Mohamed Irfaan Ali: Guyana’s involvement in Belt and Road Initiativ

Source: B&R Working Committee

Speaking Points

His Excellency Dr Mohamed Irfaan Ali, President of the Co-operative Republic of Guyana on the occasion of the Belt and Road Economic and Environmental Cooperation Forum, Beijing on January 10, 2023

Guyana/China Relationship

1. Following 50 years of growing cooperation, China remains a key strategic partner in assisting Guyana’s infrastructural transformation.

2. As a result of our strategic partnership with China, Guyana has benefitted from debt relief of approximately US$36.6 million at a time when our country was classified as a Highly Indebted Poor Country (HIPC).
3. The savings that accrued from the debt relief allowed the Government of Guyana to invest the equivalent amount in the health, education, housing and water sectors which were neglected due to the high debt service payments the country was required to make.
4. Guyana also benefitted from several concessional loans, grants, and technical co-operation in areas such as trade, health, education, infrastructure, energy, transport and communication, agriculture, sports and culture. Indeed, China is one of the largest providers of concessional financing to Guyana.
5. Some of the notable transformative projects financed with concessional loans from the Chinese government, to date, are the following:

-- The extension of the Cheddi Jagan International Airport, Guyana’s main Port of Entry, to accommodate wide-body aircraft to support the country’s tourism sector and increase regional and international trade.
-- The widening and improvement of one of the country’s largest roadways through the East Coast Demerara Road Improvement Project. This was one of the largest road projects that facilitated the establishment of major housing schemes, reduced travel time and significantly improved domestic and international trade.
-- The upgrading of the Transmission and Distribution Network Infrastructure, including the construction of new substations, and rehabilitation of existing substations of the main provider of electricity in Guyana.
-- One laptop per family/teacher and the establishment of a dedicated fibre optic backbone network along with the construction of wireless towers and data centres to support the provision of E-services to the citizenry of Guyana. This project was also intended to position Guyana to leverage technological advancements.

6. The Construction of the Guyana International Conference Centre, which now honours the first President of Guyana and the first Chinese Caribbean leader, was the most significant project implemented with grant funding. This facility, now called the Arthur Chung Convention Centre (ACCC) is utilized for the hosting of major international and local conferences.

Participation of Chinese contractors in Current/Ongoing Projects

7. Equally important, is that over the past two years, Chinese contractors have actively participated in the procurement process for major transformative projects, including:

-- the construction of a high-span bridge between the two most populous and economically significant regions,
-- upgrade of major roadways;

8. The Government of Guyana recently awarded the contract for the construction of the high-span bridge to a Chinese contractor. In the future there are a number of projects which are aligned with the greening and the Belt and Road Initiative.

Future Projects which are aligned with the greening of the Belt and Road Initiative (BRI)

9. With thirty-six (36) offshore oil discoveries since 2015, Guyana’s development trajectory has radically changed. Indeed, Guyana is now one of the fastest-growing economies in the world.
10. The unprecedented growth will present new opportunities for the realization of transformative projects such as:

-- A Deep Water Harbour port facility to link Guyana with its continental neighbour, Brazil.
-- A high-span bridge to link Guyana with Suriname.
-- Amaila Falls hydro project, which will be part of the energy corridor that will be developed by our Continental partners, Suriname and Brazil.
-- New roadways to connect the hinterland to coastland communities in Guyana to open up trade routes in neighbouring countries in South America.

11. Guyana has also launched a new Local Carbon Development Strategy (LCDS) 2030 which focuses on harnessing the country’s unique advantages in creating a new low-carbon economy while remaining committed to global climate and biodiversity goals. Under the LCDS 2030, oil revenues will be managed strategically and responsibly by ensuring increased economic and social investments. The focus will also
be placed on diversifying the economy by supporting the development of the non-oil sectors, with a specific focus on the areas of physical infrastructure, the national digital connectivity network, and repairing coastland and hinterland climate protection infrastructure.
12. It is also important to note that Guyana’s 18 million hectares of forest store over 19.5 Gt (Giga ton) of carbon (Co2). The country aims to maintain 99.5% of this forest as a global asset. Every year, Guyana’s forest removes 154 million tons of Co2 from the earth’s atmosphere. Also, the country aims to keep deforestation rates at 90% below the global average, given the role of our standing forest as an important carbon sink to the world and our intention to maintain a net-zero economy.
13. Under the first LCDS, the Government of Norway committed US$250 million to Guyana for avoiding deforestation. The proceeds were utilized for creating low-carbon jobs, climate change mitigation and adaptation, investment in digital infrastructure and promoting sustainable livelihood opportunities.
14. Last year Guyana led the world by becoming the first country to receive jurisdiction-scale carbon credits. These credits come from the TREES standard that recognizes the value of maintaining forests.
15. Under this agreement HESS is purchasing 2.5M credits for every year from 2016 to 2030. This approximates 30% of credits for each year that Guyana is estimated to earn under ART TREES. In other words, there is approximately 70% remaining credits for each year that is available for sale.
16. Allocation from these resources, specific allocations are made to the Amerindian Communities: based on the commitment in Guyana’s Low Carbon Development Strategy 2030, 15% of all earnings on carbon credits sales will go to Amerindian Communities directly.
17. Avoiding global deforestation and reducing emissions are critical to the goal of restricting the increase in global temperature to less than 2°C; a major commitment made at the COP26 climate summit, where more than 130 countries, including Guyana, pledged to end deforestation by 2030.
18. In the mold of Guyana’s aforementioned climate financing agreements, we welcome the establishment of similar initiatives with China. The proceeds therefrom could be allocated to the building of resilient infrastructure that supports the advancement of trade, in the context of the Belt and Road Initiative (BRI).

