US urges swift action on Sovereign Wealth Fund

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US Ambassador to Guyana, Perry Holloway

As Guyana’s petroleum sector evolves, United States Ambassador to Guyana, Perry Holloway while pointing to the country’s move into the realm of an important energy market stressed the need for a strong and transparent Sovereign Wealth Fund (SWF).

Ambassador Holloway noted in an OP-ED, that in spite of the often “exaggerated gloom and doom pronouncements” in sections of the media, “Guyana is poised to be a very rich country for this region with considerable revenue streams in the future.”

He said at the recent oil and gas conference at the Georgetown Marriott which welcomed hundreds of delegates, the world saw a nation poised to be transformed.  The US Ambassador expressed hope that as the development of a long-term vision for a green, sustainable economy continues, “conversations will continue to prioritise implementation of a strong comprehensive Sovereign Wealth Fund Bill, in the broadest sense, that is transparent, independent, inviolable, and non-partisan.”

He said that the fund will immediately begin to invest in education, health, infrastructure, agriculture, and security sectors of the country. “I am referring to a concerted effort by all stakeholders to start a continuous conversation on how best to implement fiscal plans that directly address the needs of all Guyanese now,” the US Ambassador said.

He cautioned that the urgency cannot be understated and according to him difficult decisions are ahead, whether they involve identifying the right talent to manage the SWF or making the difficult decision to borrow at concessional rates that will not be available tomorrow to develop the present. Ambassador Holloway noted however, that the investment today will pay off tomorrow.

He said that the development of a comprehensive SWF is the opportunity the country has been expecting to leverage the prosperity of the future into the development of the present. He added that the opportunity is “the right call and sends the right message to the Guyanese people and international donors and investors alike, that, above all else, Guyana is ready to come to the table with a plan.” He said the plan puts long-term, sustainable fiscal planning at the service of today’s progress, while protecting tomorrow’s future.

According to Ambassador Holloway, the development model the country chooses will need to be a decision of the people through a process of public consultations and legislative debate.
He emphasized that as Guyana considers its future, it will not be enough simply to have a “rainy day fund” or even an investment fund, but to institute a revenue and investment framework that protects and effectively leverages wealth to transform the nation.

Ambassador Holloway noted that whether the country is ready or not for sector’s development, the world is ready for Guyana to become not only a petroleum producer, but also a future example of what is possible with technological innovation, hardworking people, political vision, and an appropriate legislative and regulatory framework. He said the country has already exhibited hard work, innovation, and vision to get to this point in the development of the industry. “Now, Guyana can show the world that it is possible to get a legal framework right, even when many other countries have not,” the US Ambassador said. Ambassador Holloway commended the government for working on a draft SWF Bill and preparing to have a fund in place by 2020.

Back in December last year Natural Resources Minister, Raphael Trotman had said that details of the long-anticipated Sovereign Wealth Fund (SWF) could be released to the public as early as the first quarter of 2018. Guyana has been receiving economic advice from the Oceans and Natural Resources Division of the Commonwealth Secretariat on the drafting of laws and establishment of the institutions and fiscal rules for the SWF.
Minister Trotman had said the government was part of a workshop hosted by the Commonwealth Secretariat, where a framework for the SWF was settled upon. The next step, he explained, is taking the Bill to Cabinet and later to the public by the end of March of next year. Minister Trotman said he is confident of the steps taken thus far, particularly because Guyana is ahead of many countries in this process. “While Guyana has not yet produced, it has the beginnings of the framework so that when production comes, the country is ready. Every bit of legislation pertaining to the sector will be shared with the public before we attempt to pass [it]. Even in parliament, there will be a provision for more scrutiny,” he said.

Economic Adviser, Oceans and Natural Resources Division of the Commonwealth Secretariat, Dr. Daniel Wilde, had said he was impressed that the Government of Guyana is setting up a SWF so early in the process, even before there is any substantial production. According to him, there are many countries in the world that have been substantially producing for many years but have not set up SWFs until they were well into the process. “The fact that the government here has had the foresight to look at the long-term and put the law and institutions and fiscal rules in place well before commercial production should be commended,” the adviser said.

Dr. Wilde said the team now has a solid draft which will see realisation of the three objectives of the fund, including short-term stabilisation, substantial inter-generational saving and having enough money for the long-term economic development and its ongoing spending commitments. He said the workshop was well received and saw participants from the Bank of Guyana (BoG), Ministry of Finance, the Guyana Revenue Authority (GRA), Ministry of Natural Resources and the Auditor General’s Office. A SWF is defined as pools of money derived from a country’s reserves, which are set aside for investment purposes that will benefit the country’s economy and citizens. The funding for a Sovereign Wealth Fund comes from central bank reserves that accumulate because of budget and trade surpluses, and even from revenue generated from the exports of natural resources.