…says T&T firms with deeper pockets outmuscling Guyanese companies
…urges Govt to “learn economics 101” quickly, protect local interests
While Guyana draws closer to first oil, concerns continue to be expressed about the large number of foreigners grabbing up local opportunities. This time, the Georgetown Chamber of Commerce and Industry (GCCI) has noted the rampant displacement of local companies by the Trinis.
A section of the Trinidad and Tobago Energy Chamber’s safety forum
In a statement, GCCI President Nicholas Boyer noted that companies from Trinidad and Tobago (T&T) are coming into Guyana with deeper pockets than their local counterparts. These companies, Boyer noted, use their greater access to capital to outcompete locals.
“Right now, the playing field is not level, Trinidad businesses can access larger sums of capital at lower rates; therefore, they can pay higher prices for assets, as they have a lower hurdle rate,” he said.
“If our government doesn’t learn economics 101 quickly, they’ll soon have to collect their taxes from Port of Spain, because of issues like transfer pricing and lack of a multiplier effect for the dollars leaked out of the Guyanese economy.”
Boyer gave as an example a services company he set up to cater to the oil and gas sector. He noted that he has partnered with Trinidadian firms. However, he noted that representatives from one of the largest Trinidadian hardware partners have been in Guyana trying to invest and outcompete his joint venture.
“In order to strengthen the relationship and not damage it further, formal policies need to be put in place such as a local content policy and subsequent legislation, policies around investment promotion and strengthening of local businesses. We must welcome investment by our Caricom brothers and sisters, and I encourage competition; but on a level playing field.
GCCI President Nicholas Boyer
“We need to work together to encourage investment by Trinidad in a manner that benefits Trinidadian and Guyanese firms, especially the Trinidadian firms who set up more than a shell office with the address of the lawyer that incorporated, and the firms who hire and train local Guyanese and don’t repatriate all or most of the profits but instead reinvest it here.”
According to Boyer, firms who are interested in being genuine partners with Guyana will not seek to enter the market through the back door, but rather “will come to the front door and shake hands with the local Private Sector”.
He also criticised the recently-held Trinidad and Tobago Energy Chamber’s Safety Forum and the Government’s investment outreach to Trinidad. According to Boyer, both of these ventures left out the local Private Sector, resulting in a backlash against both events.
“Trinidad and Guyana have a long history together, but given what is before us, one can expect both countries’ Private Sectors to be vying to profit from extraction of Guyana’s newly-found oil,” Boyer said.
A local content policy was recently completed and released to the public, with the GCCI organising a forum to discuss its merits. In the policy, there are sections where the operator has to declare how many contracts it awarded to Guyanese suppliers for the preceding half year, versus how many it had anticipated awarding. In this way, the policy notes, companies can be measured by their actions.
Concerns have previously been expressed that oil companies’ claims of hiring locals cannot be taken at face value, but must be vetted. According to the policy, half-year and end-of-year reports will be one such vetting measure.
According to the policy, these reports will be standardised and delivered by the companies directly to the subject Minister. The information companies put down in these reports will be measured against what commitments for local content they made in their individual local content plans.
But despite legal requirements for companies to meet local content expectations, the policy stops short of saying exactly how the policy will be enforced against delinquent companies who do not wish to honour their responsibilities. According to one source, a policy with no clear measures to ensure its implementation lets delinquent oil companies off the hook.
Section 36 of the Petroleum Exploration and Production Act specifies that a company can only be granted a production licence if their proposals for “employment and training of citizens of Guyana are satisfactory”.
