– Bill strengthens transparency and oversight
December 17, 2021– The Ministry of Finance has taken note of recent pronouncements made, particularly in a page 1 comment as well as an article carried in the 17 December 2021 edition of Stabroek News, both of which can only be described misguided, hypocritical, and disingenuous.
The comment and article astonishingly express concern about the fact that the Government will be able to choose all of the members of the Board of Directors of the Natural Resource Fund. In doing so, the article conveniently chooses to ignore the fact that the previous NRF Act, which was rammed down the throats of the Guyanese people by the APNU/AFC dictatorship after they had already lost the no- confidence motion, did not even make provision for a Board of Directors. Instead, in the absence of any provision for a Board of Directors, the APNU/AFC model for the NRF was a one-man autocratic show comprising the Minister of Finance as the sole and all-powerful authority, exercising full and absolute control over the Fund.
Under the APNU/AFC model, the omnipotent Minister had exclusive power for the overall management of the Fund, including preparation and approval of its Investment Mandate, preparation of the operational agreement with the Bank of Guyana, as well as determination of the economically sustainable amount and the fiscally sustainable amount that can be withdrawn from the Fund. Bizarrely, the authors of the SN page 1 comment and article do not appear to have any difficulties with this ministerial autocracy that was established by the APNU/AFC under their NRF model, but they astonishingly have a difficulty with the PPP/C model that removes the Minister of Finance from that one-man show and introduces a Board that includes private sector representation as well as a nominee of the National Assembly.
In like manner, the comment also insinuates negativity around the withdrawal rule proposed by the PPP/C’s Bill, without taking account of the ironic fact that, at least under the PPP/C withdrawal rule the author of the SN article is able to calculate how much will be transferred, whereas under the APNU/AFC withdrawal rule the world is in the dark as to exactly how much will be withdrawn. Indeed, until the omnipotent APNU/AFC Minister decides in his sole judgement what the economically and fiscally sustainable amount will be, the entire world will be kept guessing as to what the amount to be withdrawn in any year will be.
The Ministry hereby emphasise that one of the major differences between the NRF Act 2019 and NRF Bill 2021 is that government, by removing the excessive powers of the Minister in the new Bill presented, allows for management of the Fund by the Board of Directors, a Board which will be responsible for reviewing and approving the policies of the Fund and monitoring its performance, thereby completely separating the management of the Fund from the Minister responsible for Finance. In the NRF Act 2019 these functions were the responsibility of the Finance Minister. The Ministry therefore fails to see how Stabroek News could presumptuously conclude that the key policy matters would be exclusively in the purview of the PPP/C administration.
In addition, the Directors of the Board as stipulated under Part III of the proposed Bill (Governance and Management of the Fund) “shall be selected from among persons who have wide experience and ability in legal, financial business or administrative matters, one of whom shall be nominated by the National Assembly and one of whom shall be a representative of the private sector.” The Ministry of Finance is baffled as to why the newspaper would conclude once more that the government chooses all members of the NRF Board and worse yet, how does the media house conclude that matters would be ‘exclusively in the purview of the PPP/C administration and its allies in the private sector and elsewhere.”
Another erroneous statement made by the Stabroek News in its report is that “The Board of Directors would replace the 22-member Committee in the APNU/AFC version of the NRF which was assented to by former President David Granger”.
In actuality, the 22-member Public Accountability and Oversight Committee has been replaced by a 9-member Committee which will include as stipulated in the NRF Bill 2021, and which will include a nominee of the National Assembly; three representatives of the religious community; two representatives of the private sector; two representatives of organized labour; and one representative of the professions. The proposed 9-member composition of this committee is more practical, realistic, administratively more efficient, and would provide non-governmental oversight of the fund. In comparison, the APNU/AFC 22 member committee was designed to be cumbersome and non-functional.
The NRF Bill 2021 will allow for greater accountability and transparency in the management of Guyana’s oil resources, as amendments in the proposed legislation state that the Minister could face up to ten years imprisonment if he fails to disclose the receipt of any petroleum revenue received by Government in the Official Gazette within three months of receipt of such monies. This would avoid situations like in the past where an US$18 million Signing Bonus was illegally diverted out of the consolidated fund.
The spirit and letter of NRF Bill 2021 promotes prudent management of our natural resource wealth for the benefit of both present and future generations. The proposed bill sets ceilings on withdrawals from the fund in every year except the first, specifically to secure savings for the future. However, the immediate need for sound and transformative investments in order to advantageously position our economy to ensure that the benefits from the oil and gas sector redounds towards the wider economy and all Guyanese. The solitary exception of the first year of the life of the fund takes into account the pressing development needs which must be financed, and instead of turning to the more costly option of borrowing from creditors, we can utilize our own resources for the betterment of our people.
Additionally, the mechanism to withdraw funds outlined in the NRF Bill 2021 removes the complexities and hinderances to achieving the Fund’s objectives by providing a simpler, more transparent formula for calculating the ceiling on annual withdrawals. Recall that the NRF Act 2019 was the subject of criticism from many subject matter experts, including the Inter-American Development Bank (IDB) in its publication entitled “Economic Institutions for a Resilient Caribbean” which includes a detailed assessment of Guyana’s NRF (pages 271). Amongst the observations made by that assessment were that “The formula for the maximum permissible withdrawal is among the most complex operational rules for a resource fund in the world. Its design departs from good practices”. (p. 271)