A country’s natural resources, such as oil, gas, metals and minerals, belong to its citizens. Extraction of these resources can lead to economic growth and social development. However, poor natural resource governance has often led to corruption and conflict. More openness and public scrutiny of how wealth from a country’s extractive sector is used and managed is necessary to ensure that natural resources benefit all.
EITI 2016 Progress Report
Last week’s article was the second in our discussion of the actions that need to be taken to bring about an improvement in Guyana’s score and ranking on the Corruption Perceptions Index (CPI). It will be recalled that for last year, our performance on the CPI, with a score of 40, was lowest for the English-speaking Caribbean and the second lowest from among the CARICOM countries. We were also ranked 85th among 180 countries surveyed.
So far, we have discussed the following actions that need to be taken:
(a) Strengthen local democracy by holding Local Government elections, the deadline for which
has so far been overrun by 16 months;
(b) Improve the operations of the Special Organsed
Crime Unit in support of the Anti-Money
Laundering and Countering of the Financing of
Terrorism Act, in the light of significant
deficiencies highlighted in the last National
Risk Assessment Report;
(c) Reactivate the now disbanded State Assets
Recovery Agency to secure compliance with a
key requirement of the United Nations
Convention Against Corruption relating to the
freezing, seizure and confiscation of property
derived from the proceeds of crime and other
illicit activities; and
(d) Improve the functioning of both the Public
Procurement Commission and the Integrity
Commission to secure full compliance with the
constitutional and/or legislative provisions.
In today’s article, we conclude our discussion on the subject.
Extractive Industries Transparency Initiative
Guyana’s natural resources belong to all of its citizens, both present and future, and should be exploited to ensure that they enjoy the maximum benefit. A strong and effective legislative and/or regulatory framework, consistent with international standards, is a prerequisite to ensuring good governance practices, including transparency and proper accountability, in the extractive sector.
The Extractive Industries Transparency Initiative (EITI) is a global standard for the good governance of oil, gas and mineral resources. The Standard outlines 12 principles that provide the cornerstone of the Initiative, as well as the requirements that EITI implementing countries are expected to follow. These include: (i) how licences/contracts are awarded and recorded; (ii) who are the beneficial owners of those licences/contracts; (iii) what fiscal and other legal arrangements are in place; (iv) how much is produced and how much is paid to governments; and (v) where the revenue is allocated and its contributions to the economy, including employment. EITI member countries are required to publish a detailed annual report disclosing information in relation to these requirements.
In October 2017, Guyana was admitted to the membership of EITI. The first two annual reports highlighted significant deficiencies and instances of non-compliance with the requirements of the EITI Standard. These have led the Independent Administrator to conclude that he was unable to determine that all significant contributions made by extractive entity to the revenues of Guyana were included in the report.
The 2019 report made it clear that continued inaction on some of the recommendations previously made: (i) stymies progress in meeting the requirements of the EITI Standard; (ii) impedes preventative actions to correct and address discrepancies between declarations by government agencies and the extractive entities; (iii) adversely affects the data quality and comprehensiveness of the disclosures, which may reduce the public’s confidence in the report’s data; and (iv) compromises the fundamental purpose of EITI open data as a tool for government to improve policy making and sector management.
Guyana has now been suspended from the membership of the EITI for its failure to prepare and publish its 2020 annual report which was due last year-end. The delay is reportedly due to disagreement between the newly appointed National Coordinator and the Multi-Stakeholders Group (comprising representatives from government, industry and civil society) over the terms of reference for the Independent Administrator. The deadline has since been reportedly extended to 31 July 2023. We urge the Authorities to take all necessary measures to restore Guyana’s membership to the EITI.
EITI implementing countries must undergo a quality assurance mechanism, called Validation, at least every three years to assess progress towards meeting the EITI Standard and in promoting dialogue and learning at the country level. The results of Guyana’s first EITI Validation are summarised at Table I:
The EITI Board expressed concern over the low score on the outcomes and impact component which reflected ‘an ad hoc approach to outreach and dissemination, failure to follow-up on EITI recommendations to deliver reforms and insufficient attention to the annual review of outcomes and impact’. The next Validation is due in April 2024, and it is expected that by then corrective actions will be taken in the 20 areas identified. The Board has warned that the failure to so may result in temporary suspension. See https://eiti.org/board-decision/2022-20.
