Guyana must improve citizens’ spending and productive abilities for real oil development

May 08, 2022 News

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Kaieteur News
By Zena Henry
Apart from the strides being made by government in updating laws, improving planning systems and strengthening oversight, Guyana must proactively increase the productivity of its people, and encourage improved incomes to ensure true economic transformation from its newfound oil wealth.
This is the advice of Dr. Zainab Usman, who believes that primary focus should be placed on human capital development as a means of ensuring the successful economic development of the country through its oil endowments. Usman, a Senior Fellow and Director of the Africa Programme at the Carnegie Endowment for International Peace in Washington, D.C., is another international expert lending a voice to positively guide Guyana within its oil and gas fortunes.
In a discussion paper, Dr. Usman identified Guyana’s challenge in transforming its economy as a “political project” that should involve all members of society. She submitted that in addressing transformational challenges, Guyana must immediately outline urgent policy priorities which, she said would bring Guyana closer to achieving its aspiration.
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. She noted that “Policy orientation supporting structural economic transformation, therefore, should entail proactively tackling market failures of economic transformation. 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.”
As a result, pro-poor policies can also help to address market failures on the demand side, Usman pointed out. She said that social protection instruments can help individuals and households to increase incomes and consumption, strengthen their resilience to shocks and prevent destitution.
She added, “Guyana must prioritise sustained investments in social protection to increase resilience of informal enterprises to shocks that disrupt their incomes and wipe off their assets.”
As an example, Usman pointed to the Bolsa Familia social welfare programme in Brazil which gained global acclaim for helping to pull millions of people out of poverty by providing direct cash transfers to poor households. This programme was a form of state assistance where families who had to ensure their children attended school and had regular health checks, among other stipulations that allowed them to access the government contribution.
Guyana has a huge advantage here, Usman said, “By virtue of its small population and large volumes of oil revenues, it should be able to afford direct transfers of a portion of oil revenues to all citizens – a form of universal basic income.” Offering possible models, Usman pointed Guyana in the direction of Alberta in Canada and Norway, all of which have elaborate and generous social protection schemes.
On the supply-side, Usman said policies are needed that increase productivity of workers and firms. These include the provision of physical infrastructure such as electricity, transportation, and digital infrastructure; access to finance, closing the knowledge and technological gap among firms and workers, and institutional reform, all help to increase the output of workers and firms.
To tackle these market failures successfully, Guyana’s economy requires a capable government, Usman added. “Such a capable government supports and facilitates economic activity without being overbearing, designs and implements effective regulation and is responsive and dynamic to the changing global economy.”
These are the tasks undertaken by the civil service or the bureaucracy she continued. An ill-equipped and understaffed bureaucracy cannot take on the daunting tasks of addressing market failures in an era of a fourth industrial revolution [technology] and climate change. As such, “comprehensive civil service strengthening must be on the policy agenda including the prospect of tapping into Guyana’s large Diaspora.”
Dr. Usman highlighted that Guyana could draw from the experiences of peer countries in CARICOM, in South Asia and Africa – for instance, countries like Ghana and Nigeria, where they have implemented good policies regarding local content development and gas master plans.
Guyana has much to benefit given its small population size of some 800,000 people and Dr. Usman highlighted the great benefits Guyana will earn due to oil profit per capita. “In other words, Guyana is positioned to produce a lot of oil and earn a lot of revenues for each of its citizens,” she said, adding that currently, Guyana produces the equivalent of roughly 24 barrels per citizen every year.
When output gets to 750,000 barrel per day by 2025, this could be the equivalent of 238 barrels per citizen for the year, higher than all of the current top 10 oil producers. Ballpark estimates, she said, suggest that Guyana’s oil earnings per capita by 2025 could exceed those of the wealthy Gulf Cooperation Council (GCC) countries such as Qatar, Bahrain, Kuwait, Oman and the United Arab Emirates (UAE); Norway in Europe; as well as Gabon and Equatorial Guinea in Africa. Whether revenues remain hidden and aggravate sociopolitical problems depend on Guyana’s mechanisms for checks and balances. “Taking all these factors into consideration, Guyana’s large revenue windfall will have a decisive impact on its economy, institutions, and society,” Dr. Usman predicted.

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