With the overall control of revenues from oil and other natural resources to be placed in the hands of the Finance Minister, a 22-member Public Accountability and Oversight Committee has been proposed to ensure the transparent spending of the funds.
This is according to the government’s 12-part Natural Resource Fund Bill 2018, which was published in the Official Gazette last Thursday.
The proposed legislation is critical as it seeks to ensure that there is proper management of revenues generated from natural resources, inclusive of petroleum, and that the present and future generations benefit.
It is expected to be introduced in the National Assembly shortly.
In Part II, the bill provides for the establishment of a Natural Resources Fund (NRF) to manage natural resource wealth in an effective and efficient manner by (a) ensuring that volatility in natural resource revenues do not lead to volatile public spending; (b) ensuring the revenues do not lead to a loss of economic competitiveness; (c) fairly transferring the wealth across generations to ensure that future generations benefit from it; and (d) using the wealth to finance national development priorities, including green economy initiatives.
Section 3(3) states that the NRF shall be a public fund to be held in the name of the Bank of Guyana on behalf of the government and the people. Section 4 specifically caters for the NRF to be “managed according to the principles of good governance, including transparency and accountability, and international best practices, including the Santiago Principles.”
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Further to this, Part III of the bill caters for the accountability and oversight committee, which is to be responsible for monitoring and evaluating the compliance of the government and other relevant persons with the provisions of the Act; monitoring and evaluating whether the Fund has been managed in accordance with the principles of transparency, good governance and international best practices, including the Santiago Principles; providing independent assessment of the management of the Fund and utilisation of withdrawals; and facilitating public consultations on the management of and withdrawals from the fund.
The bill provides at Section 7 for the committee, which will be appointed by the president, to be comprised of persons nominated by consortiums of civil society organisations and community-based organisations, the Bar Associations of Guyana, Guyana Consumers’ Association, the Guyana Extractive Industries Transparency Initiative, Transparency Institute of Guyana Inc, the Guyana Press Association, the trade unions, the Institute of Chartered Accountants of Guyana, the Private Sector Commission, each of the ten administrative regions and the governing council of the University of Guyana. Among the membership will be persons representing women and the youth.
Members of Parliament, an employee of the Finance Ministry, an employee or owner of an organisation engaged by the Minister or Governor of the Bank of Guyana to assist with the management of the Fund, a member of the Investment Committee established under the bill and persons who are insolvent or have been declared bankrupt, are among those who would be ineligible for membership.
According to Part IV of the bill, the minister shall be responsible for the “overall” management of the fund as well as the preparation of the Investment Mandate and in doing so will seek the advice of the Investment Committee, be assisted by the Senior Investment Advisor and Analyst and enter into an operational agreement with the Bank for the operational management of the fund.
With regards to the Investment Committee, the Bill proposes that it shall be comprised of six persons: the Chairperson, who will be nominated by the Minister; nominees of the minister, of the Leader of the Opposition and the Guyana Association of Bankers along with two ex officio non-voting members—the senior investment advisor and analyst and a nominee of the Governor of the Bank of Guyana.
These persons must have at least ten years’ experience and expertise in financial investments and financial portfolio management and a minimum Master’s Degree in finance or economics or an equivalent professional qualification. They will all be appointed for a term of four years and could be reappointed for one more term.
Included on the list of persons who would be ineligible to serve are persons who due to personal or family interests and investments have a conflict of interest. Persons with a criminal past, Ministers of Members of parliament are also listed as being ineligible.
The Minister, according to the bill, will be responsible for the termination of the appointment of a committee member.
Operational manager
It is being proposed that the Bank be responsible for the operational management of the NRF in accordance with the Investment Mandate and the operational agreement. The operational agreement shall state the fee charged by the Bank for the management service, the liability for paying damages to government for losses that occur due to negligence or intent on the part of the Bank or private managers in managing the fund and all other matters required for the effective operational management of the fund.
The bill says the Bank shall also establish risk management arrangements and all necessary internal management systems for the operational management of the fund.
In August this year, government unveiled its green paper which laid out stringent fiscal rules for the management of the Fund.
The opposition People’s Progressive Party Civic (PPP/C) had expressed concern that the Bank will be the operational manager of the fund. “We don’t want politicians to manage this money. This fund has to be independently and technically managed and this is not by politicians and stored by Central Bank. We have a problem with that model and it departs radically from best practices, such as Norway’s and others, where they have an independent group that manages this,” opposition leader Bharrat Jagdeo had told a press conference when he learned of the Bank’s role in the process.
“So even the model for this will present a lot of problems because [Finance Minister Winston] Jordan can call the Central Bank and get monies whenever he wants it or bully people…,” he added.
The bill also states that the Macroeconomic Committee will be responsible for advising the minister on the Economically Sustainable Amount. The membership shall be comprised of a representative of the Ministry who would be the Chairperson, a nominee of the Leader of the Opposition, a representative of the bank, a nominee of the Private Sector Commission and a leading international expert in macroeconomics “identified and approved by cabinet.”
These persons must have ten years’ experience in applied macroeconomic and be holders of at least a master’s degree in economics or a related field, the bill states.
According to Part V, which deals with ‘Deposits and Withdrawals,’ petroleum revenues shall be “directly” paid into a bank account denominated in United States dollars and held by the Bank as part of the fund.
These revenues, it explains, shall include revenue from royalties, whether paid in cash or kind and payable by the holder of a petroleum licence, the government’s share of profit received under the terms of a production sharing agreement or other agreement; any income tax or corporate income tax levied on the profits of companies or individuals undertaking production operations; any property tax levied on the net property of companies or individuals undertaking production operations; any petroleum income tax, additional profits tax or any future tax levied on the profits of companies or individuals undertaking production operations; any signature bonus, discovery bonus, production bonus or other bonus related to production operations or the award of a petroleum licence; and any other current or future fiscal instrument levied solely or mainly on companies or individuals involved in production operations.
The bill states revenue garnered from government’s participation in production operations through a national oil company shall also be included in the NRF.
Additionally, it says the minister may deposit excess mining and forestry revenues into the fund.
It also sets out the determination of withdrawal amounts and the process associated with parliamentary approval for withdrawals.
The Public Accounts Committee will be responsible for determining a code of conduct to govern the members of the accountability and oversight committee while the Minister is delegated with that responsibility for the members of the Investment Committee and the Macroeconomic Committee.
