Oil and poor countries

Dec 18, 2013 Features / Columnists, Freddie Kissoon

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There were two announcements that passed by without any serious discussion, though they were important enough to engender discussion in Guyana. One was that in 2013, the United States produced more oil than it bought from the outside world. Predictions are that from here on the trend will continue, particularly with shale production making for US self-sufficiency around 2020.
The second announcement was made by the Trinidadian Government of falling oil prices attributed to US oil production. And the prediction is that next year will see a further drop in prices. The simple economic fact is that as the US produces more oil, it will spend less on energy import, thereby creating a mess for countries, particularly Arab states that have used petrodollars on extravagant buildings and nothing else, perhaps with the exception of Qatar.
The oil markets in the coming years do not look good for these scandalous Arab countries that have used petrodollars the way a fountain sprouts water into the sky. Future oil markets will also have negative effects for Trinidad. The 1973 oil embargo created a rich economy for Third World and Arab countries that sold oil and became wealthy overnight from oil-hungry US, Japan and Europe.
Chavez’s grandiose scheme on spending petrodollars to create a socialist Venezuela has now grounded to a halt, not so much because of reduced oil exports, but poor economic planning. The future in Venezuela does not look bright if the US in the coming years buys less energy from Venezuela. It would be wise for Trinidad to start planning for a country without petrodollars.
A look at the way the world economy is heading means that a poor country like Guyana has to start re-shaping its economy. But will this be done? Can this be done by the present leadership in Guyana? First, there is the historic WTO agreement concluded last week. Many international NGOs have criticized it for not going far enough to help, poor countries. Secondly, there was the warning last week by Dr. Justin Ram of the Caribbean Development Bank.
Ram came to Guyana to give the keynote address at Georgetown Chamber of Commerce and Industry’s annual dinner. What Ram warned Guyana about was testimony to the complete failure of post-Independence planning in this country. Ram advised that Guyana should not rely on economic success through export of natural resource-based products.
It is amazing that after fifty years of such writings by top regional economists like our own Clive Thomas and Jamaican Norman Girvan about the Caribbean’s reliance on a monocultural economy, an economist can come to Guyana in 2011 and issue the identical caveat. It vividly reminds you that nothing has changed in the economic direction of this country since Independence in 1966.
With the failure of sugar, the new kid on the block is gold. Every Minister points to growth rates that are better than the rest of the Caribbean, except Trinidad, because of the gold industry. The Arabs, Trinidadians and Guyanese will soon find out that what you take from under the earth is not in endless supply.
Many Arab states will face dried-up oil fields in less than forty years’ time. Undeclared gold is already leaving Guyana in staggering amounts.
Here is a useful statement by Dr. Ram on depleteable resources; “…Concentration of the extractive industries such as agriculture, forestry, fishing, mining and quarrying focus on low value added, natural resource based products for export and leave the country vulnerable to “Dutch disease” effects.
Indeed, in recognition of the depleteable nature of some of these natural resources, it would be ideal to explore the establishment of a sovereign wealth fund to manage the windfalls from their extraction as has been done in Trinidad, Botswana, Norway …”
Which windfalls is Dr. Ram talking about in Guyana? Where are the windfalls from fishing, agriculture, forestry and mining? The Government admits that it cannot pay public sector workers more than five percent for 2013. If there are any windfalls from the extractive industries they are in a sovereign fund alright, but make that plural – sovereign funds, and add the word private. I am referring to corruption.
One more observation from Dr. Ram. He said that if Guyana is going to make a success of its attempts at economic transformation then there has to be “greater focus on higher education.” It is unfortunate that no one from the opposition sought to give Dr. Ram a tour of our public secondary schools and the University of Guyana. But in the end it worked out alright. He would have fainted at what he was looking at.

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