Most have heard of the intriguing impact the rice, sugar and gold sectors have had on the economy.
But little recognition is ever given to the Services Sector. This sector happens to be one of the largest in the Guyanese economy. It is even argued that it is perhaps the most loyal when it comes to delivering on tax payments.
But before delving into hardcore statistics, it is important to first understand that the services sector is an extremely large field. You would be surprised to learn that most of the forms of businesses you are familiar with are a part of this sector.
When you think of the clubs and hotels in Guyana, the laundry stores, the taxi and minibus services, the insurance companies, the car dealerships, the shipping companies, the recycling entities, the consultancy companies and even the fashion, security and machinery subsectors; they all fall under the services sector umbrella.
The services sector in Guyana is also one of the largest employers of labour, and companies in this realm also have a noted pattern of seeking expansion. This is the case with enterprises such as Church’s Chicken and Pizza Hut. These companies have expanded by leaps and bounds while providing employment for a wide cross section of Guyana’s labour force.
This booming sector has also received praises for its many successes in reports from various established institutions.Take the Guyana Private Sector Assessment Report (PSAR) for example, which was conducted by the Inter-American Development Bank (IDB).
The report says that in Guyana, the manufacturing and the services sectors are significantly impacted by upturns and downturns in aggregate demand.
It said, “Guyana’s largest economic sector, as in other countries in the region, is services. About two-thirds of value-added GDP is accounted for by the delivery of the services that are necessary for the functioning of the economy. Wholesale and retail trade is the largest services subsector, and grew by 35.8 percent in real terms in 2008-12. Transportation and storage is the second-largest services subsector.”
The report went on to state that this is consistent with the fact that Guyana’s small economy makes industrial production for domestic consumption very expensive; this means that as the economy expands, demand is satisfied by increasing imports, which are delivered through retail and transportation services. Construction is the third largest services subsector.
The report noted that, “Construction growth, although modest in 2008-12, accelerated in 2013 as a result of the investment of profits from the mining sector. Financial services, although accounting for only a small share of total value added in the economy, has experienced significant growth (56 percent real growth in 2008-12), confirming that the sector is expanding as the economy grows.”
Furthermore, the report stated that information and communications technology and business-process outsourcing are also expanding. In the past few years, the report said that Guyana has begun to host call centres that take advantage of the country’s low labour costs and its educated workforce whose first language is English. It also stated that the services sector has received the most credit from commercial banks in 2012, followed by manufacturing, agriculture and mining.
BANK OF GUYANA
Monitoring the performance of the services sector in Guyana is a number of agencies, one of which is the Central Bank.
The Governor of the Bank, Dr. Gobind Ganga, has indicated to the Guyana Inc. Magazine that the sector is a large and important one. He emphasized that dips in this industry could signal, from time to time, that economic challenges are ahead and that certain decisions are required to stimulate activity.
Ganga also pointed out that the Bank’s annual reports also keep a record of the services sector and the performance of its other subsectors.
According to the 2015 Bank of Guyana Report, the services sector, which accounts for more than half of the Gross Domestic Product (GDP), recorded a growth of 2.3 percent relative to 5.5 percent in 2014.
This outcome was largely due to an increase in activities of the transportation and storage, financial and insurance, information and communication, real estate and other services by 13.6 percent, 8.1 percent, 5.5 percent, 2.5 percent, and 1.7 percent respectively.
There were also increases in electricity and water, education, public administration and health and social services.
The transportation and storage sector expanded by 13.6 percent. This was from a 13.7 percent growth in 2014. The growth was due largely to increased mobility and activities in the transport industry (domestic air and ferry passenger services).
Financial and insurance activities expanded by 8.1 percent from 0.8 percent at the end of 2014. This performance was attributed to improvement in access to financial services and increased private sector credit of 6.2 percent.
The information and communication sector grew 5.5 percent compared to 3.8 percent in 2014, stemming from the continuous upgrading of services in the telecommunication industry. Real estate activities grew by 2.5 percent after an expansion of 6.0 percent in 2014 as a result of the growing housing market. Other service activities grew by 1.7 percent compared with a 4.0 percent growth in 2014, on account of increased tourism and other-service related activities.
The wholesale and retail industry fell by 0.6 percent compared to a 3.0 percent decline in 2014, attributed to lower consumption spending in the economy coupled with lower imports for consumption, intermediate and capital goods.
Furthermore, the 2016 Bank of Guyana Report indicated that the services sector grew by 0.8 percent relative to a 4.8 percent growth in 2015. This outcome was due to increased activities of financial and insurance, transportation, storage and other services by 2.5 percent, 1.1 percent and 5.7 percent respectively.
However, wholesale and retail trade, which accounts for more than one-tenths of GDP, contracted by 1.8 percent. Financial and insurance activities increased by 2.5 percent from a 7.5 percent growth at the end of 2015. This performance reflected slower growth of private sector credit of 1.7 percent relative to a 6.2 percent growth at the end of 2015.
The services sector is expected to grow by 3.0 percent by the end of 2017 due to greater activities in financial and insurance, transportation and storage and wholesale and retail trade by 5.8 percent, 3.9 percent and 2.7 percent respectively. The construction industry is expected to grow by 13.5 percent.
According to the Guyana Office for Investment’s website, fiscal incentives are not available for all subsectors that fall under the Services Sector. However, incentives are available to encourage investment in the following subsectors:
• Medical Subsector
Exemption of Duty and Value Added Tax (VAT) on all equipment and material needed for building.
• Funeral Homes
Such investments received a waiver on Duty and VAT on hearses.
Medical Schools under this subsector are offered exemption on Duty and VAT of all equipment and material needed to establish and operate.
• Dock Yard and Ship Building
Exemption of Duty and Taxes are available for the operation of dry docking facilities.
Exemption of Duty and VAT on all machinery and equipment used in this subsector.
• Solid Waste Collectors
Waivers of Duty and Taxes on some vehicles and equipment.
Waiver of Duty and Taxes on all machinery and equipment.
• Recording Studios (Music)
Waivers of Duty and Taxes on equipment and material.
(Article taken from the Guyana Inc. Magazine Issue 27)