Dear Editor,
Over the past year, Guyana’s big find has been hard to miss. Fox News carried the story ‘Dreams of wealth, fears of problems as Guyana finds oil’ (September 16); Christopher Helman from Forbes Magazine wrote, “With second big oil discovery, Exxon puts Guyana on the map’ (June 30); Joe Carroll from Bloomberg carried a similar story titled, ‘Exxon’s Guyana Discovery may be twice as large as thought’ (June 30), and the Guyana Chronicle reported on July 1, “More oil … Exxon reports 1.4 Billion barrels of oil find”. I can’t help but scream, “We are rich!”
But, after reading all these articles and taking some time to digest the sheer scale of the numbers, one has to sit and put the potential of this in perspective. Guyana, ranked among the most corrupt in Transparency International’s (TI) latest Corruption Perceptions Index (CPI) with a rank of 119 and a score of 29, has the potential to implode upon tapping this wealth basket. Our past and present governments have constantly been in the bright lights for alleged corrupt dealings and this can have an enormous impact on how we trend with the entire oil situation. Apart from that, being a renewable engineer/chemist, I am not at all happy at the prospects of Guyana becoming an oil state, but I am not so naïve as to think anything, at this time, can completely replace oil and gas in the transportation and electricity sectors. Replacing oil will take time, something a few nations (Sweden, Denmark, and Germany) have successfully pioneered after years of research and planning.
A few famous economists and political scientists, inclusive of Jeffrey Sachs, Michael Ross, Erwin Bulte, and Paul Collier, have spent decades elucidating the factors contributing to the negative association between natural resources and growth, in cross-country cases. After immersing oneself in these materials, there can be one conclusion, the presence of abundant resources, such as oil or precious metals and minerals, leads to corruption and rent-seeking behaviour, significantly degrading the transparency of the sitting government. The simple logic is that when a sitting government earns ‘rent’ from a natural resource, it hinders the development of representative and inclusive politics by the removal of appropriate tax collection. In other words, when a regime earns top dollars from these resources, they tend to tax the populace less heavily, which can lead to complacency and lack of objectivity when examining the actions of the regime. This finding is supported by extremely low Transparency International Corruption Perception Indices for Nigeria, Libya, Sudan, Venezuela, Yemen, etc.
Paul Collier, in his book, The Bottom Billion, carefully analysed the factors that continue to stifle the economies of the most impoverished nations in the world. One of the main determining factors is that of the resource curse. According to the author, nations faced with the imminence of riches from resources are faced with many more problems than solutions. In fact, in the 1970-1980s, economists came up with an explanation known as the ‘Dutch disease’, after observing the crippling effects of the North Sea gas discovery on the Dutch economy. In simple terms, this disease causes the currency of the country under focus to rapidly increase in value against other currencies (given the Guyana dollar’s low value, this is inevitable with an oil boom), rendering the other primary sector exports uncompetitive. In Guyana’s case, what would happen to the market value of agro-processing commodities, the rice industry, or even the sugar we export? One such scenario occurred in the 1970s in Nigeria, when the oil revenues built up, the agricultural sector (peanuts and cocoa) crumbled immediately because they became unprofitable. This had the indirect effect of slowing the economy because farmers were displaced, lands were converted to housing, and after the oil crisis, all these activities ceased, resulting in a colossal collapse of the Nigerian economy.
According to Carbonnier et al, in a piece written for The Centre on Conflict, Development, and Peacebuilding, titled, there is a greater need for strengthening checks-and-balance mechanisms instead of solely focusing on community-development programmes. In effect, their findings highlighted why some nations were able to transform their economies into strong middle working classes (eg, Chile, South Africa, Malaysia) and others remained poor, or in some instances, became poorer (eg, Niger, Democratic Republic of Congo) prior to the discovery of oil. These findings highlight Guyana’s susceptibility to failure because of corrupt practices. Guyana cannot withstand another decade of failure. Under the past regime we were enticed by projects geared towards political brainwash (Skeldon mega factory, Amaila Falls hydropower, and the Enmore sugar packaging facility) and now, the present regime has been accused of being arrogant, secretive, and visionless when it comes to the revenue and well-being of the people.
In conclusion, Guyana has found oil, we are positioned to benefit from this resource in the near future, but we have to proceed carefully and take all factors into account before evolving into the next Nigeria. For that not to happen, the government should be less fixated on winning the upcoming election and invest in professionally assessed projects, which can potentially bring long-term prosperity to the people. This is very important because resource rich countries are not only accused of underinvesting but are in many cases guilty of investing in projects with little return, leaving the burden on the taxpayers with numerous white elephant projects.
Yours faithfully,
Michael George
