Report No. 35951-GY Guyana Report No.35951-GYGuyana Assessment Climate Investment II Volume Report No. 35951-GY Guyana Investment Climate Assessment Public Disclosure AuthorizedPublic Disclosure Authorized (In Two Volumes) Volume II: Detailed Findings and Recommendations June 21, 2007 Finance, Private Sector and Infrastructure Latin America and the Caribbean Region (LCSFR) and Development Economics Research Group (DECRG) Public Disclosure AuthorizedPublic Disclosure Authorized Public Disclosure AuthorizedPublic Disclosure Authorized Document of the World Bank Public Disclosure AuthorizedPublic Disclosure Authorized CURRENCY EQUIVALENTS (Exchange rate effective as of 03/31/2006) National Currency is the Guyanese dollar (GY$) US$1.00 = GY$199.75 FISCAL YEAR January 1 – December 31 MAIN ABBREVIATIONS AND ACRONYMS BBC British Broadcasting Corporation CARICOM Caribbean Community CDB Caribbean Development Bank CEM Country Economic Memorandum CIDA Canadian International Development Agency CPAR Country Procurement Assessment Report CPI Corruption Perception Index CTO Caribbean Tourism Organization CTL Caribbean Telecommunications Ltd. DDL Demerara Distillers Ltd. DFID UK Department for International Development EU European Union FDI Foreign Direct Investment FIAS Foreign Investment Advisory Services FTA Free Trade Agreement GDP Gross Domestic Product GNBS Guyana National Bureau of Standards GNI Gross National Income GO-INVEST Guyana Investment Promotion Agency GPL Guyana Power and Light GTA Guyana Tourism Authority GT&T Guyana Telephone and Telegraph GUYSUCO Guyana Sugar Corporation GWI Guyana Water Inc. IAAC Inter-American Accreditation Cooperation IDB Inter-American Development Bank ICRG International Country Risk Guide ICS Investment Climate Survey ICT Information and Communication Technologies IEC International Electro-technical Commission IFS International Financial Statistics ILAC International Laboratory Accreditation Cooperation IMF International Monetary Fund IPA Investment Promotion Agency ISO International Organization for Standardization ISPs Internet Service Providers IPPs Independent Power Producers ITU International Telecommunications Union MSTQ Metrology, Standards, Technology and Quality NAFTA North American Free Trade Agreement OECD Organization for Economic Cooperation and Development OECS Organization of Eastern Caribbean States PAHO Pan-American Health Organization PUC Public Utilities Commission R&D Research and Development i THAG Tourism and Hospitality Association of Guyana TFP Total Factor Productivity TVET Technical and Vocational Education and Training UNDP United Nations Development Program UNICEF United Nations Children’s Fund USAID US Agency for International Development VAT Value-added Tax WBI World Bank Institute WDI World Development Indicators WDR World Development Report WEF World Economic Forum WHO World Health Organization WTTC World Travel and Tourism Council ~~ ~ Vice President: Pamela Cox Country Director: Caroline Anstey Sector Director: Makhtar Diop Sector Manager: Susan Goldmark Task Manager: Stefka Slavova I I ii Guyana Investment Climate Assessment Volume 11: Detailed Findings and Recommendations TABLEOF CONTENTS ACKNOWLEDGMENTS............................................................................................................ X CHAPTER 1. IMPROVING THE INVESTMENT CLIMATE IN GUYANA: AN INTRODUCTION ................................................................................................................... 1 AN OVERVIEW OF GUYANA’S ECONOMIC TRENDS ........................................................ 2 INVESTMENTCLIMATE ASSESSMENT........................................................................................... 13 MAINCONSTRAINTS TO DOINGBUSINESS IN GUYANAACCORDING TO THE ICs ......................... 14 CHAPTER 2. GOVERNANCE AND INSECURITY ............................................................... 23 BUSINESS-GOVERNMENTRELATIONS .......................................................................................... 23 RECOMMENDATIONS ON BUSINESS-GOVERNMENTRELATIONS ................................................... 35 CONTRACT ENFORCEMENTAND THE JUDICIARY .......................................................................... 37 RECOMMENDATIONS OF CONTRACT ENFORCEMENTAND THE JUDICIARY ................................... 53 CRIME AND VIOLENCE................................................................................................................. 55 RECOMMENDATIONSON CRIME AND VIOLENCE.......................................................................... 65 CHAPTER 3. INFRASTRUCTURE .......................................................................................... 