Oil revenue has potential to transform Guyana

– US Ambassador

Guyana’s imminent oil production will yield significant revenue that can create a large number of jobs in the manufacturing of value-added agricultural products and the development of its physical infrastructure, while at the same time delivering quality education for a diversified economy, United States Ambassador to Guyana Perry Holloway says.

“The bottom line is that this oil is going to give Guyana, if it does it correctly, the ability to transform the country into whatever direction it is that the government and the people decide they want to go,” Holloway told Stabroek News in an exclusive interview.

While the American envoy acknowledged that ExxonMobil’s oil find offshore Guyana would not generate sufficient direct jobs because of the location and no plans to set up a refinery here, he pointed out that there are varying predictions that Guyana’s Gross Domestic Product (GDP) would increase between 400 and 2,000 percent. He said the revenue from production would inject sufficient money into the local economy, thereby enabling government to fund a lot of social and physical infrastructure development, invest in renewable energy and turn primary products like rice and sugar into value-added items.

Echoing what top officials of oil firm ExxonMobil said last week, when they cautioned against expectations of a large number of direct employment opportunities to be generated by the company’s production activities here and emphasised government’s responsibility to create jobs using revenue that is earned from the operation, Holloway underscored the need for inclusivity in planning for job creation.

“Whatever the government, in consultation with the private sector, its people, the opposition… decides it is going to invest this money in, whether its infrastructure …agriculture…education… whether a specific industry—rice and sugar being two examples—that is where the reals jobs are going to be created. I think the real challenge for the government of Guyana is how we create new job creation in a way that is sustainable and has real value added,” he posited.

“For example, Guyana does not have a lot of rice manufacturing. You make the product but you don’t have the manufacturing whereas some countries make the rice but then package the rice …I am not saying that rice and sugar are the ways Guyana needs to invest because that’s for the government and the people of Guyana to decide but certainly priorities need to be set and those priorities will determine the types and amount of jobs created. I don’t think

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there is anyone out there that will argue that Guyana can use improvements in the infrastructure across the board, whether that is bridges, ports or hospitals, new schools; all of those, if you do, create jobs in the construction sector. Everyone’s list on where government should spend money should probably include those, at a minimum. I think many lists would also include agriculture … The job creation in those, will number in the tens of thousands here. That is where the real jobs are going to come from. That is the best way to prevent ‘Dutch Disease,’ by creating a diversity of jobs, not focusing the jobs on one industry,” he added.

‘Avoiding Dutch Disease’

Holloway observed that from announcement of an oil discovery here last year, Guyana’s citizenry has been constantly lamenting that they don’t want “Dutch Disease,” where the sharp increase and inflow of foreign currency negatively impacts the economy so that other products, such as sugar and rice, becomes less competitive on the export market and ultimately suffer.

It is to avoid such an occurrence that Ambassador Holloway stressed the need for economic diversification and empowerment of the citizenry, while urging that government invest in its human resource and infrastructure. “I would say it is interesting because a lot of the press reporting since the oil find was announced and a lot of the concern of the public, is that ‘We don’t want Dutch Disease here in Guyana! We don’t want Dutch Disease!’ The reason you get a Dutch Disease is if all the jobs are indeed in one industry,” he stated.

“The reality is that the real job creation is going to be outside and should be outside of the petroleum industry. The best way Guyana has to prevent Dutch Disease from occurring,” he also said.

‘No excuse’

With oil revenue too, he said, government has no excuse for its ability to greatly increase the quality of life for its citizenry as, if it is managed correctly and the right things are done, it can create a model country.

“The current government always talks about ‘the good life’ and I mean from the increased revenues perspective, it is the benefit from the revenues that are going to be able to allow it to provide people the good life but it doesn’t mean that people are just going to be given a cheque every month. People are going to have to work, they

are going to have to get an education, they are going to have to prove that they are valuable employees so the new companies will hire and keep them,” he asserted.

“Guyana is not going to have the problem it currently has today, where it says, ‘Well, we don’t have enough money to do this or we don’t have the right education system to produce these types of people or infrastructure will not allow for this type of investment.’ Guyana will have enough money to forward the education system, whatever it wants, they will have the money to build the infrastructure to do whatever it wants to do…It is really a transformational thing,” he added.

He also pointed to ExxonMobil’s current employment figures—that out of its current staff of 680 working on the Stabroek venture, some 300 are Guyanese—and said that too is a significant figure for this short period.

“I’ve been in countries with burgeoning petroleum industries and starting out there are never that many jobs in the petroleum industry and this is going to be an offshore operation with initially no refining, which is fine, but that does not create as much jobs as if you had a refinery, which takes many years to create or if you had an onshore operation so that is perfectly normal,” he said.

Further, Holloway explained that he believes that Exxon Mobil is right in that in a five to ten year timeframe, there would be hundreds and maybe a thousand jobs but not tens of thousands. “There will be jobs and for a country as small as Guyana, even hundreds of jobs or a thousand jobs is significant,” he added.

He believes that direct petroleum job expectations are high in Guyana because many are using neighbouring Trinidad and Tobago as a model for what to expect.

However, he pointed out that Trinidad and Tobago not only has several wells, which it has to exploit to get the needed amounts of oil and from its employment scope has been increased but it has also had 40 years to develop its industry, while Guyana’s industry is now in its gestational phase.

‘Accountability and transparency’

The US is also suggesting ways for government to achieve accountability and transparency in the spending of the expected wealth but emphasises that it is up to the people to hold their government accountable in the end. The Ambassador explained, “The EITI (Extractive Industries Transparency Initiative) is one of the ways that will do that and that is an effort between civil society, public and private sector, the government and everyone else.

But we also have a number of other areas. We are helping the government develop the right regulatory environment, the right legislation, but in the end if the money is well accounted for depends on the people of Guyana. I mean we can give you the tools, set the framework but in the end that, of course, depends on the people who govern and those who vote in the country.”

Assistance in putting policies in place for “rainy days” was also underscored and the David Granger administration’s proposed Sovereign Wealth Fund was lauded.

“You need to start working on the sovereign wealth fund/rainy day fund. Remember though oil was only discovered a year ago and this is not an easy thing to do. Most countries ease into in in 10 to 15 years and Guyana is trying to do it in five, so it will take a while to make these things happen.

But, luckily, there are good models out there and there are members of the international community that are willing to help Guyana. Guyana is also going to have to put forward its own blood, sweat and tears to advance the issue but we are trying to help in all possible ways we can. We might try to help with the sovereign wealth fund but there is too much on our plate and I am not sure we can do more than what we are doing,” he noted.

‘Commitment’

Washington is also receiving positive feedback from Georgetown in terms of a commitment on a holistic plan for the way forward. “I have certainly seen a strong commitment. I think they are working on how we move forward … this is all new for Guyana… and it’s moving very fast. So, anytime you are attempting something new, it starts off slow but hopefully it will pick up speed. There seems to be a very firm commitment.

I am hearing a lot of right messages from the government that one wants to hear and the international community is certainly trying to help where it can. So hopefully those efforts combined with those of the government and with the population getting more involved will lead to better things in four to five years,” the US Ambassador stated.