Norway invested millions in economic infrastructure before creating oil account for savings

Feb 07, 2022 News

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– “Why should it be any different for us…?”- Min. Ramson

By Kiana Wilburg

Kaieteur News – Norway, one of the world’s most prosperous oil exporting nations, is often proffered as a striking success story new oil producers like Guyana should pay attention to.

One key lesson Guyana is often advised to keep its eyes focused on is how to save its oil earnings. Thanks to prudent saving, Norway has amassed an oil fund that totals US$1.4 trillion dollars.
But another key lesson this Scandinavian country teaches is the importance of making investments in economic infrastructure early on. Highlighting this rarely known and discussed point was Minister of Culture, Youth and Sport, Charles Ramson Jnr.
During his blistering contribution to the recently concluded budget 2022 debates last week, the politician schooled members of the political opposition on the basis for which the PPP/C administration has chosen to make prudent investments that strengthen the nation’s infrastructure stock.
Citing Norway, Ramson said this nation had discovered hydrocarbons in 1969 but started producing in 1971. He was keen to note however that a Sovereign Wealth Fund was not established until 1990. Minister Ramson asserted that the Kingdom of Norway did not make its first transfer to such a fund until 1996. Prior to that, Ramson who holds a Master’s degree in Oil and Gas Enterprise Management from the University of Aberdeen, noted that Norway made prudent investments in economic infrastructure which included schools, hospitals, buildings, roads and bridges.
“So, why should it be any different for us here in Guyana where we have a weakness in our public infrastructure stock in the country?” the Minister asked.
In addition to closing the infrastructural gaps, Ramson posited that the use of the oil proceeds which would first be transferred from the Natural Resources Fund to the Consolidated Fund, would reduce the nation’s reliance on loans while keeping the debt-to-GDP ratio at sustainable levels.
Speaking with Kaieteur News recently on the foregoing perspective, Minister Ramson also contended that like Norway, Guyana ought to spend its initial oil revenues “on building up public infrastructure to expand economic activity so that it sustains recurrent revenue.”
Further to the lesson of Norway, Ramson explained, “…when Norway found oil, it was a poor country in Europe but they used their oil revenues to help transform the country to the point where it no longer made sense for them to make further investments into public infrastructure, in building more hospitals or schools, their return on public expenditure had reached a point of diminishing returns…”
Minister Ramson added, “The point though is that investment in infrastructure allows us to be more time efficient…that is where we are going to get our biggest return…”
Since the discovery of oil, several international bodies have urged Guyana to use a portion of its oil funds to improve the infrastructural gaps, which have hindered development for years. They have insisted that the country must do this while improving its systems for monitoring transfers and expenditure in a transparent and accountable manner.
The World Bank Group for example had completed and published a report in 2020 called: A Pivotal Moment for Guyana: Realizing the Opportunities, its first Systematic Country Diagnostic (SCD) for Guyana.
The SCD—which is an assessment of the constraints a country faces and the opportunities it can take to accelerate progress—recommended that large-scale investments in education and health, along with infrastructure, are needed to increase the opportunities for Guyanese people, including: full coverage of basic services like improved water and sanitation, roads and other forms of infrastructure, electricity, primary and secondary education, healthcare, and financial services. The report by the World Bank Group said such full coverage of essential health, infrastructure, and education services are needed to address the country’s geographic disparities.
Once again, this is a similar approach, which Norway took before creating a Sovereign Wealth Fund. (https://documents1.worldbank.org/curated/en/691761607528494981/pdf/A-Pivotal-Moment-for-Guyana-Realizing-the-Opportunities-Systematic-Country-Diagnostic.pdf).
In a similar report, the Inter-American Development Bank (IDB) also made several similar recommendations to address challenges that affect Guyana’s economic development. In a report titled Development Challenges in Guyana, the IDB categorically stated that better electricity generation and distribution is critical to sustain growth and economic diversification while adding that improved transport links between the coastal areas and the interior and between the country and the rest of the world will be key to sustaining growth. The IDB stressed that both public and private sector monies should be leveraged to address infrastructure bottlenecks. It suggested that a portion of the oil money should be used for this purpose. (https://publications.iadb.org/publications/english/document/Development-Challenges-in-Guyana.pdf)

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