Introduction
Last week’s introductory column dealt principally with the proximate origins of the present effort to re-address the Buxton Proposal. As indicated, the Proposal was first publicly introduced three years ago, on Emancipation Day, August 2018. As pointed out last week, the original Proposal was somewhat refined during 2019. Furthermore, it was yet further addressed in my Sunday column series, carried under the rubric of the Guyana Petroleum Road Map. To recall briefly the Road Map considered at great length the getting and spending of Government of Guyana (GoG) Oil Revenue Take, going forward.
Today’s column shifts focus as it highlights the main components and features of the Buxton Proposal as originally conceived. Based on past experiences, this appears to be the best sequence to follow, when attempting a clear formulation of the Buxton Proposal that is aimed at a non-specialist audience.
Main Features/Components
To aid the easy grasp of its scope, I offer in this Section ten (10) key components or features of the Proposal. These are listed serially below and described. Readers should keep in mind that each listed feature is interdependent and operates synergistically with all others. By this I mean simply that, each feature reinforces the impact of the others, thereby resulting de facto in their combined effect (as a whole) being greater than the simple sum of the effects of their individual components and/features!
The 10 Features/Components
By choice, I begin with a narrow definition of the Buxton Proposal. It is essentially a call for direct, regular (annual), predictable, and time-bound payments, to be provided to all Guyanese households (HHs) out of the country’s oil revenues subject to the provisions that follow. In other words, the transfer is provided directly by the GoG out of oil revenues as specified below. Regularity and predictability are similarly specified below. Time-bound is specified by the daily rate of oil production or DROP (of barrels of oil equivalent (boe)).
Cash Transfers, CTs, provided through the GoG from oil wealth to citizens are both implicitly and explicitly conditional transfers. This is so because they are designed a) to support HHs’ accumulation of human, financial and productive assets, and b) to protect HHs from low and fluctuating incomes/consumption. Lack of such “support” together with “low/fluctuating incomes/consumption” are two major drivers of income poverty in Guyana.
Under current law, all such CTs, which are provided by government to HHs, constitute income received by these HHs. As such, these transfers must be reported to the Guyana Revenue Authority, GRA. One implicit/explicit outcome of GoG CTs therefore, is to bring all income-receiving HHs from the Proposal into the national tax system. This is noted here as the first conditionality of cash transfers.
Furthermore, these CTs are not expected to be paid in cash (notes). This would be exceedingly cumbersome. Instead, banks/other financial and commercial firms are expected to make such transfers/credits at the direction and instruction of the GoG. These several means of payment create a second conditionality. That is, all income-receiving HHs, must become part of Guyana’s formal financial system. This creates the need for an e-identity to receive cash transfers.
And, the third conditionality is that since CTs go to all HHs, such transfers are, by definition, race/ethnic neutral! This is perhaps the most important conditionality. It avoids contention along ethnic/ racial lines
Taken together features 3 and 4 listed above, create conditions favourable for forming a platform to establish the widely discussed need for the digital transformation as well as effective digitization of Guyanese society.
The above considerations, also by necessity require that, GoG CTs are coordinated into other Government poverty interventions. This is clearly facilitated the greater the digitization of the policy interventions network.
The Buxton Proposal CTs targets, at its peak, is an annual payment of US$5,000 (1.05 mln G$) for each HH. The Buxton Proposal kicks in fully, at the peak target level. This peak level is defined as when, and only when, the daily rate of production of crude oil, DROP, is at full ramp-up. Full ramp-up according to my Petroleum Metrics (Part 5), requires a DROP of between 1.5 to 2.5 million barrels of oil equivalent, mboed. However, CTs can commence when the Government determines and pro-rates to the full ramp-up DROP, target. Thus, a DROP of 500,000 boed would yield 0.33 of the target level of US$5,000 (1.05 mln G$).
With approximately 210,000 HHs, the estimated annual cost at full ramp-up is US$1.05 bln. To ensure affordability, the total annual budget for the Buxton Proposal is subject to the additional binding constraint or cap of a maximum of 10 percent of Government Take.
Of further note, as we shall indicate, the Petroleum metrics as revealed by Rystad Energy and Wood Mackenzie (the two leading petroleum research firms) are currently projecting an estimated DROP for Guyana of 0.8 million boed in their models for post-2025. These models however, only take into account projected DROP from Exxon and partners in the offshore Stabroek Block. The two firms ignore all other oil blocks and suppliers! To quote:
“The total estimated government income from Stabroek Block alone is 120 billion US dollars in real terms.”
The petroleum metrics related to the Buxton Proposal constitutes Part 5 of this document. I utterly reject those naysayers; many of who, are on the written record, for calculating how Guyana will not ever earn 300 mln USD per annum from petroleum sales!
Conclusion
Next week I continue with this task of re-visiting the Buxton Proposal
