The obnoxious PSA has removed the fat from the cow

Oct 10, 2019 Letters

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DEAR EDITOR,

I wish to request that you please provide me the opportunity to share my views on the issue of direct cash transfer. I am equally aware that this issue has gradually ascended to the national stage, where the citizens of Guyana are given an opportunity to discuss this salient topic. With the passage of time, we have seemed to accept the 1999 and 2016 Production Sharing Agreement (PSA) that was signed between the Government of Guyana and Exxon Mobil. However, the direct cash transfer is a derivative that critically depends on the production sharing agreement that should remain an outcry to the people of this country.
In its current format, the PSA may not sustain a long-term social policy, such as the direct cash transfer to citizens. We are guaranteed only two (2%) percent of gross income or royalty that emanates from the oil revenue. The other fifty (50%) percent of profit/(loss) is not within our remit or control, since the outcome is significantly influenced and determined by external factors, such as the world market price for oil and Exxon Mobil’s insatiable expenditures (including donations) that would flow-through its profit & loss (P&L) statement. Notwithstanding the fact that whatever the fifty (50%) would represent after the P&L line items have been accounted for, the Government of Guyana would have to bear the corporate tax burden (e.g. 40% of profit) from its share of profit that Exxon Mobil should have rightfully paid when that time comes. Therefore, we should not discuss the topic of direct cash transfer in isolation of the PSA for the former is a derivative of the later.
While Guyana is poised to become “the Dubai of the Caribbean”, I would caution that the obnoxious PSA has removed the fat from the cow, and we are left to survive on the bones. It is therefore critically important that we hire a team of experienced finance managers that would properly manage the funds that would emanate from the oil agreement. Instead of the direct cash transfer, we should focus on improving the country’s infrastructure: bridges, network of roads for the hinterland and coastland; accessing a ready supply of electricity, repaying our creditors (World Bank and IDB) and improving the healthcare and education sectors. In summary, let there be a renaissance of developments that all the people of the country could benefit from.
I am struggling to believe that the Buxtonians, that believe in hard work and self-reliance; would demand that their government give them direct cash transfer for their votes. I don’t buy it. Of all the constituents that are within the confine of Guyana, is only Buxton giving support to the professor’s socio-economic proposal? And if one is that gullible to accept that proposition, is Buxton presentative of the entire population? The statistical sample is just too small to arrive to a reasonable conclusion. I could only perceive that the “grounding” of the WPA is not only revolutionary but very ambitious. It is the Professor’s democratic right, however, to present a case for the direct cash transfer. But he should allow the financial experts present to the people a revenue projection and analysis of net profit/(loss) that would derive from that would derive from the oil deal. Only then, we would know what discretionary social programmes the government should entertain. Indeed, the direct cash transfer sounds very encouraging and promising, but we must remember, that there are many external factors that could influence the realization of our share of the revenue and profit (after Exxon Mobil’s corporate tax is deducted).
Let’s amend the PSA, eliminate or minimize some of the cost recovery items (e.g. donations), clearly define cost of goods sold (COGS) and how it is computed, allowable versus un-allowable expenses that could impact the profit & loss (P&L) statement. Thereby, a reasonable person could adequately understand the Production Sharing Agreement (PSA) and engage in an amicable discussion about the country’s socio-economic future.
Unfortunately, having claimed that the WPA persuaded ten (10%) of the voting population to give the coalition government a second chance a few months ago, Dr. David Hinds seems to be counterproductively reversing all his party’s gains (efforts); having walked in that hot Guyana sun to convince people. Is he that credulous to believe that Jagdeo will consider his party’s direct cash transfer proposal in whatever form? The art of politics is, if your opponent is not considering a policy that one of its members wishes to pursue, the opposition would conversely say that it “will” consider that policy. But “will consider it”, is not a guarantee that it would see the light of day.
Dr, Clive Thomas’ socio-economic proposal appears viable, but it requires some “grounding” in financial analysis and strategy. I think he might have considered the multiplier effect of the direct cash transfer proposal that would encourage a significant increase in consumer spending. However, in the short run it would lose its intended effect; inflation is already having a debilitating effect on the country and by extension the five thousand ($5,000) bill- take it out of circulation.

Respectfully,
Winston Adams
Master of Business Administration (MBA) Finance
Bachelor of Science in Accounting & Finance

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