Latest update June 2nd, 2023 12:49 AM
Mar 21, 2023 News
…fears country could fall victim to ‘Dutch disease’
…lacks strong institutions to prevent oil corruption
Kaieteur News – University of the West Indies (UWI) lecturer and Jamaican economist, Dr. Damien King fears that Guyana could fall victim to the “resource-curse” citing that the country lacks strong institutions to prevent corruption.
Dr. King made those comments during an interview with Jamaican Observer, a daily newspaper published in Kingston, Jamaica. According to the article, King stated that even as Guyana moves deeper in developing its oil and gas finds, the country lacks strong institutions to prevent corruption.
The media entity reported that King is convinced that political parties will soon start to squabble over the spoils to the detriment of the country. “You mark my words, Guyana is going to go nowhere,” King told the Jamaica Observer, citing that the oil revenues could cause corruption to increase in the country and make it worse off than it was before accessing the wealth.
“It’s worth bearing in mind that very few countries in the world have grown from poverty to wealth, having done so on the basis of natural resources. Very, very few,” he continued, pointing out that oil-rich countries like “Venezuela is a basket case and Nigeria is a joke.”
“One of the reasons why there is this thing called a ‘resource curse’, why countries which have resources tend to do worse, is because not having resources forces a country to have good governance, because that’s the only way the Government and the elite can extract wealth. For them to extract wealth to run the Government, they have to create a wealth-creating environment,” he said using resource-poor Singapore and Switzerland as examples of countries which have become wealthy through good governance.
King continued by noting that in resource-poor countries, “The only way that the Government will have resources to function is to have an environment that creates the resources. When you have natural resources you don’t have to do that. [With natural resources] the Government then only becomes an institution to fight over the resources and extract it. And unless you have strong institutions to begin with, to put a constraint on the fight for spoils, it descends into corruption and violence because the spoils are so lucrative; it’s worth killing people to get into power. That’s what’s going to happen to Guyana because Guyana already has weak institutions.”
“It’s not even a radical view amongst political economists,” he continued. King added that because of his fears of the resource curse, he prays that oil is not discovered in Jamaica. “I would rue the day that Jamaica discovers oil for exactly that reason and Jamaica has stronger institutions than Guyana.”
Dr. King comment comes at a time when the Government of Guyana is pushing ExxonMobil Guyana to accelerate its exploration and production of the country’s oil and gas resources, all while knowing that the country has been operating with archaic petroleum laws.
Kaieteur News had reported that in December 2020, the Inter-American Development Bank (IDB) released a brief pointing out the glaring loopholes in Guyana’s legislative framework which essentially weakens the shield of protection that is needed for the oil sector.
Also, upon assuming office in August 2020, the PPP administration had promised an overhaul for Guyana’s petroleum laws. In fact, President Irfaan Ali during his inauguration address pledged to establish a Petroleum Commission to insulate the oil and gas sector from political interference. However, that has not been done and May 2023 will make eight years since Guyana is without an updated legislative and regulatory framework that is essential for the protection of the oil industry against mismanagement and corruption.
Notably, what the Government has done is implement a Natural Resource Fund (NRF) to manage the oil proceeds. The NRF legislation allows for a Board of Directors, an Investment Committee and a Public Accountability and Oversight Committee. However, most of the members appointed to the committees responsible for the management of the oil monies have either been appointed directly by the President or chosen by the National Assembly, where the President’s party has a majority.
Exxon’s affiliate Esso Exploration and Production Guyana Limited (EEPGL) is operator and holds 45 percent interest in Guyana’s lucrative Stabroek Block, which is 6.6 million acres and has 11 billion of proven barrels of oil. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Petroleum Guyana Limited holds 25 percent interest. Guyana signed onto a Production Sharing Agreement (PSA) with the oil major, which has been heavily criticised for being lopsided and benefiting the oil company more than the country.
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