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FY 1997 Development Assistance: $3,050,000
Introduction.
Guyana, the third poorest country in the Western Hemisphere, is emerging from over 30 years of authoritarian rule and a state controlled economy. It is now a nascent democracy with a freely-elected government which is making serious efforts to improve the economy and strengthen democratic institutions. It is in the interest of the United States to assist this process of democratization and market liberalization because: 1) investment opportunities for U.S. businesses, which are already significant, will expand as Guyana begins to more thoroughly develop its vast natural resources; 2) Guyana has been a key supporter of critical U.S. political and strategic interests, as demonstrated by its strong Caribbean leadership role in supporting democracy in Haiti and its cooperation in narcotics trafficking; and 3) a stable democracy and renewed economic growth will help prevent social and ethnic strife, thereby promoting internal and regional stability.
The Development Challenge.
Guyana, a small country of 750,000 people located on the northern coast of South America, has a per capita gross domestic product of just $680. From independence in 1966 until the mid-1980s, the State controlled essentially all aspects of economic, political, and social development. Extensive nationalizations in the 1970s were accompanied by a rapid expansion of unproductive and costly social services. By 1988, the State controlled over 70% of economic activity and employed almost one-third of all working persons. Increasingly, borrowed funds were used to support the growing number of inefficient state enterprises and capital investment almost ceased. The results were catastrophic --deterioration and collapse of the infrastructure, widespread poverty, disintegration of basic services, and massive emigration of skilled human resources. Authoritarian rule, buttressed by racial politics, became stronger as the economy collapsed. Misguided socialist philosophy restrained free, independent thought and encouraged total reliance on the State, stunting the growth of civil society. In 1988, the Government of Guyana (GOG) had no choice but to accept the International Monetary Fund (IMF)-sponsored Economic Recovery Program (ERP). The first free and fair national elections in over three decades were held in 1992. Voting is primarily along ethnic lines, and ethnic tensions represent a very real threat to the political and economic stability of Guyana.
Although there are tremendous developmental constraints in every sector, Guyana has made remarkable progress in moving toward a democratic government and a market economy. Largely due to USAID assistance, free and fair national elections (1992) and local elections (1994) have been conducted. Through adherence to other donor reform programs, Guyana has regained international credit worthiness. It has enjoyed solid economic growth since early 1990 of between 5% and 9% per year, and the balance of payments gap has narrowed considerably. Foreign reserves have climbed to an eight-month equivalent of imports (as compared to only a few weeks' reserve in 1991), the exchange rate and inflation have been stabilized, banking laws have been liberalized, and the GOG is making steady progress in its privatization program. USAID has played an important role in this process through reinforcing IMF conditionality, promoting the reform of agricultural policies, and providing macroeconomic, trade, and private sector policy advice to the GOG. Agricultural policy reforms, for example, resulted in liberalized policies, the elimination of certain taxes, and price controls. Coupled with P.L. 480 Title III infrastructure activities, the program has been a major factor in an astounding turnaround in agricultural productivity.
While Guyana's progress in the last five years has been excellent, and there are solid indications that Guyana will continue those measures necessary to unlock its vast potential, the toll of 30 years of mismanagement has been tremendous. For example, despite very impressive gains in agriculture, the amount of land under cultivation is now only back to the same levels of the 1960s. On a per capitabasis, Guyana's current debt of $2.3 billion is probably the highest in the world. Despite great potential, Guyana is not an early candidate for graduation from traditional development assistance. There will be an important role for USAID to play over the medium-term horizon, but that role can be effectively fulfilled with modest funding targeting economic reform and governance.
Other Donors.
Donor assistance to Guyana in FY 1994 totalled approximately $80 million. In 1995, the United States was the second largest bilateral donor. Other major contributors include the World Bank, the European Union, the IMF, Canada, and the United Kingdom.
FY 1997 Program.
The USAID program supports Guyana's return to a market-based economy and the restoration of democracy. In both the economic and political arenas, the key focus is to broaden participation. With limited funding, USAID fills critical gaps in assistance from other donors to develop and implement economic, judicial, and governance policies which broaden participation. USAID plays a lead role in supporting economic reform and is the major donor in strengthening democracy, including the administration of justice. Given current funding constraints, further reductions in future funding would result in USAID terminating assistance in one of these two areas.
Until recently, the U.S. had limited economic or strategic interest in Guyana due to its authoritarian government and closed economic system. The return to a free market economy, however, represents an opportunity for increased investment, particularly in view of Guyana's tremendous natural resource base, its political stability, low wage structure, and strategic geographic position between the Americas and the Caribbean. U.S. investment has been steadily growing in recent years, and the prospects for future investment are excellent as economic reforms expand and deepen.
