Dear Editor,
I am writing in response to Jan Mangal’s recent letter (SN: 23/01/2019) criticising the views of Mr Timothy Jonas. Mr Mangal makes some confusing and disingenuous claims about economic development, business sector stability, and the terms of our current oil contracts.
First of all, the notion that international companies thrive on instability is a falsehood – proven untrue by the many unstable countries that have lost investment opportunities and, as a result, fail to develop adequately. Tanzania, for example, passed laws on renegotiation of mining and natural gas contracts in 2017, and almost immediately, investors were off-put by the unstable business climate. This cost the country over US$200 million in foreign investment in 2018 alone. With everything else that’s going on here in Guyana, we must be clear-eyed about how detrimental tearing up our contract could be by scaring away investors.
On the other hand, Singapore has managed to foster economic success by creating a stable investment environment. Singapore’s first Prime Minister, Lee Kuan Yew, built Singapore’s business reputation on consistent, fair policies that attracted foreign investment. When Mr Mangal criticises ‘blind adherence to the contract,’ he is casting this consistency in a poor light. Singapore succeeded because the rule of law didn’t fluctuate with the political winds; Lee Kuan Yew made sure that investment terms were honoured, and contracts were upheld. This ensured transparency, stability and integrity.
And we need not look elsewhere to see the benefits of stability and contract certainty – we already see foreign investment entering Guyana. Recent headlines announced a new project at Craig on the East Bank Demerara. The investment is a joint venture between an overseas Guyanese and a United Kingdom offshore energy supply company that is expected to create 200 local jobs in the energy
industry. Certainty and stability allow businesses to plan for the future and make new investments in Guyana.
Last year was also a banner year for investment in Guyana. Trinidadian Process Components Ltd partnered with locally owned Mines Services Ltd to form a new oilfield services company in Guyana called Jaguar Oilfield Services Guyana Inc, which provides products and services to activities in the energy industry. General stability of the business sector has also encouraged local business expansion and further community investment. Local businesses like food manufacturer Sterling Products Ltd and storage facility company, Falcon Logistics Inc, are expanding operations to take advantage of improving economic conditions.
Mr Mangal also misleadingly brands the contract as ‘unfair.’ While the streak of recent discoveries has brought international attention to Guyana, there is little to suggest that the contract we signed in 2016 is ‘unfair.’ The government take of approximately 60 per cent is by all accounts on par with other frontier countries that were untested territory prior to discovery. Estimates from the International Monetary Fund put our take from Liza Phase 1 in the first few years of cost recovery at approximately US$300 million annually, with a modest oil price of US$50 per barrel. After the costs of development are recovered, estimates for our take jump to over US$1 billion per year. We will receive this money even as the companies pay all upfront costs and take all the financial risk. As future project phases come online – like Liza Phase 2 – our revenue could double or even triple. On balance, Guyana makes out fairly well for a ‘frontier’ country.
So, the suggestion that Guyana is losing money with our current contract is disingenuous. We aren’t losing money – in fact, we’re expecting a hefty influx of it. In expectation of receiving these funds, we should proceed with planning for how this money will be managed and spent to benefit all Guyanese.
Yours faithfully,
Patrick Davis
