GUYANA’S Government has pushed back against the prognosis from economist Dr Damien King that its new-found oil wealth will see it falling victim to the so-called resource curse, citing it has been strengthening its institutions to avoid the predicted outcome.

The economist noted in the Jamaica Observer last Friday that, “Guyana is going to go nowhere” as its oil wealth will lead to corruption because the country lacks strong institutions. King’s comments set off a firestorm in the South American country and has seen that country’s Government dismissing the claim in a statement sent to the Caribbean Business Report earlier this week.

However, at least two Guyanese economists share King’s views.

Guyanese economists Ramon Gaskin and Elson Low told Kaieteur News — a daily newspaper in Georgetown, Guyana — that King “has hit the nail on the head in terms of forecasting the future of Guyana, since the warning signs of economic gloom are already evident”.

“Oil-rich countries very often see those close to the Government become extremely wealthy while the average man is no better off. Many warning signs that Guyana is going nowhere are present,” Low is quoted as saying by Kaieteur News, which reached out to him for comments on King’s assertions.

Low added in his response that there is a glaring lack of transparency when it comes to managing the oil and gas sector, pointing out that “there has been a sharp increase in inequality, and poverty persists despite huge oil reserves”.

To this end, Low concluded, “Guyana is going somewhere, but not in a direction to benefit ordinary citizens.”

Gaskin, for his part, told Kaieteur News that Guyana is being steered down a dangerous path by its leaders.

“It has a lot to do with, among other things, corruption in the country,” Gaskin said. “We have a big problem with wastage and spending like wild people and drunken people.”

He went on to list projects such as a US$35-million programme for electronic identification cards and a US$2-billion gas-to-energy project, which may very well cost as much as US$3 billion, as examples of “wastage” and “corruption” that justify King’s prediction that Guyana will not make progress with its newfound oil wealth.

In addition, Gaskin said the Irfaan Ali Administration has been laying the foundation to secure total control of the oil sector by installing its favourites on key management boards.

Trinidad and Tobago-based economist Marla Dukharan even weighed in on the controversial statement. “Well said,” Dukharan tweeted in response to King, articulating that “not having resources forces a country to have good governance, because that’s the only way the Government and the elite can extract wealth”.

Former Inter-American Development Bank Country Manager for Jamaica Therese Turner-Jones, in reply to Dukharan, said that while “we have known this a long time”, added, “Not sure I agree 100 per cent with Damien’s conclusion. Good governance takes work and institutions that are supported by legislation (fiscal responsibility law, central bank independence etc).”

However, despite King’s assertion — which he said is “not even a radical view amongst political economists” — finding support from the two Guyanese economists, it was dismissed out of hand by the Guyanese Government.

“The Ministry of Natural Resources wishes to dispel statements recently published in the media by [The] University of the West Indies lecturer and Jamaican economist, Dr Damien King which attempt to undermine the progress made towards the prudent management of the Guyanese economy and the shared development vision of the Government and its people,” the statement read.

It pointed out that Guyana is labelled by leading market participants as the most successful frontier country to engage in early-stage production in recent oil and gas history, adding that since taking office in August 2020 the incumbent Government of Guyana “has been working to transform the governance framework and management of the petroleum sector by effectively developing and implementing various policies and programmes which allow for adherence to international best practices and principles”.

The statement went on to outline 10 manifesto commitments made by the incumbent aimed at improving governance in the country with respect to its oil industry, including the revision of the Natural Resources Fund Law to provide greater oversight and management of revenue, updating of the principles and conditions of all new petroleum production licences, continuous review and modernising of the legislative framework for the oil and gas sector, and interagency collaboration to improve monitoring capabilities.

It addition, it noted that to safeguard against the resource curse, ensure fiscal smoothing, and advance the quest of intergenerational wealth while utilising petroleum wealth to finance national development priorities, the Government has already remedied the deficiencies of the Natural Resource Fund Act 2019 with the Natural Resource Fund Act 2021.

At the end of February 2023, Guyana’s Natural Resource Fund (NRF) had a closing balance of just under US$1.4 billion. The account includes profits from oil and royalties garnered from the petroleum sector.

Last May, Guyana’s Finance Ministry reported that US$607.6 million was approved by Parliament to be transferred into the consolidated fund for the year 2022. Meanwhile, on February 10, 2023, it was announced that US$200 million had been transferred to the country’s coffers.

Another step it said it took was to scale back the excessive power of the minister of finance by removing the possibility of ministerial direction in determining the ceiling on withdrawals from its Natural Resource Fund. The Caribbean Business Report was also told that a board of directors was appointed with powers previously concentrated in the hands of the minister vested in that board, and that now, there can be no expenditures from the fund without prior parliamentary approval.

“The Government of Guyana remains committed to its strategic development path reinforced by the establishment of a pragmatic legal and fiscal Petroleum Management Framework, and is confident that the country’s practical, academic and industrial intelligence will ensure that policies and programmes are implemented to avoid the resource curse syndrome to our multi-sectoral economy,” it explained.

The Government’s view on the matter was supported by finance professional and entrepreneur Joel Bhagwandin who, in an article in the Guyana Standard newspaper which he shared with the Jamaica Observer, called for “outsiders” to do their homework before wildly pinning the “resource curse” narrative onto Guyana’s oil journey.

“The learned economist Damien King’s prediction that Guyana could become trapped in the so-called natural resource curse is a classic demonstration of academic mediocrity,” Bhagwandin said. “The economist offered no analysis whatsoever or citation of any study that he might have conducted from which he derived the conclusions that weak institutions in Guyana will necessitate corruption and political crimes, and ultimately invite the resource curse.”

Bhagwandin, providing a historic overview of the period 1966 to 1989 — in which his country was plagued by weak institutions from State-led socialism which stagnated its economy — however, said Guyana has been turning around and that the progress made in the last three decades has been strengthened since the current Government took office.

“Worthy of note is that this out-turn could not have been achieved over the years without the consistent improvement and strengthening of public sector institutions to facilitate the buoyant and broad-based growth of the economy, even before the discovery of oil,” Bhagwadin wrote.

He continued: “There are a number of institutional reforms and capacity-building programmes being undertaken.”

Though he said they are too many to mention, he went on to name a few such as improving the audit capacity of the Guyana Revenue Authority (GRA), the Auditor General’s Office, the Ministry of Natural Resources and other government agencies; and investment in the information technology infrastructure to modernise the entire public sector.

“Going forward, the Guyana Government understands the developmental needs and challenges of the economy…and is doing all of the right things to confront these challenges in order to achieve the developmental goals, economic diversification, and transformation of the country. This includes the consistent improvement of and allocation of resources to continue strengthening public sector institutions and building the necessary capacity.”

Concluding that against all that is happening, he finds King’s assertion that Guyana will suffer the natural resource curse because of weak institutions “highly unmeritorious and unscholarly”, Bhagwandin invited the economist to consider visiting Guyana to conduct an updated study on the public institutional framework in that country.

“This would be a very good academic study, funded by [The] UWI, that could potentially help the goodly economist earn himself a promotion from an ordinary lecturer to professorship,” he concluded.