Govt. should be bound by law to disclose all assets funded by Natural Resource Fund–says NRGI Consultant

Oct 31, 2018 News

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By Kiana Wilburg
Getting the government to report on how it spends money from the Natural Resource Fund (NRF) on an annual and quarterly basis is important. But perhaps, even more, or equally significant is getting the administration to disclose all the assets that it funded with moneys from the Fund.
This was one of the central points recently made by economist and consultant to the Natural Resource Governance Institute (NRGI), Andrew Bauer.
In an exclusive interview with this newspaper, Bauer said, “One of the things I am hoping the Ministry of Finance does, is put into legislation, that every single asset it invests in be made public. Meaning, everything that the government owns, every share it buys into, must be disclosed.
“That is how you are going to tell where the money is going; if it is going into their friend’s company or being invested properly. So, for me, this is more important than simply reporting monthly or quarterly.
Bauer said that for any Natural Resource Fund (NRF) to be successful there must be a degree of consensus. Without it, countries risk being trapped in a cycle where rules governing the use of the Fund are constantly thrown out, or altered to suit the liking of any party in power.
The economist said, “You need consensus because what is going to end up happening is that you can put together the nicest laws with the most beautiful rules and if the new party comes into power (and they aren’t in agreement with it) they can throw it out. So it is not particularly useful to have something that can be thrown out every few years.”
Further to this, Bauer said that consensus building is critical to the success of any Natural Resource Fund as politicians and oversight bodies are unlikely to enforce rules unless they have a feeling of ownership over them.
He said that there are many models of consensus building. The NRGI consultant said that these include: parliamentary debates, public surveys and political ententes.
In Norway, for example, Bauer pointed out that the political parties negotiated the fiscal rules so that each would abide by them once they entered government.
Pointing to another example, the economist said, “One of the most amazing stories is Ghana in West Africa. In Ghana, before they put the NRF in place and the fiscal rule, the Ministry of Finance ran around the country to almost every small town and village and they asked people how much money they think the government should save, how much money they think the government should spend and what it should be spent on.”
The economist added, “And when they got feedback, they fed it into the fiscal rule. The value of that showed up years later when the government tried to break the rules and locals were calling into the local radio stations saying, ‘Well this is crazy! The government is doing a horrible job…’ There was public outcry and the government stopped …So it is really important to have everyone on board.”
On that note, Bauer stressed that it is crucial that the coalition administration, follow suit and engage in cross country consensus building exercises before the establishment of the Fund.
TRIPLE CHALLENGE
In addition to the need for consensus, the Inter-American Development Bank (IDB) has noted that Guyana faces a triple challenge in attempting to establish its Natural Resource Fund. It said that the government has to decipher how to rapidly build stronger institutions; how to save for future generations and smooth consumption; and how to assure that the oil revenue spent in the short term, is planned and spent well to boost productivity and improve living standards.
Given the nation’s weak institutions and poor capacity to execute projects well, the IDB said it would be recommended that Guyana saves as much as possible until the quality and capacity of institutions improve.
The IDB sought to highlight that simply establishing a Natural Resource Fund is not a guarantee for fiscal stability.
The Bank said, “In the first instance, the appropriate mechanisms to manage the Fund, clear and simple rules for withdrawals and deposits, and issues related to governance and transparency, will be important to ensure that the Fund achieves its objectives.”
In this regard, the IDB said that the Santiago Principles, a list of 24 generally accepted principles and practices voluntarily endorsed by the International Forum of Sovereign Wealth Funds provides some general guidance for countries.
More substantially, the Fund needs to be supported by a strong fiscal framework.

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