Photo: Guyanese President Irfaan Ali / Source: Ranu Abhelakh, Reuters
Guyana is no longer the “wimpy kid” on the playground with the region’s second-lowest gross domestic product (GDP). Over the last five years, Guyana has had a major economic growth spurt, and there is no slowing down. Guyanese Finance Minister Ashni Singh expects the oil and gas sector to grow by 96.7 percent and the country’s real GDP to increase by 47.5 percent in 2022. Guyana’s forecasted oil production of one 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.
Only seventeen countries produce over one 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. In professional sports, the best athletes are not just taller, faster, or stronger than the average person; they earn a place on the podium because they can skillfully 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.
Guyana’s good governance status 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. In 2020, Guyana scored between five and 20 percentage points below the average for Latin American and the Caribbean in the six indicators for good governance, including 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 has been overall improvement, albeit with fluctuations, in most indices. Regulatory quality was on a decreasing trend, but this rebounded slightly between 2019 and 2020. Guyana’s percentile rank on government effectiveness 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 technocrats are responsible for improving these rankings to secure President Irfaan Ali’s vision for “One Guyana.”
The game at hand is not easy. Approaches to the energy sector, that is, the fiscal regimes, contract terms, and policies adopted in the 20th century will have limited success as we head toward the end of the first quarter of the 21st century. And, as we approach the first half of the century with more than a 2°C projected rise in average global temperatures, fossil fuel demand is set to decline annually, beginning sometime in the next few decades. So, while Guyana celebrates large oil discoveries, the world is moving away from oil toward greener energy.
Guyana’s Low Carbon Development Strategy (LCDS) 2030 plans to compensate for the global demand shift by creating a cleaner energy mix of natural gas, hydropower, and solar energy. However, the strategy will only be as good as the governance systems in place that ensure that these projects are delivered on time and on budget with fair transactions and safe and efficient operations.
Government effectiveness is the crux for good governance, and, as such, Guyana needs to strengthen its institutions in every area of government administration. For example, doing business in Guyana is met with many problems such as getting electricity, registering property, or obtaining construction permits which cause lengthy delays, cost overruns, and lost opportunities. Will large, multimillion-dollar projects suffer from the same problems? Apart from financial options, 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. Last month, Minister Singh announced the allocation of USD $ 6.23 million to implement a national information and communications technology (ICT) policy. The ICT 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 have a significant, positive impact on private and public sector operations. As oil revenues increase in years to come, the government will announce many more progressive development projects with thrilling promises of improved infrastructure and job creation. However, even as the government announces larger projects, 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 prominent 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. Guyana is currently a top pick for oil exploration because of successive, significant discoveries in the Stabroek Block. However, observers should retain judicious restraint amidst the euphoric cheers for each multimillion-barrel addition to estimated oil reserves. Guyana’s cheerleaders know that slam dunks and hat tricks in the opening minutes are not enough to seal a win. The discipline of good governance and the insight of strategists and policymakers will seal Guyana’s “big win” of inclusive, sustainable development. Efficient, trustworthy institutions and state agencies—the nation’s center of gravity—must play a stabilizing role in the rapid rise of the country’s energy sector.
Dr. Lorraine Sobers is a lecturer in the Department of Chemical Engineering at the University of the West Indies at St. Augustine. She has presented at several technical and socio-economic conferences regionally on issues of CO2 emission reduction in Trinidad and Tobago as a small island development state.