Oil, Government Take & Spending: Navigating Guyana’s Development Challenges – 10

Introduction: “Oil for Cash”

This week’s column addresses the development challenge posed by implementation lags. This is numbered sixth on my list of top-ten challenges, which spending of Guyana’s forecasted Government Take has to navigate, if its anticipated petroleum sector is to succeed in bringing sustained development for the broad mass of Guyanese. Meanwhile, I have been recently swamped with requests for a public response to published comments made on my latest call for oil-financed cash transfers to the Guyanese masses as a fundamental pre-requisite for both efficient and effective spending of the Government’s Take

The truth is, I had intended all along to devote the final part of this Sunday series of columns on Guyana’s coming petroleum sector (started back in September, 2016) to an extended presentation of my vision of a strategic profile for priority spending of Guyana’s expected significant Government Take. I’ll strive to bring forward that discussion somewhat, in order to focus soon on the cash transfers proposal (“oil for cash”), which I had made at Buxton. To avoid others further exposing their motives, I remind readers at this juncture that this is not a new public proposal from me, both as a general prescription for attacking income poverty, as well as a specific proposal related to Guyana’s coming petroleum sector.

At this juncture, I propose addressing the oil for cash transfers proposal, after completing consideration of all the top-ten challenges. I shall, however, attempt to speed that up, by treating the remaining challenges as summarily as I can, without cutting too many corners!

Implementation Lags

The term “implementation lags” refers to all delays encountered during Guyana’s preparations for its coming petroleum sector, circa 2020. It, therefore, covers: 1) the recognition lag, or the time it takes for the Authorities, industry operators, and other key stakeholders to accept comprehensively the imminent development of Guyana’s petroleum sector; 2) the decision lag, or the time it takes to create a policy response to this; and 3) the effectiveness lag, or the time it takes to get the complex state machinery operating in a manner designed to deal with this coming formidable challenge.

The state is labeled complex basically because it refers here to its bureaucracy/executive function, as well as its legislative, judicial/legal, security, institutional, financial management and fiscal/regulatory dimensions. At the core of these concerns, therefore, is the issue of timing. This core consideration, however, makes implementation lags far from unique to the oil and gas extractive sector in Guyana. They are indeed quite common worldwide! Lessons can, therefore, be learnt from these global experiences. I shall attempt to indicate some of these.

Lessons to be learnt

There are quite a few analyses that deal with implementation lags in preparation for a coming petroleum sector. Several of these are essentially speculative, abstract and theoretical. However, there are a small number, which are empirical evaluations and case studies. These latter are particularly helpful in providing guidance on the lessons to be learnt from other countries’ experiences. I shall focus on the latter in this commentary. Nonetheless, before that, I take the opportunity here to reference, briefly, my earlier columns of the first type, which I had previously offered on this subject.

My contribution to this topic started with an evaluation of a possible sovereign wealth fund and local content policies as crucial parts of a proposed institutional governance framework for Guyana’s emerging petroleum sector. These columns ran from January 8, 2017 to February 5, 2017, for a total of six columns. This was immediately followed by a fairly detailed evaluation of the Extractive Industries Transparency Initiative. This lasted for three columns, from February 12, to February 26, 2016. Immediately thereafter, this was followed with a broad assessment of the looming challenges of institutional governance in Guyana’s coming time of oil and gas production and export. This lasted from March 5 to March 19, for a total of three more columns.

Of note, I had observed back in my March 5, 2017 column that in the previous year, December 2, 2016, the Ministry of Natural Resources (MoNR) had announced seven comprehensive policies/laws/regulations that were originally scheduled to be in place by the end of 2016! These were: 1) A National Oil and Gas (Upstream) Policy; 2) A Local Content Policy; 3) The Passage of Petroleum Exploration and Production Legislation and Regulations; 4) A Petroleum Regulatory Commission Bill; 5) The Regulations and Oversight Mechanisms for the Commission, mentioned at 4; 6) Petroleum Taxation and Fiscal Legislation; and 7) A Sovereign Wealth Fund. Further, the MoNR had also announced the intention to revise/ update its 2013-2017 Strategic Plan in order to cover the period 2017-2021. Although scheduled for end 2016, this was far from attained at that scheduled date.

I had concluded back then that for Guyana to avoid implementation lags and other related pitfalls (falling under the rubric natural resource curse/paradox of plenty), it is necessary, though by no means sufficient, for the policies, laws and regulations indicated above to become urgently, part of Guyana’s institutional architecture, while drawing on lessons to be learnt from other countries’ experiences.

Which Lessons

I turn now to address the key lessons in regard to implementation lags, which Guyana can learn from other countries’ experiences.  Among the case study reviews on this topic I have found most useful for this purpose is one conducted by Norway in 2013 on Mozambique, under the auspices of its Oil for Development (OfD) Programme. By then, Norway had provided over three decades of petroleum-related assistance to Mozambique. The “overarching goal” of the OfD is “poverty reduction.” The operative goal is: “economically, environmentally and socially responsible management of petroleum resources, which safeguards the needs of future generations.”

Mozambique’s profile at that time is also of some significance for Guyana. Its gas discoveries were considered as “world class” and indeed a “game changer” Growing at an average of 8 percent per annum it was also among the top 10 fastest growing economies in the world. Regretfully, in spite of all this income, poverty has persisted for the majority of its population. This paradox has no doubt prompted the case study and its wide circulation.

Conclusion

Next week, I list those lessons Guyana must appropriate from this case study. Afterwards, I turn to address the seventh item, intergenerational equity, in my list of the top-ten development challenges, which spending Guyana’s petroleum revenues will have to navigate.

 

 

 

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