LEAP set to harness skills, promote sound management
Credit facility managers to have autonomy By Oscar P. Clarke
Stabroek News
June 9, 2002
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With significant job loss anticipated in the bauxite industry in The coming months, prospects for Linden seemed bleak but for the European Union (EU) funded Linden Economic Advancement Project (LEAP).

The LEAP was initiated to alleviate the social degradation likely to develop with the further depreciation expected in the bauxite sector. The project, being coordinated by the Ministry of Finance, is designed to help persons in Linden in particular and Region Ten in general achieve a level of self- employment.

According to International Programme Manager of LEAP, Dr Edo Berensten, investment in lucrative business ventures was lacking in the mining town as it was commonplace for the bauxite industry to cater totally for the needs of the Linden community. The project was started after a period of investigation and a feasibility study by the EU, which afforded the realization that a measure of aid was necessary to secure a reactivation of economic activity in the area.

In a recent interview, Berentsen confirmed that a significant portion of the residents of Linden were highly skilled, manifested in their ability to obtain jobs in critical sectors of gold mining and other heavy industrial enterprises across the country.

Further, he said, the community had several positives, including its ideal proximity to rivers and vast lands and its transportation network, along with being labour intensive and enjoying good climate. This was outlined in a leaflet produced by LEAP which cited advantages of abundant land and natural resources, plus good transport links with the coast and capital along with a key factor of being less prone to natural disasters like flooding as is notable in other parts of the country particularly the coastal belt.

What was lacking, he said, was effective managerial and business knowledge. According to the international project manager, persons in the community had good ideas but needed to convert these to successfully managed business establishments.

Part of LEAP's plan is to help persons to implement these ideas, after reviewing them with the assistance of experts to establish their viability. It is also envisaged that LEAP will try to convince persons, where necessary, to diversify their proposed area of investment if upon examination it is seen that it might contribute to a glut. They would also receive assistance in preparing applications to take to banking institutions for credit to undertake their initiatives.

This service, according to the director, would initially be free of charge before persons are requested to pay a nominal fee to offset paperwork.

Incubator

As part of the development of LEAP there is a proposal for the establishment of a business incubator to aid in the nurturing of small enterprises to make them financially viable. The incubator, it was said, will provide an environment within which small enterprises could share experiences of already established companies, a mix, which has advantages including the stimulation of cooperation in large projects. This initiative, according to Berentsen, will nurse fragile new institutions under conditions that are appropriate to monitoring their constant development.

This system, he said, was successfully implemented in former Eastern and Central European countries that once made up the communist bloc and had state-run economies. The incubator will be linked with the LEAP's business development unit.

The Linden Economic Advancement Fund (LEAF), a credit facility offering US$0.55 million for micro and US$1.25 million for small- and medium-sized loans, will also form part of the project. It is proposed that this facility will be administered by an independent financial institution to be identified by tender, which will follow certain methodologies including independence of managers in the decision-making process regarding the granting of credit; credit being cash-flow and character based rather than asset and document based; interest rates to reflect cost and risk of the credit management appropriately and further financial market conditions. It is also envisaged that LEAF will be supported by a long-term international micro-credit and small- and medium-sized loan expert.

As part of the project there will also be the creation of an Inward Investment Fund (IIF) with the aim of creating and enhancing investment opportunities in Linden targeting both local and foreign investors. This is expected to be achieved through providing information on business and investment issues in the Linden region including business to business matchmaking. It is also hoped that tours and promotional events will create the necessary awareness. And a sound coherent and transparent legal framework will be established geared towards foreign investment. This agency is expected to coordinate with Go-Invest and the Privatisation Unit to obtain funds from several sources including local and foreign investors and the expatriate Guyanese community.

LEAP will also create a web site where investors could view what was available in the mining town.

Meanwhile, over 150 proposals ranging from small agricultural ventures which include poultry rearing, fish farming and the rearing of other domesticated livestock to large scale enterprises including boat building and the revitalisation of the Linden airport have so far been submitted and are being evaluated to ensure their viability. These evaluations are being conducted by LEAP's advisory group comprising some seven members from central government, the Regional Democratic Council, Linden Town Council, Linden Chamber of Industry, Commerce and Development (LCICD) and the Linden Technical Institute.

LEAP, it was stated, has established relations with several of the regional bodies including the Regional Democratic Council and the Linden Town Council with which it must coordinate to ensure success of the project.

Keep it simple, stupid

According to Berentsen, the reason for LEAP being a seven-year programme is that it has to generate economic activity as well as see progress in such ventures, while not allowing funds to seep away in loans, credits and taxes.

To ensure this, certain formulas are being adopted by LEAP to promote the increase in business activity, which includes a KISS (Keep it Simple, Stupid) initiative. The need to keep ideas simple, according to the project director, is essential as persons would venture into complicated schemes.

According to the project director, what was also lacking was consumer orientation, with producers not reaching out to consumers. Consumers, he added, were being taken for granted and there was very little price competition evident locally. A change in mentality was needed generally to effect change in economic fortunes. Lindeners who were used to free lunches will have to adapt to the reality of situation where they will be required to pay for everything and not rely on assistance or credit to which they are addicted.

The initial stage of the project, according to the international director, is the most difficult but once the first successes are realised then it should be relatively smooth sailing.

Financing for the project will be based upon the development and approval of a yearly work plan of which an audit will be undertaken every six months. LEAP is preparing a proposal to illustrate work plans for its first six months of work, along with an overall plan encompassing its expected seven-year life span.

Sizzling with activity

Berentsen said he did not share the view that Linden was a depressed community, especially in the absence of statistics to prove the theory. Rather, he saw the area as sizzling with activity waiting to be harnessed. He said that there was an enormous informal economy, where there was very little scrutiny if any at all and for which persons did not pay taxes. This, he said, made it rather difficult to determine the true purchasing power of persons or figure their real economic outlook.

According to the project director, not because person were registered as being unemployed it meant that they were not receiving some financial reward, or were in fact employed. But he posited that in the absence of reliable employment data it was difficult to keep track of people and their means.

An evaluation of the project is expected after three and a half years to ensure that set targets are being met. It is Berentsen's dream to see the realization of 3,000 sustainable jobs at the end of the seven-year period of the project. However, he said he preferred to be cautious since he recognized that the population of the community was not static and would not allow for a true reflection of the realization of the targets. But he said that once people were willing to seek employment in other areas of the country it would show a healthy sign of mobility and a great fighting spirit of the community to overcome its position.

Staff of the LEAP office are currently being trained in all aspects of project coordination to enable them to function in various capacities at different times. All are employed on the same terms and contractual stipulations, which will see them as entrepreneurs of the labour they sell.

Dr Berentsen who is a native of Holland has had wide experience working in several former Eastern European countries and was at one time a senior adviser to the Privatization Unit.