BUSINESS PAGE is dedicated to providing objective information and issues of intrest to the business community and the public at large. The articles in Business page are prepared and contribuated by CHRISTOPHER RAM. Christopher Ram is the Managing Partner of Ram & McRae. Chartered Accountants, Professional Services Firm.

Introduction

Ram & McRae, Chartered Accountants on Friday December 14, published its Annual Business Outlook Survey for the Year 2002. Today's Business Page presents extracts from the report and discusses some of the im-plications arising from the findings. The survey includes the responses from forty-three companies of varying sizes, organisational cultures and products/services offered.

Business Page believes that while the report does not constitute a statistical measure of business activity and performance, it represents the views of our businesswomen and men expressed in a survey which guarantees anonymity. The government and indeed the rest of the country would not be wrong to regard the views of the respondents as an accurate reflection of their assessment of the economy, their performance and their expectations for the year ahead. This is not an issue for acrimonious debate but of sober discussion and dialogue between the government and the private sector. It is very unfortunate that after so many years there is no formal and regular process in which the private sector and the government discuss the problems confronting the country. This year's survey elicited forty-three responses or 47 per cent from a total of ninety-two questionnaires sent out. Responses came from companies covering the whole spectrum of the economy including distribution/retail 23 per cent, manufacturing 22 per cent, services 22 per cent, agriculture 12 per cent, financial services 10 per cent, construction and architecture 7 per cent and mining 4 per cent. Note that some companies are involved in more than one sector.

The outlook

Of the forty-three respondents, only two companies (4.6%) were emphatically confident about the economy's outlook for 2002 while six companies (13.9%) were fairly confident. Thirty-four companies were either not confident (25.6%) or not very confident (53.4%) about the prospects for the economy in 2002. This compares with last year's results when twenty-one respondents were either very confident (6%) or fairly confident (36%) about the economy's outlook.

When asked to assess their performance in 2001, 27 respondents (63%) considered theirs to be in line with expectations. Only two companies (5%) considered their performance better than they had projected while fourteen companies (33%) suffered from a decline in their anticipated performance.

Of the fourteen companies reporting a decline in performance, eight have an annual turnover of over $1,000M, two of between $600M and $700M, one of between $700M and $1,000M, one of between $600M and $700M, one of between $100M and $200M and one with less than $50M. These companies operate in a range of industries including distribution/retail, manufacturing, mining, agriculture, financial and services.

Companies were asked to rate the national and international events that made them more or less optimistic about the economy. There was overwhelming pessimism on most of the issues. Issues on which greater optimism than pessimism was expressed were the PPP/C-PNC/R relationship and the publication of the Investment Code, though the failure to give it legal status was overwhelmingly unpopular. This year's respondents showed more confidence in the country's political situation due perhaps to the dialogue between the leaders of the country's two major parties.

The majority of the respondents are less optimistic about the world economic outlook, international terrorism/war, the level of business failures and corruption. Other significant causes for pessimism are crime/drugs, the value of the Guyana dollar, management of the economy, smuggling and Government support for business and investment.

Respondents were asked to indicate their agreement with the Government's action on three highly publicised issues. Seventy-six percent of the respondents (76%) express disagreement with the compulsory acquisition of the Toolsie Persaud Ltd land for development into a market area for street vendors while Government's support for businesses in distress found respondents equally divided while eight companies (20%) had no views.

Only two respondents (5%) agreed with the publication of the Investment Code without legal force while an overwhelming twenty-seven respondents (64%) disagreed. Thirteen respondents (31%) had no views on this issue.

On a weighted average basis, respondents identified lowering direct taxation (69.8%), reducing interest rates (65.1%), and controlling inflation (53.5%) as the issues they most wanted Government to take action on. For three consecutive years lowering of direct taxation has been at the top of the respondents' wish list. Clearly our businesses consider the rates of tax on corporate income (35%/45%) too high. With the country's manufacturing sector in decline, the call for Government support has increased significantly.

The areas which a significant number of respondents considered likely to impact their businesses in 2002 included consumer spending/demand (33.8%), political stability/risk (33.2%), exchange rate (32.2%), electricity supply & rates (31.8%) and interest rates (31.2%). While political stability remained a significant issue, its weighting fell from 43.8% in 2001 to 33.2% in 2002.

When asked what operating issues they considered most important to their business, respondents identified electricity supply and improving product/service quality. In the 2001 survey, the preparation of financial information was considered the most important operating issue but it was ranked only third this year. As then, Customs procedures and inventory management were considered important while environmental issues were considered least important.

Cash flow management, access to capital and timely information were identified as the three most critical financial issues respondents faced. Of less importance were foreign currency availability, debt servicing and the build-up in receivables/ inventory.

50.2% of the survey's respondents identified employee productivity as the human resource issue most important for success. Other important issues were retention of key personnel (49.8%) and recruiting of key personnel (42%). Employee fraud, industrial relations and incentive schemes were the least critical human resources issues. The top three issues all speak of the importance of recruiting and retaining efficient and qualified personnel to the success of a company.

Significantly, the lowest ranked issues were the large number of businesses for which the commercial banks had appointed receivers, domestic and international freight, environmental legislation and the opening of the merchant bank.