GMSA MEETS WITH MINISTER JORDAN ON BUDGET 2018
- pushes for measures to assist the manufacturing and services sector.
President of the GMSA Shyam Nokta along with members of the Executive met on September 21st 2017 with Minister of Finance Winston Jordan and representatives from the Ministry to discuss Budget 2018.
The following are some of the key measure put to the Ministry of Finance.
C1. General Measures
The GMSA believes that Budget 2018 should stimulate the economy and put the country back on track to 5% or more growth. In this regard, there is a critical role for the manufacturing and services sector in helping to realise this. The GMSA therefore wishes to offer the following proposals which can help to support the further development of manufacturing and services.
In this regard, the GMSA wishes to recognize the Ministerial Roundtable initiative which has started with a sectoral focus and where many of the issues affecting specific sectors are being discussed in a comprehensive way. The Roundtable has started with forestry and wood processing and intend to advance this to other sub-sectors.
The GMSA subscribes to the view that the private sector can be the engine of growth and needs to work closely with Government to enable this.
The GMSA shares the concerns of the wider private sector concerns regarding economic performance thus far in 2017 and the decline in the economy.
C. Proposed Measures for the Manufacturing and Services Sector
The GMSA welcomes Government’s intention to move the country from being a primary producer to one where we can add value across the productive sectors – whether agriculture, forestry, or mining.
The GMSA has taken note of instances where Guyanese manufacturers of quarry materials; pharmaceuticals and agro-produce have been replaced by import sourcing in public procurement. Such measures, coupled with decreasing domestic demand and imported substitutes (in the case of the wood processing sector in particular) have been unhelpful to value adding and encouraging the manufacturing sector.
There is concern with regard to non-performing loans which increased from the corresponding period in 2016, for the manufacturing sector and services sector by 17 and 23.3% respectively.
Tax measures introduced in Budget 2017 such as VAT on electricity and on forest products have impacted negatively on the manufacturing sector, leading to increases in prices and reducing cash flow in some instances.
The services sector accounted for 49% of GDP at mid year with contributions from ICT, transportation and storage, financial and insurance activities, public administration, education, health and social services, real estate activities and other services. Wholesale and retail trade was the biggest contribution followed by transportation and storage.
In the first half of 2017, the sector grew by 9.9% compared to the 14.1% negative growth in the same period of the previous year, accounting for 7% of GDP at mid-year. This is as a result of three performers – rice milling, value adding in sugar and light manufacturing with the latter growing by 1.3% at mid year and the biggest contribution to GDP thus far (3.9%). A key sub-sector, forestry declined by 18.2% at mid-year with only sawnwood showing positive growth.
The manufacturing sector over past several years has been contributing between 6-8% of GDP. For this year, according to Budget 2017, the sector is expected to grow marginally, by 1.9 percent.
Guyana’s economy grew by 2.2% during the first half of 2017, compared to 2% for the corresponding period in 2016. However, projected overall growth for the year has declined from 3.8% to 3.1%.
A. Overview of Manufacturing Sector Performance
- The following are excerpts from the GMSA’s presentation:
- Reviewing and possibly remove VAT on electricity (and water and education)
- Reversal of the policy for items that were transferred from Zero Rated to Exempt
- Timely settlement of VAT Refunds
- Consideration of a reduction of VAT on locally manufactured goods
- Expanding VAT collection on a wider cross-section of businesses to level the playing field
Access to Finance
- Narrowing the variance in the lending and borrowing rate instituted by the banking institutions.
- Improved access to affordable finance such as improved performance of the Small Business Bureau.
- Consistent with Government’s call to support local, the GMSA advocates for public procurement to consider locally manufactured items – pharmaceuticals, aggregate and quarry products, agro-produce and juices etc. especially when such products can meet standards and are price-competitive.
- Government should apply the Small Business Laws which states that 20% of Public spending should be towards procurement of goods and services from local small businesses.
- Removal of VAT on electricity
- Adjusted/reduced tariffs for manufacturing entities based on performance thresholds
- In the short-medium term, manufacturing companies should be granted tax waivers on fuel used in electrical power and thermal (boiler) power generation (much like the mining sector).
- Incentives for renewable energy options such as gasifiers to utilise biomass, e.g in wood processing and agro-processing (rice husk etc).
- Accelerate initiatives aimed at grid improvements (transmission and distribution) and harnessing renewable energy as well as other options in order to have reliable, stable and affordable energy.
- Establish Special Economic Zones in Guyana for boosting manufacturing and value-adding and where special incentives and facilities will apply.
Standards and Regulations
- Strengthening of standards and regulatory bodies, e.g. GNBS and Government Analyst – Food and Drug Department. These are critical to ensuring consumer protection, quality products and a level playing field.
- Expediting the national quality infrastructure (laboratory facilities)
- Enact anti-dumping legislation that triggers early action when goods are dumped into a jurisdiction.
- Improvement in overall security arrangements especially response and 911 system.
- Provide tax incentives for Business investing in Security with security related expenses being tax deductible. (e.g cost required to set up and maintain security equipment and infrastructure)
- Undertake, with the private sector, a programme of greening of businesses (GMSA already did a joint exercise with EPA early in 2017).
Sector Specific Measures were also presented to the Ministry for consideration.