Bringing the benefits of resource revenues directly to the people

May 29, 2019 Letters

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DEAR EDITOR,

Consider this: by 2025 Guyana will likely be producing one barrel of oil per day per citizen. Ghana currently produces three barrels per citizen per year. By 2025 revenues to the government, just from Liza 1 and 2, are estimated to reach over US$1B.
Statistics aside, it is hard to convince a people who have only known grinding poverty in a country that was once the second poorest in the Western hemisphere, that oil is set to transform their fortunes. And even as the realisation of this resource windfall has dawned on some citizens, many have warned how the government will squander its share of revenues and that the people will not benefit directly from the industry.
It is difficult to see how the first concern will come about. Previous and current governments have shown a decidedly limited capacity to execute even the existing public sector investment projects, something Finance Minister Winston Jordan has publicly bemoaned.
If one takes the example of the new Demerara Bridge, it is clear that even when there is an indisputable need for a major infrastructure project, and that through private public partnerships, funding is available, the government is moving far too slowly. A lot of this is due to an understandable caution to get the big projects right.
The Cheddi Jagan International Airport is a cautionary example of how rushing into such large projects without even a basic feasibility study ended up squandering valuable taxpayer revenues on a huge pile of sand and a subpar facility that will very soon be unable to accommodate passenger numbers.
So due to the sheer lack of human, institutional and technical capacity to handle major projects, the money from oil will come pouring in, but it will take many years for the people to see the kinds of tangible benefits such as better education, healthcare or public transportation. Far from being squandered, the far more likely danger is that the funds will simply pile up in the Natural Resource Fund, unspent.
However there are short term options after First Oil that can make a difference and are quite simple to implement. These include reductions on VAT on a wider range of household necessities and a substantial increase in the income tax threshold, both of which would see more money in the pockets of the working class immediately.
And in the medium term, direct cash transfers to poor households could go a long way in alleviating poverty. Since Professor Clive Thomas raised this topic it has been severely criticised. Much of that criticism has come not from the people it would help, but from the elite and business class, who seem to have insights into how working class people would behave once given a regular monthly stipend.
This is based on class prejudice and neo liberal views that poor people are to blame for their poverty. None of it is based on any socio-economic data. Fortunately, several countries have implemented cash transfer programmes, and while they are not without problems, they have had tangible impacts on the citizens who are a part of them. Studies have shown that those households who receive cash transfers consume greater quantities of protein and produce; their children have higher attendance rates at school and are in better health.
In addition, such programmes inject money directly into local economies, since poor people tend to spend a large proportion of such payments, and spend it within their communities. And having the safety net of a reliable monthly income can encourage people to pursue higher education, build homes or open small businesses. In other words to prosper, to dream of a better life.
Cash transfers would also have the effect of encouraging all citizens to take a keen interest in the management and regulation of the country’s oil sector. Is the country getting its fair share? Are the oil companies being held to account by the government?
So, yes, it is time we start having a thoughtful discussion about cash transfers. There are obstacles to such programmes, such as who will qualify and who won’t. What might be the optimum monthly payment? How might a system be set up that can be efficiently, transparently and cheaply administered? This is where technology can help greatly. But these are all issues, countries that have implemented such programmes have addressed in their efforts to bring the benefits of resource revenues directly to the people.
One hopes there is the political will and vision to see that while Guyana might become on paper one of the richest nations in the world, how we care about the poorest among us will be the true test of our country’s greatness.
Yours sincerely
Albert Russell

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