Guyana urgently needs a comprehensive local content law

Dear Editor,

Oil has been found in Guyana and optimistically production will begin in 2020. This offers Guyana the incredible opportunity of leap-frogging beyond the annual incremental 3-5 per cent economic growth to annual growth rates in the double digit range.

If managed strategically and if good governance becomes the norm in Government and in the Private Sector, exponential growth instead of incremental growth is a real possibility.

The McKinsey Growth Institute has indicated resource-driven countries need a new growth model to transform the potential resource windfall into long-term prosperity.

Based on their research as shown in a Report entitled “Reverse the Curse”, the McKinsey Growth Institute has postulated a model, drawn from the many successful approaches that some resource-driven countries, like Guyana, have employed.

This model has six core elements:

Building the institutions and governance of the resources sector.

Developing infrastructure.

Ensuring robust fiscal policy and competitiveness.

Supporting local content.

Deciding how to spend a resources windfall wisely; and

Transforming resource wealth into broader economic development.

The first element of the McKinsey report speaks to our Constitution. It speaks to the type of people we are or want to be. Do we want to have one race superior to the next? Do we want one race to have all the resources? Do we want one race to own most of the businesses? Or do we want to be a People of equity, equality and inclusion?

The second element of the McKinsey Report speaks to infrastructure. We are a very large country. As President Granger constantly reminds us, the Barima-Waini Region is larger than Kuwait; Pomeroon-Supenaam is larger than Trinidad and Tobago; Essequibo Islands-West Demerara is larger than Mauritius; Demerara-Mahaica is larger than Singapore; Mahaica-Berbice is larger than Cape Verde; East Corentyne-Berbice is larger than Belgium; Cuyuni-Mazaruni is larger than The Netherlands; Potaro-Siparuni is larger than Fiji; the Rupununi (Upper Takutu-Upper Essequibo) is larger than Costa Rica and Upper Demerara-Berbice is larger than The Bahamas.

We need infrastructure. We need a road to Brazil and a deepwater harbour. We need better energy infrastructure, free of blackouts and free of exorbitant costs. We need better drainage, better water supplies, better schools, better bridges, better sewage systems, etc. We need better buses and better roads. This we all know from our daily experiences.

The third element of the Report speaks to “ensuring robust fiscal policies and competitiveness”. With oil on the way, Guyana has to ensure its core economic principles are sound. The macroeconomic policy of the Government of Guyana is centred around Guyana’s fiscal, monetary and exchange rate policy.

Fiscal policy is aimed at increased collection of tax revenues and the gearing of expenditure towards improved services and growth of the economy.

Monetary policy has been aimed at domestic price stability and the controlling of liquidity in the economy, while at the same time allowing for an increased money supply to facilitate expanded economic growth.

Exchange rate policy has been geared towards the stabilisation of the exchange rate and the maintenance of a rate that is conducive to exports. The announcements by the Minister of Finance and the policies enunciated by the government clearly show we are on the right path as Guyana prepares for oil. Of course, with oil, the very structure of Guyana’s economy will change dramatically.

One of the most pressing needs in Guyana today is for the government, in consultation with the Private Sector and civil society, to enact a Local Content Bill. Currently none exists.

The episodes of the Marriott being built entirely by foreigners even though Guyana has very good construction workers, highlights the need for us as a Society to address this abomination of our democracy and human rights. I don’t think China would allow 200 Guyanese to build a hotel in China. Matter of fact, they wouldn’t even be allowed into the country.

A local content Bill is an absolute necessity at this time during the early days of oil exploration.

Exxon and other multinational entities who occupy the value chain of oil production and associated industries, should know from day one, that Guyanese must be involved in the initial spend to produce oil and later as oil is produced.

Guyana will need many thousands of workers to develop its oil industry. Foreigners will flock to Guyana in massive numbers. Caribbean citizens will flock to Guyana given climate change, economic opportunities and CSME facilitation of “the free movement of people”.

If there is no Local Content bill, Guyanese will lose their national patrimony which will be monopolised by foreigners.

There are some basic principles that should inform our Local Content philosophy and legislation.

No lands or concessions of any type should be leased to any foreign entity without having a legitimate local Guyanese partner. And there has to be ethnic parity/equity in this arrangement similar to the South African BEE legislation.

No fishing, mining, logging licenses, etc should be issued to foreign companies unless they have a partnership with a local processor.

Technology transfer and skills transfer should be an integral part of any assessment leading to a decision for the participation of foreign firms in any sector of Guyana’s economy.

The last two elements of the McKinsey Report focus on “How to spend the financial oil wealth created from oil production” and the vision of economic development we embrace.

These two topics need to be discussed in greater detail at another time.

Guyana needs to have a National consultation on Local Content.

Land is wealth and we need to stop giving it away to economic migrants. Water is wealth. So is knowledge.

We have pledged our forests to a foreign state. We now need to ensure we don’t pledge our land, water and biodiversity to others.

Yours truly,

Eric Phillips