The David Granger administration hopes that the proposed Sovereign Wealth Fund (SWF) will be managed by a hybrid of government and private individuals, according to Minister of Governance Raphael Trotman.
“It is a well-known phenomenon that where governments are too involved in managing funds, they don’t always function at an optimum level especially if these are funds to be invested. It is best when funds are managed partially between government and private sector professionals. Some countries even have funds managed out of the country,” he said.
Trotman, who has oversight of the natural resources sector, appeared before the Parliamentary Sectoral Committee on Natural Resources yesterday and provided an overview of government’s proposed policy agenda in the area of natural resources development.
Asked by committee chairman Odinga Lumumba to define and explain the scope of the proposed SWF, Trotman said that a SWF is a common name used to describe a fund set aside by government composed of some of the income from its resources. Such funds could have several purposes such as saving for future generations to ensure that a certain standard of living is maintained, budget stabilisation in times of economic downturns, and infrastructure development
According to Trotman, government has begun to examine expanding contributions to the fund beyond revenue earned from oil and gas. He said they are looking at including “a percentage, albeit a small percentage of revenue from other resources such as gold, diamond, bauxite, stone, sand, timber and perhaps even water,” so that when oil revenue comes, savings are already being made and the fund in place.
The minister said the administration has not yet settled on what the fund regulations will be. “Issues such as what percentages will be deposited and what will trigger withdrawals are the remit of the Minister of Finance,” he said. However, Trotman assured the committee that both sides of the House will be asked to participate in formulating these regulations.
He said government has received offers of support from local and international agencies and recently held a workshop organised through the Canadian High Commission with representatives from the University of Calgary where ideas of SWF frameworks were shared.
“Guyana has the benefit of looking at good and bad and even the ugly to see what suits us. Because we know the wealth that is coming is upon us, we have the chance to create a framework that is accountable, transparent and nationally acceptable for the management of that wealth,” Trotman asserted.
Asked to explain from where the fund will draw its authority such as by an executive order or through the legislature, Trotman said that while the SWF will be accompanied by legislation, he doubts the fund itself will be presented to the legislature for approval.
However, he stressed that parliament will be involved in every stage of its development. “The role of parliament is to help design the way the fund is organised. What is important is not the additions, it is when it comes time to take out of it, on what basis should withdrawals be made, that is what Parliament will have to decide,” he said.
According to Trotman, the administration is looking to the future where there will be changes in government so they believe it will be best if both sides together determine how and when this fund will be accessed.