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Viewing cable 06GEORGETOWN5, Guyanese Business Optimistic as CSME Approaches

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Reference ID Created Released Classification Origin
06GEORGETOWN5 2006-01-03 16:18 2011-08-30 01:44 UNCLASSIFIED Embassy Georgetown
This record is a partial extract of the original cable. The full text of the original cable is not available.
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