The Promise of Oil

Mar 19, 2010 Editorial

Once again we are being regaled with the promise of untold oil billions flowing into our pockets. The last time it was the favourable Arbitral Award on the Suriname border question after which Sir Shridath Ramphal remarked that oil may not be an entirely unmixed blessing. He spoke of imitating “best practices” and the caution is still apropos.
The ground reality is that resource-rich former colonies in general and oil-rich ones in particular, have been the worst performers as far as increasing their growth rates are concerned. One study showed that countries that depended heavily on resource extraction in 1970 grew at a measly average of 1% between 1970 –1989. As a consequence their people have not experienced the dramatic increases in standards of living in such resource-poor countries like Singapore. Such results cry out for explanation.
Recently, a strong correlation has been demonstrated between the growth of the resource component of the GDP and conflicts within the countries. While the causation for this effect is complex and contextual it challenges the widespread hope that with increased revenue our present squabbles over “marginalisation”, whether is real or imagined, will disappear. This effect of increased conflict is especially noticeable in divided societies and should be of major concern to our policymakers.
The most significant factor in ensuring that countries remain locked in low growth rates and mired in poverty while the dollars keep pouring in is what the economists like to call “rapacious rent-seeking” – but laypersons recognise it by the catch-all expression, “corruption”.
Corruption, from all studies, appears to be the major by-product of resource extraction from even the developed countries – much less the poor ones like Guyana. Whether the administration has taken heed or not of the sustained accusations of “corruption” that have bedevilled them up to now, it must accept that the opportunities for graft will increase in direct proportion to the increase in revenue when the oil starts flowing.
It is proposed that the Government utilize the LCDS and “National Development Strategy” to initiate a national discussion to create a focused strategy, with the understanding that the oil revenues will be utilized to fund the projects proposed by the strategy. A national consensus on development projects should go a long way towards ameliorating the conditions that precipitate conflict over “marginalisation” of any group.
To ensure that the oil revenues do not flow into the pockets of corrupt politicians, it would be best to constitute an independent “Oil Fund for National Development” (OFND) that operates on transparent accounting rules to ensure that all oil revenues are accounted for. The rules of such transparency have now been fully endorsed by the international community so it would not present any problems to so-called “privacy” needs of corporations.
To place the oil revenue directly into the Consolidated Fund is to ensure that at the very best (assuming no sticky fingers) the money will be fritted away in pork barrel showy schemes with no long term impact on our sustainable development. The OFND will have to ensure that the oil industry does not blossom at the expense of other previously important production sectors, such as agriculture and fishing, and ensure that the economy diversifies into manufacturing and higher technologies – and involve all sections of the society. We have long advocated the need for us to have a development bank to kick start the needed investments we all know are necessary to lift us out of poverty. We had suggested the utilization of the billions that are presently being sterilized in the Bank of Guyana, but this would have violated the conditionalities of the World Bank/IMF under which we are straitjacketed.
The OFND would provide our own revenue stream and the IFIs do not have to grant or withhold permission. We do not believe that Government itself should necessarily get into the ownership of new productive facilities but should identify private entities which can be partnered and eventually assume total ownership.
Let us plan for a balanced development before the potential deluge of oil drowns us with money.

Discover more from Kaieteur News

Subscribe to get the latest posts sent to your email.

Latest News