High transportation, energy cost stymieing services sector – GMSA President

The content originally appeared on: INews Guyana
GMSA President Rafeek Khan

The Guyana Manufacturing and Services Association (GMSA) on Friday branded the extortionate transportation costs in the services sector as a focal concern for local operators, coupled with the existing clamour on high energy expenses.

GMSA President, Rafeek Khan disclosed during their annual luncheon that in some instances, local operators are spending over 50 per cent of the raw material value for transport. Along with other factors, he noted that production cost is then skyrocketed.

“Competitiveness is ultimately the key factor that affects growth of industries, from farm to market, forest to mill, the cost of transportation for goods are as much or even more than 50 per cent of the value of the raw material coming to the processing facility.”

Khan added, “While energy costs often take precedence, the burdensome logistics cost for transportation to transport our primary production, especially in agro, forestry and mining must also be addressed. We’re extremely blessed as a nation with an abundance of natural resources but accessibility to these resources are sometimes limited. On the other hand, where hinterland and road exist, the prohibitive costs of maintenance contribute to higher production costs.”

The GMSA President divulged that due to high transport fees, vehicles are burdened to carry more than the intended load, thereby damaging infrastructure.

“The small operators quite often lose their competitiveness because of the limited volume of raw materials and produce which they are able to transport. This sometimes lead to overladen trucks, which not only causes the necessary breakages to equipment but destroy roads.”

Moving forward, Khan said as the country aims towards sustainable development in the wake of climate change, it is imperative that Government “builds to last” and prioritises in areas that positively affect competitiveness.

Attendees at GMSA’s Business Luncheon on Friday

He highlighted, “Built to last is a compliment to sustainable development. We are facing changing weather patterns that destroy bridges and roads. Repairs to damaged infrastructure can be avoided if properly built from the start. We can naturally neglect to prioritise what we do not see often.”

Speaking on production, the Private Sector official said manufacturers cannot rely on solely local consumption. With the current Administration creating waves in ensuring that sectors are thriving, the local agencies must aim to capitalise.

“Export is essential for each and every one of your businesses. We’re going to be, as Private Sector, engaging the regional and international private sector bodies on how we can get part of their business. But at the end of the day, if we’re not competitive in manufacturing the products, you’re not going to get sales for export. We see more imports coming in and less exports going out,” Khan observed.

Last year, Government removed VAT from ATVs for mining, forestry, agriculture and manufacturing in the emergency budget. For 2021, in order to reduce the cost of transportation for hinterland communities, it also removed the duty on ATVs for use in the hinterland.

In response, he added, “The Government’s enthusiasm and commitment to infrastructure development across the length and breadth of Guyana is duly recognised [by] Guyana Marketing and Services Association. Removal of VAT for hinterland travel provided great relief, especially for small businesses and commuters alike.”

No reduction despite Govt help

Minister within the Public Works Ministry, Deodat Indar in his feature address contended that they have commenced engagements with carriers to determine why prices have not dropped for hinterland travel.

The Minister assured, “I met with the Aircraft Owners’ Association a month ago and they have to provide to me and Minister Oneidge [Walrond] why the prices haven’t gone down. They have to provide to us the data that we remove VAT on travel but yet persons are complaining that the price have not went down. They have submitted something to us. We have to sit down and go through all of the numbers. If you reduce and remove VAT from a previous regime, then you’re supposed to get reduction.”

Minister within the Public Works Ministry Deodat Indar

On the issue of reliable power and cheaper energy, Indar mentioned that several projects are on stream to contribute to the energy mix, including the Amaila Falls Hydropower Project and the gas-to-shore project, which will also compliment to Government’s transition to renewable power sources.

“What we have now is fossil fuel generated power. Most of the energy is heavy fuel oil. Heavy fuel oil is expensive and a lot of greenhouse gases is emitted from that. We’re transitioning away from those things. Between 2022 to 2027 and thereafter, we have to transition away from these to more renewable power and more renewable energy sources.”

“We’re going to put in solar grid ties in Linden, Essequibo and Berbice. Leguan, Wakenaam, Bartica, Mahdia, Lethem, Mabaruma and some other areas will have grid ties solutions where you generate and just tie it into the grid. It carries down the amount of fossil that you’re using. That will generate electricity at the same time cut your costs significantly,” the Minister told the Private Sector officials.

In August, with the aim of cushioning the high shipping costs due to the global pandemic, President Dr Irfaan Ali had announced several reductions to shipping-related charges to the tune of $4.8 billion in order to bring relief to citizens and businesses.