By Wayne Forde
As an oil and gas producing nation, Guyana may face challenges that other oil and gas producing countries encountered in the early stages of development. Mitigating these risks is critical for the future prosperity of Guyana and presents fertile ground for discourse. Nigeria is a relevant case study in this area. Before the discovery of oil, Nigeria’s economic mainstay was the exportation of agricultural produce such as palm oil, cocoa, groundnut, cotton, and other crops.
However, as activities in the oil and gas industry expanded with the discovery of more hydrocarbon reserves, the economic concentration of the country gradually shifted to crude oil exportation. In many ways, Nigeria’s economy was similar to Guyana’s “six sisters” economy today. Although Nigeria attained the status of a major oil-producing country by 1970 and was rated the seventh-largest producer of crude oil in the world, millions of Nigeria’s still live in poverty today. Nigeria neglected SMEs to focus on oil exportation-and paid a stiff price.
Small and medium-sized enterprises (SMEs) are the engine of growth that promote equitable development and the incubators of entrepreneurship, individual creativity, and innovation.
SMEs drive economic growth and development. Neglecting SMEs is a critical mistake.
According to the World Bank (2019), SMEs provide significant economic activity in the private sector in high income and emerging economies and account for two-thirds of employment, with small firms contributing more to work in low-income countries than high-income countries.
In Guyana, more than 70 percent of the small and medium-sized enterprises (SMEs) failed during the past five years, with the most significant number of closures occurring in 2015.
In 1994, SMEs in Guyana represented 45 percent of the private sector manufacturing and there were several problems that impeded performance and productivity including the lack of finance for capital improvement, the irregular power supply that hampered production, the lack of modern machinery, skills training, high taxation, and marketing deficiencies.
In 2019, the World Bank identified similar constraints that impede sustained growth and prosperity in Guyana. These include taxes, burdensome regulations, an inadequately educated labor force, and corruption are some problematic areas. These problematic factors have a negative impact on Guyana’s competitiveness in the global market space.
In a Global Competitiveness report (2015-2016), Guyana ranked 121 out of 140 countries. Meanwhile, Singapore ranked number one in global competitiveness in the 2019 GCI report. Inefficient government bureaucracy, lack of innovation, and corruption are the most significant problematic factors affecting Guyana’s competitiveness. These factors contribute to Guyana’s rank of 134 out of 190 countries in the Ease of Doing Business. An oil bonanza will not make Guyana more competitive globally or improve its rankings in global indexes without a strategic plan and the allocation of human and financial capital to find and implement sustained solutions to the problems.
Improving Guyana’s competitiveness as a country is a significant area of concern. Renowned Harvard professor Michael Porter’s concept of competitiveness focuses on the prosperity “created” from the economic activities rather than “inherited” prosperity, i.e., the exploitation of national resources. Depending on inherited success often becomes a powerful barrier against upgrading real underlining competitiveness. Guyana has been slow to develop the institutions and laws needed to govern the new oil industry, and a recent political crisis has further delayed that process.
There is a paucity of data in the area of business discontinuance, closure, and factors that determine small (SME) success in Guyana. Although the definition of small business differs from country to country and region to region, small and medium companies are significant contributors to employment and growth in the Caribbean and Latin America. Dr Minto-Coy a professor at the Mona School of Business and Management, at The University of the West Indies noted that scholarly and practitioner communities pay insufficient attention to small businesses in the Caribbean. Dr Minto-Coy emphasized that five decades of scholarship in the Caribbean focused on socioeconomic issues with inadequate attention to challenges that small business and entrepreneurship encounter in various categories.
These categories include financial support, government policies, programs, education and training, research and development, commercial infrastructure, market openness, physical infrastructure, and cultural and social norms that are entrepreneurial factors that impact small businesses, according to the Global Economic Monitor (GEM). There is no data for Guyana in these categories for (SMEs).
It will take prudent management of the oil revenues and the will to confront challenges, crafting the appropriate policies, and a serious effort to attract the human capital, including the diaspora necessary to fill gaps and transform institutions, organizational culture, and behavior in Guyana.
For Guyana to bring about transformational change to improve SMEs success, competitiveness and innovation, there must be an efficient collection of data that provides useful information to inform policy. It is essential to establish a robust agency for mining SME data if Guyana is to be competitive globally.
Guyana needs to craft a National Value Proposition (NPV) and a comprehensive small business development strategy to create a competitive advantage. With oil revenue funding, there should not be any constraints.