Agency Goal: Encouraging Broad-based Economic Growth
The GOG is committed to fostering private sector-led growth but it lacks the requisite policies, experience, and institutional structures. Lack of implementation capacity to most effectively use national and donor resources is also a major constraint. Although significant progress has been made, it has not been equitable; approximately 35% - 40% of the population is living below the poverty level.
The USAID program addresses the primary constraints of poor implementation capacity and an inadequate enabling environment for private sector growth. The program also seeks to ensure that the impact of an improved economy more equitably benefits all social classes. As a result of USAID assistance, bottlenecks in implementing development programs, economic reforms and creating a business environment conducive to private investment have been identified and are being addressed. The implementation ratio of the Public Sector Investment Program increased from approximately 60% to 81% between 1994 and 1995, the GOG now consults with the Private Sector Commission, a private sector umbrella body, on a monthly basis to identify and address economic policy issues, and the number of loans being made to microenterprises is growing. Residual funds from the terminated Title III program are being used to improve farm to market roads, drainage and irrigation systems, and sea wall defenses. Thousands of small farmers have benefitted from this program. USAID assistance is also enabling the GOG to formulate its first comprehensive national development strategy in over 30 years.
Agency Goal: Building Democracy
By conducting free and fair national and local elections, Guyana took the first steps toward democracy. However, its socialist past, extreme poverty, and ethnic tensions threaten progress made. A severely deteriorated judicial system has also eroded confidence in the law being the basis for the resolution of disputes, the protection of personal and property rights, and protection from arbitrary acts of government.
The USAID program is intended to promote due process and the rule of law, encourage good governance through increasing transparency and accountability, and develop civil society through civic education and support for advocacy non-governmental organizations (NGOs). USAID has two activities directed toward these objectives -- a program to improve the efficiency and effectiveness of the judicial system and a democracy strengthening program to promote a more pluralistic society, and a responsive, open government.
Excellent progress is being made in justice improvement. USAID assistance targets both infrastructural needs and improved management systems. All infrastructural improvement targets were met in 1995; however, it will take years to fully rehabilitate essential facilities. The upgrading of skills of judicial personnel was initiated as scheduled through short-term, continuing education programs. Key policy advances were also made as the GOG revised fines and fees to emphasize cost recovery, and salaries were increased to help retain qualified employees. The lack of skilled human resources is a long-term problem and it has adversely affected USAID assistance specifically in court management. Improvements, however, are being made as rapidly as possible within current constraints.
USAID assistance in democracy has been primarily limited to elections support, and short-term training for locally elected representatives. Long-term assistance is just now being provided for a more comprehensive program, and a workplan is presently being developed. It is anticipated that assistance will be provided to the national assembly (library development, and establishing a committee system), training of local government officials, and promotion of civil society.
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Encouraging Economic Growth |
Stabilizing Population Growth and Protecting Human Health |
Protecting the Environment |
Building Democracy |
Providing Humanitarian Assistance |
Total | |
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USAID Strategic Objectives |
||||||
|
1. Expand Economic Opportunities Dev. Assistance |
$900,000 |
$200,000 |
$1,100,000 |
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|
2. Strengthen Democracy and Legal Institutions Dev. Assistance |
$1,950,000 |
$1,950,000 |
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|
Total Dev. Assistance |
$900,000 |
$2,150,000 |
$3,050,000 |
USAID Mission Director: Pat McDuffy
PROGRAM: GUYANA
TITLE AND NUMBER: Expanded Economic Opportunities for the Urban and Rural Poor, 504-SO01
STATUS : Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,100,000 DA
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 1998
Purpose: To encourage broad-based economic growth by expanding economic access and opportunity.
Background: Years of mismanagement under a socialist government have left Guyana with an extremely weak private sector and a severely limited capacity to implement public sector economic development programs. Recent macroeconomic gains have not been equitable, and broad-based economic growth is the foundation of sustainable development. USAID has three activities which address this objective: a P.L. 480 Title III agricultural policy reform and infrastructure development program, a program to improve the business environment, and assistance in the formulation of a national development strategy. The GOG's commitment to these activities is amply demonstrated by its satisfaction of all Title III agricultural policy and infrastructure targets, and its adherence to a rigorous and unpopular structural adjustment program which has been an economic shock to thousands of households, particularly the poor and marginalized. Political will in economic reform is evident, although progress is slow in some areas due to lingering socialist philosophy.
Role and Achievements to Date: The USAID program to support this objective has focused on reinforcing the conditionalities of other donors, accelerating implementation of national and donor programs, and filling critical gaps in other assistance programs. The policy reform component of the P.L. 480 Title III Program was successfully completed in 1995. These reforms, coupled with Title III agricultural infrastructure activities, have resulted in a 250% increase in rice production since 1990. The amount of land under irrigation increased by 78,000 acres in 1995, over 15 times USAID's target. All major donors and over 200 Guyanese professionals are participating in the formulation of a national development strategy, which will be completed by June 1996. Because of USAID assistance, two key ministries now have their first coordinated plans in over 30 years to develop and implement policies to promote economic development. Additionally, mechanisms have been established to ensure regular dialogue between the public and private sectors.
