News, Americas, NEW YORK, NY, Fri. Feb. 17, 2022: Guyana is no longer the ‘wimpy kid’ on the playground with the second lowest gross domestic product (GDP) in the Caribbean region.
Over the last 5 years Guyana has had a major growth spurt and there is no slowing down. Growth in the oil and gas sector is projected to be 96.7% in 2022 and the country’s real GDP is expected to increase by 47.5%. Guyana’s forecasted oil production of 1 million barrels per day (bbl/d) by 2030 and projected income of tens of billions of dollars in the next decade, towers above fellow Caribbean Community, (CARICOM), members.
In the big league of oil production, only seventeen countries produce over 1 million bbl/d and only sixteen countries have more reserves than Guyana’s latest estimate of 11 billion barrels of oil equivalent. Guyana is heading for the big league in oil production. A lesson from the sporting arena is an apt comparison to Guyana’s current position.
In professional sport, the best athletes are not just taller, faster or stronger than the average citizen; they earn a place on the podium because they are able to skilfully combine discipline, strength, stamina and agility with an understanding of the game. In the same way, Guyana’s success depends much more on the practice of good governance than its hydrocarbon reserve volumes.
The status of Guyana’s good governance is the backdrop for evaluating the risk of investing in Guyana. The higher the risk, the weaker the bargaining position. There is good news and bad news about Guyana’s governance stats compiled by the World Bank. Guyana scores between 5 and 20 percentage points below the average for Latin American and Caribbean in all indicators for good governance. The indicators are Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption.
The good news is that there have been overall improvements, albeit with fluctuations, in most indices. Regulatory Quality was on a decreasing trend, but this rebounded slightly between 2019 and 2020. The Government Effectiveness percentile rank fluctuated but did not improve overall between 2015 and 2020. Control of corruption was on an increasing trend but this declined marginally between 2019 and 2020. Guyana’s technical team has the responsibility of improving these rankings to secure its grasp on “One Guyana”.
The game at hand is not easy. The energy sector plays, that is the fiscal regimes, contract terms and policies adopted in the 20th century will have limited success as we head toward the first quarter of the 21st century. And, as we approach the first half of the century with more than 2°C projected rise in average global temperatures, fossil fuel demand is set to decline annually beginning sometime in the next few decades. While Guyana is celebrating large oil finds, the world is moving away from oil, towards greener energy.
One of Guyana’s defence moves is found in its Low Carbon Development Strategy (LCDS) 2030 proposal which plans, among other things, to create a cleaner energy mix of natural gas, hydropower and solar energy. This is as well and as good as the systems in place to ensure that these projects are delivered on time and on budget with safeguards to ensure that transactions are fair and operations are safe and efficient.
You have heard the saying, “If you are faithful in little things, you will be faithful in large ones.” Government Effectiveness is the crux for good governance and as such, institutional strengthening is needed in every area of government administration. Myriad difficulties are encountered doing business in Guyana causing lengthy delays, costs overrun and lost opportunities.
This is often played out in the arena of public services when it comes to conducting personal business such as getting a supply of electricity, registering a property or obtaining construction permits. Will there be a replay in large multimillion dollar projects? Apart from financial opportunities, tax breaks and social welfare outlined in Guyana’s 2022 Budget, higher standards of service to the public and procedural improvements can make life easier and fairer for the average citizen. It will also increase confidence in state agencies to deliver on projects and promises.
There are several plans underway for massive national development projects. Senior Minister in the Office of the President with responsibility for finance, Dr. Ashni Singh, recently announced the allocation of GYD 1.3 billion for the implementation of a national Information and Communications Technology, (ICT) policy. This initiative, intended to improve the ease of doing business in Guyana, promises increased internet connectivity alongside cheaper, more reliable electricity access. Many hope to see this project having a significant, positive impact on private and public sector operations. In years to come, many more progressive development projects will be announced with thrilling promises of improved infrastructure and job creation. However, as larger projects are announced, it is impossible to ignore the lack of commensurate, game-changing policies and initiatives to protect whistle-blowers who call foul. It is time for a full-court press on corruption.
Guyana can be a legendary player in the Latin America and Caribbean region only if it relies on Good Governance, not just abundant cash and oil resources, to achieve progress and prosperity for all. Right now, Guyana is the top pick for exploration because of successive, large discoveries in the Stabroek Block. However, within the euphoric cheers for each multimillion-barrel addition to estimated oil reserves, there is judicious restraint. The fans of Guyana know that slam dunks and hat-tricks in the opening minutes is not enough to seal a win.
The discipline of good governance and the insight of strategists and policy makers will seal Guyana’s ‘big win’ of inclusive, sustainable development. Efficient, trustworthy government institutions and state agencies, the nation’s center of gravity, must play a stabilizing role in the rapid rise of the local energy sector.
