Dear Editor,
The development of Guyana’s energy sector is fundamental for the growth of our country’s manufacturing base and industrial capabilities.
In 2014, petroleum imports accounted for 21 percent of Guyana’s GDP. With the fall in oil prices, petroleum imports became cheaper, but the reliance on heavy fuel oil for power generation still remains. In order to reduce, and eventually eliminate, this dependency, Guyana needs to diversify its energy grid by investing in renewables and liquified natural gas (LNG). T
The proposed 400 MW gas-to-power energy project, using associated natural gas from the oil wells, would be fundamental in lowering energy costs. Our Government understands the value of the project, and is looking to include it in the Payara contract negotiations. Any significant regulatory delays, however, could hamper Guyana’s attractiveness and growth. Both energy and mining – in addition to agriculture, forestry and manufacturing – also need supporting infrastructure to fuel exponential growth.
Traditional infrastructure such as roads, ports and bridges are important to reduce logistical costs and bottlenecks, but even more fundamental is the development of health and educational structures. Good schools would provide training for our Guyanese citizens, and encourage the diaspora to come back. Without those proper systems in place, these growing sectors won’t have enough skilled personnel to properly run their operations.
The People’s Progressive Party/Civic administration’s tax-relief measures in the 2020 budget should help encourage the growth of other sectors, to help diversify the economy beyond natural resources. The PPP/C Administration seeks to exempt certain equipment from VAT, and remove corporate taxes on private education and healthcare. Despite a promising initiative, a comprehensive tax reform may be at hand to allow for a thorough deliberation between all Members of Parliament.
Measures could include a reduction of the corporate tax rate and incentives to reduce energy costs. Guyana would also benefit if its informal workers, which account for 48 percent of its labour force, were encouraged to transition into the formal economy. This would improve tax collection rates and widen the tax base, increasing the revenues entering our country’s coffers.
Diversification of the economy, development of infrastructure, and the improvement of the business environment will be pointless without proper accountability over the Government’s finances, which the PPP/C Administration will put in place. The National Resource Fund (NRF), which is used to manage the oil revenues, must have well-established independent committees to ensure that it doesn’t become a slush fund. The administration has vouched to change the NRF Act to make it more transparent, it is unclear if and when they’ll follow through.
As seen in the multi-billion-dollar 1MDB scandal in Malaysia, countries with newfound wealth from oil are more likely to spend without restraint. Allowing for a few executives to control vast amounts of funds while simultaneously having no oversight is a recipe for disaster.
Our PPP/C Administration has begun to implement certain accountability measures to assure the Guyanese people that these funds will not be squandered.
Sincerely,
David Adams
