Identifier
Created
Classification
Origin
06GEORGETOWN5
2006-01-03 16:18:00
UNCLASSIFIED
Embassy Georgetown
Cable title:  

Guyanese Business Optimistic as CSME Approaches

Tags:  ETRD PREL ECON BEXP XL GY CARICOM 
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UNCLAS SECTION 01 OF 02 GEORGETOWN 000005 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ETRD PREL ECON BEXP XL GY CARICOM
SUBJECT: Guyanese Business Optimistic as CSME Approaches


SUMMARY: The Single Market component of the Caribbean Single
Market Economy (CSME) came into force on January 1, 2006,
for Barbados, Belize, Guyana, Jamaica, Suriname, and
Trinidad. Guyanese officials have expressed optimism that
the CSME will afford greater market opportunities,
particularly in niche agricultural markets. However, supply-
chain deficiencies and a lack of value-added production
capacity may limit Guyana's growth potential. END SUMMARY.

UNCLAS SECTION 01 OF 02 GEORGETOWN 000005

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ETRD PREL ECON BEXP XL GY CARICOM
SUBJECT: Guyanese Business Optimistic as CSME Approaches


SUMMARY: The Single Market component of the Caribbean Single
Market Economy (CSME) came into force on January 1, 2006,
for Barbados, Belize, Guyana, Jamaica, Suriname, and
Trinidad. Guyanese officials have expressed optimism that
the CSME will afford greater market opportunities,
particularly in niche agricultural markets. However, supply-
chain deficiencies and a lack of value-added production
capacity may limit Guyana's growth potential. END SUMMARY.


1. On Christmas Day, GOG President Jagdeo signed documents
indicating Guyana's commitment to the CSME, becoming the
sixth CARICOM head of state to do so. This was the
culmination of several initiatives aimed at preparing Guyana
for CSME compliance by January 1. In other recent
developments, parliament forwarded the Competition and Fair
Trading Bill to a select committee after a second reading on
December 15. The bill, based on CARICOM draft legislation to
ensure harmonization with the CSME, includes provisions
against bid-rigging, misleading advertisements and price
fixing and would establish--with Inter-American Development
Bank assistance--a Competition Commission with the authority
to review anti-competitive business practices. In addition,
an audit team comprised of Prime Minister Samuel Hinds,
various government ministers and agency head, as well as
CARICOM General Counsel Winston Anderson and Technical
Administrative Services Coordinator Yvonne Holder, found
Guyana's CSME readiness "in pretty good shape" following a
review in October.

--------------
The Private Sector's Attitudes
--------------


2. Nevertheless, Bal Persaud, Executive Director of the
Private Sector Commission (PSC),an industry association
that includes sixteen of the country's largest firms and
several manufacturing and services organizations, has said
the private sector is not prepared to take full advantage of
the CSME. The PSC has commissioned a UN ECLAC impact
assessment that is expected to help the private sector
develop a nation-wide competitiveness strategy. Persaud is
critical of government-private sector cooperation in

preparation for the CSME, arguing that the GoG has been too
focused on attracting special treatment as a Heavily
Indebted Poor Country rather than making investments in
infrastructure and regulatory reform that would improve
competitiveness. Relatively high energy prices, poor port
access, and lengthy customs clearance procedures are among
the specific deficiencies he sites. Persaud also told
EconOff in a recent meeting that a larger environment of
government suspicion of the private sector, born of years of
collective decision-making, has also prevented the private
sector from becoming a driving force in Guyana's economy.


3. On the agricultural front, Nizam Hassan, General Manager
of the New Guyana Marketing Corporation, a government
corporation designed to promote non-traditional (i.e. non-
rice and sugar) exports, also expressed hope for the CSME's
potential. Hassan cited the Central Packaging Facility in
Sophia, just outside Georgetown, which has been certified
compliant with CARICOM standards and exports produce to
Barbados and Antigua, as an example of the investments
Guyana has made to take advantage of a wider market. The
NGMC, with USAID support, also commissioned a series of
country and commodity-based market surveys aimed at
facilitating export growth under the CSME. Like Persaud,
Hassan noted to EconOff that government-business
coordination in the run-up to the CSME has been disjointed.
He cites a need to evolve from a "suitcase mentality" based
on individual business people hawking their wares at
government-sponsored trade shows toward a more comprehensive
approach.


4. In a recent media interview, Norman McLean, president of
the Guyana Manufacturers' and Services Organization, hailed
the CSME as opportunity to allow Guyana to become the "bread
basket of the Caribbean", noting that agricultural
production, as opposed to the tourism-centered smaller
economies of the region, will drive Guyana's adaptation to
the CSME. McLean also identified CARICOM's Regional
Development Fund as an essential part of CSME implementation
that will allow weaker states to make adjustments to spur
CSME readiness. Note: While not named as a lesser-developed
county in the Treaty of Chaguaramas, Guyana, as a Heavily
Indebted Poor Country, would be able to access the Fund
under Article 156 of the Treaty. End Note.

--------------
Potential Areas of Growth
--------------


5. Agriculture is most likely to be the sector in which
Guyana has a comparative advantage as the CSME develops.
Despite talk of diversification, Guyana's traditional
exports, rice and sugar, remain the major areas of growth.
The recent decline of other sugar producing economies in the
region, such as this week's end of sugar production in St.
Kitts, as well as investments in mechanization to lower the
costs of production in the face of decline world sugar
prices will make Guyana a regional leader in sugar
production. In addition, Guyana has strongly pushed for
enforcement of CARICOM's Common External Tariff on rice
imports.


6. However, Guyana is also staking its hopes on exports
elsewhere in the agricultural sector. The forestry sector,
which accounts for roughly 14% of Guyana's GDP, stands to
gain for greater market access under the CSME. Mohabir
Singh, operator of Guyana Furniture Manufacturing Ltd. noted
in a recent media interview that Guyanese hardwood could
emerge as an alternative to the U.S. southern yellow pine
used widely for construction throughout the Caribbean in an
estimated US$100 CARICOM market. Singh cites two obstacles
to the Guyanese wood products industry's inability to take
full, immediate advantage of the CSME, namely (1) a lack of
value-added production in country, and (2) the inability of
local producers to secure adequate supplies of timber in the
face of concessional agreements to export raw timber to
China and Vietnam. To this end, timber executives and
manufacturing interests came together earlier this month to
form the Forest Products Marketing Council charged with
moving the industry toward higher value-added production.


7. Guyana has made some efforts in the services arena as
well. For instance, administrators of the FAA-approved Art
Williams and Harry Wendt (AWHW) Aeronautical Engineering
School at the Ogle Aerodrome, East Coast Demerara,
reportedly the only aeronautical engineering facility in the
region, are hopeful that the CSME's provisions for the free
movement of skilled workers will allow if to expand its
student base. The school has already graduated 76 students,
many of which have gone to work in Guyana, other CARICOM
nations, and the Middle East.

--------------
Comment
--------------


8. If nothing else, Guyana's CSME implementation is clearly
borne of necessity. With the pending reduction of EU sugar
price supports, Guyana has no choice but to look toward
diversification and regional economic engagement as drivers
for growth. Nevertheless, the lack of value-added production
capacity will mean that, in the short term, Guyana will
remain by and large an exporter of raw materials. Additional
challenges, such as the ability to retain skilled workers in
the face of the free movement provisions of the Treaty of
Chaguaramas, my also undermine Guyana's efforts to expand
the skilled manufactures and service sectors.

BULLEN