May 20, 2022 News
By Renay Sambach
Kaieteur News – In 2021, Guyana passed its local content legislation, which caters for locals getting first preference in the country’s oil and gas sector. The Local Content law is intended to regulate the way companies operate in Guyana’s oil and gas sector; employ persons, buy services and the way that they procure goods.
However, local companies, especially medium-sized businesses lack of access to loans from the banking sector with reasonable interest rate has been hindering their competitiveness in the oil and gas sector. As a result of the aforementioned, several members in Guyana’s private sector have voiced their concerns about the issue.
President of Georgetown Chambers of Commerce and Industry (GCCI), Timothy Tucker, stated in the Private Sector Commission 2021 report that medium-sized businesses have suffered the most due to the fact that they are not classified as a small business to get support from the government and not large enough to have easy access to money with good interest rate from the banking system.
In the PSC 2021 report, Tucker was speaking in the capacity as the Chairman of the Finance and Economics Sub-Committee.
He noted in the committee’s report, “Access to finance for businesses, especially medium-sized businesses continue to be a challenge the Sub-Committee will continue to address moving forward.” However, he stated that the private sector will continue to engage the government, banks, and key stakeholders on the issue.
Similarly, on Thursday April 12, during his speech after being re-elected as the Chairman of Guyana’s Private Sector Commission (PSC), Paul Cheong, stated that one major thing that he would be pushing for is for better access to financing for companies, especially small and medium-sized businesses.
Cheong said, “We will continue to engage stakeholders on a wide range of issues including access to finance for small businesses, especially those operating in the oil and gas industry.” He noted too that the members of the PSC will continue to its efforts to promote a culture of collaboration and joint ventures to access larger investment opportunities.
Cheong added that the commission have recognize that building partnerships is crucial in increasing local knowledge, expertise and resources to make better products and reach a greater audience.
Moreover, while he was a guest on Kaieteur Radio’s Guyana’s Oil and You, economist and executive member of GCCI, Richard Rambarran, stated that local companies need better and cheaper access to finance to create competitiveness in the oil and gas industry. He also stated that he believes the current stance goes against the local content law.
When questioned on GCCI’s stance on the issue of local companies’ access to loans with reasonable interest rates from the banking sector. “We have discussed in the chamber of commerce, and I will say this because it’s something that we feel very strongly about, we have discussed that there cannot be a successful local content regime that helps to lift the standards of MSMEs [Micro Small Medium Enterprises] in Guyana, without improvement to access the finance for those same MSMEs,” he responded.
Rambarran added that when it comes to the technical work of the oil and gas sector or other types of work to support the oil and gas industry, a Guyanese would need access to finance, but more importantly access to cheap finance. He highlighted that the aforementioned will help Guyanese be more competitive in the sector.
“It is no small secret that Guyana is by virtue of the prevailing conditions, not as competitive as some other countries,” he said. He reiterated that access to finance has been one of those bugbears to the local private sector that has really restricted the competitiveness.
The economist added, “To answer the question very cleanly or very bluntly, there cannot be absolute success of the local content legislation without cheap and better access to finance. It is just something that absolutely has to occur.”
According to him, if that does not happen, Guyana runs the risk of the local private sector being unable to compete with regional and international counterparts.
Rambarran listed several measures that would help bridge the gap. He believes, for instance, that there must be financial sector development, financial expansion, financial deepening, more institutions, more complex instruments being offered and instruments that cater for what is happening within the modern development of Guyana.
He also called for a revision of the schedule guidelines that the Bank of Guyana (BOG) issues. “Think about the interest rate, for example, that an enterprise here would have to face here versus an enterprise, maybe let’s take Trinidad, versus an enterprise in Trinidad,” he explained.
Rambarran added that the difference in differential alone in the interest rate and the nominal amount that will accrue from the differential in the interest rate alone is enough to wipe out profitability for a local company – which in turn will render the local company uncompetitive. The economist stated that there is need for improvement, and he highlighted that based on his assessment, it does go against the spirit and intent of local content. As such, he said, “So it is something that needs to evolve and evolve rapidly if we are to have full recognition of the benefits that will accrue.”
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