All parties contesting in the next general elections should declare their views on the oil and gas sector, including if they support the re-negotiating of the controversial contract signed between government and ExxonMobil and its partners in the Stabroek Block, says former presidential advisor Jan Mangal.
“I believe oil should be the top agenda item for all parties in the next elections,” Mangal wrote in a letter to this newspaper that was published last week.
“All political parties should explain their plans for oil and how to ensure Guyana benefits from oil. All political parties should explain their reasons for/against re-negotiating the contract with Exxon for the Stabroek Block. All political parties should explain their plans for investigating the highly suspicious awards of oil blocks in the run-up to the last election in 2015,” he stated as he listed several areas he believes needs addressing by aspiring policymakers.
Mangal’s letter was in response to attorney and A New and United Guyana co-founder Timothy Jonas, who put forward his views on how Guyana’s overwhelming unemployment problem could be tackled in a recent letter.
Jonas has stated that since the unemployed traditionally would have been employed in the sugar, rice, timber and mining industries as labourers, weeders, cutters, tractor operators, among others, he believes that “the best chance of employment opportunity within the reach of the authorities for this group continues to lie in areas of resource extraction and agriculture.”
“These are labour intensive industries, which can absorb an unskilled workforce, and do not need to rely on our existing fragile and unreliable electrical and transportation infrastructure,” he reasoned.
To create these jobs, Guyana needs new investors who can set up shop in the interior and extract resources without having to rely on our failing infrastructure, he said.
But to make this happen, Jonas said, the country’s “single largest requirement to attract foreign investors engaged in those industries” is to have a government that demonstrates that investors can be confident that it will keep its promises to them and not renege on contracts signed.
While Jonas did not make reference to the 2016 contract signed with ExxonMobil and partners, Mangal highlighted his assertion and said that he did not believe such a claim.
“Jonas claims that Guyana can only attract foreign investors if Guyana respects the sanctity of contracts, i.e. Guyana can only attract investors if Guyana does not re-negotiate the contract with Exxon. But I view this claim as incorrect. Contracts in the oil and gas industry are commonly re-negotiated as conditions change. The 1999 Exxon contract has already been re-negotiated in 2016, and it needs to be re-negotiated again,” Mangal said.
And although he did not explain what calculations he used or how his final figure was derived, Mangal said he believes that Guyana is losing some US$2.6 billion on the Liza 1 project alone.
“And Guyana will be losing more on the second project, Liza Phase 2, and even more on the third and subsequent projects. If Guyana does not get a fair deal now, this will jeopardise the sustainability of our new oil industry. Guyanese may react severely in the future once they see the value being forfeited. Just look at Venezuela next door,” he opined.
‘Long-term plan’
Mangal lauded Jonas for his bold stance in entering politics and stating what his policies and views are. However, he offered an alternative view to Jonas’ on tackling the unemployment problem, saying that Guyana will see investment opportunities to absorb unemployment numbers when its politicians and policies are transparent and the red tape and bureaucracies are eliminated, and when small and medium-scale companies starts flocking here knowing the opportunities are fair, and the country’s diaspora returns to invest.
He argued, “The best course for Guyana is to develop a long-term plan which addresses Guyana’s existing deficiencies, for Guyana to fix its existing failed political system, and for Guyana to focus on rooting out corruption. We should not use oil as a panacea for our ills. This will not work.”
He added, “The fact that large natural resource companies are attracted to our country is not a sign of investor confidence. Far from it, it might in fact be the opposite. Companies like Exxon thrive in chaos, and they are able to make huge profits in war zones. Just look at some African oil producing countries. Being able to attract Exxon to Guyana is not a sign that Guyana is open for business. Guyana will know it is open for business when small/medium regional companies and diaspora feel safe to open shop in Guyana, and when there is a level playing field. Guyana will know it is open for business when small/medium companies from Europe and the Americas know they can operate in Guyana without having to bribe some government officials for permits and when they are not vulnerable to shakedowns. Guyana will know it is open for business when visiting businesswomen know they do not have to meet with high level government officials, but instead can follow an efficient, transparent and respected process to set up a business. Guyana will know it is open for business when some government officials stop taking bribes to have meetings, and when some officers of the legal system stop accepting bribes to influence court decisions. So let us not be fooled that because Exxon and other natural resource companies are here, we are somehow suddenly open for business. There is much work still to be done to make Guyana attractive to real diverse sustainable investment.”
Mangal believes that while it is good that Guyana has oil resources and ExxonMobil has a contract to extract it, large multinationals stand to benefit most if the country is in turmoil.
“Remember these companies are able to thrive in chaos, and these companies will likely make even more money from our oil if Guyana falls apart (social unrest, militarisation, police state, etc). Some claim that multinational natural resource companies not only benefit from chaos, but that they sometimes encourage the degradation of democratic institutions so as to increase profit. Hence large multinational companies and their sovereign backers can benefit by keeping border problems alive. For example, they may demand a higher risk premium for investing in a country with a border problem,” he said.
Mangal said that Guyana should not focus on the extraction of natural resources in its interior since those industries rarely help countries develop in sustainable ways, and usually do serious and lasting damage to the environment.
“Guyana should instead focus on getting a fair deal for its oil (by re-negotiating the Exxon contract), and on using that revenue to develop the country and its infrastructure, and to spur other sectors such as agriculture, manufacturing, green tourism and research, etc,” he reasoned.
And where Jonas pointed to deceased Singapore Prime Minister Lee Kuan Yew, who credited his country’s growth and ability to thrive while its neighbours were in poverty to its honouring of contracts, Mangal said that Guyana lacks the expertise in negotiators and law-abiding qualities of that country. As a result, he suggested that what worked in Singapore would not be possible, at this time, here.
“Although it seems Singapore did in fact honour investor contracts, these were likely to be fair contracts negotiated by qualified bureaucrats, and not the lamentable form witnessed in Guyana with Exxon,” he said.
“But Singapore did not succeed in its project of nation building because of some blind adherence to respecting contracts with foreign investors. No, Singapore succeeded because of the rule of law, and because of a rules-based system for every aspect of the country’s business and its people’s lives. Singapore succeeded because it had long-term visions and stability via an authoritarian and somewhat benevolent leader, and because Singapore dealt with its racial issues with a strong hand (race became subservient to a higher goal, which was economics). Singapore succeeded because it invested huge sums in education,” he added.
He noted that that Jonas’ letter also raises the issue of the allegiance of local lawyers. “Many of Guyana’s best law firms are now working for oil companies or their contractors. This could pose a conundrum for some lawyers who may feel they have to choose between advocating for the best interests of their country folk versus advocating for the best interests of their clients, in instances where these interests might diverge,” he said.
Those attorneys entering politics, Mangal said, should also “declare their ties to oil and associated companies.”
