Local oil and gas chamber lauds NRF amendments

The Natural Resource Fund Act 2019 is an important piece of legislation albeit–for reasons of constitutional legitimacy, transparency, accountability, and governance of the Fund. However, the 2019 Act is set to be amended to the Natural Resource Fund Bill 2021. This was stated by the Guyana Oil and Gas Energy Chamber (GOGEC).

The chamber pointed out on Wednesday that the “Natural Resource Fund Bill 2021 did not propose the removal of any component from the 2019 Act per se, rather, the bill seeks to replace certain components in the current act that conforms to international best practices – following the Santiago Principles.”

Ultimately, the body said, the aim is to ensure greater accountability, transparency, and prudent governance of the Fund in the interest of the people of Guyana.

It reminded that the ultimate oversight body of the Fund is the National Assembly, the Public Accounts Committee, the Bank, presumably the Central Bank/Bank of Guyana, the Board of Directors, the Public Accountability and Oversight Committee which by design will exercise non-governmental oversight, and the Ministry of Finance.

With respect to transparency and accountability, GOGEC reminded that the Bill mandates monthly, quarterly, and annual reporting and that the annual report has to be tabled in the National Assembly where the Fund is subject to both internal and external audit.

“The Board has management responsibility of the Fund and the Board has to be guided by the legislation on how the Fund ought to be managed. The Board, therefore, cannot (legally) deviate from the investment mandate of the Fund as stipulated by the Act,” GOGEC said.

The body continued, “The Bill is inclusionary of all key stakeholders in national development, particularly, civil society groups, women representation, the private sector, the political opposition, professional associations, and labour representation.”

The formula for the transfer of funds into the Consolidated Fund, GOGEC highlighted, is simplified and included in the Bill. It said that everyone will be able conduct an analysis of the transfers into the Consolidated Fund and that the Central Bank will be pivotal in the management of the funds.

“The Minister of Finance will have to make public all receipt of funds from the oil revenue that were transferred into the Consolidated Funds. Failure to so do can result in imprisonment of the Minister for up to 10 years. All investment income earned by the funds will be capitalised. The income will be compounded, thus making the fund progressively greater.”

Compliance with the Santiago Principles

The Santiago Principles is a voluntary set of 24 guidelines, designed to promote good governance, accountability, transparency, and prudent investment practices, as well as maintain a stable and open investment climate. The Santiago Principles are now observed by more than 20 countries’ Sovereign Wealth Funds (SWFs).

The implementation of these principles can be grouped into three key areas:

Legal framework, objectives, and coordination with macroeconomic policies: in the case of Guyana, the legal framework is the legislation, namely, the Natural Resource Fund Act. The objectives of the Fund are set out in the Act and those objectives are aligned with the economic policy and development agenda of the government of the day.

Institutional framework and governance structure: the institutional framework in the case of Guyana is the operationalisation of the Fund, which is held in the Federal Reserve Bank, the Bank of Guyana which has responsibility for the operational Management of the Fund, the Board of Directors, the Public Accountability and Oversight Committee, the Ministry of Finance, and then ultimately, the National Assembly.

Investment and risk management framework: in the case of Guyana, this is the investment committee, the investment adviser (s), the private manager (s), and the investment advisory company.

Rationalising the Withdrawal Rules of the Fund

The withdrawal rules of the bill are tied to the development needs of the country and the development agenda of the government of the day.

Guyana is a resource rich, underdeveloped economy. Oil revenue is a bonus to accelerate Guyana’s economic transformation, modernisation, diversification, and development over the next decade.

Guyana has a huge infrastructure deficit, including social, physical, and overall public infrastructure. Therefore, the SWF / NRF should be structured to invest in Guyana’s infrastructure development, education, healthcare, and national security.