Guyana2005 INVESTMENT CLIMATE STATEMENT -- GUYANA
Openness to Foreign Investment
The Government of Guyana (GOG) encourages foreign direct
investment in almost all sectors. Billed as a "first stop
shop" for investors, the Guyana Office for Investment (GO-
INVEST) is charged with leading government efforts to
attract foreign and domestic investment. GO-INVEST focuses
primarily on the agriculture, tourism, manufacturing,
information technology, fishing, and wood processing
sectors. Originally designed to be a "one stop shop" for
investors, GO-INVEST has not been fulfilling its mandate.
Instead, it serves as the first in a long line of
bureaucratic hurdles required to obtain the permits and tax
concessions necessary to do business in Guyana. Potential
investors face separate bureaucratic procedures at
ministries throughout the government to obtain the desired
permits and concessions. Major foreign investments receive
intense political attention in an economy still dominated by
the state. The government has enacted new laws and amended
existing ones to encourage foreign direct investment, with
mixed levels of success.
Guyana has not signed a Bilateral Investment Treaty with
the United States. Negotiations began in 1993, but broke
down in 1995 due to disagreements on formal investment
rules. There have been no continuing negotiations. Guyana
has similar treaties with Germany and the United Kingdom.
Guyana has double taxation treaties with Canada, the United
Kingdom, and CARICOM countries.
The National Assembly passed Investment Bill #17 in
2003, designed to stimulate socio-economic development and
to attract and facilitate foreign investment. However, Bank
of Guyana statistics show that foreign direct investment,
outside of the telecommunications sector, has decreased in
recent years. Foreign direct investment in Guyana decreased
from US$43.5 million in 2002 to US$26.1 million in 2003. In
2004, the telecommunications sector accounted for US$25
million of the US$35 million invested in the country. Other
important laws pertaining to investment include the Income
Tax Act, The Customs Act, the Procurement Act of 2003, the
Companies Act of 1991, the Securities Act of 1998, the Small
Business Act, and the Consumption Tax Act.
Although the judicial system is responsible for
upholding the sanctity of contracts, it does not have the
capacity to uphold its legal mandate. Apparent corrupt
practices, coupled with long delays in the administration of
justice make the courts an undesirable and largely
ineffective way to settle investment or contractual
disputes, particularly for foreign investors unfamiliar with
Guyana's political scene.
Foreign ownership of companies is permitted and
welcomed. There is no mandatory screening of foreign
investment. However, the government screens most
investments to determine which businesses are eligible for
special tax treatment, access to licenses, approval and
procurement. In spite of recent moves to remove
discretionary power from the various ministries, the Guyana
Revenue Authority (GRA) retains significant authority to
interpret how relevant laws, such as those listed in
paragraph three, apply to specific shipments of goods
brought into the country by investors.
In general, foreign investors receive the same treatment
as local investors in Guyana. One exception is the special
approval required for local financing. Foreign borrowers
applying for a loan of over US$10,638 (G$2 million) must
request permission to take out the loan locally from the
Minister of Finance. This requirement reflects Guyana's
preference for foreign investors to bring capital into the
country. In most cases, foreign investors seek credit
abroad to avoid Guyana's typically high interest rates.
Another exception in the mining sector restricts ownership
of small and medium scale mining property titles to Guyanese
ownership. However, foreigners may enter into joint-venture
arrangements whereby the two parties agree to jointly
develop a mining property. There are no restrictions on the
percentage of the investment shouldered by the foreign
investor. These arrangements are strictly by private
contract. Foreign investors that have entered into these
arrangements report high levels of risk and have complained
that Guyana's sluggish legal system rarely settles disputes
in a timely or satisfactory manner. One investor who
entered into a private joint-venture mining contract
reported that the mining property was sold by his partner
after the investment had been made and without his prior
knowledge or consent. Despite some success in the courts,
he was unable to fully recover the money he had originally
invested.
The government has made progress in recent years with
privatization initiatives. Of the 18 government entities
originally targeted for privatization, 16 have been
privatized. The Aroaima Mining Company (AMC) and Guyana
Power & Light (GPL) remain the two major exceptions. RUSAL,
the Russian aluminum giant, assumed management control of
AMC in 2004 as part of a joint agreement with the Government
of Guyana (GOG) to revitalize the bauxite industry. The
government announced that AMC is slated for privatization in
2006. In 1999, the GOG entered into a joint agreement with
Americas & Caribbean Power Limited (ACP) to privatize GPL,
with each party holding 50% of the company's shares. Four
years later, ACP sold its shares back to the Government for
$1 and withdrew from the deal. The GOG is now seeking a
US$30million investment for the re-privatization of the
utility, though it has not identified any potential suitors.
