Government needs to come clear on how it plans to manage the funds that are expected to flow from the emerging oil and gas sector, especially since Natural Resources Minister Raphael Trotman has indicated that Government could be moving in another direction other than the Norwegian model of the Sovereign Wealth Fund (SWF).
This is according to Opposition Leader Bharrat Jagdeo, who said last Friday that countless economies were able to thrive using the Norwegian model of the SWF. However, Government here seems hell bent on going in another direction.
Jagdeo was again addressing the pitfalls in the oil and gas sector and Government’s seemingly inability to effectively manage what could eventually become a booming oil and gas industry.
Back in June during the debate of the Petroleum Commission Bill, Jagdeo had urged the fast tracking of the legislation that would open the way for the establishment of the SWF. He had said that government needed to build the fund around the model which exists in Norway. However, Minister Trotman was totally against it.
“Mr Speaker, all those who lecture about Norwegian models obviously are in the dark ages because the new literature says that the Norway model cannot apply to countries that are developing like Guyana”, he had said in rebuttal to the Opposition Leader’s suggestion.
At his press conference on Friday, Jagdeo said the Norwegian model remains the most successful model that has separated the management of the oil resources from the politicians.
“It is done technically. So the procedure is clear so that political people do not get their hands on the money. It is the most successful model in the world and also avoided the destruction of the economy through the Dutch Disease. Most countries have gone down the path that has seen an increase in national wealth,” Jagdeo told journalists.
Jagdeo said if Government will not be “going down this road “then it needs to state clearly how it intends to keep safe the country’s oil reserves.”
The Sovereign Wealth Fund of Norway, officially known as the Government Pension Fund of Norway, is the largest in the world, at latest count worth more than a trillion dollars. The fund was created on the back of the country’s vast oil wealth to provide its citizens with pensions.
The purpose of the petroleum fund is to invest parts of the large surplus generated by the Norwegian petroleum sector, generated mainly from taxes of companies but also payment for licence to explore as well as the State’s Direct Financial Interest and dividends from the partly State-owned Statoil.
The current revenue from the petroleum sector is estimated to be at its peak period and to decline in the future decades. The Petroleum Fund was established in 1990 after a decision by the country’s legislature to counter the effects of the forthcoming decline in income and to smooth out the disruptive effects of highly fluctuating oil prices.
Back in 2015 following the discovery of oil reservoirs by ExxonMobil, President David Granger had said that his Government would be focusing on the establishment of the much-needed fund.