How to treat the oil wealth

Sep 24, 2018 Letters

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Dear Editor,
To avoid this disaster the oil money will have to be used to assist all aspects of Guyanese business, but since I understand agriculture I will address it and suggest what we have to do to protect it.
We have to reestablish the Guyana Agricultural Industrial Bank [Gaibank] to lend at subsidized rates to help them to tool up, to make them more efficient and competitive with international standards.
Low interest rates and low corporate taxation should be introduced e.g. more like 15-20% and not the current 35%, so duty free fuel and other subsidies and soft loans must be used from the oil revenue to help us to tool up to be more efficient producers.
We must have very strong institutions which will ensure that the money is being used for the purpose it is intended. Roads, waterways, drainage systems, markets, machinery all have to be upgraded to make them more efficient or you can wake up one day as in Venezuela today, to find that there is no longer a single farmer operating in the country and the oil money to the country has dropped due to world market forces and low production due to incompetence.
The Venezuelan oil production has dropped from 2.4 million barrels per day in 2007 to 1.5 million barrels a day by 2018 and is no longer sufficient to support the populations’ needs even to buy food.
Venezuela’s rice industry is dead and they have to buy rice from Guyana. There was a time when I thought that the PetroCaribe phenomena was Chavez trying to bribe his neighbors to support his repressive regime. It may not be so; he may have been forced to do it because he did not have the foreign exchange to buy the food so he was bartering the oil for it.
I know that giving each family direct money has been suggested, but in addition there must be, as in sugar, a price stabilization fund and so we must by law retain a certain amount of the oil money, as determined by Parliament, to stabilize us in the future against the ups and downs of the oil price, which has shown to be very volatile.
We are going to have to demand that Government, any government in power, must be accountable to the people as to exactly how they are spending this money, and whenever necessary we have to renegotiate the contracts with the extractors at more beneficial terms than at present.
This is very important. We for example negotiated in 2016 to renew a contract made since 1999 when there was no oil find, and the operation was very speculative. We made exactly the same deal, maybe even worse, when we were renewing the contract which was made in 2016 AFTER we knew that there was a lot of the stuff out there.
This boggles the mind and brings our woefully badly unprepared situation clearly into focus. But more than our share of the revenue, we must force some slowing down of the extraction rate. I am now convinced that the rate of extraction is very important to us. We have to keep it as low as we can negotiate.
The rule of law in Guyana has not in fact improved in any significant way in recent years but it must. There cannot be any major investments in the inevitable industries which will spring up at lightning speed in the next few years as byproducts of this oil find, unless investors and the citizens of Guyana have confidence in the judicial system.
The international organizations which I alluded to a few weeks ago which help nations like ours avoid the resource curse, must all be invited here by the Guyanese people [all of us] to make our government comply.
First, the donor community should extend the International Finance Corporation’s recently updated transparency requirements for extractive industries to all bilateral development finance.
Second, the international community should work to build demand for accountability in resource-rich countries by providing grants to local civil society actors, so that they are in a position to monitor revenue flows.
Third, major financial centers should agree to harmonize transparency requirements for extractive industries in the biggest stock exchanges, building on the Dodd-Frank legislation. Finally, the financial institutions that subscribe to the Equator Principles should “establish independent monitoring mechanisms” to ensure that their membership is actually living by these standards, rather than paying them mere lip service.
This oil money must be used to build our existing and new infrastructure including hydropower, the road to Brazil and the deep-water harbour. And everyone must obey the rule of law. We can’t have the GDF putting roads under arms across private transported property without even consulting the owners.
We cannot have ministers of government illegally holding up private people’s business activity for two years because they can’t decide where they want to build a road to the bridge.
Go-Invest must be cleansed of any corruption if it exists now, and upgraded since it’s going to play an important part in the business boom which is to come. And income tax must be reduced across the board especially to our manufacturing sector so that their products must be competitive.
But taxation must continue to keep the people interested in what’s going on at a high level and as in Trinidad whose fuel and gas sold to Guyanese must be subsidized including any power generated by GPL.
Editor, I am not talking about us implementing two or three of these measures to avoid the resource curse, we must do all of it. And if who are in power can’t show us that they are preparing us for it, then we have to use the ballot to change them.
I believe that the President is perceived by most of the population in Guyana as not corrupt, and that is a good start, but since it is clear to a blind man that corruption still exists in this country in the other government personnel/entities, I have to say that it is not enough for him to be perceived as honest. He has to take charge and stamp it out.
I understand that we are two years away from first flow of this oil, and that after the first flow we will have to repay enormous sums owed to the extractive operators taking maybe another 2-3 years.
But at this point we are still a very poor nation with very weak and corrupt institutions. It still takes years to pass transport on property and you have to bribe up and down the line to do it. To settle an industrial dispute takes decades but the judge in charge, for whatever reason, says that he doesn’t need help!
We have to stop with the cook shop mentality and set up our institutions now, before the oil flows not after the extraction begins and we end up playing catch up with the extractors with this same corrupt badly paid people manning many of our important institutions and remain worse off than when we did not have the oil.
This is our first experience with this first flow tsunami of wealth, but it is not theirs.
Tony Vieira

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