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On January 23rd 2019, the previous administration passed the Natural Resource Fund Act that established the Natural Resource Fund (NRF) to invest Guyana’s windfall from its oil and gas and mining industries. The NRF’s objective is to help stabilise the Guyanese economy from economic shocks, finance national development priorities and provide savings for the nation’s posterity.
The current administration has drafted a new piece of legislation, the Natural Resource Bill 2021, which seeks to eviscerate good governance and remove independent oversight from the Natural Resource Fund (NRF) as provided under the current Natural Resource Fund Act 2019, so that the government could easily take up to US$1.7 billion annually from the Guyanese people’s fund.
Public Accountability & Oversight Committee:
Essential to the governance structure of the Natural Resource Fund under the Act, is the 22 member Public Accountability & Oversight Committee (PAOC). The PAOC is an independent committee that is appointed by the President and whose membership is nominated by a broad-based segment of Guyanese society, consisting of representatives from:
- The ten Regional Democratic Councils
- A consortium of civil-society and community-based organisations
- A consortium of Women’s civil-society and community-based organisations
- A consortium of youth civil-society and community-based organisations
- The Transparency Institute of Guyana
- The Bar Association of Guyana
- The Guyana Consumers Association
- The Guyana Extractive Industries Transparency Initiative
- The Guyana Press Association
- The most representative associations of trade unions
- The Institute of Chartered Accountants of Guyana
- The Private Sector Commission
- The University of Guyana
The law mandates the PAOC to establish a code of conduct to govern its members and the PAOC shall publish the code on Parliament’s website. This self-imposed code of conduct speaks to the autonomy of the committee.
Under Section 6 of the Natural Resource Fund Act 2019, the Public Accountability & Oversight Committee’s role is to:
- Monitor and evaluate the compliance of the Government and other relevant persons with the provisions of the Act
- Monitor and evaluate whether the Fund has been managed in accordance with the principles of transparency, good governance and international best practices including the Santiago Principles
- Provide independent assessment of the management of the Fund and utilisation of withdrawals from the Fund
- Facilitate public consultations on the management of the Fund and utilisation of withdrawals from the Fund.
Below is the current Governance Structure in The Natural Resource Fund Act 2019
The Dismantling of The Public Accountability and Oversight Committee
Under the proposed the Natural Resource Fund Bill 2021, the government wants to strip the Public Accountability & Oversight Committee (PAOC) of all its authority to prevent independent accountability and oversight in the operations of The Natural Resource Fund. The government wants to take away authority from this independent committee and place it in the hands of a politically handpicked Board of Directors. Under the new Bill, the new role of the PAOC will be relegated to:
- Receiving quarterly reports from the Board of Directors on the operations of the Fund
- Meeting at least quarterly with the Board of Directors of the Fund to be briefed on the operations of the Fund
Moreover, in the Natural Resource Fund Bill 2021, the Finance Minister shall determine a code of conduct to govern the PAOC and the Finance Minister will publish the code on the Finance Ministry’s website. This dictate by the Finance Minister makes the PAOC dependent upon the Finance Ministry to determine how to conduct its affairs.
In the Natural Resource Fund Bill 2021, the composition of the PAOC is completely reshaped. Instead of having the broad-based 22 member representatives of the Guyanese society, the PAOC will be truncated to a nine-person committee. In fact, there will be little transparency in the appointment of the PAOC. This removes accountability and participation from the society as was required by the original National Resource Fund Act 2019. The proposed PAOC will consists of:
- One representative from the National Assembly
- Three representatives of the religious community
- Two representatives of the private sector
- Two representatives of organised labour
- One representative of the professions
Board of Directors:
In the Bill, the government wants to create a three-to-five person Board of Directors, with a nominee from the National Assembly and the private sector, respectively. The President will select the rest of the members and appoint all members onto the board, including the Chairman. The Board of Directors will:
- Manage the of the Fund
- Review and approve the policies of the Fund
- Monitor the performance of the Fund
- Ensure compliance with the approved policies of the Fund
- Exercise general oversight of all aspects of the operations of the Fund
- Ensure that the Fund is managed in compliance with all applicable laws
- Prepare the Investment Mandate
- Seek advice from the Investment Committee with regards to the preparing and amending the Investment Mandate
- Be assisted by the Senior Investment Advisor and Analyst
- Enter into an operational agreement with The Bank of Guyana for the operational management of the Fund
Below is the proposed governance structure under Natural Resource Fund Bill 2021
The proposed Bill is an attack on good governance. The public will no longer be consulted and provide oversight on the operations of the Natural Resource Fund and Guyana’s oil money. There will be no independent oversight and accountability. The government will control everything.
The destruction of the Sustainable Amount:
Under the Natural Resource Fund Act 2019, the maximum amount that can be withdrawn from the National Resource Fund is the lesser of the Economically Sustainable Amount and the Fiscally Sustainable Amount.
The Economically Sustainable Amount is the maximum amount that can be withdrawn from the NRF without adversely impacting the nation’s economy. While the Fiscally Sustainable Amount ensures that the government considers the impact of the level of nation’s oil production, the price of oil, the nation’s non-petroleum revenues and the NRF’s assets under management (AUM) will have on the NRF’s objective.
The Macroeconomic Committee was created to determine the Economically Sustainable Amount. The Finance Minister appoints the five members of Macroeconomic Committee. Committee members are nominated by the Finance Minister, the Private Sector Commission, the Leader of the Opposition, Cabinet, and the Bank of Guyana. The Macroeconomic Committee’s role is to:
- Analyse how past and future spending from withdrawals from the Fund would affect the economy’s competitiveness
- Recommend to the Finance Ministry an Economically Sustainable Amount that can be withdrawn from the fund while maintaining or bolstering the strength of the nation’s economy
Specifically, this committee is tasked to analyse how spending from the fund would impact:
- The exchange rates
- The balance of payments
- Economic growth, especially in the manufacturing and agriculture sectors
- Composition of public spending
- The stability in public spending
- Public Debt
- Other relevant macroeconomic indicators
Under the new Bill, the government wants to get rid of the Macroeconomic Committee. There will be no requirement to determine how spending from the Natural Resource Fund will impact the economy. In addition, the government has stricken out the Fiscally Sustainable Amount requirement and, in its place, has used an arbitrary approach to determine the maximum amount to withdraw from the Natural Resource Fund. Under the Natural Resource Fund Bill 2021, the government will determine the maximum withdrawal amount ranging from 100% of the first US$500 million paid into the Fund in the preceding fiscal year to 3% of any amount exceeding US$2.5 billion paid into the Fund in the preceding fiscal year.
For instance, if US$2.5 billion is paid into the fund in a fiscal year, the government can withdraw up to US$1.5 billion or up to 60% of the amount paid into the Natural Resource Fund. Not included in this withdrawal amount are funds that can be used for emergency purposes such as natural disasters.
The Natural Resource Fund (NRF) is the Guyanese people’s fund; therefore, all Guyanese have a vested invest in ensuring that the NRF is governed and operated with the highest international standards and accountability. The livelihood of our children and grandchildren depends upon it. This land belongs to all of us, and we must ensure that we benefit from all its resources. We the people must do everything within our power to make sure that we protect what rightfully belongs to us.
Rennie Parris, BBA, MSc, CFA