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Business and Economic Commentary by Christopher Ram Part 16
November 03, 2024
Jagdeo promises gross constitutional violation: Ali needs to assert his authority.
Introduction
Vice President Bharrat Jagdeo – in one of the government’s most egregiously constitutional violations – announced at his weekly press conference at the PPP/C’s headquarters that the government has no intention to seek parliamentary approval for the already bungled cash payout of oil money to Guyanese at home and abroad.
Article 217 of our Constitution could not be more precise in its requirements: no moneys shall be withdrawn from the Consolidated Fund except through proper legislative authorisation. This is not mere bureaucratic red tape – it represents the fundamental barrier between democratic governance and autocratic rule. When Jagdeo dismisses these requirements as inconvenient obstacles to “government flexibility,” he is not just expressing an administrative preference but advocating for dismantling vital constitutional provisions and safeguards against financial abuse.
A public declaration by the Vice President that the Government will ignore this vital constitutional provision in the distribution of over sixty billion dollars or nearly three hundred million United States dollars without legislative authoritative authority and parliamentary oversight represents more than just administrative overreach – it signals a dangerous drift toward autocratic governance that should alarm every Guyanese citizen. President Ali’s apparent acquiescence to this constitutional subversion is more troubling, marking a profound failure in his primary duty as guardian of our Constitution.
Resource Curse
This cavalier disregard for the constitutional Framework invites comparisons with many third-world countries that have fallen victim to the Resource Curse. However, we need only look at neighbouring Venezuela to see where profligacy and thoughtless spending lead. In the early years of its oil boom, Venezuela similarly began bypassing legislative oversight for direct disbursements, arguing for “flexibility” in helping its citizens. This erosion of institutional checks and balances contributed significantly to the eventual mismanagement of its oil wealth and the following economic crisis. Remember Guyanese, Venezuela has the largest oil reserves in the world.
We have forgotten our country’s lesson from the Burnham era, which showed the dangers of concentrated power over national resources. The constitutional provisions Jagdeo now seeks to circumvent were designed to prevent the recurrence of such centralised control over public funds.
The darkening path
This is not the first instance of financial abuse by the Ali administration. In the 2022 Budget, approximately five billion dollars were allocated for contingency relief, a process hitherto unknown in Guyana. Ram & McRae warned at that time that this was just the beginning. Now, we are facing tens of billions more in even looser and larger situations. What started as general grants with weak controls is now evolving into more perilous forms of arbitrary power. We cannot overlook the trend: insufficient oversight over exploiting the country’s national resources is being used to undertake development projects outside the legislative purview. It is evident that every decision and action taken—including spending on programs and projects—is being executed not through constitutional mechanisms but through executive decree, with no meaningful checks or balances in place.
Mr Jagdeo’s creative justification for resisting Elder Kwayana’s call for legislation to regulate the proposed grant, was that that would create “rigid recurrent expenditures”. That is absolute nonsense, and I do not think that the Vice President himself believes it. It suggests, however, that whatever he thinks, he views constitutional constraints as impediments rather than essential safeguards. This concentration of power in the executive branch, particularly in Jagdeo’s hands, represents a clear and present danger to our democratic institutions. It is time that Guyanese take note.
This is not only about legal and constitutional technicalities. The absence of legislative debate, careful drafting, and parliamentary oversight in these massive cash distributions creates a stream of financial and governance failures. Opposition oversight is dispensed with, and there are no defined procedures for auditors to follow, while public accountability simply does not exist. Perhaps most dangerously, the door opens wide for political manipulation of these distributions, turning what should be national wealth into a tool for political control.
Ali’s duty
We also recall that the decision on the cash grant ostensibly came from President Ali. Since that announcement, however, Jagdeo has jumped into the driver’s seat and has varied Ali’s ideas beyond recognition. By his silence, President Ali, the Head of State and the primary guardian of our Constitution is demonstrating a glaring failure to prevent this overreach, amounting to a dereliction of duty. The President has sworn an oath to uphold the Constitution, not to stand by while his Vice President systematically undermines it.
President Ali has to show who appointed whom, assert his constitutional role, direct what the process requires, and demand a proper legislative framework for these distributions. The National Assembly must reclaim its rightful oversight role, and civil society must unite in opposition to this dangerous precedent. Our nation’s future hangs in the balance, and silence is no longer an option.
The moment demands action from every citizen, every parliamentarian, and every civil society organisation to stand firm in defense of our Constitution. Our nation’s future depends on it.
Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 142 – November 2, 2024
Renegotiations, Referendums, and Reality – response to Ram & McRae’s Survey
Introduction
The response to Ram & McRae’s recent survey on the 2016 Petroleum Agreement was revealing, particularly Vice President Bharrat Jagdeo’s immediate dismissal of its findings and his attempt to shut down any discussion of a referendum. His reaction betrays a troubling resistance to public discourse about Guyana’s most valuable natural resource.
Let us be clear: it is not within any VP’s power to decide whether Guyanese can have a referendum. The Constitution establishes referendums as a democratic tool, with such decisions resting with the National Assembly and the President, not with a party official, however high up. While Mr. Jagdeo is the General Secretary of the ruling party, he is not even the First Vice President – that position belongs to Brigadier Mark Phillips by virtue of his position as Prime Minister.
Campaign Promises vs. Current Reality
Mr. Jagdeo’s dismissal of a referendum on the Agreement is particularly revealing, given his party’s explicit promises during the 2020 election campaign. The PPP/C’s manifesto and numerous campaign speeches promised not just to review but to actively renegotiate the contract’s terms. Now, the VP attempts to rewrite history, claiming “we showed that we can get more out of the contract” through peripheral arrangements like the gas-to-energy project and Local Content Law.
The evidence suggests otherwise. The gas-to-energy project’s terms remain outside of the 2016 Agreement and are troublingly opaque, with mounting questions about its actual cost to Guyanese taxpayers. Even the Local Content Law is defined far too broadly, and the promised review due in 2023 has still not been done. And while essential for domestic business participation, it does nothing to address the Agreement’s fundamental inequities. Most critically, the cost recovery provisions still allow operators to claim up to 75% of revenues, leaving Guyana with a diminished share of its resource wealth, environmental protections remain inadequate, and worse of all, Jagdeo and the PPP/C are placing the myth of sanctity of contract over national sovereignty. Please see columns 133 – 135. Egregiously, the country is without the all-important Petroleum Commission, with the unacceptable substitute being the VP himself and the Ministry of Natural Resources, with its poor track record.
The VP’s claim that a referendum would “complicate” the electoral process defies constitutional precedent and global democratic practice. Numerous countries, including several Caribbean nations, routinely conduct referendums alongside national elections, recognising both the cost efficiency and democratic value of such exercises. The actual “complication” appears to be his reluctance to face the electorate’s direct verdict on this crucial issue and his own stewardship of the sector.
“Suspect” Survey
Mr. Jagdeo’s description of the survey as “suspect” demands examination. The survey itself was a global survey using Google Forms. Additionally, it was distributed to all leading members of private sector organisations and political parties in Guyana – including the PPP/C, where he serves as long-term General Secretary. If the results are “suspect,” one must ask why his party and supporters, who received direct invitations, chose not to participate and offer opposing views.
Understanding Survey Methodology
Meanwhile, Mr. Freddie Kissoon’s critique in the state-owned media reveals mistaken facts relevant to his academic training and fundamental misunderstandings about research methodology. He confuses basic facts, citing wrong numbers and mischaracterising the nature of the initiative. A survey serves different purposes from a poll – it gathers detailed information and insights about specific issues rather than predicting population-wide views. Our exercise was explicitly designed as a consultative survey seeking informed stakeholder feedback about particular aspects of the Petroleum Agreement. The valuable responses received, including a detailed technical analysis of contract provisions, demonstrate the success of this approach.
Conclusion
The passionate reactions to this survey from high officials and their supporters suggest it has struck a nerve. The underlying message resonates clearly: there is substantial public concern about the Agreement’s terms, and these concerns cannot be dismissed through procedural objections or deflections about methodology.
Its findings present a critical test of our democratic principles. The Ali Administration’s resistance to discussing modifications to an Agreement that will shape Guyana’s fortunes for generations reveals a troubling gap between democratic rhetoric and practice. Their continued refusal to engage with these concerns suggests a deeply worrisome possibility: they fear what a genuinely informed and empowered electorate might decide about an Agreement that will shape Guyana’s destiny for the remainder of this century and beyond. Their resistance to democratic consultation raises the profound question of whether they truly serve the interests of the Guyanese people or other, less public interests.
Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 141 – October 25, 2024
Introduction
Survey Shows Overwhelming Support for Renegotiation of Petroleum Agreement
Introduction
The results of a recent survey on the 2016 Petroleum Agreement with ExxonMobil and partners reveal overwhelming public support for renegotiation, with serious concerns about key provisions of the Agreement. The survey, conducted by Ram & McRae using the Google Forms platform attracted 135 responses from a diverse group of respondents including professionals, academics, students and citizens, provides compelling evidence that the Government’s “sanctity of contract” position is at odds with public sentiment.
Key Findings
An overwhelming 94% of respondents believe the Government should seek to amend the current Petroleum Agreement, with only 6% either opposed or unsure. This stark statistic alone should give pause to those who continue to defend the status quo. The survey revealed that only 3.8% of respondents were satisfied with the existing provisions of the Agreement. The remaining 96.2% identified multiple areas requiring modification:
- 83.2% want the royalty rate revised
- 79.4% called for changes to tax payment arrangements
- 66.4% seek modifications to tax certificates
- 66.4% want the revenue guarantee revised
- 61.8% support ring-fencing provisions
Governance and Oversight
On the critical question of oversight, nearly half (49.6%) of respondents favor a fully independent Petroleum Commission, while 44.4% support a combination of government and independent oversight. Only a small minority supported exclusive political control, highlighting the public’s disfavour of the current arrangements under which Vice President Jagdeo reigns supreme to the exclusion of everyone else.
The survey also revealed deep concerns about the Natural Resource Fund’s withdrawal rules. A mere 9.8% consider the current withdrawal levels appropriate. Maybe respondents are alert to the fact that under a 2023 amendment to the Natural Resources Fund Act, almost the entire amount of the first US$2,000 Mn. from profit share and royalty can be withdrawn and spent – no questions asked. It is ironic that the beneficiaries of this profligacy are arguing that more ought to be left in the Fund as intergenerational savings.
Fairness and Profit-Sharing
When presented with actual data showing Guyana’s modest and mildly declining share of oil lifts (from 13.04% in 2020-21 to 11.97% in 2023), an overwhelming 87.8% of respondents rated the current profit-sharing arrangement as either “somewhat unfair” or “very unfair.” Only 3.1% considered it fair, providing a clear mandate for revision of these terms.
Obstacles to Change
Asked to give their views on what they consider the key obstacles to renegotiation, respondent cited as the principal reason identified as the top reasons the following:
- lack of political will (80.3%)
- fear of potential economic repercussions (53%)
- diplomatic concerns (44.7%)
- Legal constraints 37.9%).
The reasonable inference to be drawn from “Legal Constraints” is a reference to the sanctity argument so warmly embraced by the Government in place of their commitment to “review and renegotiate”!
Public Awareness
A striking 86.5% of respondents believe there is insufficient public awareness about the Agreement’s specific provisions. This suggests that greater public education could further strengthen the case for renegotiation. It is however surprising for another reason: no day passes without a news article and more making adverse comments on the Agreement.
Article 31.2 and Path Forward
While 53% of respondents were aware of Article 31.2 of the Agreement which allows for amendments with contractor consent, 47.4% view the current silence on invoking this provision as a missed opportunity by the Government to seek and obtain better terms. The main factors contributing to this silence were identified as:
- Lack of public awareness (72.5%)
- Political reluctance to challenge powerful oil companies (62.6%)
- Inadequate technical capacity (35.9%)
- Fear of damaging Guyana’s reputation (33.6%)
Conclusion
The survey results paint a clear picture: there is strong public support for renegotiating the 2016 Petroleum Agreement. The current “sanctity of contract” stance by the Government which had promised to renegotiate the Agreement appears increasingly untenable in the face of such overwhelming public sentiment for change. As one respondent noted, “The supremacy of Guyana’s Sovereign tax laws should be maintained. The contract broke one law to install another.”
The challenge which Guyana faces is to translate the strong and compelling public sentiment expressed in this survey into political action. Neither of the two major political parties has given Guyanese any reason to suggest that they are prepared to take decisive action to change this lopsided and penal arrangement. With general elections approaching in 2025, political parties would do well to heed these findings and recognise that the public’s patience with contemplating living with the 2016 Agreement beyond the middle of this decade is fast evaporating.
Business and Economic Commentary by Christopher Ram Part 15
October 20, 2024
Uncertainty and confusion over Cash Grant
Introduction
The announcement of an immediate $200,000 per household among a Santa’s list of gifts, was met one day later by the removal of the word “immediate” followed by announcements, revisions, and clarifications regarding the cash grant initiative which had received widespread acclaim. Perhaps the most full-throated accolade came from prominent attorney and columnist Ralph Ramkarran who effusively described the announcement and address as a”masterstroke” that has “transformed the political discourse leading up to Christmas and the elections next year.”
