Feb 15, 2021 News
– Guyana should steer clear of same
Kaieteur News –Arthur Deakin, analyst at Americas Market Intelligence (AMI), an intelligence and research firm, has cautioned Guyana to ensure that “mismanagement and political cronyism” are absent from the regulation of the Natural Resource Fund (NRF) — or what is commonly known as the Oil Fund.
In one of his recent publications titled ‘Fundamental Lessons for Guyana’s Sovereign Wealth Fund’, Deakin referenced countries that Guyana should take lessons from in avoiding the poor regulation of funds.
In turning to a country that mismanaged its NRF, Deakin referenced Angola. He recalled that this South African nation, with nearly eight billion proven crude reserves and a top 20 global oil producer, is seeking to reclaim $5 billion in stolen funds and has resorted to an austere $4.5 billion IMF programme to rebalance its financial standing.
“The fund suffered from mismanagement and institutional corruption,” Deakin wrote, “in which the country’s leaders used political patronage to spend uncontrollably and excessively.”
In contrast, the analyst pointed to Norway, which owns the largest sovereign wealth fund with US$1.3 trillion in revenues, has showcased how to effectively spend and grow its oil-based revenues. He said that through its annual contributions, the fund now provides Norway with about a quarter of its annual government budget, while also weighing in that it is also worth three times the country’s annual GDP, safeguarding wealth for future generations.
Against this Deakin explained, “The success of the fund is based on its upstanding transparency and governance, in which several different entities and committees check and balance their respective management roles. The stability of the fund, reflected by having only three CEOs in 25 years, allows for investment continuity and operational efficiencies. Norway’s strong democracy and institutions also serve as a backbone to the fund’s success.”
He heeded that although Guyana’s Central Bank will also be in charge of operating its respective fund, Guyana’s ingrained culture of corruption makes the Central Bank more “susceptible to political coercion and interference.”
It is against these fundamental points that Deakin pointed out that Guyana’s NRF Act should implement the best transparency practices adopted in Norway, while avoiding the politically-tied shortfalls experienced in Angola.
“The announcement that the Office of the President will have oversight over the Ministry of Finance and Natural resources is not an encouraging sign. It is essential to have independent accountability of the funds—not more political involvement. Although the original NRF Act established a decent framework, it needs fine-tuning and proper implementation to succeed. Guyana must do all it can to avoid an Angola-like situation,” Deakin cautioned.
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