Petroleum Commission
In May 2017, the Petroleum Commission Bill was presented to the National Assembly, providing for the establishment of a Petroleum Commission ‘to monitor and regulate the efficient, safe, effective and environmentally responsible exploration, development and production of petroleum in Guyana’. Specific functions include:
(a) Monitoring and ensuring compliance with national policies, laws and agreements relating to petroleum operations;
(b) Ensuring compliance with health, safety and environmental standards in petroleum operations in cooperation with other government agencies;
(c) Promoting local content and local participation in petroleum activities;
(d) Participating in the measurement of petroleum to allow for estimation and assessment of royalty and profit oil and gas due to the State;
(e) Providing necessary information to the relevant authority for the collection of taxes and fees from petroleum operations;
(f) Assessing tail-end production and cessation of petroleum activities, and decommissioning plans; and
(g) Undertaking research into optimum methods of exploring for, exploiting and utilizing petroleum and petroleum products of Guyana.
The Bill was referred to a Special Select Committee for detailed scrutiny. Regrettably, to date there has been no further development, raising important questions about seriousness of the present Administration to have in place a comprehensive legislative framework for the oversight of the operations of the petroleum sector. We urge the Authorities to take urgent measures to have the Petroleum Commission in place.
Natural Resource Fund Act
The Natural Resource Fund (NRF) Act 2021 was passed in the Assembly on 29 December 2021 without debate, after a chaotic scene erupted as Opposition Members of Parliament vehemently opposed the Bill being considered without its referral to a Special Select Committee. The following day, the President assented to the Bill while the Minister of Finance signed the commencement Order the next day to bring the Act into operation. The speed at which all aspects of the Act were executed was clear evidence that the Authorities were determined not to entertain any detailed scrutiny of the Bill.
The main issue of contention was the repealing of the predecessor legislation of 2019 and replacing it with what many believe to be a lesser form of legislation that removes several safeguards against the abuse over the oil revenues accruing to the nation. Several civil society organisations and individuals had expressed similar concerns. In the repealed legislation, there was provision for the establishment of a macroeconomic committee to advise on the maximum “economically sustainable amount” that can be withdrawn from the Fund, taking into account past spending from the Fund; potential impact of future spending on Guyana’s competitiveness; economic growth, especially in agriculture and manufacturing; and assessment of macroeconomic variables such as inflation, exchange rate, balance of payments and public debt.
That provision has now been replaced with a schedule of annual withdrawals from the Fund, thereby dispensing with the need for the exercise of professional judgment by a team of independent experts in advising on the amounts to be withdrawn. We urge that the Authorities to reconsider this and other matters of concern and take the necessary steps to amend the Act.
Whistleblower protection
As a signatory to the Inter-American Convention Against Corruption, Guyana is required to create, maintain and strengthen the system to protect public servants and private citizens who in good faith report acts of corruption to the relevant authorities. However, it took 22 years for legislation in the form of the Protected Disclosures Act 2018 to be passed to give effect to this important provision so vitally necessary in the fight against mismanagement, corruption and unethical behaviour. To compound matters, after more than four years, the Act is yet to be operationalized via the issuance of the relevant Order by the Minister of Legal Affairs.
The failure to offer legal protection for whistleblowers acting in good faith and in the public interest, will only deter persons having information about the abuse and misuse of authority, from coming forward and make disclosures to the appropriate authorities, for fear of discriminatory action taken against them. We have already had two recently recorded cases where disciplinary action was taken against whistleblowers. We call on the Minister to sign the Order to operationalize the Act.
Access to information
Access to information on government programmes and activities is a fundamental right of all citizens. It is an essential element of every system of democracy and facilitates transparency and accountability, indeed good governance practices. In November 2006, draft legislation on access to information was presented in the Assembly. It, however, languished there for five years, and it was not until June 2011 that a new version was presented. This new version was passed in the Assembly on 15 September 2011 and assented to by the President on 27 September 2011.
