I read the recent coverage in Stabroek News relative to Sovereign Wealth Funds and shake my head in agreement. Every pronouncement from every source, be it foreign or local, came in comforting, if not inspiring language on what has to be done, how such should be done, and by whom. The cautionary comments encourage, but then I remember other times, and other firsthand experiences.
I have been near SWFs before. It might be more accurate to state that I have been near to people (investment bankers, portfolio managers, advisers, actuaries and the like), who were near the people (princes and political potentates) who held sway over vast mother lodes of accumulated and accumulating wealth. At times, I have stood and watched as the accumulated numbers went the other way, as in depreciation, if not dissipation and disappearance. Things can move quickly, especially when on stealthy wheels.
Let there be no mistake: those other times and places and people had some intentions on the stockpiled proceeds and the rest calculated to come on stream soon. Despite the well-spoken words and promises, those careful smoothly articulated intentions of savvy institutions and pivotal local people were not in the best interests of either the country or citizens served. Those providing expert guidance are very skilled at gambling with OPM. That stands for other people’s money, meaning the poor citizens longing for one good break.
SWFs can provide high returns, but only when such is accompanied by high risk. Risk tolerances and capital preservation are hurled out of the window, and so, too, are the dreams of uninformed and unwise citizens. The challenge is to monitor for excess risk-taking and arresting it right from the inception. It must be remembered that those who make investment decisions involving hundreds of millions justify their existence by performance yields. In a crowded investment marketplace and conservative blue chip returns, the mining has to occur in other arenas and through other instruments. This is the arcana and exotica of real sophisticated products, which only very few understand. Nobel Prize winners and other very smart people blew up themselves, while experimenting through the use of other people’s money. Guyana cannot afford this; it must guard its SWF when the time comes.
The high risk investments will bring high returns and high earnings (millions) to those managing the money. The risks will be rationalized, normalized, contextualized, and memorialized by some real sharpshooters. I have seen them in action and the damage they left behind. Guyana and Guyanese do not have the capacity (or stomach) to be jeopardized on this one.
In the same vein, governments come and go; when they go, they are weighed down by hefty bank statements. Again, citizens lose; they get barbequed slowly on an open spit. In these situations, the Wall Street sorcerers, the offshore institutions, and those well-named PEPs all emerge richer, slicker, and ready for the next financial adventure and the promise of more future pillage. In the meantime, a nation is left to mourn its empty pockets and empty wells.
In terms of the SWF itself, the starting point has to be visibility and access. What goes in (all proceeds); what comes out (legitimate releases only); what is done with principal (rewards versus risks); how many critical eyes are scrutinizing (overlapping and overarching layers); and how many hearts and minds are in the right place (ethics and honour and country).
Editor, as said earlier, I have been there and near. So, as I hear the local talk, there is guarded appreciation. There would be much more good feeling in the doing, the implementing, the realizing. Now whether there are those in this country who can rise for this one grand promise and this special moment is the sulfurous open question in these early stirring days. Perhaps what follows ought to help.
The US Army sends men out there; they go willingly to face bullets and the possibility of death; these men (and women) do so because there is something in them which moves them, and that something is bigger than them. I trust that there are men and women in this society who will look deep, and find that indefinable something that is bigger and greater. And that then they will step forward to tread on the treacherous consuming crucible that is oil wealth. The living is the proving. No talk is necessary.