Guyana Petroleum Road Map Part 2 Guidepost 5: Defining the Buxton Proposal

Introduction

Last week’s column introduced four attributes of the Buxton Proposal, which I am certain, if kept constantly to the fore-front of its consideration would allow a deeper understanding of it as a potentially transformational poverty policy intervention, reaching beyond a cash transfers to all households’ scheme (and thus race/ethnic neutral). As a scheme the Proposal offers real opportunities to transform the coverage and operations of Guyana’s tax system; its financial system (payments, credits and savings); its data management and organizing system; as well as, the integration and management of all public anti-poverty policy schemes (such as, NIS, pensions, and welfare services, in health, education and other social benefits).

My singular premise is that, with income poverty at 35 percent; inequality (Gini Coefficient) at 44.6 and with significant infrastructural deficits (physical, social, institutional, and information) these factors combine to constitute the chief obstacles to Guyana’s economic growth and sustainable development. The four attributes highlighted last week, therefore seek to make the developmental thrust of the Buxton Proposal pellucidly clear upfront.

Why is it important for me to establish this developmental thrust? The reason is far too many Guyanese (including the poor), get sucked into the deception of treating all payments from the State to the poor as welfare-driven and therefore, state handouts! However, when similar cash transfers are made to private businesses these are routinely treated, in effect, as required to strengthen local business by promoting local content support for overall economic growth and development.

Buxton Proposal: Formal Description

To begin, when stripped to its essentials, the Buxton Proposal is a call for direct, regular (to be determined) predictable (certain) time-bound (also to be determined) payments to all Guyanese households. The sum proposed is an annual value of US5,000 or approximately G$1.05 million. The recommendation is for the proposal to become fully operational when, and only when, Guyana’s output of oil is at the Full ramp-up level. Full ramp-up has been indicated earlier in presenting Guyana’s Petroleum Road Map. This item will be re-stated as I continue on this topic. I had recommended that, based on projections given, the Proposal can begin when Guyana’s daily rate of oil production (DROP) reaches 1 million barrels of oil equivalent, boe per day. It has been suggested however, in private discussions that, the commencement level for the Proposal should be reduced; with the proportionate principle I have recommended for 1 million barrels per day as startup applied to inaugurate the scheme.  On top of this readers should recall that I place a Budget Constraint on the Buxton Proposal. That constraint is a maximum of ten percent of Government Take from petroleum revenue is to be devoted to the Proposal!

For the rest of the column I shall expand on each of the individual items indicated above.

Details

First, while Government may look for “fiscal pace” to aid in managing the Buxton Proposal, my basic expectation is that the expected Government Take will be enough to cover the cost of the suggested cash transfers. As will be indicated this is estimated to fall in the region of US$1.05 billion. As an aside, I indicate here that at the end of my presentation of the Proposal I shall synthesize the basic petroleum metrics that I have earlier advanced for the Road Map.

Second, I am not committed solely to the route of an “annual lump sum” or indeed, any other payment period. Public consultations with stakeholders should be undertaken in order to develop an understanding of public preferences on this matter, and, the likely impact of the various preferences on the cost and efficiency of managing the Proposal.

As discussed at length earlier in the Road Map, Full Ramp-up of Guyana’s DROP is defined as when crude oil output is between 1.5 and 2.5 million boe per day. This is based on projected recoverable petroleum reserves of 13-15 billion boe. It has been shown that, countries with such similar reserves level, currently produce output within this range.

Some have queried if the sum of annual transfer is too high, or indeed, affordable. Given the aim of the Proposal, it has to be substantial enough to make a significant dent on reducing income poverty and income inequality while advancing domestic incomes as a driver of domestic output.

Household

The last Population Census suggests there are presently in Guyana, about 210,000 households. Thus, each household size has been reducing over recent Censuses. The formal Census definition is: “A private household consists of one or more persons living together, that is, sleeping together at least 4 nights per week and sharing at least one daily meal”. Household members need not be a relative of the same family, or the head of the household. (Appendix C, Concepts and definitions), 2012 Population. The Census report illustrates various types of living arrangements, which exist in the field and offered these as guidance to the nature of this social unit.

It is of the utmost significance for the Buxton Proposal that, the Bureau of Statistics, which is officially responsible for surveys in Guyana is recommended to play a strong leading role in the technical evaluation, determination and elaboration of the Buxton proposal.

It is my strong view that the Bureau of Statistics, because of its considerable survey experiences and use of the household as a primary unit for data collection in Guyana, is the best equipped organization to advance the technical evaluation and implementation of this Proposal.

Clearly however, the challenge lies not only in determining the composition of the household, but the designation of its Headship as a vehicle and location of the primary legal obligations under the mandate of a cash transfer scheme.

Further, both the treatment of the institutional population and transient population raises unique legal and social difficulties. Here the scheme has to rely on the experienced inputs of the Bureau of Statistics.

Conclusion

Next week I turn to direct attention  to a few  of the key factors that arise in operationalizing the Buxton Proposal.