Foreign investors have equal access to privatization
opportunities. For some larger operations, foreign
investment is openly preferred.
Most large-scale investments in Guyana's infrastructure
are government projects financed by international lending
institutions, with the Inter-American Development Bank (IDB)
as the largest donor. U.S. firms are generally given equal
access to these projects, though many are too small to
interest U.S. bidders.
Conversion and Transfer Policies
The Guyana dollar is fully convertible. There are no
limits on inflows or repatriation of funds, although there
are spot shortages of foreign currency. The exchange rate
is US$1 to G$199.25 (January 2005). There is no limit to
the acquisition of foreign currency, although the government
limits the percentage that a number of state-owned firms may
keep for their own purchases. The government recently eased
restrictions on the establishment of foreign currency bank
accounts in Guyana, a step that has significantly simplified
the process of moving money. Funds can now be wired in and
out of the country electronically without having to go
through cumbersome exchange procedures.
In practice, many large foreign investors in Guyana use
subsidiaries outside Guyana to handle earnings generated by
the export of primary products, including timber, gold, and
bauxite. Those companies then advance funds to their local
entities to cover operating costs.
The exchange rate is commercially determined according
to market supply and demand using telegraphic transfers for
the three largest commercial banks. Political uncertainty
and poor economic performance by the Guyanese economy since
1999 have eroded consumer and investor confidence. The
government has intervened in support of the Guyana dollar
with some success. The GOG announced that it will continue
to intervene in defense of the Guyana dollar and its
international reserves.
Expropriation and Compensation
On August 16, 2001 the National Assembly approved the
Acquisition of Lands for Public Purposes (Amendment) Bill
2001. This Bill cleared the way for the government to
specifically acquire a private parcel of land at a price the
owner contended was less than fair market value. The
opposition political party accused the government of bias
and heavy handedness. The government argued that the bill
is not anti-investment or anti-business. Rather, it is
designed to benefit the vendors, storeowners and the country
as a whole.
Dispute Settlement
Guyana is a signatory to the Convention on the
Settlement of Investment Disputes between States and
Nationals of Other States. International arbitration
decisions are enforceable under Guyana's (then British
Guiana) Arbitration Act of 1931. The country is also a
member of the International Center for the Settlement of
Investment Disputes (ICSID).
There have been several high profile investment
disputes in recent years involving U.S. and other investors
in Guyana. Most disputes focus on special tax treatment,
access to licenses, and approvals necessary to conduct
business in Guyana.
-The U.S. firm which owns 80 percent of Guyana Telephone &
Telegraph (GT&T), the local telephone company, is in dispute
with the Public Utilities Commission (PUC) over the
interpretation of a number of provisions in its purchase
agreement. Areas of dispute include service and use rates
and implementation of a previously agreed upon expansion
plan. The Government of Guyana has threatened to use
legislation to break the 40-year monopoly granted to GT&T, a
deal signed by the previous administration. Though it
continues to openly criticize the company, the GOG has yet
to follow through on its threats to legislate or mandate its
way out of the contract.
-A local recipient of an Export and Import (EX-IM) Bank loan
to build a parboiled rice mill (using equipment imported
from the U.S.) in Guyana is in dispute with Guyana's Central
Housing and Planning Authority regarding a permit necessary
to begin construction on its facility. Although the High
Court issued a ruling in favor of the company that ordered
the Central Housing and Planning Authority to issue the
permit, the government moved to appeal the decision. The
dispute is the company's second involving permits in two
years. The first dispute ended when the High Court mandated
that the Environmental Protection Agency issue the relevant
environmental permits. The permits were issued only after
the company filed a contempt of court motion against the
government.
-A U.S. company importing spare parts and construction
equipment to Guyana reported receiving a notice that it had
lost its privileges to operate a "duty-free" warehouse that
it had been operating for more than a decade. The company
reported that extensive bureaucratic procedures required by
the GRA delayed the import of crucial spare parts by several
months and threatened its vitality. The Embassy brokered a
deal that allowed the company to continue its operations.
