…First ‘solid draft’ legislation by April
Minister of Finance, Winston Jordan has assured that the much anticipated establishment of a Sovereign Wealth Fund (SWF) will be in place before the first barrel of oil is drawn from commercial oil exploration in 2020.
SWFs are quite common around the world for a variety of reasons. In Guyana’s case, a SWF is being established for the first time, and will be used solely to hold revenues from the newly discovered oil reserves. ExxonMobil is poised to become Guyana’s first commercial oil producer in 2020, hence, the importance of the SWF.
There are expressed views that the establishment of the fund is taking too long, especially given the newest revelation that Exxon provided Government with a U.S. $18 million signing bonus which was never acknowledged by Government, although many questions were asked by the media.
At the conclusion of a four-day workshop yesterday spearheaded by Dr. Daniel Wilde, the Commonwealth’s Economic Advisor for Natural Resources, Oceans and Natural Resources Division, Jordan assured that the fund will be in place soon.
“There is a lot of talk in the press about Sovereign Wealth Fund. A lot of it good, some of it misguided, and some of it intended more to scare than to educate people. In fact, you get the impression as if the absence of a sovereign wealth fund, even today, means something crooked is going on, or something is being cooked, so to speak,” the Minister stated.
He added, “You can’t open an account and keep zero balance and effectively you haven’t earned a cent yet from the oil revenue. So trying to put a wealth fund in place today, where nothing is going into it, wouldn’t hold in any commercial bank.”
Government has looked closely at Uganda’s legislative framework and crafted preliminary legislation which has been reviewed by the Inter-American Development Bank (IDB), the International Monetary Fund (IMF), the Commonwealth, the United States and United Kingdom.
Over the past four days, Wilde has been consulting with local state agencies on the preliminary legislation.
According to Jordan, he has received Cabinet approval for the fund to be used for three specific purposes – intergenerational saving, stabilization of the fund (given the fickle nature of oil prices) and infrastructural development.
The Finance Minister shared the vision of utilizing funds from oil to push the Government’s green economy agenda.
“For things to go beyond slogans you have to have money. We’d love to have a green agenda, but you have to have money to promote that green agenda and implement it. The oil revenues offer us a significant opportunity for us to go green, and so rather than just shouting just going green, we can make it a reality in the shortest possible time,” Minister Jordan stated.
Minister of Natural Resources, Raphael Trotman also spoke at the closing of the workshop and pointed out that Government will have public consultations on the sovereign wealth fund, similar to what was undertaken with the Petroleum Commission legislation.
“Both will be well in place before the first barrel of oil is poured, and I think that will be a signal achievement for this Government, so we wouldn’t be struggling to put things in place after oil is produced or just before,” Trotman stated.
He also pointed out that the SWF legislation will adhere to the ‘Santiago Principles’ which are the accepted practices voluntarily endorsed by members of the International Forum of Sovereign Wealth Funds to promote transparency, good governance, accountability and prudent investment practices.
Wilde noted that the Government is setting up a SWF early in the process, and that many countries have had substantial production for many years without a SWF.
“The fact that the government here has had foresight to look into the long term and put the law and institutions and the fiscal rules in place well before commercial production, really should be commended,” Wilde stated.
He concluded that Guyana now has a very solid draft that will substantially achieve the three main objectives set out by Government.
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