Oil booms result in bursts of economic growth, but this is often followed by a downturn that severely affects countries unprepared to mitigate the effects of falling prices. The head of the Guyana Oil and Gas Association (GOGA) says it is important that the South American country finds ways of dealing with this reality, since it often leads to “violent conflict, greater inequality, less democracy and more corruption.”
Speaking at the opening session of a two-day symposium on oil and gas in Guyana’s capital, Georgetown, on Thursday, President and CEO of GOGA, Bobby Gossai Jr. said the economic benefits oil production will bring to Guyana, if utilized wisely, has the potential to transform the country. “Our new and emerging sector has the opportunity to transform the full development of the cooperative republic. As such, it is crucial that we learn from the experience of others of how to not make the mistakes of the past and chart a new course of growth for a sector that should not be managed in the traditional way.”
Mr. Gossai’s call is the latest in a series of warnings from numerous officials, experts, private sector and other stakeholders over the past several months, on how Guyana’s oil wealth can translate to a major success story, or one of epic failure.
“The ‘resource curse’ literature describes a tendency for them (mineral-dependent states) not only to fail to harness their resources for national development, but even to be harmed by them in many cases,” he said, pointing out that the living conditions in most oil producers are close to, or below the average, for sub-Saharan African countries.
“Oil booms, promote bursts of temporary headline economic growth, followed by hangovers so deep that growth in the very long term is often lower than it would have been without the resource,” he emphasized.
The GOGA CEO said it is noteworthy that the poorer and weaker a country is before an oil discovery, the more likely it is to be harmed by it.
For a country that has been ranked as one of the poorest in the region, and in which, according to Transparency International, a high perception of corruption exists, the consensus is that Guyana must work extra hard to avoid the pitfalls of so many oil producing countries around the world. Mr. Gossai believes that if these issues are to be addressed effectively, a closer examination of what constitutes corruption must be made. “…instead of Transparency International’s definitions, we need definitions that capture the systemic aspects of corruption, and the processes involved.”
Oil production is set to begin in Guyana by mid-2020. The country is in a race against time to put all the necessary regulatory systems in place before that time reaches which has seen a number of consultants being hired by the Guyana government to advise on the way forward.