USA, Guyana collaborate to ensure oil wealth does not land in private pockets

 By Abena Rockcliffe With promising indications that Guyana will soon become an oil producing country, the newly inaugurated government has begun talks with the United States of America (USA) with an aim to adopt the most suitable measures to secure the wealth that will be derived. This was made known by United States Embassy ChargÉ d´ Affaires, Bryan Hunt during a recent exclusive interview with Kaieteur News.

President David Granger

United States Embassy ChargÉ d´ Affaires, Bryan Hunt

Hunt explained that the USA wants to ensure that Guyana, “as a matter of priority,” becomes a candidate country for the Extracted Industries Transparency Initiative (EITI). The EITI is intended to ensure that all oil deals are transparent and the public is kept up to date with the wealth generated from such deals. Hunt told Kaieteur News that his country has had preliminary discussions with the Granger government on how Guyana might transparently manage the financial resources generated, not only from oil and gas  but from minerals and timber as well. The Envoy said that the new government as well as the previous government was spoken to about the “need” for Guyana to become a candidate country for the EITI. The EITI, as explained by Hunt, is the global goal standard by which governments can ensure that its country’s financial inflows from natural resources extractions are transparent to the public. “In this way everyone knows what you (government) are receiving, everyone knows the terms of the contract and then civil society can be able to hold the government accountable to make sure that those resources flow into the state coffers and not into private pockets. So getting Guyana into the EITI is something that needs to happen on a priority basis,” said Hunt. The US Envoy indicated that, in this regard, the Peoples Progressive Party/ Civic (PPP/C) administration had done some preliminary work with the Inter American Development Bank (IDB) “and some (work) with us.” He said that the USA is prepared to continue to work with Guyana through the current government to put together a submission to the EITI for candidacy. However, the ChargÉ d´ Affaires explained that the process for Guyana to become a candidate will be a very involved one as the country will have to demonstrate that it has adopted the right laws and the right stakeholder groups and so forth. “But we are going to work with them on a priority basis to move that ahead,” he said. Also, the USA is advocating for Guyana to establish a Sovereign Wealth Fund (SWF) which President David Granger has already signaled his intention to do. With regards to the SWF which President Granger spoke about establishing while he was in election campaign mode, Hunt said that the USA, as well as the broader International community, is supportive of this intention. The USA representative said that this is the goal standard, not for the transparency of the inflows like the EITI will provide, but for the transparency of the management of the outflows of cash from oil generated wealth. Hunt explained that with a SWF, all the revenue that is derived from whichever industries selected to be covered—weather oil, timber or gold—flows into this single fund. He said that instead of spending this money immediately, government can then use that money in a sustained way to ensure that there are enough funds to govern the country not just immediately but for the long term. Hunt noted that this fund comes in handy as the natural resources, which are always going to be finite, begin to run out. The Envoy explained that a SWF guarantees a predictable budget stream over a long term period. He noted as well that it also guards against the Dutch disease which is when the public sector inadvertently crowd out the private sector by dumping huge amounts of capital into the country. “So I think it is important, and President Granger has the right approach in the principle that Guyana  needs a sovereign wealth fund  and I think we will all from the international community, agree with that basic premise,” said Hunt. Hunt explained that all does not end with the agreement that Guyana needs such a fund, as the government now has to decide which structure will be used “because there is not one single model for a sovereign wealth fund, there are different models.” Hunt explained that the different models will have different rates of expenditure. Different models can hold money onshore or offshore. “Also sometimes you have multiple SWF; one for long term investment and one for short term growth. So there are a number of models that the government will need to consider.” Hunt said that he is quite sure that the International community is prepared to work with the Granger administration to help explore the various options “as there is not a so called right answer to this question. It’s a policy choice that the government will need to make in the best interest of the country.” He said that the US hopes that there will be public forums to ultimately decide on and adopt a model that “people believe will work best to ensure the long term sustainable management of resources here in Guyana.”