A Guyana Manufacturing and Services Association (GMSA) forum on Thursday heard that changes are needed to a government paper on the planned Sovereign Wealth Fund (SWF) to insulate it from political interference.
“The Green Paper, as it was intended, has been the subject of review and commentary. Within the GMSA, we started a discussion in the services sector but recognised the need for wider discussion involving private sector and civil society and the need for a space for this to happen,” President of the GMSA Shyam Nokta told the forum, which was organised at the Pegasus Hotel to discuss the SWF.
“I think it is unfortunate. Where is the government inviting persons to these consultations instead of the private sector? Today you have the GMSA and other organisations instead inviting the government,” chartered accountant Christopher Ram, who was one of the panelists at the event, would later add.
Representing government and giving an overview of the SWF Green Paper was Ministry of Finance representative Sonya Roopnauth, who reiterated much of what is stated in the document. Also on the panel were Vice-President of GMSA Ramesh Persaud, Guyana Trades Union Congress General Secretary Lincoln Lewis and a University of Guyana representative Carol Webster.
Ram said the “Green Paper” was a misnomer, since such a document provides for wide-ranging consultations, discussions and feedback. “I think the document itself needs to change. It is not a Green Paper. It is a White Paper because a Green Paper gives options, what are the advantages and disadvantages. This paper is very prescriptive. It says what the government has decided to do. That is not consultation and what the constitution means,” he said.
“I am, not sure what their consultation process is, who is taking the notes, and do we have a committee in the Ministry of Finance for the government to consider recommendations and to decide. Because, unless we do, we are hearing that government is going ahead with legislation by the last quarter of 2018. They are not waiting on us,” he added.
Before the National Assembly went into recess last month, Minister of Finance Winston Jordan tabled the document. It sets out fiscal rules for the management of the SWF but with the Ministry of Finance as the overall manager and the minister having a key role in composing the macroeconomic committee, which would be responsible for determining how those funds are apportioned.
It stipulates, “the Ministry would be responsible for overall management of the [SWF], including requested withdrawal in the Annual Budget Proposal; calculating the Fiscally Sustain-able Amount; drafting the Investment Mandate; entering into the Operational Agreement with the Bank of Guyana and drafting the Annual Report and reporting on the [SWF] through the Annual Budget.”
Separately, a Sovereign Investment Committee would be responsible for advising the Minister of Finance on the Investment Mandate and would consist of seven members to be appointed by him. “Members of the Committee would be persons with substantial experience, training and expertise in financial investments and financial portfolio management; and a minimum of a postgraduate degree from a reputable university in the discipline of finance or economics, or an equivalent professional qualification,” the document says.
Will not work
Ram stressed that “unless you put good mechanisms in place, nothing is going to work” and added that he believes that “the best SWF you can have is a well-managed economy and a properly structured country.”
Pointing to Singapore, he noted that that country is not one that is natural resource-blessed but still has one of the best economies and SWFs in the world because it “runs its economy well and puts aside its money.”
He said the president at one time told the nation that a petroleum department will make decisions but the people of the country don’t know where that department is going and have trepidation believing anything else said since “not a single piece of legislation has been crafted since 2015.”
“It is good to say we have a SWF fund but where is the support, where is the underlying confidence that the Ministry of Finance will not do what it has done with all the other consultations? We know what happened with the PPP/C administration and we know what happened in the APNU+AFC administration. They do not protect funds. So this political control of this SWF just will not work,” he posited.
Persaud said given the right structure and accountability framework, a SWF can prove beneficial for the people of Guyana. It is to this end that he laid out a number of recommendations. “It is very difficult to take away the hint of politics in many things that we do but we can insulate ourselves from it to some extent,” he said.
Persaud suggested that the fund should be set up as a separate legal corporate entity by an Act of the Parliament, as provided for under the Constitution, and designated as an entity to receive all funds from the oil and gas sector and any other natural resources deemed necessary.
He said the people of Guyana have to be the owners of the fund and through their elected representatives in the National Assembly they will “perform all duties of a shareholder at an Annual General Meeting or similar to those identified as per the Companies Act of Guyana and the Public Corporations Act.”
And when it comes to governance, Persaud believes that “The National Assembly acting with their rights as shareholders should appoint a Board of Directors,” where nominations can be piloted by the Minister of Finance through the Appointments Committee.
How the Board of Directors is constituted and managed was proposed by Persaud. “I don’t expect everybody to agree with all of this but I give you an example of how a board could be built that could be non-political,” he said, while noting that the members should not be less than seven but not more than nine. To avoid political partisanship ,he proposed that its composition be, “a lawyer who is a senior counsel as nominated by the Bar Association; an accountant with 15 years as a member of the ICAG (Institute of Chartered Accountant of Guyana) and nominated by them; an economist with no less than a PhD who should be nominated by the council of the University of Guyana; a representative nominated by the Caribbean Development Bank; a CEO or Head of a publicly-listed company or a licensed financial institution in Guyana nominated by the Guyana Securities Council; a Fortune 500 CEO or C Suite Executive; a director as nominated by the international Forum on SWFs; and two directors nominated, respectively, by the Labour Unions and Guyana Human Rights Commission.”
However, the Board should not be involved in individual investment decisions, Persaud stressed, even as he reminded that the association does not want the Bank of Guyana to be the operational manager of the fund as set out in the Green Paper. The GMSA recommends the Fund being treated as a financial institution, with the Bank of Guyana being its regulator.
With strict management principles for the fund, the GMSA wants all earnings from the designated natural resources to be deposited into the fund where asset class limits should be determined and approved by the board based on recommendations from management or other investment specialists.
He would go on to list other fund management principles but made it clear that of key importance was reporting on the fund. “Audited accounts are to be tabled in the National Assembly no later than April 30th after the end of the financial year. Quarterly, half yearly and annual reports are to be published in the newspapers and other media as is required by companies listed on the stock exchange. Full disclosure should be made of all investment holdings…,” he said, while noting other measures.
For his part, Lewis said the people of Guyana needed to see tangible returns from the investments from oil revenue because for too long the country has been seen as resource rich but with a poor populace.
Roopnauth stated that unlike the many negatives being uttered about the paper in its current form, especially criticisms of the power of the Minister of Finance, the proposed SWF is similar to global models. “The one equalising criteria right now is to make sure that the people are qualified, that we are not just picking people at random…,” she said.