Dear Editor
EVERY Guyanese hopes to participate in the promised boon from our natural resources and simultaneously fears it all going terribly wrong with Guyana becoming a failed state from the “resource curse”.

The resource curse refers to the paradox that countries with an abundance of natural resources, specifically non-renewable resources such as minerals and fuels, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources. I take this opportunity to provide suggestions to strengthen our national governance framework–starting with getting the Oil & Gas model correct.
The discovery of oil has resulted in mixed outcomes for low-income resource-rich countries, which has led to the characterisation of these countries as having been “cursed” by the natural resources. Too often only the political and well-connected elite become very wealthy and in the process, allow foreign exploitation, which results in little to no benefits for the general population. We should accept that Guyana remains vulnerable to the “resource curse” and immediately address the Principal (the citizens) vs Agent (government) problem.

The Principal vs Agent problem occurs when one person, government department or entity (the Agent) is able to make decisions on behalf of, or that impact the citizens (the Principal). The Agent is hired (or elected) by the Principal to represent its interests in a negotiation for a financial transaction. For example, when you are selling your home, you hire a real estate broker (Agent) who represents the seller’s (Principal’s) interests to the buyers. If the real estate broker works on behalf of the buyer’s interest because the buyer is paying them to do so, then the seller gets a bad deal. Therefore, the seller of property pays the real estate agent a commission based on the sale price in order for the real estate agent to be focused on achieving the highest price for the property and reduce the probability of the real estate agent being tempted to enrich himself personally by making a side deal with the buyer for additional compensation.

In these commercial transactions, the seller is happy to pay the real estate agent in order to ensure that the broker’s personal interests are aligned with the economic interests of the seller. While this type of compensation is politically controversial and uncommon in government, the private sector has already figured out how to militate against these dangers and become comfortable with paying commissions and high compensation to ensure that the experts we hire to represent us have their personal interests aligned with the economic interests of the people they represent.

There are some basic rules that seem to accompany good outcomes — Transparency and Inclusion are among them. The incentives for corruption are powerful, particularly for poor countries with less developed institutional governance infrastructure. The dilemma faced by our decision-makers must be acknowledged and the perverse incentives confronted by countering the enticements that can derail our national interests. This is a national challenge with very real consequences if we get it wrong.

My previous public letter (January 2017) advocated for Guyana to adopt a policy similar to the Alaska Permanent Fund model in which every resident of Alaska receives an annual cash dividend from the Sovereign Wealth Fund of the state oil revenues. The Minister of Natural Resources commendably responded indicating that the proposal would be given serious reconsideration to benefit the citizens of Guyana in a similar way. And in another encouraging step by the government, the recent publication of the ExxonMobil contract by the Government of Guyana is laudable. Encouraged that we continue to make progress towards good governance, my suggestions in this letter are aimed at building on the Alaska model proposal to achieve maximum financial benefits for Guyanese, reduce inequality, support the protection of our environment, and ensure that the economic benefits from the Oil & Gas sector strengthen our productivity, innovation and competitiveness.

The Proposal
Let us adequately compensate our public servants by paying them commissions on the enactment of good policies and effectively negotiated deals.
We should work to align the interests of our public servants with the interest of all Guyanese. This proposal will align the financial interest of public servants, citizens, and the business class. This plan is focused on incentivising the public sector to design the appropriate policies to enhance competitiveness, increase revenue collection and increase flow of Investments. Public servants will be paid only upon receiving revenues into our national treasury. This solution is similar to how we sell real estate today – the real estate broker (Agent) receives a commission from the seller (Principal) to get the best deal and is only compensated once the seller receives its money from the sale.
Payment of Commission to Public Servants

The government – as the representative of the people – is responsible for negotiating the best deal for the people. It is prudent to align the interests of our public servants, including negotiators, by compensating them based on performance (commission) in addition to a fixed element of their take- home pay. The pool of beneficiaries of the public-sector commission payment should include the lead negotiator (in the case of Oil & Gas–the Minister of Natural Resources and the Negotiating Team at GGMC), their agency, and the Cabinet. Once the splits are determined, the Shadow Cabinet (Opposition Members of Parliament) should share in the Cabinet’s split with a lesser but fixed portion. By aligning the public sector (including the Opposition), with the interest of all Guyanese, we should give ourselves a chance to see constructive collaboration on issues of critical national interest.

