Mangal criticises Sovereign Wealth Fund model released by gov’t

Dr Jan Mangal, the former petroleum advisor to President David Granger yesterday strongly criticised the Sovereign Wealth Fund (SWF) model contained in the long-awaited Green Paper tabled by the government in parliament on Wednesday.

In a post on his Facebook page yesterday, Mangal said: “Did those in charge not learn from the Petroleum Commission Bill? We seem to be trying our best to repeat the same mistakes now with the SWF, with respect to politicizing the oversight of the SWF by placing too much power with a Minister.

“The Commonwealth Secretariat, who drafted the SWF, seems uninterested in bringing best practices that help the people of Guyana? I say this because they drafted the completely unacceptable Petroleum Commission Bill, and now this SWF. And the World Bank, they seemed content with the lack of progress over the last three years. I do not trust these two institutions to help the poor people of Guyana.

Guyanese, seems like we are between a rock and a hard place.

“If the other guys were in charge, this oil stuff would already be a train wreck, but the current guys are steering in the wrong direction. We need to find a real new alternative as time is running out”.

Other experts have also warned against politicians having charge of the SWF.

The Green Paper lays out stringent fiscal rules for the management of the SWF but with the Ministry of Finance as the overall manager and its minister having a key role in composing the macroeconomic committee which would be responsible for determining how those funds are apportioned.

“The Macroeconomic Committee would determine the Economically Sustainable Amount and would consist of the following five members appointed by the Minister of Finance,” the document stated. It points out that a representative of the Minister of Finance will be the Chairperson and one of the members, a leading expert in macroeconomics, shall also be appointed by the Minister with the approval of Cabinet. Also among the five members would be a representative of the Bank of Guyana (BoG) to be nominated by the governor. Critics would likely see this candidate as a third nominee of the government. The other two persons would be a member from academia or the private sector nominated by the Opposition Leader and a member from academia or the private sector nominated by the Institute of Chartered Accountants of Guyana.

The Green Paper also noted that, “the Ministry would be responsible for overall management of the (SWF), including requested withdrawal in the Annual Budget Proposal; calculating the Fiscally Sustainable Amount; drafting the Investment Mandate; entering into the Operational Agreement with the Bank of Guyana and drafting the Annual Report and reporting on the (SWF) through the Annual Budget.”

Separately, a Sovereign Investment Committee would be responsible for advising the Minister of Finance on the Investment Mandate and would consist of the following seven members appointed by him. “Members of the Committee would be persons with substantial experience, training and expertise in financial investments and financial portfolio management; and a minimum of a postgraduate degree from a reputable university in the discipline of finance or economics, or an equivalent professional qualification,” the document says as it lists the seven persons.

These would be a representative of the Minister of Finance; an ex-officio representative nominated by the Minister of Natural Resources; an ex-officio representative nominated by the Governor of the Bank of Guyana; a representative nominated by the Institute of Chartered Accountants of Guyana; a representative nominated by the Guyana Association of Bankers; a representative nominated by the Leader of the Opposition; and the Senior Investment Adviser and Analyst. Here again, the government would have a major role.