Govt. promises stronger institutions to protect oil money

Nov 30, 2018 News

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By Kiana Wilburg

One of the most important public financial management tools at Government’s disposal is the Natural Resource Fund (NRF), for which a Bill was laid, recently, in the National Assembly.
But this tool can only be effective if the relevant institutions that would be using it are strengthened. Otherwise, there would be wastage of the nation’s oil money.
This was noted by Finance Minister, Winston Jordan, during the reading of his 2019 budget speech on Monday.
Jordan said, “As we anticipate additional resources being made available within the National Budget, it is imperative that we be careful in our planning, thoughtful in our decision-making and understanding in our expectations.
“We must, therefore, approach, with urgency, the strengthening of our institutions so as to prevent the wastage of these scarce and finite resources.”
The Finance Minister recalled that it was late in 2016, that the Government began crafting legislation to establish a sovereign wealth fund, recognizing the need to have the requisite systems in place, prior to petroleum production.
“The Government received extensive expert advice and technical support. It undertook in-house consultations during this process. At the request of President David Granger, a green paper was prepared, published and laid in the National Assembly to encourage public consultation and feedback, to inform the drafting of the Natural Resource Fund Bill – one of the most important pieces of legislation in our nation‘s history.”
The Finance Minister said that the Bill, as presented to the National Assembly, provides for a Fund that directly meets 21 of the 24 heralded Santiago Principles, with the other three being met upon implementation of the Fund.
He said that these Principles refer to the international generally accepted principles and practices of Sovereign Wealth Funds, which speak to transparency, good governance, accountability and prudent investment practices.
The economist said that Petroleum revenues will form part of the national patrimony, and given the importance, Government has proposed to establish a Public Accountability and Oversight Committee, consisting of representatives of a broad cross section of the nation.
He noted that the Committee will be mandated to report on the Fund, including the investment of petroleum revenues as well as the utilization of withdrawals from the Fund, which are to be invested through the National Budget.
Additionally, the Natural Resource Fund Bill notes that the Oversight Committee will consist of 22 members who are nominated in accordance with Part Three of the Bill and appointed by the President.
The Committee will include a representative from civil society organizations and community based organizations, a nominee to represent women with the said person being nominated by civil society organizations, a nominee of the Bar Association of Guyana, a representative of the Guyana Consumer’s Association, a nominee of the Guyana Extractive Industries Transparency Initiative (EITI), a nominee of TIGI, a nominee of the Guyana Press Association, a nominee of most representative associations of trade unions, a nominee of the Private Sector Commission, one nominee from each of the 10 Regional Democratic Councils and a nominee from academia who is nominated by the governing council of the University of Guyana.
The Bill is silent on there being a seat at the Oversight table for a member of the political opposition.
Furthermore, the Bill points out that a person shall not be eligible for appointment if he or she is a Parliamentarian, an employee of the Ministry, an employee or owner of an organization who is engaged by the Minister or Governor of the Bank to assist with the management of the Fund, is a member of the Investment Committee established under Section 13 of the Bill or the Macroeconomic Committee that is established under Section 20 of the Bill.
One is also not eligible to be on the committee if he or she is insolvent or is, or has been declared bankrupt, is of unsound mind or otherwise medically unfit, or has been convicted of any offence not minor in nature.
The draft legislation notes that the President may terminate the services of any Committee member for a number of reasons, two of which include incompetence and misconduct.
Additionally, the Government has paved the way for the Committee to have financial resources to carry out its functions. It is also expected to publish bi-annual reports of its activities on its website and that of Parliament’s.
These reports will also be provided to the National Assembly as well as the President.
CRUCIAL ROLE OF OVERSIGHT BODIES
Whether or not rules are in place, independent oversight bodies have important roles to play in holding governments to account for the management of Natural Resource Funds.
This was recently endorsed by Chatham House, a non-governmental organization based in London whose mission is to analyze and promote the understanding of major international issues and current affairs.
Chatham House explained that in many countries, the courts are explicitly mandated to determine the constitutionality of legislation and ensure government compliance with laws, including those governing natural resource fund management.
Where the courts are free from political interference, Chatham House said that judicial review is a strong form of independent oversight insofar as courts are able to enforce their decisions on the government.
Chatham House said, “Some countries are not brave enough to embrace this type of independent oversight. But the evidence is overwhelming to prove that this is an extremely powerful form of ensuring transparency and accountability in the operations of the NRF.
In 2008, the Timor-Leste Appeals Court found that a US$290.7 million withdrawal from the Petroleum Fund by the Government was illegal. The rationale was that it violated the 2005 Petroleum Fund Law requirements that the government provide a detailed explanation for the withdrawal and that petroleum revenues be managed for the benefit of current and future generations. The Court was able to order that the money be returned to the Fund.”
Turning its attention to the importance of Multi-Stakeholder Groups, Chatham House said that some countries have established formal forms of these oversight bodies to reinforce and support the work of traditional bodies such as Parliament and the Judiciary or to provide an additional source of regulation.
Chatham House said that in Chad, Ghana, and Timor-Leste, civil society persons such as Chartered Accountants, trade unionists, traditional leaders, and central bankers, form formal oversight committees for their country’s NRFs.
The transparency body said, “Ghana’s Public Interest and Accountability Committee, for example, is mandated by law to monitor the management of petroleum revenues as outlined in the Petroleum Revenue Management Act.
Timor-Leste’s Petroleum Fund Consultative Council, which consists of various civil society persons is mandated to advise Parliament on how the country views the operations of the fund as well as recommendations for improvement…”

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