Yet, what began as a bold proclamation by President Irfaan Ali has evolved into a case study of policy implementation challenges the country is facing under a Party that has governed Guyana for 28 of the last 32 two years.
The Revision and Lingering Questions
The latest position is that instead of $200,000 per household, the government would now provide $100,000 to every resident adult citizen 18 years and older. While this change addresses some implementation concerns, it has also given rise to a host of new questions and uncertainties.
“Resident” usually and in tax laws, is defined by physical presence in the country for more than 183 days. It would be interesting to learn whether the Government would apply this stringent measure in a circumstance that could operate in a manner that is adverse to its political interests.
Despite the government’s stated intention to begin distribution “as soon as possible,” no specific start date has been announced, . This lack of clarity leaves citizens in limbo and raises questions about the government’s readiness to implement the program.
The Vice President announced some five months’ timeline but gave no indication of the order in which payouts will be made. Will it be based on geographic location, ease of accessibility, possession of qualifying papers, or whatever other criteria? So from total but unrealistic uncertainty of immediately, to some vague within five months. This also will reduce the political goodwill and support engendered by the original announcement.
Just as misleading, if not unacceptable, is the cost of the measure. Originally it was announced as $60 Bn, suggesting 300,000 households at $200,000 each. With the new proposal of $100,000 per adult, we are told that the revised grant would “substantially increase the $60 billion previously allocated for this measure.” However, this figure seems inflated given that Guyana’s adult population (18 years and older) is significantly less than 600,000. All the financial wizards have to do is look at the voting of the last elections and adjust for persons who would have become 18 on the arbitrary cut-off date of 1st. January 2024, deaths and migration. That number is certainly less than 500,000 so on the outside the amount to be paid out is $50 Bn. While it is frightening to think that the government could not do that simple exercise, it is even more troubling to think otherwise.
One of the concerns raised about the proposal was that since there was no parliamentary approval for the payout, the Government was banking on the popularity of the measure as justification for violating the Fiscal Management and Accountability Act and indeed the Constitution. It is now left to be seen whether it will seek Parliamentary approval, as it should have from the outset.
Another tweaking was by the Vice President who suggested, without details, that there might be more such handouts. If this is now policy, it raises concerns whether the Government has reduced economic, social and financial management to receiving profit oil and royalties and paying these out as cash handouts to citizens, a clear abdication of the duties and functions of government. In narrowly defined circumstances, universal cash grants have their value but it is dangerous to think that they are a substitute for proper management.
NIS update
Commentary last week called for the official release of the outstanding reports of the National Insurance Scheme. The 2022 Report has now been published on the website of the NIS and confirms that the Scheme has turned a substantial surplus in 2022 which is more than likely to be repeated in 2023. Since the stated purpose of the injection was to assist contributors who are just short of the 750 contributions to qualify for a pension, it might just be a case of too much too late.
But that is only one of the multitude of problems facing the NIS, some of which are rooted in the past, and some due to past and present administrations.
Let us stop playing slow walk. The Government must be proactive in solving the myriad of problems which go well beyond just money – even $10 Bn.
Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 140 – October 18, 2024
Exxon and Partners – Relinquishment Time
Introduction
President Irfaan Ali enjoys his encounters with international journalists, including BBC’s Steve Sackur and more recently New York Times’ International Climate Correspondent, Somini Sengupta. While the President has ably navigated the questions posed to him, he has benefitted from some important questions which Sackur and Sengupta failed to ask – like how he moved from “renegotiation” to “sanctity of contract.” Or the reason(s) for his country’s refusal to join more than 90% of the open countries of the world in signing the global Framework imposing a minimum corporation tax rate of 15% on companies like Exxon, Hess and CNOOC. Whether intended or otherwise, the beneficiaries are the oil companies, the sufferer being Guyana, It now begs the question whether a local journalist would raise these vital topics.
As if the 2016 Agreement is not sweet enough – no taxes, low royalty and a 40-year stability – there is the relinquishment provision which gives Exxon almost exclusive control of the country’s most important sector for decades to come. While Exxon headlines the Stabroek Block, it controls the equivalent of 21% of Guyana’s total area of 83,000 square miles, through its involvement in the Stabroek Block, the Canje Block and the Kaieteur Block. With the exception of the East India Company up to 1857, there are no comparable statistics anywhere in the world, where a company enjoyed such dominant control over any country.
