Op Ed: Guyana’s blueprint for oil windfall

May 01, 2022 News

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By Kiana Wilburg

Kaieteur News – The hydrocarbon industry is a very complex one. Even with the right systems in place, many countries have failed to maximise earnings transparently, thereby proving that structural economic transformation is not an automatic guarantee.
Even so, it is still not a reason for one to lose hope. In fact, achieving a successful oil-led development in Guyana is an attainable ideal, says Dr. Zainab Usman, a Senior Fellow and Director of the Africa Programme at the Carnegie Endowment for International Peace in Washington, D.C.
Drawing on the successful cases of the United Kingdom, Australia, Norway and the Netherlands, Dr. Usman posits in one of her analytical reviews that Guyana can forge a path for greatness.
To do this, Dr. Usman posited that Guyana must learn how to accurately diagnose its central development challenge and aspiration. Simply put, we must ask ourselves, what kind of oil nation we want to be and what are the obstacles in our pathway.
Dr. Usman said this should be an endeavour that is contextual to the country’s history, culture and endowment structure and should entail an inclusive process that incorporates perspectives from academia, business, civil society, politics and technocracy.
After accurately diagnosing what the development challenges are, Dr. Usman said Guyana’s second objective must be to frame this as a “Political Project of National Survival.”
The expert said her recommendation is premised on the fact that this has been an essential feature of the successful cases cited in oil and gas. They ensure economic transformation is framed and treated in the society as a political project of national survival. She explained that the aim of this political project would be to create a stable political economy, generate shared prosperity, and build a country resilient to external aggression and geopolitical shocks, rather than just aiming to ‘build a strong economy’ or achieve ‘industrialisation’ as an end in itself.
Another pillar of importance, she said, is the stabilisation of political competition to underpin not undermine this political project. In this regard, Dr. Usman explained that the stabilisation of political competition (elections, party system, intergovernmental relations, etc.) is essential to avoid situations where large revenue windfalls distort politics towards violent competition to capture the oil and gas rents at the expense of longer-term objectives. She said, stabilisation is crucial to resolving the collective action problems that plague efforts at long-term development and institution-building especially in culturally heterogenous societies with Nigeria being a prime example where electoral transitions are highly volatile and destabilising to the country’s policy agenda.
The co-editor of the book, The Future of Work in Africa: Harnessing the Potential of Digital Technologies said, “Guyana’s political actors, groups and organisations must negotiate a stable balance of power that allow for the periodic peaceful transfer of power, that can therefore resolve the collective action problems needed to pursue the political project of economic diversification.”
Her next lesson for Guyana to heed pertains to the creation of a shared vision for the oil resources. Dr. Usman said there needs to be a shared vision for how Guyana’s economy can be best positioned to work for all Guyanese. According to Dr. Usman, developing this shared vision is critical to addressing the deep structural challenges of the economy such as a weak manufacturing and industrial base, regional disparities, lack of specialised workforce skills, small population density in hinterland regions and high rates of emigration.
Dr. Usman, who has also consulted for Oxford University and the Office of the National Security Adviser (ONSA) in Nigeria, said economic policies must be proactively focused on long-term structural economic transformation rather than a short-term stabilisation or revenue management orientation that continuously reacts to the oil industry’s boom and bust cycle.
Finally, Dr. Usman said Guyana must outline the most crucial policy priorities to be used by the oil funds. In this regard, she said, “A stable distribution of power with a shared vision for Guyana’s economy should allow for a policy orientation that is not only focused on narrow revenue maximisation and management objectives but a bigger vision of supporting economic transformation…In addition to coordinating Guyana’s resource endowments, it should proactively tackle the market failures of economic transformation.”
Dr. Usman said these market failures include the supply-side constraints on the productivity of firms and workers and the demand-side constraints on people’s incomes and their capacity to consume goods and services.
To successfully tackle these market failures in Guyana’s economy requires a capable government. The Senior Fellow said such a capable government supports and facilitates economic activity without being overbearing, designs and implements effective regulation, is responsive and dynamic to the changing global economy.
The industry expert asserted that these are the tasks undertaken by the civil service or the bureaucracy. She warned that an ill-equipped and understaffed bureaucracy cannot take on the daunting tasks of addressing market failures in an era of a fourth industrial revolution and climate change.
Additionally, she said comprehensive civil service strengthening must be on the policy agenda including the prospect of tapping into Guyana’s large Diaspora.
Overall, Dr. Usman warned Guyana to not let the universal difficulty of maintaining a long-term planning horizon for the oil sector by no means induce complacency.
To ensure Guyana has economic transformation that is perhaps on the same scale of the elite successes of the industry, Dr. Usman in conclusion urged that there be an accurate diagnosis of Guyana’s development challenge, that the authorities frame the development challenge as a political project of national survival; that efforts be made to insulate the oil windfall from unhealthy political competition; and create a shared vision for development.
With such a blueprint, there is no reason for Guyana to not ensure sustainable growth and prosperity for current and future generations.

 

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