US urges private sector to take bigger role in spending oil money

Jun 26, 2019 News

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The US government is urging the private sector to have a bigger say on how the proceeds from the oil and gas industry will be spent.

Yesterday, during a business luncheon of the Guyana Manufacturing and Services Association (GMSA) at the Pegasus Hotel, US Ambassador, Sarah-Ann Lynch, told representatives of the private sector that the emerging industry has provided unique opportunities to advocate for government’s action with the goal of ensuring that the Natural Resource Fund (NRF), is implemented properly from the start, before the profits from first oil begin, to ensure those profits benefit the Guyanese people well into the future.
“You are not alone. This chamber, and others like it throughout the country, represent a
diverse array of Guyana’s citizens, voters, and taxpayers. Together, I encourage you to
collaborate with other stakeholders to devise a calculated strategic plan of action that targets job
creation, investment, and long-term revenue management,” she said.
At the forum were representatives from GMSA including President Clinton Williams, and several businessmen, including banking staffers.
Lynch, who assumed duties as ambassador earlier this year, said promoting responsible economic growth is one of her top priorities.
Her remarks would come at a time when there is a huge debate ongoing over the country’s oil deal with ExxonMobil, a US company.
The production sharing agreement (PSA) gives Guyana a two percent royalty and a 50/50 share in profits. However, ExxonMobil has to take out expenses before Guyana gets a share of those profits.
The establishment of a sovereign wealth fund, known in Guyana as the NRF, has been watched closely as its management would mean control to billions of dollars and how it would be spent.
“Boom times don’t always result in the most responsible choices.
“I urge the GMSA to continue being proactive in ensuring that its members are at the forefront in participating in and benefitting from the economic growth, while defending their rights and interests and those of their communities.”
The ambassador was heartened by GMSA’s joint initiative with the Ministry of Finance to improve the agro-processing sector.
“The NRF is a government-owned investment fund set up to invest revenues from oil and gas – and other natural resources – to protect and boost the national economy. If implemented immediately and efficiently, it should provide Guyana with the opportunity to invest in its long-term future as well as today’s infrastructure, health, education, security, and even agriculture needs.
“I must congratulate the people of Guyana for taking this important step before first oil production and before oil profits begin rolling in next year.”

However, she warned while the fund exists it now must be implemented.
Get it right
“Now is the critical time to get this right. You, the private sector, have an important role to play in ensuring that the fund achieves its purpose to transform transient natural resources into stable and sustainable future income.”
Lynch disclosed that studies have shown that the most effective sovereign wealth funds depend on four things- independent, transparent, inviolable, and being non-partisan.
Transparency
With regards to transparency, it is critical in the fight against corruption.
“But fiscal transparency refers to something more. It means publication of high quality information on how a government (or an independent Natural Resource Fund) receives, spends, and manages a public resource.
The GMSA should push to ensure transparency at all phases of implementation.” She said that for instance, one of the provisions of the legislation provides that the Minister may, through a competitive and open procurement process, hire an investment advisory services company to provide advice on fund investments.
“In all likelihood, this would be a private sector company. The GMSA and other private sector
agencies can exercise due diligence to ensure that this advisory company is competent and
reputable, and advise the Government as it develops its shortlist of potential firms.”
She said that GMSA can offer insights and guidance to the budget authorities on various NRF -related matters as the Government prepares the national budget.
According to the Ambassador, the Natural Resource Fund is not just any law.
“It will play a very important role in the economy. Now that a framework is in place, it should remain in place for the foreseeable future. Of course, as times goes on, amendments and adjustments may be needed, but time is now short and it is critical that the framework remain. Advocacy by the GMSA and your sister private sector agencies must be directed at ensuring that the fund remains sacrosanct.”
She said that political fortunes ebb and flow, but a sovereign wealth fund and its defense must be constant across all governments for decades to come, so that all those current and future governments remain accountable for staying true to the spirit of the fund and keeping it alive.

 

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