Introduction
This week’s column considers those processes that are required for making the Buxton Proposal operational. It treats with the processes of economic appraisal, scheduling, executing, implementing, monitoring, periodic review and related sequences necessary for promoting an effective, cost efficient, transparent oil-for-cash transfers to all Guyanese households’ mechanism. Because these are complex and technical tasks, I start by quoting from the Buxton Proposal, when it was introduced. Then I had explicitly admitted:
“To be categoric, despite what others say, the Proposal is a policy proposal submitted [to the Authorities] to explore, evaluate, and operationalize [the hope is] the appropriate Government body will be directed to initiate with urgency, a Feasibility Study and Pilot Project based on the Proposal.
Before continuing, it would be remiss of me, if I did not acknowledge in this introduction that, this will be my first column on the Petroleum Road Map which will appear after First Oil has formally arrived for Guyana. Coincidentally, Exxon and partners have successfully dug their fifteenth well. As the series has asserted repeatedly, this is a truly transformational period in Guyana’s history. The thrust of the Buxton Proposal is to lay a “people-basis” for its realization.
Technical Challenges
To be frank, the Buxton Proposal is ultimately dependent on the level of political support it can garner. Despite their large numerical majority in Guyana, the asset and income poor, the vulnerable, the powerless, as well as those who are systemically denied access to opportunities from which to benefit from what Guyana offers, the narratives on development, oil, and Guyana’s future, are unrelentingly opposed to the re-ordering of prevailing national priorities, This re-ordering dynamic is embedded in the Buxton Proposal.
The Proposal also raises technical challenges. Indeed, worldwide experience with successful oil-for-cash schemes are founded on very high-level multi-disciplinary skills. All required skills are not available presently in Guyana. This means external recruitment by the Authorities of some of these skills. Guyana’s regular development partners, may or may not be in one way or another involved in finding and recruiting the skills needed to complement what the Authorities can recruit.
In the Proposal I have advocated for the University of Guyana and the Bureau of Statistics to form the core of the Working Group undertaking the Feasibility/Pilot Study of this proposed policy intervention to tackle Guyana’s high level of income poverty. To quote:
“In keeping with global experiences, The University of Guyana and the Guyana Bureau of Statistics should constitute the core of the technical/research Secretariat for the Feasibility/Pilot Study”.
Examples of the required skills-set are provided. These include all areas of social engineering, management, finance/accounting and logistics. A number of Government institutions/organizations will necessarily have to play significant roles in the evolution of a country-wide cash-transfers to households’ scheme. Indeed, because of the scope of coverage (all households) governmental bodies of one sort or another will inevitably become “points of contact” for the successful operation of the scheme. This reliance is not confined to one type of Governmental body, but the one that is appropriate, given the geographic location of households.
In particular though, the Guyana Revenue Authority will face big challenges as it has to rapidly secure and apply the correct tax status to every household member. A large swathe of these will be entering the tax code for the first time. In point of fact it might even be anticipated that, the Feasibility/Pilot Study, would consider the option of proposing the cash transfer benefit as a “taxable allowance against income”, thereby simplifying the sequence of receiving the cash transfer reporting it, and then paying taxes on it.
There are other similar issues, which it is hoped the Feasibility/Pilot Study would address. One worth mentioning here, is the range of practical problems arising from a robust and workable (operational) description of a household, with minimal ambiguity. Such a definition will have to withstand “legal challenges” given the sums involved.
Another, which I mentioned in last week’s column is at what point does the Proposal commence? I had recommended when Guyana’s daily rate of production, DROP, reaches (one million barrels of oil equivalent, boe. The maximum of US$5,000 annually, is reached at Full ramp-up of oil production, which is fixed at a DROP between 1.5 to 2.5 million boe. A DROP of 1 million is approximately two-thirds of a DROP of 1.5 million; so, the Proposal pays two-thirds of US$5,000 or US$3,333. Alternately it can operate so that given any DROP the Scheme starts from; the proportionate principle would apply.
There are additional concerns! Should the payment be annual, or can it be sub-divided into smaller periodic proposals. Relatedly also, when production plateaus and begins to decline should the payment “decline, Pari passu”. If yes to what minimum DROP?
I would recommend that, such issues are addressed in public consultation in order to benefit from the advice and guidance of stakeholders in the process.
To operate with fully-risked expectations, the best recommendation I can offer is the swift pursuit of the socio-economic appraisal of the Buxton Proposal. The aim is its completion within one year of First Oil, allowing for a commencement date in 2022. This I believe gives sufficient time for the Authorities to complete the recommended studies and prepare for start-up two years from now. This period gives households time to plan their way forward.
Conclusion
Readers should constantly keep to the forefront my recommendation that a Budget Constraint is placed on Government spending on the Buxton Proposal. That constraint is 10 percent of Government’s Take from petroleum earnings.
Next week I shall adduce some of the significant literature that has emerged over the past decade in support of the efficacy of cash transfers to households as among the most effective poverty intervention modalities developed thus far.
