As promised last week, today’s column first indicates the main lessons to be learnt from other developing countries’ experiences in dealing with implementation lags when preparing for the coming on-stream of a relatively massive extractive petroleum sector such as Guyana’s. As also noted my specific focus is on lessons learned from a case study review conducted on Mozambique in 2013 by the Norwegian Oil for Development Programme (OfD). Following the completion of this task I shall turn to consider the seventh topic on the list I provided of the top-ten development challenges, which the successful spending of Guyana’s petroleum revenues has to navigate.
Among the many lessons concerning implementation lags, which I draw from the Mozambique study four are particularly useful. These are indicated below.
The first lesson is one, which perhaps most attentive readers might well anticipate. That is, primacy should be allotted to the systematic improvement of transparency and accountability when preparing for the coming time of building a brand new petroleum sector. This particular recommendation is indeed quite common to most policy areas seeking to promote sustainable development. The unique aspect of this recommendation is that the OfD in making it goes beyond the standard tableau of the Extractive Industries Transparency Initiative (EITI), to which Guyana is committed. Specifically it adds reporting on conflict disclosure and beneficial ownership to the EITI. Additionally, OfD calls for 1) the strengthening of citizen-based demands for transparency and accountability and 2) focusing on financial transparency in the context of both legal and illicit capital flows. This latter involves the anti-money laundering bodies more centrally than is commonly admitted in public discourse (the Financial Intelligence Unit, FIU, Serious Organised Crime Unit, SOCU, and State Assets Recovery Agency, SARA)
The second lesson to be learnt relates to planning for the future management and spending of anticipated petroleum revenues. The OfD programme lengthily emphasizes two dimensions of this task. To sum up, one is the scale-up of Guyana’s financial management through the rules-based integration of the National Budget and petroleum revenues earned through the Production Sharing Agreement with Exxon and partners. I plan to address this topic separately at a later stage. And, the other dimension is to plan well in advance for the transition from an all- consuming focus on the Government Take, or share of petroleum revenues, to society’s Take, or share of those revenues.
The third lesson is derived from Guyana’s present situation. It is one, where in effect, more than a score of countries, regional, and international bodies and agencies are already providing significant direct assistance to the Authorities for the implementation of their arrangements for the coming on-stream of the petroleum sector circa 2020. Experiences elsewhere attest to the fact that such a circumstance is prone to conflicting, if not confusing advice. The lesson therefore is to secure donor coordination and a contextualizing of these interventions as two necessary ingredients for the successful delivery of a grounded design for these interventions.
The fourth lesson is basically for the Authorities to secure from a domestic standpoint a similar effort aimed at 1) delivering a roadmap of specific and measureable steps and outcomes (theory of change) they should adopt 2) integrate these interventions under an overall strategy 3) support broad-based coalitions for change where possible and 4) promoting environmental protection, (its governance and management) more to the forefront of consideration, given the anticipated coming in the next decade of substantial onshore petroleum exploration.
There are of course several other lessons that are there to be learnt. In my judgment the four addressed above suffice for present circumstances. I’ll leave this topic therefore, and in the next Section I shall go on to introduce the eighth development challenge, which spending Guyana’s petroleum revenues will have to navigate in coming years in order to promote sustainable development.
Like a few of the other already considered development challenges, which face Guyana’s spending of its coming petroleum revenues, maintaining intergenerational equity has several dimensions to it, not only economic. Intergenerational equity has broad applications across the social sciences. These applications include environmental, sociological, psychological, legal, social policy, as well as economic developmental. In all these applications equity seeks to convey the notion of fairness across generations. To be clear, this fairness applies to those generations already born and those yet to be born! As used in this column, however, I am not referring to the existing distribution of Guyana’s population by age group (young and old) but to generations currently living and those yet to be born.
From this perspective there are three primary petroleum industry related concerns or issues that are posed for Guyana’s way forward. First, while there is no doubt that oil and gas discoveries will continue to be made, and indeed might even be added to in geological time, these resources remain nevertheless ultimately finite for Guyana. For all practical purposes they are therefore, non-renewable. After peak production is reached petroleum resource depletion will step in. And, as a consequence if these resources are to benefit present and future generations of Guyanese then fairness in its use, especially its first use, is an obligation for every generation.
Second the oil and gas sector is notorious for causing serious environmental damage. This is due to a mix of causes including: willful neglect, cutting corners, lack of suitable preparation, and even Acts of God. It is unfair for the present generation to plan to use up the national petroleum patrimony and irresponsibly leave any resulting environmental damage to be attended to by future generations. As we shall observe next week this cuts across a major theoretical concern, which is how to measure for intergenerational equity on the principle that the present generation of Guyanese inherits its natural resources from previous generations and holds them in common with all generations, past and future. It therefore has an obligation to pass it on in reasonable condition to future generations.
Third this discussion recognizes the Authorities have framed Guyana’s development strategy as promoting a “Green State and Sustainable Development”. Under this rubric a petroleum dependent path of economic growth inexorably magnifies the challenges of intergenerational equity.
I’ll wrap-up this discussion at the beginning of my next column. Afterward, I address the eighth development challenge namely, overcoming enormous external pressure to spend petroleum revenues on the basis of the permanent income hypothesis budget rule.