President has warned against Dutch Disease

Dear Editor,
In February, I had previously written on the Government’s approach to local content policy, cautioning that fixed and over-ambitious schedules for the levels of employment and materials might not be the best approach to such a complex subject.
Ten months later, we see the emergence of legislation which is rumoured to be sent to Parliament for debate imminently, but may have unintended consequences that would be harmful to the country’s overall development.
When President Ali spoke about the local content policy at the February seminar, he emphasised it would be across all sectors. This was a good point, as it would not result in the mass migration of jobs to the oil industry. However, the subsequent debate and the draft schedules have been centred on the oil sector. These mandates, if passed, would send the industry into overdrive to secure skilled labour from other sectors, rather than risk being in violation of the legislation.
This would be made even more urgent should the law be retroactive. While the heads of the Private Sector bodies are talking up local content, many local companies are complaining of having lost workers to the oil sector over the past year, and this would be accelerated with the proposed legislation. Add to that the redirection of capital and entrepreneurial focus and we have a classic and extreme example of Dutch Disease.
This directly contradicts the President’s own pronouncements of creating a diversified economy. If they don’t decide to scale back investments, it is a certainty that foreign companies would begin to adjust their contracts with suppliers as soon as the legislation is passed, in order to reflect and stay in line with the new laws, as well as create whole departments to monitor compliance. They will not wait around for any administrative body to be formed to regulate the legislation.
More jobs, you may say. In fact, no; as they would simply be siphoned off from the civil service, traditional manufacturers, or construction companies, some of which are already moving to work with the industry rather than the Government. Slippage in deadlines and cost overruns through higher labour costs for vital infrastructure are occurring, and would increase.
The local content policy should not be some zero-sum game about grabbing as much from the other party in the short term. The energy sector is probably one of the most collaborative industries on the planet, with the goal of sharing risks and maximising outcomes for all parties. A more holistic and flexible approach would have better long-term benefits for Guyana, and even for the local Private Sector.

Yours sincerely,
Lynn Nicholas