Since 1988, the Government of Guyana has opened the economy to market-oriented reforms based on the liberalization of the trade and investment regime and the liberalization of the foreign exchange market.
The liberalization policies were initiated within the context of the IMF/World Bank Structural Adjustment recovery Program. These policies moved Guyana's economy from a previously centralized, state-controlled system to one that is market-oriented with the private sector playing the leading role.
It should be noted that the present Government which took office in 1992 continues to promote these reforms and to support policies aimed at attracting foreign investment by relying on the free market.
Guyana is the most liberalized market in the Caribbean. Apart from removing most non-tariff barriers, Guyana has implemented the Common External Tariff (CET) which currently stands at 0-40% and has scheduled it for a further phased reduction to 0-20% by January 1, 1998. This means that the highest tariff rate in 1998 will be 20%.
Guyana took the decision to implement a phased CET against the background of a move toward freer international trade and its own participation in GATT/WTO.
The import and export license regimes are being rapidly scaled down in keeping with the country's macro-economic and structural adjustment program. It must be noted that import licenses are only required for reasons of national security, health and environmental safety, but even these requirements are under review.
Guyana has a top corporate tax rate of 35%. An additional 10% is applied only to profits of commercial companies.
The Government introduced incentives for the production and business sectors by identifying certain items for consumption tax exemption in the following areas:
Textiles: weaving machines, knitting machines, sewing machines.
Construction: prefabricated buildings of aluminum and of steel.
Agriculture: manure spreader and fertilizer distributors.
Manufacture: machinery for manufacture of fruit juices, machinery for
the preparation of meat and poultry, machinery for preparation and tanning of hides. Mining: Gold and diamond machinery. Forestry: Saw blades.
The contribution of state-owned companies to total production has been reduced significantly from its 1988 figure due to the Government's divestment policy.
Private companies in the mining and forestry sectors contribute significantly to total production.
The Government remains committed to the monetary policy aimed at dealing with inflation and a viable balance of payments.
Based on the performance of the Economic Recovery Program implemented in 1988, the economy registered positive growth rates of 6.1% in 1991, 7.3% in 1992, 8% in 1993 and 8.4% in 1994. Guyana became for the third year in a row the Caribbean's fastest growing economy.
The sale of treasury bills continues to be the primary instrument for monetary management. By varying the volume of treasury bills and issuing them at market determined prices, the authorities seek to influence the liquidity of the financial as well as short term interest rates. As a result, the commercial banks' lending rates declined from 26% at the end of 1992 to 17% in early 1994.
Inflation rates declined from approximately 35% in 1991 to approximately 12% in 1994.
The continued liberalization of the economy, particularly the trade regime, makes Guyana attractive to foreign as well as local investors. As a result, more than US$100 million of local and foreign investment is programmed for 1995.
Government officials are working to reduce bottlenecks in the investment sector. The Guyana Office for Investment (GO-INVEST) was established in mid-1994 as a one-stop agency to assist investors in acquiring information and to promote investment generally.
It must be noted that crime and corruption do not exist at a level that would seriously reduce investment. Serious efforts have been made by the authorities to clamp down on corruption in the area of the collection of customs duties over the past two years. The effect of this is that customs duties collected have more than doubled over the period.
In 1994, competition in the financial sector was enhanced by the licensing of two new banks in Guyana. Of the seven commercial banks, two are wholly private-owned. Three others are non-Guyanese with foreign corporate headquarters. With respect to the two others in which the Government has majority shares, steps are being taken to divest them.
The commercial banks operating in Guyana are:
Bank of Baroda
Bank of Nova Scotia
Guyana Bank of Trade and Industry
National Bank of Industry and Commerce
Guyana National Cooperative Bank
Since the introduction of market oriented reforms, all direct controls of credit and interest rates have been removed. Credit is, therefore, market determined. A new feature of the banking sector is that banks are seeking to provide export credit facilities for small and medium sized businesses.
In 1994, a Financial Institutions Bill was tabled in Parliament. This legislation is intended to strengthen and modernize the regulatory framework of the financial sector so as to align it with international and regional standards.
The Government has eliminated virtually all price controls.
The previous Government privatized 14 state-owned enterprises (SOE) between 1989 and 1992. This gives an approximate average of 3.5 SOE's per year.
The present Government has fulfilled IMF/World Bank privatization program requirements by bringing the three state enterprises, Guyana Glassworks, Guyana Sugar Corporation Dairy Project and the Guyana National Engineering Corporation, to the point of sale by the end of 1994. Six other state enterprises are targeted for privatization in 1995. The privatization process is by no means being slowed down.
One of the objectives of the Government's privatization policy is to ensure transparency and accountability within a democratic framework. The Government, therefore, has to give consideration to the views of workers' and consumers' organizations on how the privatization deals should progress.
No private property is threatened with expropriation by the Government.
While privatization is a main feature of the Government's liberalization program, some utilities, such as water and electricity, remain under the state's control. Telecommunications is privatized.
The private sector is free to establish companies in all sectors of the economy.
The idea of a "black market" has to do with illegal economic activities, for example in trading and commerce, because of the failure of the formal economy.
Within the context of the informal/parallel economy, there are no restriction on trading or engaging in commerce, and individual companies and proprietors are free to organize. Therefore, an informal economy as such does not exist in Guyana.