…says ‘Green Paper’ does not offer enough protection to Guyanese
Guyana must be financially prepared for the incoming oil boom if the country and its people are to truly benefit from the revenues earned from this new sector.
This is according to financial analyst Sasenarine Singh who said that it must first be established that this oil wealth will only be felt by the masses around 2024.
“Those who are spreading this myth that the good life is coming in 2020 are out to mislead the people for political purposes,” Singh, a former Alliance For Change (AFC) member, said.
Another point, he made, is if the institutions are not in place in time and are not constructed to be independent of partisan politics, most of this oil wealth will go to waste.
Singh told Guyana Times International on Sunday that there were several negatives that could happen.
“Extreme macro-economic volatility can cause the foreign exchange rate to change in such a manner that the production process will become extremely uncompetitive,” he added.
He said it could cause wild spending, which could allow too much good cash to be thrown into too many bad projects. Such actions, according to Singh, will drive a rapid increase in the cost of living that will eat up any potential gains from the oil wealth, because most people can see their disposable income declining.
“It can expose the nation to wide swings in revenue between periods of high oil prices to those with low oil prices, which means less revenue. You do not develop a nation with such inconsistent revenue flows,” Singh further added.
The former AFC member said careful attention must be paid to the idea that Guyana could be faced with a US$40 per barrel oil price. “Have we thought about this? Are we planning for this? Will we be able to deliver the services to the people at such a low price for oil? So, how can Guyana prepare for these un-eventualities?” he questioned.
First and foremost, Singh is of the opinion that Guyana must protect the budget process and the national budget to not make it too dependent on the oil revenue. For a start, he said it must only have access to the interest income from the Sovereign Wealth Fund (SWF) thus making the revenue swings more predictable.
Green Paper
But he also questioned how far Guyana has gone to put systems in place to create such a fund. The financial analyst claimed that while the Green Paper was released and the highlights look good on paper, when the fine print is studied more closely, people would realise that there is much more work to be done, because “this Green Paper is shallow and does not cover enough of the bases to protect the people of Guyana”.
“For example, I am extremely concerned about the adequacy of the system around the withdrawal of funds from the SWF. Withdrawal of the capital from the SWF must never be a partisan political measure and thus a simple majority in Parliament is unacceptable to authorise the depletion of the capital of the SWF,” he opined.
While he agrees that Government must have flexibility to withdraw the interest of income earned, Singh said that should be automatic, but never the capital. Also, such withdrawal must have national consensus from all sides, including civil society.
But Singh did not stop there. He told Guyana Times International that the Green Paper has not properly thought out on how to transform the SWF after all the oil has been exhausted. He said the unborn children of Guyana have an even bigger right to these funds than the current generation and he was yet to find the meat on what the Green Paper proposes to protect inter-generational equity for these unborn children.
“So the entire oil and gas framework must be strengthened to ensure that consensus is built around all processes. When it comes to these oil and gas revenue, 51 per cent of the stakeholders cannot and should not equal 100 per cent,” he added.
As regards local content, Singh believes all the local Private Sector is doing is scrounging on the edges for the crumbs while all the core services continue to be provided by companies outside of Guyana. “Even neighbouring Trinidad that has “no skin” in the game, no risk exposure is benefiting from the Guyanese oil and gas industry more than Guyana.”
He continued, “So, when will we take our rightful place as the local owners of these resources and secure a more equitable access to the oil services business; after all, all of the environmental risk is ours, all the resource depletion risk are ours and there are so many other risks that we totally own, but yet cannot see the returns to match those risks.” (Samuel Sukhnandan)