Performance Requirements & Incentives
While there is no set policy regarding performance
requirements, they are often written into contracts with
foreign investors. Some contracts require a certain minimum
level of investment, as is the case with the U.S.-owned
telephone company. Investors are not required to source
locally. They do not have to export a certain percentage of
output. Foreign exchange is not rationed in proportion to
exports. There are no national ownership or technology
transfer requirements.
The Status of Aliens Act allows a non-resident of
Guyana to acquire and dispose of assets, and moveable and
immoveable property in the same manner as a citizen of
Guyana. The government treats domestic and foreign
investors alike with regard to investment incentives. There
are incentives offered to all investors equally and
incentives available based on specific criteria such as
location of an investment or investment in specific
government-targeted sectors.
The Fiscal Enactments (Amendment) (No. 2) Bill of 2003
allows the Minister of Finance to grant exemptions from
Corporate Taxes for a period of five years to an investor if
the activity demonstrably creates new employment in Region
1: Barima Waini, Region 8: Cuyuni-Mazaruni, Region 9: Upper
Takatu-Upper Essequibo and Region 10: Upper Demerara -
Upper Berbice. The act allows for exemptions of corporate
taxes if the new economic activity falls under the following
categories: non-traditional agro processing (excludes sugar
refinery, rice milling and chicken farming); tourist hotels
or eco-tourist hotels; information and communications
technology (excluding retail and distribution); petroleum
exploration, extraction, or refining and; mineral
exploration, extraction, or refining. In the latter three
activities defined, the Minister may grant exemptions for a
period up to ten years. In spite of outlined provisions
for tax relief, the Minister maintains final discretion over
which investors receive corporate tax exemptions.
Other incentives available to investors include
affordable leases for land in industrial estates. Though
promoted by GO-INVEST, the application for the Land is done
through the Minister of Tourism, Industry and Commerce.
The Ministry of Tourism continues to accept and encourage
the submission of lease applications for industrial estates,
though there are no industrial estates available for lease.
The government advertised two estates near to the capital
city of Georgetown as being available for lease. However,
the government attempts to repossess these properties are
ongoing. The land was previously leased to investors who,
according to the government, have not developed the land or
engaged it in any productive process. Officials from the
Ministry indicated that the process for repossession is not
straight forward. To apply, potential investors are
requested to submit an application form and a business
proposal to the Ministry of Tourism. Though not required,
GO-INVEST can make a recommendation to the Ministry of
Tourism on the investor's behalf. The application and
business proposal is then reviewed by Ministry personnel who
determine whether the investor qualifies for the land.
Qualifying criteria include the export component of the
business and employment opportunities created. It is
difficult to predict when and if the GOG will be successful
with repossessing lands since these matters tend to be tied
up with extensive Court decisions and appeals.
-Waivers of the customs duty and the high consumption taxes
on plant, machinery and equipment are granted based on
submissions made to the Commissioner General of the GRA.
-The Income Tax (In Aid of Industry) Act Chapter 81:02
provides for accelerated depreciation of plant and equipment
on applicable trades outlined in the act; export tax
allowances for manufacturing or processing of non-
traditional products exported to countries outside of the
Caribbean Community (15 member countries make up the
community); and research and development tax allowances.
The approval authority for duty and consumption tax
exemptions on plant, equipment, machinery and spare parts
lies with the Commissioner General of the GRA. Investors
are expected (though not required) to submit business
proposals to GO-INVEST that outline the proposed project,
the value of the investment, and employment to be generated
from the economic activity. GO-INVEST reviews the proposal
and makes a recommendation to the GRA. GRA grants approval
in accordance with the Customs Duties (Amendment) (No. 2)
Order of 2003. Each project is reviewed on a case-by-case
basis and recommendations are made accordingly. The GRA
determines whether imported materials are being imported for
the reasons stated by the investor and whether those
materials are eligible for tax relief under the law.
Right to Private Ownership and Establishment
Foreign and domestic firms have the right to establish
and own business enterprises and engage in all forms of
remunerative activity. However, in some cases, licenses are
required. Private entities may freely acquire and dispose
of interests in business enterprises, although some newly
privatized entities have limits on the number of shares that
may be acquired by any one individual or entity (domestic or
foreign). Similarly, the articles of association of some
firms prohibit the issuance of more than a certain number of
share transfer forms to any one individual or company in an
effort to prevent attempts to gain control of such companies
in the secondary market. In theory, the government can
limit competition with state-owned companies by denying
private firms the required licenses to operate. Licenses
are granted primarily in the mining, telecommunications,
forestry, banking, tourism and environmental sectors.
