Sovereign Wealth Fund legislation soon
A section of the gathering at the Sovereign Wealth Fund seminar at the Arthur Chung International Conference Centre yesterday (Delano Williams photo)
A section of the gathering at the Sovereign Wealth Fund seminar at the Arthur Chung International Conference Centre yesterday (Delano Williams photo)

Sovereign Fund Legislation is expected to be laid before the House in 2016 as Guyana moves to ensure every citizen enjoys an equitable share in the national patrimony.The bill will be informed by views garnered from consultations to be held countrywide before it is tabled for scrutiny and eventual finalisation in the National Assembly. President David Granger during the last elections had promised to create a Sovereign Wealth Fund from the revenues of the extractive Industries.

Minister of Governance Raphael Trotman addressing the two-day workshop
Minister of Governance Raphael Trotman addressing the two-day workshop

Speaking at a Sovereign Wealth Fund seminar at the Arthur Chung International Conference Centre on Wednesday, Minister of Governance Raphael Trotman said the fiscal structures will be built taking the lessons learnt from other countries and Guyana’s unique context into consideration.

Strategies and policies that maximise the net benefits from resource development projects and how industry and governments can work together to reform poor governance models in favour of greater transparency and accountability are all areas to be explored, Mr Trotman said.

Earlier this year, oil was discovered in Guyana, and US exploration company ExxonMobil is expected to recommence drilling soon, but Mr Trotman said Guyana’s resource wealth is more than the back gold.

“We have an abundance of natural resources that go beyond the oil that is to come in the near future, and includes gold, diamonds, sand, stone, bauxite, forest products, and even water; which we have thus far failed to effectively capitalise upon. Earnings from all of our natural resources will be housed within resource wealth management funds to the benefit of all Guyanese.”

Key areas

Guyana is expected to benefit in three key areas, namely savings for future generations; budget support in times of economic downturns; and infrastructural development.

The latter will include the building of roads to create better access and improve ease of trade and development in hinterland communities and across Guyana as well as the building of schools.

Mr Trotman wants the Fund to be prudently managed. “The truth is that extractive industries often generate large economic rents that governments can capture through taxes, royalties, and license fees. These fiscal measures, while allowing governments to capture a substantial share of the rents for the public, also need to be carefully structured to provide a stable and attractive investment climate.”

He pointed out that the magnitude and volatility of revenues from natural resources due to issues of commodity prices on the world market and individual sector challenges have led many governments to set up stabilisation funds to smooth the macroeconomic and budgetary impacts, and to provide sustainable revenues for future generations.

Issues

Of the 46 odd countries with Sovereign Funds, a number of them had issues concerning its governance and operation, including the savings rules, the timing of withdrawals and the spending that they support.

Guyana is aware of these shortcomings, and is hoping to get it right when the Fund comes into operation. Yesterday’s seminar sought to introduce local policymakers to existing models and to share experiences, both good and bad.
Mr Trotman said it is an integral part of the plan to prepare Guyana to commence the process for planning “for what we know will be a wave of wealth that may not pass again in our lifetimes”.

The two-day seminar supported by the Canadian High Commission is being facilitated by experts from the University of Calgary, Canada, a premier academic institution with a strong extractive resource governance programme.
Canadian High Commissioner to Guyana Pierre Giroux said Sovereign Funds help governments uphold their public responsibility, and are becoming increasingly important factors in economic development in emerging markets.

“The Government of Canada remains committed to working with Guyana and other partners on this initiative,” he said, pointing out that the Fund provides a foundation to create economic prosperity for many years to come.

However, he also pointed out that Sovereign Funds are complex mechanisms and have to be properly managed to ensure transference and accountability so that all benefit, and in the way they should.

 

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