Contract Administration
Having resiled from its renegotiation commitment, the Administration, ignoring the signal failures identified below, boasts about its contract administration, meaning how the Ministry of Natural Resources oversee the operation of the various Petroleum Agreements entered into by the Government of Guyana. Each and every failure comes at a cost and while the focus has understandably been about the Stabroek Block, it has detracted from Exxon’s role in two other blocks – the Kaieteur Block and the Canje Block, with significantly smaller areas than Stabroek.
Contract administration is a critical aspect of resource management, where the State must ensure that contractors fully meet their legal, fiscal, environmental and other obligations under their Agreements. Equally important is avoiding situations where, through poor oversight, negligence, or incompetence, companies receive greater benefits and more latitude than are legally permissible. Unfortunately, from the very inception of the 2016 Agreement, there have been concerning lapses in administration.
Contract failures and relinquishment
Raphael Trotman allowed Exxon to claim US$460 million in pre-contract costs, significantly more than their own financial statements revealed. Eight years after the Agreement was signed, not a single Ministerial audit has been completed, with only two audits combining several years instead of the required seven annual audits. Then there is the case of a staggering sum of US$211 million of unsupported expenditure being cleared at an administrative level rather than by the Minister of Natural Resources. These issues are facilitated by inadequate accounting and reporting, weak and permissive environmental oversight, and a lack of disclosure and accountability.
Another critical failure is in the handling of relinquishment provisions under the various Petroleum Agreements. “Relinquishment” refers to the obligation of oil companies to give up, within no more than ten years, the area over which they are granted a prospecting licence. This provision is crucial for ensuring that areas not explored, or which are proven unproductive are returned to the State, allowing for potential reassignment or conservation.
To understand the scale of this issue, let us examine the three Blocks where Esso is the Operator. According to the Guyana Geology and Mines Commission, these Blocks are as follows:
First, two quick asides. Exxon was permitted extraordinary latitude under the relinquishment clause of the 1999 Agreement, and now, under the legally questionable 2016 Agreement, it is allowed seven years instead of the usual four before it relinquishes any of the vast blocks it was awarded. Utilising an exception permitted in the then law, all that is required of Exxon after four years is to request a renewal, without any obligation to relinquish.
At the end of this renewal period, which lasts for three years, Exxon must request a further three-year renewal but must relinquish at least 20% of the original Contract Area, excluding Discovery and Production Areas. The retained area should comprise no more than two discrete areas, no piece by piece. At the end of that second renewal period, i.e., after 10 years, Exxon shall relinquish the entire Contract Area, with the exception of Production and Discovery Areas and Areas under Appraisal Programmes.
The Agreement was signed, dated and executed on 27th June 2016 but notarised on 7/10/2016 – which can be interpreted as 7th October 2016, or 10th July 2016. Even if we accept the word of Exxon’s former clandestine public official doing secret PR work for the company, Exxon should have given up 20% of the Stabroek Block no later than 7th October of this month. The big question is whether any such relinquishment has been effected.
For the Canje Block, 20% of the contract area should have been handed back by 4th March 2019, and another 20% by 4th March 2022, with the remainder to be handed back by March 2025. For the Kaieteur Block, 20% of the contract area should have been handed back by 28th April 2019 and another 20% by April 2022, with the remainder to be handed back by April 2025.
Question of Administration
All companies awarded petroleum agreements must apply for renewal of their licenses before the current period ends. This is crucial because each renewal comes with the obligation to give back (relinquish) part of the area they control. In this regard, I do not recall any public disclosure of timely applications for renewals, the extent of the relinquishments and whether the applications were granted.
The administration of the petroleum agreements covering vast areas of Guyana’s territory is about the country’s sovereignty as well as our national patrimony. The public has a right to know how these areas are being managed. Any carelessness in administration comes at a huge cost to Guyana, and by not enforcing relinquishments as stipulated, the country can lose opportunities to re-auction areas bringing in substantial revenues since the country is de-risked.
Conclusion
The administration of Guyana’s oil blocks reveals a complex picture of rapid development coupled with significant challenges. While the success of the Stabroek Block has brought benefits, the apparent lack of enforcement of relinquishment provisions in other blocks raises serious concerns about the overall management of our oil resources.
Next week, we will look at the Prime Minister Samuel Hind’s defence of Exxon.