Description: The USAID program to improve the business environment stresses increasing private sector investment in productive sectors, better macroeconomic analysis and planning, and improved public resource management. Key means of increasing private sector investment will be through the development of a policy framework conducive to trade and industrial growth, and strengthening private sector organizations to more effectively dialogue with the public sector. Improved macroeconomic management includes data compilation and analysis, and development of a framework for public sector investment programs. Maximizing revenue generation, better budget management, and privatization are targeted to improve public resource management.
Host Country and Other Donors: The USAID program is designed to complement or fill critical gaps in other donor programs. Key donors include the World Bank, the British, the Inter-American Development Bank, the European Union, and the Canadian International Development Agency. The GOG has met or exceeded required host country contributions.
Beneficiaries: The activities benefit all Guyanese but, because of the emphasis on equity, small farmers, small businesses, micro-entrepreneurs, and the lower income strata of society will be the main beneficiaries.
Principle Contractors, Grantees, or Agencies: USAID has contracted IGI International to assist in the implementation of the program to improve the business environment.
Major Results Indicators
Baseline Targets
Share of consumption by the 12% (1992) 16% (1997)
poorest 40%
Number of individuals benefitting 256 (1994) 4,000 (1997)
by micro loans (one sentinel institution)
GOG expenditures on sea defenses $4,000,000 (1994) $12,000,000 (1997)
PROGRAM: GUYANA
TITLE AND NUMBER: Strengthened Democratic Institutions and Processes, 504-SO02
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,950,000 DA
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 1998
Purpose: To promote a more pluralistic, responsive, open government by removing barriers to a sustainable democracy and strengthening democratic institutions and processes.
Background: Guyana's economic and social development depends on sustainable institutions and processes. This objective directly responds to Guyana's social development requirements, and it also supports economic development since open, responsive government encourages economic growth. Similarly, the effectiveness of the justice system is as important to business as it is to good government. Due to 30 years of misguided socialist ideology, Guyana's democratic institutions and processes are extremely fragile, and the judicial system has severely deteriorated. USAID's justice improvement activity is designed to improve the effectiveness and efficiency of the judicial system, and its strengthening democracy activity promotes a pluralistic society and a responsive, open government. Other donors have provided short-term assistance in the electoral process, but USAID is the only donor providing long-term assistance in strengthening democratic institutions. The GOG is clearly committed to the democratic process, and it has provided outstanding support to improve the judicial system. Guyanese institutions, however, are extremely weak, skilled human resources are scarce, and ethnic politics and voting threaten progress and stability.
USAID Role and Achievements to Date:: USAID has extensive experience in assisting judicial systems in the Caribbean, and it has been providing short-term assistance in democracy activities in Guyana for four years. USAID's two activities supporting this strategic objective build upon this experience. Judicial system assistance targets infrastructure, and efficiency and effectiveness. All targets were either achieved or exceeded in 1995. Eight magistrate courthouses were renovated, a temporary law library was established, and training programs were provided for judges, magistrates, and justices of the peace. Improvement to management systems was not planned for 1995, but the GOG implemented salary reforms and cost recovery policies which further activity objectives. Only limited, short-term assistance was planned in promotion of the democratic process, and all planned activities (training for newly elected local government officials) were completed as scheduled. A long-term activity to strengthen democracy has just started and the first annual workplan is now being developed.
Description: Infrastructure and training assistance will continue in the justice activity, but emphasis will shift to improving management systems and processes. Assistance will be provided to streamline the court registry system, establish improved court reporting procedures and practices, regularize the docket, revise laws, and improve records and case management. Assistance in strengthening democratic institutions will focus on registration and voter education, strengthening NGO electoral monitoring capacity, establishment of a parliamentary committee system, additional training of local government officials, and strengthening the role of civil society.
Host Country and Other Donors: USAID is the only donor assisting the judicial system or providing long-term assistance to strengthening democracy. Great Britain, Canada and the European Union, however, have indicated growing interest in collaborating with USAID.
Beneficiaries: The beneficiaries are the people of Guyana as a whole but the activities primarily benefit those who do not have access to equal justice or actively participate in the democratic process, i.e. the disadvantaged.
Principal Contractors, Grantees, or Agencies: The University of the West Indies, in collaboration with the University of Guyana, is assisting in the implementation of the justice improvement activity. The National Democratic Institute is the principle grantee for the strengthening democracy activity.
Major Results Indicators:
Baseline Target
Strengthening democratic institutions 2 (1995) 2 (1998)
(Freedom House Rating)
Trained local Government officials 520 (1994) 750 (1998)
Court case backlog 3,506 (1995) 500 (1997)