Oil, Government Take & Spending: Navigating Guyana’s Development Challenges - 18

Today’s column continues to advance my overall assessment/evaluation of Guyana’s Green Paper, which proposes to establish a Natural Resources Fund (NRF) next year. Last week’s column had made two observations, which are, by a distance, the most important from the perspective of an overall assessment/evaluation.

To recall briefly, the first was that the NRF represents state-owned capital, generated from the export of Guyana’s natural resources. The NRF, however, like similar sovereign funds, is designed to operate within a universe of private investors, responding to private risk-return incentives in global markets. The second observation was that in order to survive in global markets, such state investments have to be organised in a manner that avoids challenging the dominance of ruling private risk-return incentives in these markets. Both these observations apply, de rigeur, due to the sheer current size of such state-owned funds (US$8.1 trillion total, of which natural resource-based funds are US$4.4 trillion or 54 percent).

Four additional observations follow in today’s column. However, I do not believe these are nearly as weighty, as the two introduced last week. Next week I shall conclude this evaluation and then comment broadly on governance of the NRF.

The International Forum of Sovereign Wealth Funds (IFSWF) identifies five SWF goals. These provide a useful guide to their intended operations and concerns over their governance (See Schedule 1.)

Finally, it would be useful at this point to observe the most recent reported data on the average allocation of assets held by SWFs worldwide. For convenience, comparative data for 2002 and 2016 are shown in Schedule 2 below.