We need other industries when extractive ones fail us

Dear Editor,

During the days leading up to the end of 2017, the APNU+AFC coalition government revealed the long asked for Petroleum Agreement between oil giant, ExxonMobil and Guyana. While it is undoubtedly a great win for transparency, we should be careful not to hail them as heroes for something that should have been revealed to the Guyanese public a long time ago. It was journalists, civil society and individuals demanding the release of the contract that saw it being made public. This should serve as a good lesson in the civic responsibility of the people in demanding better from their leaders.

When it comes to powerful oil companies and their interest in countries with poor governance and high poverty rates, blind idealism with regard to their interests will do us no good.  We only have to take a look at the examples of how other countries such as Chad, Nigeria and Papua New Guinea, have fared with regard to economic instability, social conflict and human rights violations following the discovery of oil. One of the many things these countries have in common is their predator-prey relationship with ExxonMobil.

Kaieteur News had in June 2017 begun a series of articles titled, ‘What Guyana needs to know about ExxonMobil.’ The series explored ExxonMobil’s blatant disregard for the countries in which they have oil interests. With a long thread of litigation suits aimed towards Exxon for their disregard of environmental protection, the deceiving of shareholders and the underpayment of royalties, one can see a clear pattern of abuse by the oil giant.

ExxonMobil is currently being probed by the US Securities and Exchange Commission regarding the way in which they valued oil and gas “in the backdrop of low oil prices and possible curbs on carbon emissions.” Over the years, they have engaged in the active funding of climate change denials despite being aware of the connection between “the burning of fossil fuels and climate change”. Aside from funding climate change denials, Exxon also had a lawsuit brought against them of committing human rights violations in Indonesia where they have oil operations.

They have had several major oil spills, caused by ruptured pipelines, and those have caused lasting effects on the ecosystems. Exxon was also responsible for one of the largest oil spills in the United States of America. After a ship’s hull was torn, 11 million gallons of oil were released into the environment. Up to this day, oil still remains in the areas where it was spilt; and plant, land and marine life are still being affected. That reality, matched with the fact that Guyana’s Environmental Protection Agency currently does not have the capacity to enforce environmental regulations in the oil and gas sector nor monitor compliance with environmental regulations of the state, spells disaster for the future of our ‘green state.’

Oil and bad politics too often tend to go hand in hand. Given that taxation meant to create fiscal revenues is not necessarily needed in oil rich countries, leaders can choose whether or not the concepts of transparency and accountability are the ones they abide by.

In the interest of ensuring oil wealth is managed properly, many oil rich countries have created Sovereign Wealth Funds. Too often, however, these crumble due to human failings in the form of corruption, malfeasance and bad investments. Minister of Finance Winston Jordan was reported in the media as stating that Cabinet approval has been given for the fund to be used “for three specific purposes.” These are: intergenerational savings, stabilization and infrastructural development. We’ll see how that goes.

While extractive industries such as oil, gas and mining help in the economic growth of a country, significant thought must always be given to the vast number of negatives associated with them. It is interesting to note that the Norwegians had late last year disclosed that they were considering divestment from holdings in fossil fuel companies. With $1 trillion in assets, the Norway Sovereign Fund is one of the largest holdings so far to consider divestment. Despite the remarkable economic success gained from the oil industry, this suggests that they do not have a lot of faith in oil’s future and are seeking alternatives. Norway’s own oil giant, Statoil has through the building of large offshore wind-energy projects, begun to diversify its holdings.

Guyana’s leaders should take a page out of Norway’s book and begin securing our future in things other than extractive industries. Dr Justin Ram of the Caribbean Development Bank had in 2011 advised that Guyana should not rely on its natural resources based products.

“…Concentration of the extractive industries such as agriculture, forestry, fishing, mining and quarrying focus on low value added, natural resource based products for export and leave the country vulnerable to ‘Dutch disease,’” he had said. Dutch Disease refers to the negative effects of anything that provides a sharp rise in foreign currency.

Guyana, like many resource rich countries do not put as much efforts into the area of sustainable growth strategies. Money earned from extractive industries should be reinvested so as to ensure the economy remains stable and not wholly reliant upon them. Extractive resources are limited and prone to frequent fluctuation. As such, we need to be sure that we have other options when they eventually fail us.

Yours faithfully,

Akola Thompson

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