…says facility conforms to transparency, accountability, good governance

By Lisa Hamilton in Barbados

THE Caribbean Development Bank (CDB) has lauded the Government’s Natural Resource Fund as a positive step in the right direction towards protecting Guyana from the ‘resource curse’.

At the CDB’s 2019 Annual News Conference in Barbados on Thursday,
CDB Director of Economics, Dr. Justin Ram, spoke extensively on the fund being set up to manage the country’s large expected flow of oil revenue.

“I think that the proposals from the government are sound with respect to the Natural Resource Fund, whereby, the revenues go into the fund first and then there are applications by the government to spend those resources. That, I think, is critical and can help with mitigation so that the ‘Dutch Disease’ or ‘Resource Curse’ does not happen in Guyana,” he told this newspaper.

The Natural Resources Fund Bill 2018 was passed on January 3, 2019, in the National Assembly with no objection. The bill, which will cater for funds from oil production in 2020, was passed with minor amendments. Minister of Finance Winston Jordan, in moving the second and third readings of the bill, stressed that a Public Accountability Oversight Committee, as catered for in the bill, will be appointed. Jordan said that the Public Accountability Oversight Committee will not feature any representatives from the government or any ministry or the Opposition side of the House.

Even as things progress, Dr. Ram commended the Fund for its conformation to the Santiago Principles which promote transparency, accountability, good governance and prudent investment practices.

“What this means is that the resources will go into the fund and so the priority is to save first and then to spend. That, I think, has to be prudent because, remember, the oil resources in the ground, once it comes out of the ground, it’s gone forever. And those oil resources belong to current generations as well as future generations, so it’s important that Guyana either invests some of those resources in other productive industries or save it for a rainy day and for posterity,” he advised.

Dr. Ram listed a number of Guyana’s productive industries such as manufacturing, gold and agriculture and projected that the country has significant potential to develop a diversified economy if it injects its oil revenues to these areas.

Improve business environment
However, he warned that where Guyana runs the risk of losing its footing is if it allows oil revenues to pour into the country and inundate the economy.

“You don’t want a situation where too many oil revenues come into the system. It leads to an overheating economy, it leads to inflation which means that other employees in the rest of the economy are now seeking higher wages and those higher wages tend to put a drag on the competitiveness of those sectors, leading those sectors to decline. That’s the ‘Dutch Disease’ which you really want to avoid,” he explained.

Should Guyana continue along the track of avoiding this, Dr. Ram said that another important step the country will need to take is to improve the business environment for its sectors. “[You need to look at] what aspects of the value chain in Guyana should be improved. Perhaps government regulations making it easier –digital [technology] can help with that; improving the in’s and out’s with respect to the port facilities, so it’s easier to export goods and perhaps import what the country requires. You want to reduce the overall cost of doing business and I think that is what Guyana needs to focus on right now,” he said.

Ram also recommended that Guyana take a look at its energy supply which, being intermittent, can result in higher costs for doing business.
“One area the government needs to look at improving overall is the energy structure to ensure that there can be continuous and reliable, 24/7 supply of electricity in Guyana,” he suggested.

“That can also mean the utilisation of renewable energy because climate change is a real issue and we want to ensure that all of our borrowing member countries, even those who are exploiting hydrocarbons, can move to more sustainable future.”

Green economy
Guyana has been forging ahead in its 2030 Green State Development Strategy (GSDS) which will see the country seeking out greener economy pathways which include transition to renewable energy and greater energy independence. When questioned about opportunities available to Guyana in this regard, Director of Projects, Daniel Best, said that the CDB has supported a number of its Borrowing Member Countries (BMCs) in energy initiatives and Guyana will be no exception.

“We have been able to mobilise very concessional resources for the development of renewable energy interventions,” Best began. “Guyana is certainly a Caribbean territory and a member of the Caribbean Development Bank, so access to solar resources, wind and, of course, hydro, which would be big in Guyana, we have the resources to support the development of all of these.”

He also encouraged the energy efficiency of government buildings, a direction Guyana has already embarked upon with over 70 government buildings equipped with solar panels as of 2018. Both Best and Dr. Ram commended Guyana for its recent successes regarding fossil fuel finds.

Earlier this week, United States (US) oil giant, ExxonMobil, reportedly discovered oil in two of its recently drilled wells which would now add to its record of five billion oil-equivalent barrels already. Leaving words of advice, Dr. Ram said: “For citizens of Guyana, be happy that you have these revenues and be happy that the government has taken the right steps towards trying to avoid that…I think for us at the Caribbean Development Bank, what the Guyana government has signalled about how it intends to manage the resources coming from the oil sector is good and should hopefully avoid the Dutch Disease or the resource curse effect.”