A Sovereign Wealth Fund is much too important to be left in the hands of politicians

Dear Editor,

Former Minister of Natural Resources Raphael Trotman announced last December that the details of Guyana’s proposed Sovereign Wealth Fund (SWF) could be released to the public as early as the first quarter of 2018 and, as we get closer to the date of disclosure, I am deeply concerned that it will be poorly designed and badly managed if it is left in the hands of politicians.

Although I love my country dearly, it is an undeniable fact that it is a dangerously corrupt nation. Everyone knows about the corruption allegations made against former members of the PPP/Civic government, some of whom are still under suspicion even though the vast majority of allegations have not resulted in legal proceedings. Under the current government PNC+AFC coalition, corruption allegations have not stopped. Since they took office in May 2015, there was the Exxon/Mobil signing bonus debacle; the Saffon Street bond fiasco; the D’Urban Park Development Project, and I am personally aware of several serious issues with the public procurement system involving government officials.

As a true patriot who has invested heavily in my nation in blood, sweat and tears and huge debts, my biggest fear is that the political corruption that has plagued Guyana for decades since Independence, will infect the SWF and turn it into the biggest corruption scandal in the history of the country. The proposed SWF will be a vast reservoir of oil revenue and this will definitely fatten the eyes of every corrupt politician and official. Even those who are not yet corrupt will be exposed to enormous temptation.  I wonder how many would be unable to resist. There is an old saying: ‘the real reason for locks on doors is not to keep thieves out, but to stop honest persons from becoming thieves’. We need to bear that saying in mind when setting up Guyana’s Sovereign Wealth Fund.

My research into Sovereign Wealth Funds worldwide indicates that they are most vulnerable in nations with entrenched corruption like Guyana. I found out about the misuse of the Malaysian SWF that put Prime Minister Najib Razzak under tremendous pressure to resign over a missing $3.5 billion. I read about a bitter legal battle over $3.3 billion in losses through bad investments by the Libyan Investment Authority (LIA), Libyan SWF set up by the late benevolent dictator Muammar Gaddafi. I also know about the collapse of SWFs like Ecuador’s Stabilization Fund, Nigeria’s Petroleum (Special) Trust Fund and the winding down of SWFs in Chad and Papua New Guinea. All these have unique features, but common threads of bad management, corruption and poor accountability.

As a businessman, I see several weaknesses when I look at what undermined these failed or failing SWFs across the world. In many cases, I see that the officers entrusted with running them had too much discretionary power. I see that they channelled public money in SWFs into things like debt payments and government spending. I see evidence that these SWFs were raided by crooked politicians or officials affiliated to politicians and the funds were diverted from the national purse to build huge personal fortunes. Most of all, I see that most of these SWFs were designed with glaring loopholes, perhaps deliberately, that made their operations obscure and complicated, making it easy to hide corruption and hard to prosecute fraudsters.

That is why I urge my fellow citizens to join me in calling on the government to depoliticize Guyana’s Sovereign Wealth Fund and take its design, implementation and monitoring out of the hands of politicians and put it in the hands of an independent body approved by the citizens of the nation, as well as international anti-corruption agencies. We have to put powerful transparency and accountability mechanisms in place to protect the SWF from wrongdoing and poor investments.

The International Monetary Fund (IMF) is urging Guyana to put systems in place to ensure that the fund is not abused. In fact, the IMF is calling for legislation to be instituted as soon as possible to guide government’s spending. I agree, but I also want to see laws that put checks and balances in place to curb the discretionary powers of politicians and officials. The SWF is much too important to be left in the hands of our politicians. Too much money is at stake. I feel so strongly about this that I have done my research and come up with several key recommendations about the Sovereign Wealth Fund. I hope others will do likewise so we can have a healthy public debate about it and keep our politicians on their toes.

These are my suggestions:

1.  Members of the SWF Board must not be appointed directly by government because this usually results in political favouritism, incompetence, inefficiency and slack oversight. The Board must comprise competent, independent professionals drawn from civic society, or even accomplished professionals from Caricom or elsewhere to ensure that it is professionally managed by accountable officials and is managed according to transparent policies.  The board can comprise representatives from the private sector; the Chamber of Commerce; an Indo-centric and Afro-centric elected leader; a member from the Inter Religious Organisation of Guyana; a leader of the Universal Peace Federation of Guyana; a representative of Transparency International and Mr Christopher Ram. Trust me, the level of accountability will be tremendous.

2.  The roles and responsibilities of the Board must be clearly defined and made public.

3.  There must be clear rules governing domestic/external investment and these must be made public. Specifically, the Sovereign Wealth Fund must be protected from abuse by diverting funds to currency stabilization or damage control for bad public spending or any political reason.

4.  There must be a national public information and civic education campaign so ordinary citizens can understand the objectives, checks and balances and benefits of the SWF.

5.  There must be clear and harsh penalties for wrongdoing and a suitable time frame for prosecution must be clearly defined.

6.  The SWF board must be made accountable to Parliament, auditors and the media, and the details of this accountability must be clearly defined and made public.

I am making these suggestions now because I am worried about the Finance Minister Winston Jordan’s implication at a press conference that the government’s preliminary legislation is being patterned on Uganda’s legislation. Uganda is thought of as a corrupt nation by Transparency International (www.transparency.org). To me, Guyana’s SWF cannot succeed without public confidence and this will not be achieved by modelling it on the SWF of a corrupt nation. That is not the way to go.

Our SWF can help generate long-term economic benefits, but it must be well-planned and well-managed. I hope my letter makes other citizens think about what important conditions they would like to see in the SWF in order to produce the intended results. It is the people of Guyana who hire political leaders.  They are our servants and are paid handsomely; let them fulfil our needs as the people and our wishes.  On the other hand, I encourage this Government which took the seat of power recently after 23 years: Cherish the victory!  Serve the people well!  Do not think that the people will ever be gullible to politicians ever again (maybe a few).  They should create history, consult the people at all levels without political or racial rhetoric and lead as a well-defined government that we as Guyanese can honour and be proud of for many, many decades.

Yours faithfully,

Roshan Khan Sr

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