Avoid plugging oil revenue into manufacturing; invest in education, health and infrastructure instead – Consultant urges

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The recently released Green Paper on Guyana’s Natural Resources Fund has put in place a sturdy policy foundation for the management of the South American country’s oil revenues. This is the view of a consultant at the Natural Resource Governance Institute (NRGI), Andrew Bauer.

The Green Paper was laid in the National Assembly for consideration on August 8, 2018. It is designed to stimulate discussion and presents key issues for consideration regarding legislation to be enacted in relation to Guyana’s national patrimony. It also makes proposals for the management of oil revenues.

Bauer, speaking at a public discussion in Georgetown on Wednesday facilitated by the Guyana Press Association with the support of Conservation International, said he recognizes that the Government of Guyana is doing its best to avoid the mistakes made by other countries. He said the strongest elements of the Green Paper are the multi-layer accountability structure.

“Essentially, the way it works is that Parliament is the ultimate authority. The manager of the fund is the Ministry of Finance and they say where the money will be invested, the Central Bank is the Operational Manager and they are the ones that do the trading in stocks and bonds and then, they hire external managers.”

He noted that part of the strength of the paper is that the Government is taking these issues that have to do with accountability and transparency very seriously.

Looking at infrastructure development, he underscored that, “In an ideal setting, you would go around the country and identify which are the biggest roadblocks to growth and what are the things that are holding people back from having jobs and then you make a priority list.”

Additionally, he said oil revenues should be used to improve sectors such as education and health as it will result in tremendous long-term benefits for generations to come.

He also cautioned against investments in the manufacturing sector.

Bauer said, “In most oil-rich countries you cannot develop a manufacturing sector because your exchange rate is too high or too appreciated so the key is to put your money into education and the right type of infrastructures because you don’t want to end up like Azerbaijan…where the money is either wasted or even leads to violent conflict.”

The Consultant has expertise in the areas of public financial management; natural resource regulation and taxation; state-owned enterprise and sovereign wealth fund governance; local government finance and intergovernmental transfers; economic development and industrial policy; accountability mechanisms; lobbying and advocacy

The Natural Resource Governance Institute is an independent international organization in New York and it has offices around the world. It works with countries to help them realize the benefits of wealth generated from oil, gas, and minerals.