Guyana’s involvement in BRI

19. The Government of Guyana signed a Memorandum of Understanding (MoU) with the Government of People’s Republic of China on cooperation within the framework of the Belt and Road Initiative. This agreement is expected to see enhanced cooperation in the five main areas of the BRI, namely, policy coordination, facilities connectivity, trade and investment, financial integration and people-to-people interaction. Guyana started the process of negotiating a “Plan of Action” with the Chinese Government to give effect to the MOU.
20. Guyana recognizes that the Belt and Road Initiative (BRI) presents an opportunity to address its infrastructure gap in a climate-resilient and sustainable manner.
21. Indeed, the Belt and Road Initiative (BRI) is aligned with several transformative projects mentioned, here, earlier. These projects will enhance the competitiveness of our country and facilitate trade relations in the Caribbean, South America and the Rest of the World.
22. As my government continues to advance the delivery of other critical infrastructure, China remains a robust partner by offering more excellent specialized firms that can accommodate Guyana’s growth and greater sophistication of our economic sectors. New roads, bridges, ports, and ICT investments will continue to define our relationship.
23. Guyana is also advancing its transformational and sustainable development agenda through the highly anticipated gas-to-energy project. This initiative will see the construction and operation of a pipeline from one of the Floating, Production, Storage and Offloading (FPSO) vessels to an onshore natural gas liquids (NGLs) processing plant. The project entails the construction of a 225km, 12-inch pipeline to transport a guaranteed minimum of 50 million standard cubic feet per day of natural gas, to a designated development zone. The project is expected to significantly reduce the cost of energy by almost 50%, and hence, aid in the development of the manufacturing industry, and harmonization of the clean-and green-society policy. The flagship Gas to Energy Project will add 250 MW of new generation capacity to Guyana’s grid. Lower electricity costs from the Gas to Energy Project and low carbon energy investments will spawn opportunities such as cement manufacturing, petrochemicals, and the possibility of steel manufacturing over the longer term.

Recommendations

Notwithstanding the benefits to be derived from the Belt and Road Initiative (BRI), the take-off of the initiative has not advanced as envisaged in some regions. Many countries on the corridor are heavily indebted, hampered by low growth, and limited fiscal space to incur additional debt to finance projects aligned with the BRI initiative. Consequently, it is imperative that the Chinese government consider and employ the following actions:

1. Provide more concessional loans to support projects in developing countries that are in alignment with the BRI.
2. Ensure that the loan approval process to finance projects under the BRI is more seamless.
3. Leverage Public Private Partnerships (PPP) to support the rebalancing of project risk and benefits for developing countries which are heavily indebted.

Given its positive impact on trade, sustainable, resilient and green infrastructural development, and overall competitiveness, the Belt and Road Initiative is of immense mutual economic benefit and continues to hold great potential. However, the continued successful implementation of the Initiative in developing countries, including Guyana, could be further enhanced by the following conditions:

4. Provision of concessional Financing to support projects in developing economies that are in alignment with the Belt and Road Initiative – The economic viability and promise of the Belt and Road Initiative (BRI) is countervailed by the ensuing challenges of limited fiscal space within developing economies, as they grapple with the lingering effects of the COVID-19 pandemic and the Russia-Ukraine conflict. In this regard, the provision of concessional financing for BRI-aligned projects

would go a long way towards ensuring the Initiative’s continued execution despite the prevailing economic challenges.
5. The timely approval of financing to support projects under the Belt and Road Initiative – Our in-country experience suggests that the programming of concessional financing for development projects is a sometimes a lengthy process, as the various criteria applied. Without sacrificing due diligence, we believe that creditors and beneficiary countries can work closely to identify possible hurdles which obstruct the achievement of timely financial close, with a view to eliminating them. The removal of such hurdles would pave the way for the seamless execution of financing arrangements for potentially transformational Belt and Road Initiative (BRI)-aligned projects.
6. Leveraging of the Public – Private Partnership model as a means of actualising projects under the Belt and Road Initiative – Considering the challenge of limited fiscal space that confronts many developing countries, the Public-Private Partnership model offers a compelling alternative for the actualisation of BRI projects.
The Public Private Partnership (PPP) is a critical arrangement that can support a country’s development needs. There is cognizance that Governments have the ability to leverage concessionary public funds, public assets, and other public resources, that can attract private sector investments. The idea is that the PPP model is a mechanism for encouraging the development of a mix of flexible options that are based on global, regional, bilateral, and national (or even community-based) solutions that link both the public and private sectors.
7. The use of carbon financing mechanisms by China to support sustainable development initiatives and climate action-positive investment opportunities in the context of the BRI is also one that we
must consider. Guyana presents and excellent opportunity through which we can have dialogue on this. We therefore encourage China in the new dispensation of the Belt and Road Initiative, to look at the opportunities our LCDS provides in building a more sustainable and resilient Belt and Road Initiative. I thank you.