67 ELECTRICITY............................................................................................................................... 67 RECOMMENDATIONS ON ELECTRICITYPOLICY ............................................................................ 81 TELECOMM~NICA~ONS............................................................................................................... 83 RECOMMENDATIONSON TELECOMMUNICATIONS ........................................................................ 98 TRANSPORTAND LOGISTICS...................................................................................................... 102 RECOMMENDATIONS ON TRANSPORTAND LOGISTICS............................................................... 116 WATER...................................................................................................................................... 118 CHAPTER 4 .SKILLS, MIGRATION, TECHNOLOGY AND QUALITY ......................... 124 INTRODUCTION.......................................................................................................................... 124 EDUCATIONAND TRAINING: RECENT DEVELOPMENTSAND CHALLENGES ................................ 127 EMIGRATIONAND WORKERREMITTANCES ............................................................................... 136 THE ETHNIC SEGMENTATION OF THE POPULATIONAND ITS IMPLICATIONS............................... 140 TECHNOLOGYAND INNOVATION............................................................................................... 142 INFRASTRUCTUREFOR QUALITY ASSURANCE........................................................................... 146 RECOMMENDATIONS ON SKILLS. MIGRATION.TECHNOLOGY AND QUALITY ............................. 149 CHAPTER 5 .FINANCE ........................................................................................................... 151 ACCESSTO CREDIT ..................................................................................................................... 151 COSTS AND ACCESSTO FINANCIALSERVICES: THE PERSPECTIVE OF THE FIRMS...................... 158 ACCESSTO FINANCIALSERVICES: A KEY PROBLEM FOR FIRMS WITH GROWTH POTENTIAL .......................................................................................................................... 162 ... 111 POLICY RECOMMENDATIONS TO IMPROVE THE ACCESSAND COST ASPECTSOF FINANCE........ 170 CHAPTER 6. POTENTIAL FOR ECO-TOURISM GROWTH ........................................... 172 OVERVIEW................................................................................................................................. 172 CHARACTERISTICSOF TOURISTS................................................................................................ 178 SUPPLY OF ACCOMMODATIONAND TOURISM RELATED SERVICES ............................................ 180 OCCUPANCY RATES AND PROFITABILITY .................................................................................. 182 INVESTMENT INCENTIVES AND RECENT INVESTMENTS IN TOURISM .......................................... 184 GUYANAAND ITS COMPETITORS ............................................................................................... 185 COMPETITIVENESS OF THE GUYANESETOURISM SECTOR .......................................................... 186 CONCLUSIONSAND RECOMMENDATIONS.................................................................................. 195 REFERENCES .......................................................................................................................... 200 iv LIST OF TABLES Table 1-1: Structure of Merchandise Exports in Guyana. 2004 .................................................................................... 7 Table 2-1: Starting a Business in 2005: A Cross-country Comparison ...................................................................... 23 Table 2-2: Percentage of Senior Management Time Spent Dealing with Regulations................................................ 24 Table 2-3: Inspected Firms and Frequency and Duration of Inspections .................................................................... 34 Table 2-4: Pre.Payment. Payment at Delivery and Trade Credit: A Comparison ....................................................... 42 Table 2-5: Business Association Membership and Dispute Resolution ...................................................................... 44 Table 2-6: Proportion of Firms with Overdue Payments That Have Filed Court Cases. by Size ................................ 44 Table 2-7: Time. Costs and Number of Procedures to Enforce a Debt Contract in Court........................................... 50 Table 3-1: Independent Power Producers in Guyana .................................................................................................. 73 Table 3-2: Local