Analysis and News

Shipping charges reduced to pre-pandemic levels to bolster the economy

BY GEOCAP's Contributor: Navendra Seoraj

Even as global shipping costs continue to soar amid the pervasive COVID-19 pandemic, the Government of Guyana has foregone $4.8 billion in revenues by reducing freight charges to pre-pandemic levels, to cushion the effects of the increased shipping rates on the local economy.

The move by the government will translate into exponential benefits for consumers and the business community over the next six months, as they will be able to save 4.8 billion GYD.

As announced early this month by Guyana’s President, Dr. Irfaan Ali, the decision to reduce the exorbitant freight charges followed an assessment of the socio-economic effects of the COVID-19 pandemic on household income, the private sector and the economy as a whole.

“In this regard, we have recognised the marked increase in shipping costs from some countries which has moved from an average of 2,500 USD to as much as 15,000 USD dollars per 20-foot container and from 3,500 USD to over 20,000 USD for a 40-foot container,” the Head of State said.

Bloomberg had reported in April that the price for a container of goods from China to the U.S. West Coast and European ports had hovered near record highs for several months, and conditions were ripe for more increases even though spot rates usually softened at that time of year.

Around the same time, President Ali had said that a possible short-term solution to rising commodity prices stimulated by exorbitant shipping costs, could be an adjustment in the margins of businesses.

This, however, was a challenge for the business community, since it had to contend with other uncontrollable factors and simultaneously recover from what the World Trade Organisation (WTO) described as an “unprecedented disruption” to the global economy and world trade, as production and consumption had scaled back across the world.

Consequently, having carefully assessed the impact of COVID-19 on the local economy to-date, and on the prices passed on to the consumers, the government reduced freight charges to pre-pandemic levels, in the calculation of customs duties, excise taxes and input value added tax (VAT) on goods imported.

The relevant aspects of the Customs and VAT Acts were amended to reflect this concession, which is effective on all invoices dated August 1, 2021, to January 31, 2022.

Government agencies are tasked with ensuring that the benefits are passed on to the consumer and not pocketed by unscrupulous importers.

Following the announcement of the concession, several private sector bodies had commended the move.

The Private Sector Commission (PSC), which is the umbrella body for most business associations,    expressed gratitude to the Government of Guyana for the decision to reduce the freight charges to pre-pandemic levels.

“The PSC is quite confident that this new measure is widely welcomed by businesses and consumers alike,” the commission said in a statement.

Further, the private sector body said: “The PSC had crafted several proposals regarding the issue of shipping cost. The PSC is pleased to see that this proposal was largely considered and implemented.”

This decision, the commission believes, will certainly stimulate economic activity and promote growth and enhancement within the private sector, and facilitate consumer saving.

To this end, the PSC urged the business community to ensure that consumers benefit from all savings made as a result of this tax relief.

It was reported that the government has been working closely with the private sector to ensure that Guyana’s economy remains stable amid fluctuations on the global scene.

A coordinated local effort is needed, especially with the WTO saying in March that the relatively positive short-term outlook for global trade is marred by regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries.

According to the latest statistics from Guyana’s Ministry of Health, close to 153,000 persons have been fully vaccinated so far.

“While we work in partnership with the private sector, they have a responsibility, a social responsibility to adjust margins to help the consumer, and we are hoping that the private sector would help also and there would not only be government policy and measures in addressing this global issue,”

President Ali

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