SWFs aren’t enough to save economy when you become hooked on oil - Ramson

SWFs aren’t enough to save economy when you become hooked on oil – Ramson

Jun 18, 2018 News

By Kiana Wilburg
Top oil producing nations such as Norway and Algeria are well equipped with Sovereign Wealth Funds (SWFs). These accounts serve as a safe keeping for money derived from natural resources.

Oil and Gas Academic, Charles Ramson

The funds can be used for investments overseas and budget stabilization.
But even with a solid SWF in place, there is no guarantee that the economy would be safe from the vagaries of a low oil price environment. Attorney-at-law and Oil and Gas Academic, Charles Ramson presented a case on this matter last Thursday at Moray House.
He was at the time, making his contribution to a discussion on “Oil and the Economy: Themes and Concerns”.
During his presentation, Ramson highlighted how difficult it is for nations to get sustainable economic growth and overall development when they are heavily reliant on oil and gas. On this note, he highlighted some statistical data for seven countries as it relates to their economic performance from 1960 to now.
These countries include: Saudi Arabia, Kuwait, Russia, Kazakhstan, Algeria, Angola and Norway. Using financial data compiled by the World Bank, Ramson showed how the Gross Domestic Products (GDPs) for each country took a hard hit during the low oil price environment, which existed from 2013 to 2016.
Ramson said, “Norway, arguably the best run oil and gas economy in the world, look at the sharp decline in their GDP from 2013 to 2016. If you use US current prices, the decline represents US$150B off of its GDP (see graph attached to article)… Therefore, we are establishing how difficult it is to get and maintain economic growth when you are dependent on oil and gas. What I want us to do as a nation is to see what oil really is and how volatile it is…”
He stated that oil creates an imbalance even with all the countries that are said to have well managed SWFs.
“SWFs aren’t enough to save the GDP when you become hooked on oil…”
Ramson, who is also a member of a Consultancy firm, believes that the government has failed to show how it intends to diversify other sectors.
He noted too that Guyana is still without a Green State Development Strategy (GSDS). That document will cost Guyana $230M to prepare. Its objective is to provide a strategy that will reorient and diversify Guyana’s economy, reduce reliance on traditional sectors and open up new sustainable income and investment opportunities in higher value adding and higher growth sectors. The document is still in its draft stage. “We are essentially marking time,” expressed a concerned Ramson.

A graph showing the sharp decline experienced by Norway’s GDP during 2013 to 2016.

As he made his call for diversification, Ram said, “Let’s not see oil as some are seeing it now – as a cash cow salivating with wild dreams like winning the lottery on what will we spend the money on, and how they can get rich like the Arab sheiks – or worse as the solution for our every problem – hoping that the government will put money in our bank accounts every month like Cinderella’s fairy godmother.”
GUYANA’S SWF
The draft legislation, which will pave the way for the establishment for the Sovereign Wealth Fund (SWF) is still receiving finishing touches.
Finance Minister, Winston Jordan has announced that the draft document will be the subject of several rounds of consultations before it gets to Parliament by year end.
In the interim, the International Monetary Fund (IMF) has already provided advice to the government on the different areas in which they should improve on in the draft document. One of the areas it commented speaks to the need for clearer reporting requirements when the SWF is used by officials.

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