The “Roop” Column
Guyana Resources - A Christmas Blessing or Scrooge Curse
Peter R. Ramsaroop, MBA
One of my young advisors, JC Bollers, the grand nephew of the late Sir Harold Bollers, recently completed his academic paper on Guyana Resources . In our discussions I thought it was appropriate to share with the public his thoughts and our discussions on the issue of Guyana Resources. This is the season when we reflect on the year and why the average citizen has not progressed from last year and for some, they have gone backwards given the economic environment we are faced with. I would ask that you keep this column for future reference as we get closer to oil:
For as long as I can remember, I've always asked myself how our country can have so much natural wealth but still be poor? Guyana is suffering from what academics call the 'resource curse' . This happens when a country's economy becomes too dependent on primary exports like oil and sugar, sugar in our case. It's more likely to happen in a country with institutions that lack transparency and caring leadership for all.
A resource state's incentives are to keep the handful of export producers happy. In this situation, voters and the private sector commonly find themselves subject to a government that isn't as accountable to them as it is to the sugar or oil company. When commodity prices fall, the economy falters and lacks a private sector strong enough to pick up the slack. Normal economic growth needs a healthy private sector, which requires predictable enforcement of laws, contracts, property rights and an open economy. This is often absent in a resource state.
A functioning democracy requires that the government be dependent on the electorate for tax revenue . The government produces accountability in exchange for this. This accountability creates trust and legitimacy. It is absent, though, when a government gets enough of its funding from resource rents. In this situation, various groups fight for their 'fair share' of the resource rents at the government level. When the resource wealth gets distributed according to politics, that's when widespread ethnic conflict and political instability take place.
UK journalist Nicholas Shaxson says: " If citizens had the oil money in the first place, and the state had to bargain with them to get its cut, it seems likely that would change the game entirely."
Maclean's Magazine of Canada has said that Guyana may be able to eventually match Kuwait's annual oil production of 500 million Barrels . However , if only one tenth of that amount is produced and royalties are 55 percent, at US$100.00 per barrel, that means an average annual payment of roughly $US3600.00 per person or $US300.00 a month.
Do you want that HUGE AMOUNT to go to the government?
For the future, I STRONGLY recommend the following:
• Amend our constitution to state that ALL natural resources belong to Guyana 's citizens .
• Let each Guyanese choose at which bank to have their royalties deposited.
• Have CGX (or any extractor) publicly state each payment and pay it directly to the banks.
• Tax only withdrawals of principal to encourage saving and investment.
• Allow banks to issue credit to citizens based on all types of income.
• Enjoy an economy bursting with energy, life, HOPE and PROSPERITY for ALL.
“The people may get lazy,” you say. Is that worse than government using all the money to selectively bless others with laziness?
”Well people may waste the money,” you say again. Does the government have the monopoly on being wasteful? People spend according to their priorities. Governments spend money on what is politically expedient. We should be asking if people are more wasteful than the government.
“Well what about infrastructure?” The government will get REVENUES through taxation . That should be enough to build infrastructure and buy some accountability. That would be a very merry Christmas indeed for ALL.
Our Best Wishes for a Merry Christmas with a Healthy and Prosperous 2008.