New law to give Pres. Ali dangerous control over oil money

Dec 25, 2021 News

– Analyst cites frightening reduction of oversight mechanisms

Kaieteur News – International Consultant and Co-Director of Energy Practice at Americas Market Intelligence (AMI), Arthur Deakin is of the firm conviction that the PPP/C Government’s Natural Resource Fund Bill 2021 gives a worrying degree of power to the President which is not catered for in the existing law.

AMI’s Co-Director of Energy Practice, Arthur Deakin

In his latest commentary, Deakin wrote, “The proposed Natural Resource Fund legislation is concerning. Although the original law gave too much power to the Minister of Finance, the new law simply transfers those powers to the President.”
Deakin flagged the fact that the oil money will be controlled by a Board of the Directors with no less than three and no more than five members, all of whom would be appointed by the President. The analyst also raised concerns about the fact that government has done away with the 22-member Public Accountability and Oversight Committee and replaced it with a 13-member version, all of whom would be appointed by the President with no clear confirmation process.
To ensure proper accountability, the Co-Director said, members should be selected by non-political institutions. Either the private sector or multilateral organisations, and confirmed by the National Assembly. Overall, Deakin said the bill has moved towards less oversight, instead of more.
Over the past two weeks, Kaieteur News has been at the forefront of exposing several weaknesses of the Bill which include a noticeable absence of consequences for the misuse or abuse of the oil money that can be withdrawn for emergencies or green economy initiatives.
When Guyana had pursued the creation of its first NRF legislation back in 2018, it was warned to have clear penalties or the fund could run the risk of failing to serve current and future generations. This advice was provided by the Natural Resource Governance Institute (NRGI), which also cited numerous examples from around the world of how often Natural Resource Funds become easily mismanaged, and the perpetrators go unpunished.
The 1Malaysia Development Berhad (1MDB) fund, established in 2009, has proven to be a major source of alleged corruption and mismanagement. Designed to attract investment into Malaysia through joint ventures with foreign firms, 1MDB acquired over US$11 billion of debt by 2014. Among its more suspect transactions are a US$1 billion investment in a Saudi oil company in 2009 which has gone missing; funds that were diverted in 2012 from an Abu Dhabi state fund to a firm in the British Virgin Islands (a secrecy jurisdiction); and US$4 billion that has been misappropriated from Malaysian state firms. Malaysia, the US, Switzerland, Singapore and the UK are still trying to unravel the web of corruption and money laundering schemes that are related to the fund and robbed current and future generations of their wealth.
The Azerbaijani and Iranian funds are other examples of extra-budgetary funds, which have been used to fund the legacy projects of political parties instead of being prudently saved for future generations. In Azerbaijan, for instance, government authorities have used the State Oil Fund (SOFAZ) to directly finance strategic government projects, such as the railway between Azerbaijan, Georgia and Turkey. These expenditure items were not subject to the same reporting or public procurement requirements as those financed through the regular budget process, nor were they subject to as much parliamentary oversight.
In Iran, that country’s US$40 billion National Development Fund provided loans to private-sector companies, cooperatives and economic enterprises owned by non-governmental institutions through agent banks. While the fund managers did not provide information on the specific investments, news reports revealed where they actually went. Importantly, the executive directly controlled the fund and, therefore, some decisions bypassed normal budgetary and parliamentary procedures.
Taking the foregoing into account, among other cases of blatant mismanagement, Guyana was urged to have “clear consequences for malfeasance.”