‘Guyana cannot avoid ‘resource curse’

I do not believe that Guyana can avoid the curse that has afflicted so many resource-rich countries. The controversy surrounding the recent contract the government signed with ExxonMobil’s subsidiary is a clear indication this.  Whether or not the government’s rollout of some oil big-shots last week was – as some believe – a gimmick intended to intellectually intimidate its critics or was a genuine effort at learning, one must be hopeful that it has gained something useful from the venture. The process whereby many resource-rich countries have squandered their resources and become mired in corruption as their populations remain wallowing in poverty is very disheartening, and elsewhere Sir Paul Collier, one of the government’s invitees, made an insightful contribution as to how the ‘resource curse’ might be avoided that is  well worth reading. (http://www.imf.org/external/pubs/ft/fandd/2013/12/collier.htm).

But first, whatever was the government’s expectation or Sir Paul’s intention, he made what I assess to be a withering critique of the regime that should not be left without comment. He stated what most of us already suspected, that ‘Guyana was unequally matched in negotiations with ExxonMobil and other multinationals’ and he could only properly have come to that conclusion from an appreciation of the outcome of the negotiations. For someone of his calibre to conclude that, notwithstanding the necessary resources at its disposal, a government, sworn to protect the interest of the people, was outclassed in this manner is a formidable critique. It suggests that the results of the negotiation are not marginally but substantially in favour of the other side. In sports, à la West Indies at the moment, the team would have been relegated. Hard for the government to swallow as it must be, there is only one reason that this disastrous result was possible, namely that the government did not realise that it was fielding such a weak team and did not know what it was getting into!

Secondly, it appears to me that Sir Paul chose his words very carefully when he warned Guyanese against wanting to ‘tear up the contract’ and suggested that now it is established that there is oil, Guyana should focus on extracting better terms in future contracts and build its capacity to scrutinize the payment of taxes.  Guyanese are not clamoring for the contract to sbe abandoned but there is hardly a contract in the world that cannot be renegotiated and that is what most critics are demanding. To even suggest that the government should not attempt to renegotiate a contract that clearly resulted from a mismatch in the negotiation process and, according to the government’s own advisor, falls well below international norms, is galling regardless of what resources are likely to be garnered from other sources.

Exxon management must also be aware that while they should not encourage the renegotiation of contracts, they are set upon a long-term working relationship with Guyana and that that relationship will not be amicable if a substantial part of the population believes that it is based upon an amoral outcome for, though not perhaps as important to business, morality is essential to political activism. Of course, whether a contract is renegotiated or not usually depends on the strength and will of the parties, and my own assessment is that although we have sufficient of the former, perhaps to save face, as the government busies itself with all manner of speculative enhancements of Exxon’s contribution and power, there is a diminishing quantity of the latter!

In his 2013 article, Sir Paul claimed that both governments and companies are responsible for the failures of resource-rich countries to optimize their natural wealth. Good management of a resource discovery requires a cooperative relationship between properly informed citizens and governments. International organizations have been conducting training programmes to help build technical capacity in governments, tighten the rules to prevent multinationals from avoiding taxes and becoming involved in bribery, and nongovernmental organizations have been workings to empower citizens to scrutinize public revenues. But these interventions are incomplete: the proper education of the citizenry also needs to be addressed, for together with their duty to hold government accountable they can also ‘pressure governments to dissipate new resource wealth in populist gestures,’ e.g. pressure for public sector wage increases and the provision of cheap gasoline and advocate for distribution of handouts to citizens. Citizens do not automatically become appropriately informed and generally the traditional media lack the specialized economic journalism that could help build such understanding, and so the task is left to governments.

Although significant efforts have been made to build the capacity of citizens to scrutinize government ‘no equivalent attention has been given to the distinctive challenge of government communication efforts to build citizen understanding’ and there is no established body of international expertise on building citizen understanding.  Sir Paul suggested a few basic principles that could be utilised to get citizens to reflect not only on their own but also on the national well-being.  Oil and gas discovery can evoke glamorous images of achieving wealth without effort, but fossil fuels have no natural owners and will eventually run out. Spreading understanding of this, he claimed, is more difficult than the mass communication of news. ‘So both crafting the content of a message and ensuring that it spreads are challenges as demanding as technical economic decisions.’

Governments tend to want to focus our attention on their ‘vision’ of the future but ‘while visions can instill an ambition, they do not instill understanding of the process by which it can be achieved. That is done through a narrative.’ However, such narratives have to be disseminated and experts have found that successfully spreading them tends to depend on reaching a relatively small group of influential people. In other words, one needs to craft an appropriate narrative and build understanding networks. ‘Sometimes the most suitable strategy is determined by the structure of authority, as with the clan chiefs of Botswana. But sometimes it is determined by the content of the message. The narrative of good stewardship resonates with many religious teachings.’ A sensible government must prepare the ground for a resource discovery by deliberately building a critical mass of citizen understanding that in advance ‘punctures fantasies by presenting facts that are easy to grasp.’

As in so many other areas, what the above suggests is that the ‘resource curse’ will be best avoided where there is an active  symbiotic relationship between a properly educated people and an accountable government. And here is the heart of my pessimism, for in Guyana such a cooperative relationship will not develop. After all, as John Stuart Mill said some time ago, ‘The influences which form opinions and decide political acts are different in the different sections of the country. An altogether different set of leaders have the confidence of one part of the country and of another. … each fears more injury to itself from the other nationalities than from the common arbiter, the state. … That any one of them feels aggrieved by the policy of the common ruler is sufficient to determine another to support that policy. Even if all are aggrieved, none feel that they can rely on the others for fidelity in a joint resistance; the strength of none is sufficient to resist alone, and each may reasonably think that it consults its own advantage most by bidding for the favour of the government against the rest. Above all, the grand and only effectual security in the last resort against the despotism of the government is in that case wanting: the sympathy of the army with the people’.  And even the latter is subsumed in our context (SN 8/6/09).