Investors should be aware that getting all the licenses
required to operate in Guyana can be a time-consuming task.
According to the GO-INVEST Investor's Roadmap, the estimated
processing time to obtain the approvals to lease state or
government lands may take one year, though some investors
report much longer delays. To register a patent or
trademark can take approximately six months. The right of
foreigners to own property or land in Guyana is specifically
protected under the Constitution.
Protection of Property Rights
Guyana adopted British law on patents and copyrights
upon independence. This outdated legislation currently is
being revised to conform to global norms. Guyana joined the
World Intellectual Property Organization (WIPO) and acceded
to the Bern and Paris Conventions in late 1994. WIPO
officials visited Guyana in early 1995 and conducted a
seminar on intellectual property rights. At present, there
is no enforcement mechanism to protect intellectual property
rights. Patent and trademark infringement is common. Local
television stations pirate and re-broadcast TV satellite
signals with impunity. Guyana has not ratified an
intellectual property rights agreement with the U.S. Trade
Related Intellectual Property Rights (TRIPS) draft
legislation was prepared, but has apparently been shelved.
Transparency of the Regulatory System
Guyana has no anti-trust legislation. Historical
factors, Guyana's small population, and economies of scale
have led many sectors to be dominated by one or two firms.
Capital markets are still evolving and the allocation of
investment takes place without a well-organized market.
Bureaucratic procedures are cumbersome. Investors often
receive conflicting messages from various officials and have
difficulty determining where the authority for decision-
making lies. In the current absence of adequate
legislation, much decision-making is centralized. An
extraordinary number of issues are resolved in Cabinet or in
the Office of the President, a process that is not open to
public scrutiny and which often results in long delays.
Attempts to reform Guyana's many bureaucratic procedures
have not succeeded in limiting red tape.
Efficient Capital Markets and Portfolio Investment
Guyana's banking system is still not fully developed.
Inefficiencies and delays periodically plague the foreign
currency exchange market. Businesses report that currency
shortages can result in significant delays in converting
Guyana dollars to U.S. dollars at some banks. Because
Guyana has yet to develop an effective inter-bank trading
system, some banks may be short of foreign exchange while
others have currency available.
In November 2004, the Financial Institutions Act was
passed, giving the Central Bank the power to take temporary
control of financial institutions in trouble. This
effectively gives the bank greater responsibility for
licensed financial institutions. Previously, the Central
Bank had been criticized for not taking a more proactive
role in helping one local bank to remedy its poor financial
situation. As a result, the institution went into
receivership and many small depositors were unable to
recover their savings.
The cost of capital in Guyana is not attractive.
Interest rates on capital loans range from 10% to 19.75%.
The Minister of Finance must give permission for a foreign
investor to borrow over US$10,638 (G$2 million) in Guyana.
The government sells treasury bills at auction to finance
the public debt, and other government-controlled rates move
with the treasury bill rate. Private attempts at bond
financing have not been successful. One large Guyanese
company offered a bond issue in early 1995 in an attempt to
raise US$10 million. The issue was not successful and no
subsequent large bond offers have been made.
The banking system in Guyana is liquid. Local bank
statements reveal that deposits continue to increase even as
loans continue to decrease; a trend that appears to indicate
the existence of a large underground economy. Some experts
suspect that the underground economic activity could account
for more than 50% of Guyana's total economic activity.
Eager to lend money, but skeptical of Guyana's legal system,
banks claim that they are unable to find suitable local
candidates for loans.
Although large and well-established companies sometimes
use equity financing, the government encourages companies to
finance new operations by offering shares on Guyana's stock
market. In 2003 The Guyana Association of Securities
Companies and Intermediaries Inc., (GASCI) a self-regulating
organization, was registered to operate the Guyana Stock
Exchange. Its members, the stockbrokers who compete against
each other in share trading, own GASCI. GASCI relies on
trades to support the exchange's operations. However, the
small sums traded have been insufficient to meet
organizational expenses. Consequently, the Association has
struggled to maintain adequate staffing levels. Already the
target of two lawsuits that allege non-cooperation, the
Association has also struggled to garner the support of
listed firms that are unwilling to disclose relevant
information. Individual investors generally prefer to
utilize the banking sector to finance investments, although
one Canadian company reported that it was able to
successfully finance its operations using the stock market
in late 2004.
