#BTColumn – Guyana: The spat of local content
Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.
by Wilberne Persaud
A few weeks ago, an unfortunate misstep pushed Guyana’s Local Content Policy (LCP) into the region’s headlines. The Act aims to reasonably retain the benefits generated by activity in the petroleum sector for Guyanese companies, businesses and workers to a degree that optimizes the use of existing and easily created local capacity.
The policy encourages both training and the transfer of skills available to the local population — benchmark proportions of the local workforce are indicated. These are certainly laudable goals. The embarrassing event was an email leak from the CARICOM Private Sector Organization (CPSO), the fledgling association of regional business interests, with four representatives from Trinidad and Tobago and just one from the Guyana. The email revealed the group’s dissatisfaction with the LCP. Careless handling of e-mail communication is not in itself a good sign.
The question is though, what happens next? Suresh Beharry, Guyana’s representative on the CPSO, was reportedly tasked with conveying the organization’s concerns to the Guyanese government. Unsurprisingly, he indicated his support for the Act, while pledging to negotiate resolution of the CPSO’s concerns.
The Guyana Private Sector Commission questioned the “legitimacy” of the CPSO. Subsequent developments suggest that the issue remains unresolved. The CPSO’s demise indicates that Trinidad and Tobago’s private sector believes that the policy, to its detriment, “protects” Guyanese businesses – effectively hindering free trade and undermining their potential gains. A brief overview of the Guyana Bureau of Statistics’ foreign trade figures for the most recent year available provides some background. Guyana’s exports to Trinidad and Tobago are negligible — reported under “Other”.
CARICOM, the region’s economic integration movement, operating under the Treaty of Chaguaramas, as agreed policy, seeks progress towards the CARICOM Single Market and Economy (CSME). Either way, these sticking points are nothing new. The perceived benefits and costs of “integration” had previously led Robert Persaud (no relation to author) during the October 2019 election campaign to suggest that “…the time has come for us to revisit the Chaguaramas treaty…we are the ones…expected to pay more and get less Trinidad and Tobago has been very predatory in the way it has approached opportunities in the oil and gas sector in Guyana, and we must do reverse.”
The implementation of the agreed provisions of the CSME to enable the free movement of goods, services and labor in the region is progressing at a hesitant pace. Indeed, before the expected windfall from oil extraction, meaningful negotiations with a deeper understanding of common issues and engagement were badly needed. Complaints from Guyanese about treatment at immigration ports of entry in Barbados and Trinidad and Tobago are well known. The “free movement of workers” remains an aspiration rather than a reality.
But the advantages of regionalism have been recognized. Many reflect on a simple fact: the phenomenal past performance of the West Indies cricket team owes part of its success to the breadth of the catchment area from which talent is recruited. Still, team selection was often a problem, a big problem too. Nationalism, parochialism if you will, intervened.
We can also consider the political advice of Nobel laureate Arthur Lewis in proposing industrialization for the then British West Indies.
His idea was an integrated customs union, but given the low levels of income, small size and population, there was no point in industrialization activities aimed solely at satisfying local demand. We all know how it ended. Import-substitution industries never emerged from the protected “infant industries” that grew into adults and the policy, implemented completely against Lewis’s recipe, failed.
What policy implications flow from reflecting on these events? They are shouting at us: the need for well-organized and well-defined negotiating arrangements is overwhelmingly evident. Trust, confidence and demonstrated reliability between partners in entering into transactions of any kind, while never a guarantee of success, are the foundation of high performing, mutually satisfying and profitable partnerships.
Cooperation rooted in a genuine quest for equity must prevail. How should this, how could this be achieved? Not hard at all: share your concerns openly, be transparent about desired outcomes, and if there is conflict, be prepared to accept outcomes that are truly logical and fair.
The leaked email created waves, why? Transparency was born from hidden, secret concerns! Once mutual trust successfully overcomes this hurdle, Guyana will have to face the fact that trade and economic development, the adoption of appropriate technologies enabling reliably functioning production and transport systems and much more, all require absorptive capacity. It cannot be overstated.
Guyana’s population is tiny. People are the real potential and the real resource for development. For many years, migration has resulted in a haemorrhage of a great deal of talent and potential expertise – engineers, heavy machinery operators, administrators, middle and senior managers, project managers, the list goes on. Therefore, reliance will fall on skilled workers/professionals who are not currently available in Guyana. Add to this the fact that strong institutional capacities lag behind the obvious requirements and need to be developed. Solving these problems requires importing skill sets – physically and otherwise.
A functioning professional cadre of recruits from the Diaspora, the wider Caribbean and other sources should fill these gaps. Even with best practices and huge amounts of oil money, the potential for chaos and avoidable corrupt practices is real. These conditions do not, should not and cannot change overnight. Some of the issues to overcome are captured by indices covering ease of doing business, functionality of transport infrastructure, etc. These are just a small sample of the list of issues that need to be addressed holistically and comprehensively.
No amount of robust econometric modeling, optimistic projections and glitz of new displays of wealth will guarantee success in achieving sustainable development, in the absence of absorptive capacity – it takes time to emerge. Ideally, only an effective government committed to monitoring policy implementation can foster this. If resolving the CPSO and Trinidad and Tobago LCP concerns proves difficult, a mutually agreeable honest broker can be engaged to assist. Once achieved, glimpses of a harmonious future exploitation of oil and gas resources, managed with care, should emerge.
Wilberne Persaud, author and consultant economist, is a former chair of the Department of Economics at the University of the West Indies, Mona, Jamaica.