Example 1 – Payment of Commission to Public Servants
A basic example of the commission payout assumes that the commission portion paid to the public servants might be a tenth of one percent (0.1%). If we assume that we will realise US$5 billion over time from the ExxonMobil Liza deal, and the negotiators are entitled to a tenth of one percent, then that would be US$5 million for those in the commission pool. In this scenario, imagine if the government were able to negotiate an even higher deal (i.e. US$10 billion), while it would result in an increase for the public servants commission pool to US$10 million, the true beneficiaries would be the citizens because the Sovereign Wealth Fund would make $10 billion instead of $5 billion.
Stock Option Pool for Public Servants

The policy should also consider the long-term development of our national economic interests and the strategies to ensure that the new oil businesses that emerge from the Guyana oil projects reflect a broad-based, diverse group of Guyanese. Therefore, there is a need for Guyanese businesses to be granted exploration concessions as an essential part of local content. Consequently, the interests of the business class must be aligned with the interests of public servants and citizens. To encourage strategic visionary decision-making, the public sector should be allocated a stock option pool (i.e. ownership) in Guyanese businesses that are granted exploration concessions or performance warrants for facilitating local content opportunities. Broad-based citizens’ economic empowerment should also be factored into the granting of the concession by allocating shares to our Sovereign Wealth Fund. The stock option pool proportion should be non-negotiable, so that it must not become a bribe – and there should be careful rules for selection of concessionaires that weigh their capability and qualifications with other realities of our societal divisions – in other words, there must be fair-participation policies to ensure inclusion that advances social cohesion.

Example 2 – Stock Option Pool for Public Servants
Some believe it is in the nation’s best interest to auction off future oil blocks. Assume that exploration licences are auctioned off at US$50 million per block paid into our Sovereign Wealth Fund, and under the proposal, would result in US$50,000 for the public servant commission pool. However, with the proposed public servants stock option pool, granting the concession to a capable Guyanese group would result in a win-win scenario. If the stock options for the Sovereign Wealth Fund (ownership in the Guyanese company for granting the concession) is 10% and the Guyanese group successfully builds a company with US$1 billion valuation – the public servants commission pool would be worth (at 5%) US$5 million (100x the benefit of auctioning commissions). More important, there would be broad-based citizen economic empowerment with the Sovereign Wealth Fund receiving US$100 million – money that can go towards supporting primary and secondary education or scholarships for tertiary education.

During his visit to Guyana, international Oil and Gas business executive Kola Karim pointed out that if we mandated 30% local content across the board, we would already be seeing significant benefits. For example, the first ExxonMobil Production Facility (FPSO) came at a cost of US$1.2 billion – very little of which was felt in our economy. If 30% local content was required, Exxon’s partners would have had to find Guyanese partners and invest locally – investing in our human resources and infrastructure and already drastically altering our economy. We would have seen at least an additional US$360 million pumped into our economy since 2015. Local companies that are able to participate in these opportunities can be required to pay the facilitators (Ministry of Business and GOINVEST) stock options or performance warrants (shares/percentages of the deals).

Potential threats in the proposal
Most readers’ reaction to any proposal that suggests higher pay for the government officials, including Cabinet members, is understandably going to be one of outrage. The APNU+AFC administration is still recovering from its ill-timed Cabinet pay increase. That instinctive reaction will only be further angered with the previously unheard-of proposal to pay a commission to public servants for doing their jobs. The idea that these already handsomely compensated (arguably overpaid) public servants should be made wealthy with the consent of the people may cause anxiety inducing torture for many citizens. This proposal is counter-intuitive and provided for us to look at alternative models of governing.
The proposal should only be considered if it is clearly the best path to achieving the outcomes desired by the critics and supporters of the plan. The ultimate measure of the merit of this plan must be based on its impact on the least well-off members of our society. The goals of such a proposal must be clearly articulated and it must be scrutinised for weaknesses and loopholes and can only be considered if the goals and the desired outcomes are aligned. Finally, criticism of these initiatives should be presented with options that are likely to better produce the desired outcomes as opposed to simply criticising without making constructive suggestions.

There are challenges in this proposal that must also be mitigated. There is the danger of focusing singularly on financial returns at the expense of other important considerations – including preserving and protecting our environment. Therefore, we will need to be just as careful to implement the checks and balances. Our regulatory bodies – such as the EPA – must be substantially funded, their employees enviably compensated, and their autonomy to perform their duties sacredly protected. Monitoring and Enforcement bodies–and our law enforcement must also be similarly shielded.

Additionally, as Kola Karim advanced during his recent visit, serious consideration should be given to government investment in related or supporting sectors – including bolstering our judiciary (judges and prosecutors) to be equipped to deal with legal matters related to Oil & Gas – ensuring that we invest in developing the local Legal, Financial and Enforcement (public and private) infrastructure to address Environmental, Joint Venture, Fund management and other matters and disputes that are bound to arise. The penalties and powers of a corruption body are also critical, because it would create a “stick” (penalties & bankruptcy) against the “carrot” of commissions.

I expect strong opinions against these suggestions. There are many valid considerations against these bold unconventional measures. However, I hope the naysayers will think deeply about the reasons why poor resource-rich countries almost always end up with a few billionaires while the masses suffer. Outside of fanciful thinking, I believe we can find a way to avoid the “resource curse” by being realistic and pragmatic about the Principal vs Agent dilemma.

These proposals are designed to create broad-based economic empowerment and remake our economy to work better for all Guyanese by militating against the danger of self-enrichment at the expense of the nation, stimulating local business participation, and paying every Guyanese a dividend from our newly created Sovereign Wealth Fund so they can directly benefit from the resources which are rightfully their birthright. It must be affirmed in our law that the natural resources of Guyana are the birthright of its citizens.
Regards
Selwin Asafa George