Suriname 2012 PSAR

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Suriname 2012 PSAR 2012 Suriname 2012 PSAR October 2012 This Suriname Private Sector Assessment Report (SU-PSAR) presents an overall assessment of private sector development (PSD) and recommendations for facilitating and accelerating private investment and growth. This report includes a summary of the main characteristics and issues of the economy of Suriname as it relates to private sector development, the selection of priorities, a section on monitoring and evaluation of PSD initiatives, and finally a section with recommendations for interventions and also for filling in data gaps. The report includes two annexes the Suriname Donor Matrix (SU-DMX), and the most important sources of information currently available for the analysis of PSD. I want to thank the support, comments and suggestions of Diego Morris, Steven Hofwijks, Adriana La Valley, Marco Nicola, Paz Castillo-Ruiz, Tara Lisa Persaud and JJ Saavedra. I also want to recognize the comments and support from Vice President Robert Ameerali, and from Kenneth Foe A Man and Sieglien Burleson from the Suriname Business Forum. Finally, I want to thank all the people that were interviewed in Paramaribo that provided data, analysis and experiences that have been incorporated into this report. Carlos Elias Ph.D. Suriname PSAR Suriname Private Sector Assessment Report Table of Contents 1) Introduction ............................................................................................................................. 4 2) Chapter I: Indentifying market failures ................................................................................... 6 a) Goal of PSD in the country and current programs ............................................................... 6 b) Overview of the economy ................................................................................................... 8 i. The domestic economy .................................................................................................... 8 ii. The international economy ............................................................................................ 14 iii. The productive structure ................................................................................................ 17 iv. The institutions .............................................................................................................. 19 c) State of the private sector .................................................................................................. 20 d) Large and fast growing sectors in the economy ................................................................ 22 e) Issues for private sector development ............................................................................... 22 i. Business supportive institutions structure ...................................................................... 23 ii. Donors and other international entities .......................................................................... 25 iii. Access to finance ....................................................................................................... 28 iv. Corporate taxation ......................................................................................................... 30 v. Business environment .................................................................................................... 32 vi. Technology and innovation ........................................................................................... 38 vii. Trade and FDI policies ............................................................................................... 40 viii. Labor regulation ......................................................................................................... 44 ix. Infrastructure, communications and energy ................................................................... 44 x. Environment .................................................................................................................. 48 xi. Gender ........................................................................................................................... 49 3) Chapter II: Selecting and prioritizing issues .......................................................................... 52 a) Priority PSD issues—improving PSD coordination .......................................................... 52 b) Priority PSD issues—improving the business climate ....................................................... 53 c) Priority PSD issues—opening space for private sector participation ................................ 54 d) Priority PSD issues—increase participation of domestic companies in the mining sector 54 e) Action plan ........................................................................................................................ 54 4) Follow-up, monitoring and evaluation .................................................................................. 55 5) Chapter III: Conclusions and recommendations .................................................................... 57 Annex 1: Sources of information used in this report .................................................................... 59 2 Suriname PSAR Annex 2: Suriname Donor Matrix Report (SU-DMX) ................................................................. 60 3 Suriname PSAR 1) Introduction The main result from the analysis presented in this report, and its common thread, is the identification that the greatest challenge for private sector growth and development is the poor business environment that limits the creation and growth of private sector enterprises. The weakness of the private sector is related to the strength of the public sector that employs about 60% of total employment and participates in many sectors in the economy, including among others financial services, transport, and agriculture. From a sector perspective, mining is the engine of growth of the economy and largely funds the public sector. Simplifying the growth process: in Suriname economic growth results from the transmission of resources from exports of gold, oil and bauxite, to government, and from government to the rest of the economy via public spending. In this overall context the domestic private sector is small and its economic activities are mostly limited to the provision of non-tradable goods and services, most notably in commerce. It is important to clarify that the mining sector behaves as an enclave as it is dominated by large multinational corporations with few links to the rest of the economy. Importantly for this report, there are no large and fast growing sectors, with the exception of mining, because the private sector is underdeveloped. Although some export oriented economic activities exist and there is some industrial production, in the aggregate these activities and industries are small. This report, therefore, notes that to facilitate private sector growth it is necessary to facilitate the expansion of the private sector into all areas of economic activity by improving the business climate and reducing over time the presence of the state in the economy. Throughout this report, this is called to open space for the expansion of private sector domestic and export oriented activities. It is also important to highlight that the analysis presented in this report is limited by the availability of data. All efforts have been made to back findings and analysis using available data, however, in many cases a subjective interpretation was necessary to prepare this report and to identify priorities. For this reason important recommendations included in this report relate to filling in data and information gaps. Therefore, this Suriname Private Sector Assessment Report (SU-PSAR) presents an overall assessment of private sector development (PSD) and recommendations for facilitating and accelerating private economic investment and growth.1 Following the suggestion of the guidelines for the preparation of Donor Coordination Matrices (DMX) for CARIFORUM countries, the SU-PSAR includes as an annex the Suriname Donor Matrix (SU-DMX). This introduction presents a brief description of the purpose of the PSAR and DMX, and explains their purpose and how they complement each other. It is important to note that this report would need to be updated over time as the overall economic conditions change, new PSD programs and projects are implemented, new actors enter or leave the market, and data gaps are filled in with primary data and analysis. It is recommended that this report is updated every two years, or less if conditions change significantly. 1 This report is funded by Compete Caribbean, which is a program created to facilitate Private Sector Development (PSD) in CARIFORUM countries and sponsored by DFID, CIDA and the IDB. 4 Suriname PSAR According to the PSAR guidelines the PSAR is: “a report meant to provide a comprehensive framework to identify market failures concerning the development of the private sector and prioritize them in terms of their need for an urgent solution. These outcomes are the result of a process that involves the use of descriptive and analytical tools to assess the state of the private sector and the economy as a whole, as well as consulting with firms in strategic sectors of the economy to prioritize issues. The PSAR can be decomposed in two big parts: first, it compiles and analyzes information from different sources in order to provide a snapshot of the state of the private sector in the country, and second, it brings the information to
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