Corruption
Despite the paucity of documented corruption,
allegations of corruption are common. Although the
government has recently acted to address this problem with
legislation that requires public officials to disclose their
assets prior to assuming office, its implementation has been
slow and ineffective in preventing corruption.
The Procurement Act 2003 was passed in Parliament to
provide for the regulation of government procurement of
goods, services and the execution of works to promote
competition among suppliers and contractors and to promote
fairness and transparency in the procurement process. The
Act has come under fire by critics because it grants the
Minister of Finance the power to unilaterally appoint a
National Board, responsible for the National Procurement and
Tender Administration that exercises jurisdiction over
tenders.
Offering or receiving a bribe is a criminal offense in
Guyana punishable by incarceration. The law is not applied
extraterritorially. The government has periodically
prosecuted officials for corruption with mixed success.
OPIC and Other Investment Insurance Programs
OPIC renewed its support for U.S. investors in Guyana
in 2000 following the settlement of a long-standing dispute
between an OPIC client, Green Mining, Inc., and Guyana.
OPIC support for U.S. investments in Guyana had been
withheld since mid-1992, and its restoration was linked to
the settlement that was reached with Green Mining, Inc.
This settlement marked the resolution of all matters pending
between Green Mining and the Government of Guyana. The EX-
IM Bank resumed limited coverage in Guyana, offering
insurance and short-term loans for the private sector at the
beginning of 1994.
Labor
Guyana's labor force comprises approximately 320,000
people with skills encompassing a vast range of disciplines
in the fields of manufacturing, agriculture, electronics,
commerce, management, and other professional practices.
Education and skill development are provided in primary,
secondary, and technical schools as well in the university
and privately owned institutions of learning. Individual
companies mount various programs to develop human resources
specific to their needs. Parliament passed the Trade Union
Recognition Bill in 1997. All businesses operating in
Guyana must recognize and collectively bargain with the
trade union selected by a majority of its workers. Guyana
adheres to the International Labor Organization (ILO)
Convention protecting worker rights.
Emigration continues to pose a problem to employers
throughout Guyana. One non-government organization reported
that because of emigration patterns, it trains fifteen
employees for every five that it needs. Skilled workers
migrate in record numbers every year to the United States,
Canada, the Caribbean, and Europe. Unemployment and
underemployment continue to plague Guyana's economy.
Foreign Direct Investment
There was a surge in foreign direct investment from
1989 to 1991 that fueled healthy growth figures in the early
to mid-1990s. In recent years there have been relatively
few large-scale investments in Guyana. The most notable
recent investment was made by DIDCO; a local company that
launched US$16.6 million poultry farm in May 2002.
Following is a list of foreign direct investment compiled by
the Bank of Guyana.
Foreign Direct Investment
January-December 2002/2004
(US$ Million)
Companies 2002 2003 2004
Ask 4 Solutions
5.0 - -
Barama
4.0 11.0 3.3
Blue Sky Communication
2.0 - -
Caribbean Containers Ltd.
0.3 - -
Courts
0.3 - -
Decipher International Inc.
2.0 - -
Esso Standard Oil S. A. Ltd.
0.3 - -
Global Seafood Technology
1.3 - -
Guyana Lottery Company
0.3 - -
Guyana Power and Light Co.
2.6 - -
Guyana Telephone & Telegraph Co.
14.0 - 10.0
National Milling Company Ltd.
0.5 - -
Omai
4.5 1.5 -
Sanata
6.4 - -
Trans World Telecom (TWT)
- 6.0 15.0
Mining Exploration companies
- 7.6 5.0
Skeldon
- - 1.7
Total 43.5 26.1 35.0
Source: Bank of Guyana
The Guyana government has signed a deal with Cambior
(Canadian Company) to privatize its Linmine bauxite
operations. The government announced plans to secure
investments during 2005 with the following entities:
Jaling Forest Industries Inc. (Canadian Investors)
Omai Bauxite Company Ltd. (US$39M)(Canadian Investors)
Lake View Hotel and Resort (US$25M)(Unknown Investors)
RotorWay International Guyana (US$5M)(American Investor)
ROMANEX Guyana Exploration Ltd. - a subsidiary Of Vannessa
Ventures (US$1.5M)(Canadian Investors)
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