AN important factor in the success of Guyana’s oil and gas industry will be the ability to cultivate an economy where small and medium-sized businesses can grow, thrive, and benefit from new opportunities.
Guyana has traditionally ranked low on indices that track the ease of doing business. According to the last World Bank Ease of Doing Business Report, Guyana ranked 134 out of 190 countries on the ease of doing business in the country. While this is only one metric by which to judge a country’s economic state, it’s an indicator of how much work Guyana still needs to do. While interest and capital from international investors continue to increase, local businesses face issues such as limited access to credit and financial services, complicated permitting requirements and challenges such as unreliable electricity. The government is working to address many of these issues with steps like the gas to power plant and new financing programmes, but more remains to be done.

While many Guyanese companies have been able to successfully enter the oil and gas industry, there are still others, particularly smaller companies, which are yet to find ways to take full advantage of the current and upcoming opportunities. This is not a unique challenge to Guyana as the global oil and gas industry requires expertise that is often difficult for new entrants to gain, and the contract sizes tend to be very large for small companies to handle. This is one reason why companies that already have a foothold in the oil and gas industry have been successful at bidding for, and winning, contracts in this space.

Back in 2021, President Irfaan Ali highlighted the government’s work with regional bodies on the modernisation of the institutional and legislative infrastructure to help establish the single window approval system for permitting. This was a significant step towards making it easier to do business in Guyana by improving the access to more streamlined processes and approval.

Importantly, the upcoming gas-to-shore project is also projected to cut electricity cost by more than 50% when it is realised in 2024. Guyana has struggled with high costs and unreliable power and fixing that will be a key element of improving the business climate. Reliable and low-cost power will be a game changer for large industrial users of electricity who can become more competitive in areas such as manufacturing, food processing and telecommunications.

The government is also actively exploring ways to improve access to business financing. Some local companies have reported struggling to adapt to the longer payment terms that are standard for international companies, but which can make it difficult for small local firms who lack the same access to lines of credit.

Notably, Vice President Bharrat Jagdeo, at the Guyana Manufacturing and Services Association mid-year dinner in July, stated that pending legislation would provide the government with the ability to regulate payment terms to local companies. “The issue of payment terms, we spoke of it in opposition; we raised it with the oil and gas companies and that has to change, and the legislation provides for us to regulate this.”

Another area where Guyanese have also expressed concern is the issue of contract bundling, where a single contractor is awarded a contract covering a broad service, like cleaning or facility maintenance, and then that company subcontracts out the more granular aspects of that work to other companies. While this practice has attracted scrutiny from companies who might rather contract directly with big “name brand” companies, the reality is that this is a very common practice for large international companies across all industries.

Sub-contracting can be a valuable way for smaller firms to grow and build capacity and a way for local companies of different sizes to participate. Few companies have the size, scope and resources to fulfill large contracts and it is key that small firms recognise that the opportunities in the sector globally tend to come from “Tier 1” contractors servicing the industry as much or more than they do from the global oil companies. Through this process, smaller companies can gain a foothold in the industry, gain skills and eventually compete with large established companies.

The government seems well aware of the difficulties and nuance of doing business in the country for small and medium-sized companies, but Guyana is still playing a game of catchup when it comes to improving opportunities. Oil represents a unique chance to accelerate that progress and ensure that as many benefits as possible are captured locally.