As of March 2013, the Act had not been brought into operation. The Advisor on Governance had contended that the delay was due to difficulties in finding a Commissioner, budgetary constraints and lack of information on government websites. Faced with criticisms from the United States Government, the Organisation of American States, the International Press Institute, and Transparency Institute Guyana Inc. for failure to operationalize the Act, the then President issued the relevant Order on 10 July 2013. Five days later on 15 July 2013, he appointed a two-term former Attorney General to the position of Commissioner.
The Commissioner is to act as a clearing house for processing requests. It is unclear why our legislators opted for this centralized model as opposed to a decentralized one whereby individuals and organisations can approach government agencies directly instead of the Commission-er. By the time the information is made available, its relevance for decision-making and other purposes may very well be lost. In Jamaica and Trinidad & Tobago, for example, the legislation on access to information does not provide for a Commissioner of Information; and it is the responsibility of individual government agencies to make available relevant information to the public and to respond to requests for information.
A key requirement of the Act is the preparation and submission of an annual report to the Assembly setting out, among others, the number of requests made to the Commissioner and how they have been dealt with. However, to date, no such report was tabled. In the circumstances, the effectiveness of the legislation governing access to information on government programmes and activities could not be determined.
Financial independence of constitutional agencies
The FMA (Amendment) Act 2015 was passed, the purpose of which was to establish the financial independence of constitutional entities by providing for lump sum payments to be made to these entities. In this way, the entities were freed ‘from the automatic obligations of Budgetary Agencies and the discretionary powers exercised by the Minister of Finance over Budgetary Agencies, which obligations compromise their independence which they are intended to have as contemplated by the Constitu-tion’. The amendments were therefore a genuine attempt to give effect to the constitutional requirements relating to the financial independence of constitutional agencies, as discussed in previous articles.
Regrettably, FMA (Amendment) Act 2021 reversed the above provisions, resulting in constitutional agencies once again in effect becoming budget agencies.
Legislative audit
We have argued on several occasions that the Audit Office needs to intensify efforts to undertake more performance audits to ascertain whether value for money is obtained for sums expended on government programmes and activities. For too long, the focus has been accountability for inputs, and if a thorough review is carried out of these programmes and activities, it could be that in many cases large sums were expended but there is little to show in terms of the achievement of objectives and the related outputs, outcomes and impacts.
Ministries/Departments/Regions are to maintain an effective internal audit capability, an area that is somewhat neglected especially in some of the larger Ministries and Departments. A review of the reports of the Auditor General over the years indicates a significant number of findings are in the nature of internal audit findings, resulting in the reports being unwieldy and cumbersome in content. If budget agencies could get their act together to have strong and effective internal audit services, this would free up the resources of the Audit Office to undertake more performance audits. The Ministry of Finance Internal Audit Service could then consolidate the reports of individual Ministries and Departments and present it to the Assembly for detailed consideration by the Public Accounts Committee (PAC). This suggestion will require an amendment to the FMA Act.
Work of the PAC
Much has already said of the work of the PAC and need not detain us. Suffice it to state that the effectiveness of the work of the Committee is to a large extent dependent on the timely examination of the public accounts as well as other accounts referred to it for detailed scrutiny; and the imposition of sanctions against public officials found culpable for the mismanagement and abuse of public resources. Recent developments, however, do not augur well for the functioning of the PAC. The Commit-tee needs to set aside political partisan interests and work genuinely in favour of the national interest.
Conclusion
Despite political wrangling over the years, Guyana has made significant progress in having in place strong legislative frameworks for dealing with corruption; mismanagement and abuse in the use of public resources; and money laundering and drug trafficking, among others. However, these measures are not enough. They need to be translated into real action plans, coupled with rigorous monitoring to ensure full and effective compliance with the various legislative provisions.
The best of systems are unlikely to achieve the desired results unless the key officials involved in overseeing their implementation are be appointed in a competitive and transparent manner based on professional and technical competence as well as proven track of performance, rather than on political or other considerations. The serious commitment and unwavering support of the Government and the Legislature are also a necessary prerequisite if real progress is to be achieved.
