Dear Editor,
I refer to a statement from Mr. Winston Jordan that was published on October 5, 2019 in KN and headlined as “Natural Resource Fund… Rigid withdrawal rules prevent account from becoming slush fund – Finance Minister”. However, when one actually reads the Natural Resource Fund Act 2019 (Act No. 12 of 2019), it clearly does not reflect what Mr. Jordan is attempting to project.
In setting up a Sovereign Wealth Fund (SWF) that can best serve its shareholders (in Guyana’s case the people), the process requires consideration of the following:
1. The saving rules: how are assets transferred to the fund?
2. The spending rules: How are assets transferred from the fund?
3. The investment strategy: how should assets be invested?
4. The governance strategy: roles and responsibility – who does what and who appoints whom?
I had cause to re-read this act for two business events I was invited to make presentations at in Georgetown, Guyana on October 5, 2019, on the Local Content Environment and the SWF. At those events I did commend the Caretaker Minister for the passage of the law since I am of the firm belief that half of a bread is better than no bread at all, to which my good friend Mr. Christopher Ram, a co-presenter at one of the events, disagreed. But let me be clear, this law is inadequate.
When we ask the question who does what and who appoints whom we find that the Office of the Minister and the Office of the President make all the appointments. So having withdrawal rules that appear rigid is irrelevant if they are being managed by political puppets of the Minister/President.
There are a few key decision-making bodies provided for in the law. One of them is the Public Accountability and Oversight Committee (PAOC). Its function is to provide an assessment of the management of the SWF and utilization of withdrawals from the Fund among other roles. But the President exclusively appoints that 22-member body. We have seen since December 21, 2018, how intellectually bankrupt that office has become with respect to following the rule of law and the Constitution. So what prevents such a recurrence from happening that can corrupt the functioning of the SWF?
In clause 11 of the law it says “the Minister shall be responsible for the overall management of the Fund….” and it demands that we must trust the Minister who marches to a political tune to do the professional thing? Yeah right! The Minister appoints his or her Investment Commit-tee to manage the SWF, he or she decides how much they shall be paid and if they are not fulfilling his or her political objectives he or she may choose to terminate their appointment. Is that independent and rigid enough to prevent the establishment of a political slush fund?
Then clause 15 reveals that the Minister shall appoint the senior staff of the SWF and also have the power to fire them. Then there is a technical advisory committee to the Minister called the Macroeconomic Committee and he is responsible again for appointing, remunerating and as clearly spelled out in clause 20, firing them.
So there is nothing in this law that provides the internal control framework to prevent a slush fund from being set up. Every appointee under this law is a creature of either the President or the Minister and if these politicians want a slush fund, then with the appointees in place, either do it or find another job. Therefore under this Natural Resource Fund Act 2019 (Act No. 12 of 2019), establishing a slush fund is a “walk in the park”.
So I reject Mr. Winston Jordan’s attempt to mislead the people that rigid rules are in place because history and empirical evidence have illustrated to us that the rules are as strong as the independence of the appointees.
Yours faithfully,
Sasenarine Singh
