Latest update March 29th, 2024 12:59 AM
Aug 17, 2018 Letters
Dear Editor,
To date, there have been numerous significant finds of oil reserves within our Maritime boundaries. With first oil proposed within the first half of 2020, the need for legislation for and the establishment of a Sovereign Wealth Fund becomes ever more portentous. The focus now is not on the details of such finds but rather the disbursement of the potential financial gains that are to be received from the refinery processes.
Our current regime has set in motion a number of legal and administrative procedures to execute these processes, one of which includes the formulation of a Sovereign Fund. For clarity, a Sovereign Wealth Fund (SWF) is a state-owned investment fund investing in real and financial assets whereas in Guyana’s case, it’s oil. This fund is expected to be used for the development of various sectors of our local economy; general infrastructure and resources; more specifically our local Agricultural and Natural Resources sectors. But what about our Human Resources Sector?
Before we get to that, let’s have an understanding of SWFs. Firstly, SWFs are in existence for over a century. Their first uses were to the benefit of school attendees at different levels of learning. This more localised to the North until 1953 when Kuwait as a sovereign state established the Kuwait Investment Authority (KIA). Kuwait’s fund has a current estimated value of US$600 billion.
There are numerous nations around the world with SWFs that have acquired significant economic growth and development from the proceeds of oil. These oil giants such as Norway, Abu Dhabi, Kuwait, Saudi Arabia and China all have well established and stable Sovereign Funds. Many of these countries have already approached Guyana and a few have signed MoUs with our government. They offer years of experience and alliances in a variety of sectors that range from data management to infrastructural development, to models of financial management. But what is a SWF used for?
Before we, or rather our elected government develop strategic plans and procedures for the use of the fund, a model must first be decided upon. There are two basic models. However, SWFs can be tailored to its purpose or use but they are still built on two specific models. Therefore, I ask, should our government eventualise the Stabilisation Model or the Savings Model? This must be decided upon and made public with detailed explanations why and how the model will be used.
Whichever model chosen, great consideration must be given to the current and future needs of our people; whether it be socio-economic or socio-political needs. When we take the ‘Green Economy’ concept of the APNU/AFC government’s manifesto into consideration we must also deliberate on the socio-cultural factors. Stemming from this, we or rather our government can model a sustainable SWF that supports a general ideal of our country as a whole. The Stabilisation model can be used to reduce our economic instability whilst a Savings model appropriates revenues for the future. Norway as an oil giant utilises the Savings model and through its procedures have seen significant development especially in the education and environmental sectors. However, we have seen the failure of this model with our neighbour Venezuela. If our administrators are to model a SWF that encompasses rivaling challenges and failure, they need to be more responsive to countries that have strong functioning SWFs.
The government of Norway owns and utilises a two part functioning fund known as The Government Pension Fund of Norway. Its subs are, The Government Pension Fund Global and The Government Pension Fund Norway. These funds operate independently with separate processes, investments and ultimate goals. They focus primarily on stabilizing the country’s’ economy whilst providing adequate savings to offset future financial woes. Let us not forget our current border controversy, which can foretell future woes. Therefore, it’s within our leaders’ interest to also develop a fund that economically supports strategic approaches such as violent conflicts.
International laws generally aid the sustainability of effectively managed SWFs. Hence, it can be influential for our leaders to design local legislations that foster international support. On the other hand, SWFs can be used to stimulate military and paramilitary forces with adequate resources to effectively ward off or defend our country from foreign and domestic threats. Therefore, a well thought out and effectively designed SWF is vital to the actualisation of the purpose and use of the revenues of our emerging oil industry.
A. Sepaul
THIS IDIOT TELLING GUYANA WE HAVE NO SAY IN THE 50% PROFIT SHARING AGREEMENT WE HAVE WITH EXXON.
Mar 29, 2024
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