Analysis and News

World Bank 2020: Doing Business in Guyana – Starting a Business, Getting Electricity and Credit

BY GEOCAP's Contributor: Kayshav Tewari

Doing Business 2020, a World Bank Group publication, is the 17th in a series of annual studies measuring the regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 190 economies and over time.

The report uses 11 indicators to gauge and compare the ease of doing business in any given country. In this article we shall consider three of these areas: Starting a Business, Getting Electricity and Credit.

Overview

Guyana is classed as an Upper-middle income nation, with an income per capita of 6,995 USD and a population of around 800,000. In 2020, it was reported to have a Doing Business (DB) score of 55.5 which gives it a DB Rank of 134 out of 190. This means there are 133 nations in which doing business is easier.

Starting a Business

Guyana’s best score for any individual indicator was for the procedures, time and costs of starting up a business. While this score was 86 out of a possible 100, it still meant a ranking of 111 among 190 countries.

On average it takes about 18 days to start a business in Guyana – a process which entails things such as: Company Name Search and Registration, a Declaration of Compliance, a Tax Identification Number (TIN) with the Revenue Authority, a VAT Registration and Social Security Registration.

The total cost of this entire process amounts to 9.4 percent of income per capita whereas for OECD High Income nations, this cost is merely 3 percent of income per capita. In absolute values however, the costs in Guyana fall within a reasonable limit. There is also no Paid-in minimum capital requirement.

The sole area for improvement when compared to other nations has to do with the timeliness with which the relevant bodies – the Guyana Revenue Authority, the Registrar of Companies and the National Insurance Scheme – are able to complete their respective processes.

Getting Electricity

This indicator looks at the procedures, time and costs required for a business to obtain a permanent electricity connection and the reliability of such connections. This indicator identifies a significant inhibitor to doing business in Guyana. Out of 100, Guyana scored 45.9 which places it at a rank of 170 out of 190 nations.

This underwhelming performance has mainly to do with the unreliability of electricity supply in Guyana i.e. the frequency and duration of power outages – the average for the year amounting to a total of 113 hours of power outage.

Notwithstanding this, the number of procedures and time taken to establish a permanent electricity connection are broadly comparable with the Latin America and Caribbean and OECD High Income averages.

The costs associated with this process, however, are very high – amounting to 424 percent of income per capita, with this number being 66 percent for OECD High Income nations. This consists mainly of the costs of purchasing distribution transformers and low-voltage lines and the security deposit that must be paid to Guyana Power and Light (GPL).

Getting Credit

This indicator has to do with two main things: the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. Out of a possible 100, Guyana scored 55 on the Getting Credit score which placed it at a rank of 94 out of 190 countries; this is one of its better rankings.

Guyana’s credit bureau, Creditinfo Guyana Inc, a credit reporting institute, was reported to be very effective in delivering the quality of information necessary for potential borrowers of credit to assess their creditworthiness. This information can also be accessed by banks and financial institutions so that more informed lending decisions can be made.

While this information might be of high quality, it is available for only 31 percent of the population, around 160,000 people. This pales in comparison to the Latin America and Caribbean average of 48 percent and an OECD High Income average of 67 percent.

As the credit history and information of more individuals becomes available, the notorious gap of uncertainty and informational asymmetry between lenders and borrowers in Guyana’s financial system might be somewhat alleviated.

The site to access individual or a business’ credit information in Guyana is https://gy.creditinfo.com.

As for the collateral and bankruptcy laws, there is much scope for improvement. The main areas include the establishment of a public credit registry (as opposed to the for-profit private credit bureaus) that provides comprehensive credit information on citizens, and the refining of laws that guarantees the rights of secured creditors in cases of insolvency and liquidation (over the rights of government’s claim to taxes).

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