21, 2018
Finance | South America | Guyana

The Push For A Multifaceted Economy

Program of reforms targets economic diversification

2 years ago

Guyana's president is sure that within just five years its economy will look decidedly different to the one it has inherited from colonial times and much less dependent on global commodity prices
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Guyana’s new government is introducing a broad program of economic diversification in order to add value, move away from its primary commodities and avoid over-reliance on its massive oil discovery made in 2014

From eco-tourism to value added production, from boosting small business to developing the agricultural potential of the hinterland, Guyana is now paving the way to greater economic diversification and attracting the investment to do so through a host of new investment incentives and an energetic reform of institutional capacity. It is a call for the world’s investment communities and Guyanese expats to be at the vanguard of a new business culture in the country. The country’s new government is so serious about this that one of its first acts was to create a new Ministry of Business.

President Granger believes that the country’s future depends on its ability to transform and mature the commodity-based economy it has had for the last 100 years. Downstream is the goal and his wide sweeping diversification plan is pinned on the development of the infrastructure, affordable renewable power sources, workforce training and small businesses that will get Guyana there.

For starters, this means more manufacturing, more agro-processing, more sugar by-products and more retail production. Guyana’s new president is sure that within just five years, the economy will look decidedly different than the one it has inherited from colonial times and much less dependent upon global commodity prices.

Minister of Finance Winston Jordan says diversification efforts made over the last decade that have already seen services overtake agriculture as a percentage of GDP. This government intends to build on that progress. “That is our vision as to where we want the economy to go. For too long we have depended on the primary sector. Because we are a primary producer of commodities, our pace of development is affected. Our program over the next five years will focus on diversifying the economy to reduce its vulnerability to external shocks,” he says.

“To do this, we need to get rid of some of the impediments to investment and growth. There are challenges, including the poor state of infrastructure and the high cost of fossil fuels that we use to generate electricity, so one of the sectors that we are mostly immediately looking at is renewable energy. Of course, Guyana has just found oil, and is hoping to begin exploitation of that resource in another three to four years. That will help us finance the diversification we seek.”

The government intends to establish a sovereign wealth fund before oil production comes on line that will use oil revenues to invest in infrastructure. Larger than England and Scotland combined, much of Guyana’s hinterland is still covered in tropical rainforest. President Granger’s administration plans to complete new roads that will not only link Georgetown with Brazil but also connect the hinterland.

“Though the bulk of the population lives on the coast, the wealth of the country is in the hinterland,” explains Minister Jordan. “We have very few water links with the rest of our country. Most of the connections to the hinterland are through rugged passages or by air. The focus now is to construct roads, refurbish airstrips and upgrade river transportation.” These transport links will also allow for the development of mineral resources like gold, diamonds, manganese and bauxite, which are mainly located in the interior. Plans are to complete the Guyanese leg of the Pan-American Highway and to also construct a deep water port that will help the country diversify its trade links with CARICOM, which represents a large market for Guyanese agricultural, as well as with markets to the south.

“Because of our colonial past, we have never really had strong links with South America, even though a giant neighbor sits right on our doorstep. As such, few commercial and trading links were established, but given shifting and evolving trade arrangements and agreements, we have begun to diversify our markets,” says Jordan. “Our fresh approach to governance includes a new focus on economic diplomacy to ensure that Guyana stays on a growth path. We will continue to maintain, strengthen and enhance links with our traditional trading and diplomatic partners, like the United States, UK, Canada, European Union and the Caribbean. However, we will also be looking outward to Central and Latin America and Africa.”

“For too long we have depended on the primary sector. Because we are a primary producer of commodities, our pace of development is affected. Our program over the next five years will focus on diversifying the economy.”

Winston Jordan, Minister of Finance

Investors will also have access to these markets, an additional draw for those considering building manufacturing bases in the country. In order to supply these new manufacturers with affordable energy, the Guyanese government is looking to boost infrastructure in solar and wind farms. It has also identified 100 sites for hydroelectric power development.

These steps, along with institutional strengthening, will facilitate the growth of Guyana’s private sector, and the government is targeting the country’s very large diaspora, many of whom reside in North America, to participate in this growth. As a safe destination for investment, many will be attracted to return to their native land, bringing in new skills and know-how.

For US investors, regardless of whether they are of Guyanese descent or not,  a number of opportunities exist, particularly in renewable energy, agriculture, mining, ICT and eco-tourism. “These are a few of the areas in which US investors might be interested,” Mr. Jordan says.




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