By Ryhaan Shah
Already, most of us are very concerned at what we see as mismanagement, corruption, and the overblown expectations of the Granger Government with regard to the oil and gas industry. This despite the many warnings sounded and the valuable lessons that can be learned from countries that have successfully managed large natural resource wealth.
The phenomenon known as the paradox of plenty is particularly associated with non-renewable resources such as oil and gas. What brings on the resource curse is arguable: whether it stems from greater volatility as dependence on the major revenue earner becomes linked to swings in global markets; whether from weak institutional infrastructure; or whether it stems simply from a sharp rise in corruption and mismanagement of a weak or compromised Government.
There are grand failures, such as Nigeria, where the oil industry is wracked by corruption and mismanagement. Analysts contend that whereas oil was expected to add value to the average Nigerian, it has actually become a cost, because of the irresponsibility of the officials tasked with managing the sector. Guyana seems headed in this direction, and appears unwilling to learn from countries that are managing their wealth with due diligence and prudence.
Canada has the world’s second largest oil reserves, and is the third largest producer of aluminium and diamonds. The country implements and applies strict regulations, and much of the oversight of royalties, taxes, incentives, permits and licensing is done through provincial bodies. The National Energy Board, which oversees regulations, also answers to Parliament.
Chile, which is the world’s top producer of copper, has — like Canada — managed to stave off the resource curse by ensuring full transparency through the regular publication of information by the Finance Ministry on both the operations and revenues earned, along with comprehensive oversight of royalties, taxes, production values, and environmental assessments.
Since large reserves of oil and gas were discovered in Norway in the 1960s, the country introduced a novel approach to managing such wealth. Each year, Norway sets aside its oil earnings and takes out 4 percent to be used for public services. This prevents wealth concentration, currency appreciation, and mismanagement and corruption by public officials; and other countries, like Israel, Chile and Colombia, have adopted similar measures.
Botswana, the world’s largest producer of diamonds, has also managed to avoid the resource curse, and uses a three-pronged approach to its wealth management. With vision and foresight, Botswana pursues economic diversification, divests revenues to make the country less susceptible to global market volatility, and invests surplus revenue in the country’s development. Botswana continues to be one of the least corrupt of African countries, and remains largely conflict-free.
Already in Guyana, nothing like transparency, providing information to the public, and getting ready to establish strict regulations and oversight is being done. In fact, it’s just the opposite, and the Green Paper with proposals to establish the Sovereign Wealth Fund tabled in the National Assembly does nothing to dispel the grave concerns.
Government’s track record on diversification, for instance, is non-existent. It shut down three sugar estates, making over 6,000 jobless, without ever considering how the estates could be diversified to ethanol or other production to make them profitable.
Another case in point is the newly appointed head of the all-important Department of Energy, Dr Mark Bynoe. There was no transparency in this selection. He was handpicked by Granger, and we are being assured that his woeful lack of qualifications and experience in the oil and gas sector is to be bolstered by paid expertise at an additional cost to taxpayers. Note, also, that final decisions will rest with him.
Where there should have been a global, transparent search for the best candidate for this crucial post, the PNC Government has anointed a party loyalist who will basically toe the line. This is the Burnhamism that wrecked Guyana, and it does nothing to instil confidence in Government’s handling of the oil sector thus far.
Government’s top economist, Professor Clive Thomas, proposes that, come 2020, each household should be given one million Guyana dollars annually to spend as they please. This might well be the PNC’s campaign strategy for re-election in 2020: to literally buy votes; and there is a substantial body of citizens who would welcome such handouts. For lower-paid workers, who do not earn a million a year, why would they bother to work at all?
Most Guyanese would much prefer that, like every other country with wealth earned from non-renewable resources, the earnings be prudently managed and invested in long-term development projects that would provide gainful employment for everyone.