Budget sets stage for `great boom'-Private Sector Commission head
By Gitanjali Singh
"Considering all the constraints... the political and economic climate... the budget is one of the most positive things done in years. It is a real stimulant," says Private Sector Commission (PSC) Chairman, Yesu Persaud. Persaud told Stabroek News, in an invited comment yesterday, that the budget contained only pluses which could really stimulate the economy for a "great boom" in the future. He said it had led to the investment climate improving 100% on what it was before and that the government was now seriously facilitating the private sector. "If the political situation is corrected, Guyana can be on the boom path," the leading city businessman said, noting that exports now needed to be stimulated. Non-traditional exporters to extra-regional markets are eligible for tax breaks on 75% of their income, but Persaud said these exporters have to become aware of this. Finance Minister, Bharrat Jagdeo, unveiled plans on Monday to among other things, reintroduce tax holidays (abolished in 1994), create the atmosphere for secondary trading and for a modern insurance industry. He also said the government will work with the private sector to establish a private development bank and will promulgate legislative changes to provide cheaper mortgages to boost the housing sector. Persaud, who aggressively lobbied for the return of tax holidays over the last few years, said the restoration of this incentive was especially welcome. The tax holidays are for five years. But while he feels the government is now on the right track to facilitate private investment, Persaud says there is still need for investment allowances. He is of the view that the private sector in Guyana is reacting positively to the investment climate, noting its interest in developing the Ogle aerodrome into a municipal airport and in the Guyana Airways Corporation. The businessman said the government will need to give special status to the proposed private development bank for its creation to be effected by the private sector. A crucial issue will be funding and Persaud hopes that with the help of the government, the private sector can tap into resources from international financial and donor agencies. The government-owned development bank--the Guyana Agricultural and Industrial Development Bank (GAIBANK)--was dissolved in the merger with the Guyana National Cooperative Bank. The private sector has been clamouring for a development bank since to source long term capital. Persaud said promulgating a Mortgage Finance Act will be the stimulus for institutions to put money into mortgage financing. Those institutions registering under this Act would be eligible for the tax free benefits enjoyed by the New Building Society (NBS). On the other hand, the NBS Act will be amended for the society to accept securities other than a transport to issue mortgages. "Securities legislation is also very necessary as many persons are investing without protection and such legislation will protect against fly-by-night operators," Persaud said. Noting the need to keep inflation down, Persaud said he expects to see the exchange rate situation stabilise with inflows coming in over the next week. He expects a further alleviation in foreign exchange supply with further inflows expected. "I can't see any minuses in the budget," Persaud said. He expects the government to abolish the two per cent turnover tax in the 1999 budget. Managing Director of the National Bank of Industry and Commerce Limited and past chairman of the Guyana Association of Bankers, Conrad Plummer, said the budget was an attempt by the government to come to grips with what threatens to be a very difficult year. Noting that this will be a tight budgetary year, Plummer said there was need for cooperation on all fronts--political and social. "3.2% growth is really a large decrease from what Guyana has experienced over the last few years," Plummer said, alluding to the government's economic growth projection for this year. He said this will have all sorts of impacts on Guyanese lives. He finds the promulgation of a Mortgage Financing Act to be a good idea in principle as the country needs serious mortgage financing for a boom in the housing sector. He also welcomes the reintroduction of tax holidays. "Securities legislation are long overdue and any initiative that will encourage a secondary market will be most welcome," Plummer stated. Additionally, Plummer said, any decrease in the reserve requirement by commercial banks would be appreciated and added that it would be reflected in the spreads. Jagdeo said the 1996 reserve requirement circular will be revised. Plummer stressed that the high reserve requirements at 14% and 16% were not necessary with the stringent stipulations on lending by the Financial Institutions Act. He feels that the government can take off the five percentage points it added in recent years and even come down lower on the requirement and not affect the liquidity situation. "The system will adjust to it or absorb it," Plummer said, alluding to excess liquidity with a lowering of the reserve requirement. Head of the Forest Products Association (FPA), David Persaud, said that given the current difficulties facing Guyana, it would be difficult to expect more from the budget though the FPA would have liked to have its concerns addressed. The FPA had made out a case to Jagdeo for duty free concessions on diesel, fuel and spare parts for heavy duty equipment and for sawmilling operations. "We are disappointed that we have not gotten any of the concessions we discussed with the minister," Persaud told this newspaper. But the FPA is happy with the reintroduction of tax holidays and hopes investment in the forestry sector would benefit. Persaud said the current fiscal incentives were not sufficient to attract local investment in the forestry sector. 'Passing mention' of tourism industry in budget galls TAGThe Tourism Association of Guyana (TAG) is peeved at "only passing mention" being accorded to the tourism industry in Guyana by Finance Minister, Bharrat Jagdeo, in his budget presentation in Parliament. TAG has, however, commended the government on a budget geared for social development "within the considerable constraints of limited public funds and debt servicing responsibilities". A release from TAG observed that the tourism sector which contributed as much as 20 per cent of the Gross Domestic Product (GDP) in 1994, "and offers significant opportunities for social development," did not get the recognition it deserved. According to the association, at two separate budget consultations with Jagdeo last year and this year, it had suggested an increase in the airport departure tax by $500 to $2,000 to fund a tourism marketing campaign. It had also suggested that the ten per cent tax on hotel rooms go towards tourism development in Guyana. Jagdeo announced in Parliament on Monday that the departure tax will be increased to $2,500 (an increase of $1000), which TAG says will result in an additional $99,369,000 or US$662,480 in government revenues. "There was, however, no mention of any intention to direct these funds into tourism development," the TAG release said. Referring to the association's suggestion regarding airport tax revenue for a public relations campaign, TAG maintained that the lack of such a campaign was the biggest obstacle to eco-tourism development in Guyana. "The marketing campaign is necessary to create and maintain an image of Guyana as a tourism destination and is intended to increase the number and length of stay of visitors to the country," the release said. TAG noted that the predicted growth of the industry will be dependent on some form of direct marketing since the present trend was a decline in the numbers of visitors to Guyana. It feels that eco-tourism provides opportunities for a significant increase in government revenues, employment and foreign exchange generation, rural and hinterland development, natural resource conservation and management and sustainable development. Noting that the eco-tourism industry could only be developed through a commitment by the government, TAG said the opportunities that exist today for expanding the local eco-tourism market will not exist forever. "The association is disappointed that while the budget predicts a 3.5 per cent increase in the tourism industry this year, the necessary financial commitment to the development of the sector is once again missing," the release said. It emphasised that meaningful tourism development which will contribute to the economic development of Guyana required commitment. TAG opined that the 1998 budget "neglects to recognise and convert the potential of this new industry, one of the few industries expected to experience growth in the next year". 
|