Apr 29, 2010 News
Guyana’s economic freedom score is 48.4, making its economy the 153rd freest in the 2010 Index of Economic Freedom.
The report however stresses that Guyana’s overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights.
Guyana is ranked 27th out of 29 countries in the South and Central America/Caribbean region, and its overall score is well below the world and regional averages.
According to the report Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom.
“Average economic growth over the past five years has been only about three percent, lagging behind other developing countries.”
It was pointed out that long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government.
The report lists as the biggest barrier to development as the oversized government, “with expenditures that often exceed half of GDP…Significant restrictions on foreign investment, combined with an inefficient bureaucracy, substantially depress the entrepreneurial environment.
Guyana gained its independence in 1966.”
The report suggests that Guyana is one of the poorest countries in the Western Hemisphere, and its state-dominated economy, dependent mainly on agriculture and mining, has been stagnant for many years.
“Despite some progress, the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment.”
It was also stressed that Guyana’s weighted average tariff rate was 6.9 per cent in 2008. “Import restrictions, import taxes, import-licensing requirements for a relatively large number of products, burdensome standards and regulations, inefficient customs administration, weak intellectual property rights enforcement, inadequate infrastructure, and corruption add to the cost of trade.”
Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers.
The report slated Guyana as having relatively high tax rates citing the income tax rate, corporate tax rate at 45 per cent with “other taxes include a property tax and a value-added tax (VAT)….In the most recent year, overall tax revenue as a percentage of GDP was 35.7 percent.
Total Government expenditures, including consumption and transfer payments were listed as high, while privatization of state-owned enterprises yielded mixed results according to the report.
“Poor management of public expenditures has led to persistent fiscal deficits. In the most recent year, government spending equaled 49.6 percent of GDP.”
The 2010 reported the inflation rates as being high, averaging 9.0 per cent between 2006 and 2008, but has been falling steadily from a peak of nearly 12 per cent in March 2008.
“It was 6.4 percent at the end of 2008 and is expected to continue to fall in 2009, barring a renewed shock to global energy prices…Guyana has made progress in removing price controls and privatizing the large public sector, but the government still influences prices through the regulation of state-owned utilities and enterprises.”
Another 10 points were deducted from Guyana’s monetary freedom score to adjust for measures that distort domestic prices.
“Guyana has been moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state. The approval process for investments can be burdensome and non-transparent…While there is no mandatory screening of foreign investment, the government conducts a de facto screening of most investments to determine eligibility for special tax treatment, access to licenses, availability of land, and approval for investment incentives.”
The report added, also, that investment is hindered by crime, corruption, inefficient and burdensome government bureaucracy, non-transparent regulations, a weak and burdensome judiciary, and an inadequately educated workforce.”
Guyana has been noted as moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state.
Guyana’s judicial system was also lambasted and is listed as slow and inefficient. “It is also subject to corruption. Law enforcement officials and prominent lawyers question the independence of the judiciary and accuse the government of intervening in some cases.
“A shortage of trained court personnel and magistrates, poor resources, and persistent bribery prolong the resolution of court cases unreasonably…Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.”
Labour regulations are relatively flexible. The non-salary cost of employing a worker is low, but dismissing an employee is fairly costly.
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