Investment Climate Assessment
EDITORIAL
Stabroek News
May 21, 2004
The World Bank two weeks ago launched an Investment Climate Assessment (ICA) in Guyana and similar ICAs have also been launched in Jamaica and Trinidad.
The ICA will focus on the microeconomic and structural aspects of Guyana's business environment, seen in an international perspective. ICAs became a part of the World Bank private sector development strategy in April 2002 and analyse the conditions for private investment and enterprise growth in poor (IDA-eligible) countries to promote economic growth and reduce poverty.
The ICA provides a standard measurement and comparison for the investment climate conditions and would allow for the better identification of the features that matter most for productivity and income growth. The assessment also tracks changes in the investment climate within countries and allows for a comparison with other countries.
The assessment will look in detail at factors constraining the effectiveness of the product markets, the financial and non-financial markets and infrastructural services, including weaknesses in an economy's regulatory and institutional framework. The assessment will also identify reform priorities in the investment climate by linking constraints to firm level costs and productivity.
An investment climate survey underpins the ICA and has already commenced in Guyana.
This survey allows for comparison of existing conditions and the benchmarking of these to monitor changes over time.
The results of the ICA in Guyana should be out in nine months, highlighting its key findings and recommendations. The report would be much anticipated by both the government and the private sector and it would now probably make better sense for the Presidential Business Summit to be pushed back until this report is available. This would allow both sides to speak from a position of strength on the issues constraining private investment and growth in Guyana.
Guyana's economy has been stagnating since 1997, with the annual growth rate averaging one per cent per annum. Real per capita income fell last year by $47 and the poverty reduction programme has encountered its own difficulties, making it impossible to achieve the Millennium Development Goals.
The lack of growth and achievement has been blamed on almost everything, the political situation, the weather conditions and the crime situation. The President has openly criticised the private sector for being a complaining bunch while many businessmen will privately tell you that the government only mouth clichés and really do not back up rhetoric with action.
Of course, being under an IMF-monitored programme constrains the government's fiscal responses but the programme has its pluses as it allows for macroeconomic stability, albeit without growth. As Charles Feinstein of the World Bank has said, political and macroeconomic stability are necessary but not sufficient conditions for growth. The government can still take action independently of these to improve the investment climate.
The ICA is crucial for Guyana as its results and recommendations would feed into donor assistance strategies and programmes while seeking to shape Guyana's reform priorities.
The ICA would also form the basis of an authoritative opinion on Guyana's investment climate and the reforms recommended could be the springboard to jump start the economy.