Introduction
We continue today with part two of the LCDS which President Jagdeo launched on June 8 and which is out for consultation up to the end of September, the timeline driven mainly by the need that it should be ready for the Copenhagen Conference in December of this year. That is when the world will be meeting to discuss a successor to Kyoto, the environmental treaty. The principle of the LCDS is simple enough. Rich countries, the thinking goes, have been destroying the environment at an alarming rate. And in its efforts to meet the demands of its people and not unusually the greed of illegal loggers, developing countries are unwittingly contributing to the impending crisis by the exploitation of their rainforests and eventual deforestation. Time is running out and there are few easy, inexpensive or quick solutions.
Cutting down the forests accounts for 20% of the world’s emission of greenhouse gases. The world then has an interest not only in halting but in reversing the trend of deforestation. To do so would be less expensive and faster than it would be to transform the world’s economies to make them more eco-friendly. In comes REDD – the acronym for “reduction of emissions from deforestation and degradation.” The basic outlines of REDD are clear. Rich countries will pay poor ones to keep their forests intact. In return, the rich will get credits that they can put towards their emissions-reduction targets under the proposed new climate treaty.
The promise
That on paper is simple and straightforward enough. As the Economist puts it, rainforest countries are being told “lay down your axe and you will get cash.” But it is far less simple than this or what the Government’s Frequently Asked Questions Booklet (FAQ) makes of it. In fact, that booklet along with the propaganda style of the consultations and public information programmes that are taking place to sell the LCDS do a disservice to the case, leaving serious and fundamental issues unaddressed which might not otherwise cause controversy. Which Guyanese would argue against higher and free revenue inflows, the preservation of our forests that help to protect the iconic Kaieteur Falls or, more mundanely, cheaper electricity? And who would oppose the promise of good governance, reduction of corruption, better delivery of education, health, water and housing?
If the LCDS promises holds true and the McKinsey arithmetic is more realistic than it appears, when the “money starts to flow” we will have the same level of public services, all capable of being financed not by taxes but from rich countries. The government will be able to charge a more honest rate of VAT and a reasonable rate of income tax. Our education system will offer many more QCs and Bishops’ and we will be able to afford a more functional and productive university. It must also be a huge incentive for the Guyanese public to support.
Cynicism
Yet the public has not warmed to the idea and even in areas where there are captive audiences, the average attendance to the consultation is, generously, less than 20. Despite the huge and expensive PR campaign the public is not engaging and is at best cynical. There are concerns about what the country has to give in return, the secret commitments the President has made to the world and the secrecy and apparent conflict between what he tells the world and what he says at home. The LCDS assures us that our sovereignty is not at stake, yet the President has committed the country and future governments to cede to the world the stewardship of the country’s entire forest by outsiders. That is according to the same Economist which has on more than one occasion spoken with admiration of Guyana and the President’s initiative. The consultations need to point out that no government can bind its successors and need to ask about any opt-out clauses under REDD. Would we have to pay back any money we receive as one country has been bound to under a bilateral arrangement, and are there going to be non-financial consequences as well?
The public is cynical too that President Jagdeo is already showing signs that his commitment to the environment is not guaranteed and only this week he issued a threat to continue forestry exploitation unless the rich countries put up the money to pay rainforest countries to keep their forests. The cynicism has been fed too by Mr Jagdeo’s fickle and inconsistent loyalty to strategies.
This is not the first strategy that the President has embraced. He effectively abandoned both versions of the National Development Strategy (NDS) when he realised that a debt-write off strategy was more lucrative and then jumped on the Poverty Reduction Strategy with its promise of more donor funds. Next has come the National Competitiveness Strategy that offers substantial funds from the Millennium Challenge Account sponsored and financed by the United States. Would Jagdeo’s successor – from whichever party – be as committed to the LCDS that he is now single-handedly offering? Or as some cynics see it, is the LCDS the case for a third term?
The LCDS and the NDS
Those who have pulled out their NDS to make comparisons with the LCDS are struck at the comparative absence of detail and the narrowness of the LCDS. By the standard of the NDS, the LCDS is a mini-sector strategy, and it is surprising that none of the 3,000 persons who have attended the consultations has asked about NDS 2 which covers the ten years 2001-10. How committed is the ruling party to the LCDS and does it know and agree with the ceding of control of three-quarters of the country to foreign control?
The LCDS seems extremely short on imagination and ignores any incentives to consumers in preference to investors. Why is there no incentive for solar heating or disincentives for those who contribute in no small measure to the huge fuel bill and non-friendly imports? As one colleague said to me, the owners of the Prados and Tundras that are allowed in daily under duty and tax concessions should give him a credit for driving a small vehicle. The LCDS leans to large-scale agriculture without recognising the role of the small operator or the damaging effect of illegal cross-border operators which is likely to worsen as the road to Brazil makes it easier for those operators to come, do and go as they please. With LCDS milk and honey flowing will Guyanese still have to bear one of the highest tax burdens in the world and would the President finally correct the VAT rate to what it should be?
Seeing REDD
A doubling of any country’s annual budget is not a small matter. The economy and the society can be transformed by simply doing nothing. That must be a huge incentive for any government. Not that that is how the government intends to spend the money. Under the strategy the government will set up new institutions in the Office of the President to drive major low-carbon programme priorities and manage and direct the use of the money coming in under REDD. It is of course hardly reassuring that the money will be placed not in some trust or the Consolidated Fund, but under the watchful eyes of the Office of the President which also currently controls the Lotto Funds in breach of the constitution. Since the President’s embrace of a low carbon economy is a new development, which fund did the money come from to pay McKinsey for its dazzling mathematics to show the worth of our forests? REDD on the other hand is premised on good governance, accountability and transparency which have been endangered by Jagdeo’s disregard for the constitution and the law.
Nor is it clear how the international community putting all this money into Guyana will view the two-tier approach of the LCDS, which provides for the forests under Amerindian control to be an opt-in arrangement. Effectively the country is committed to ceding the vast portion of the country to the international community, but not the Amerindian-controlled forests which that community would be at liberty to manage and/or exploit if it so chooses. While they have a historical and cultural interest in the forests’ preservation, if the Amerindians choose not to be part of the LCDS would they be excluded from LCDS funds or would they get the best of both worlds? And how does Jagdeo’s proposal to deal with LCDS funds fit in with Article 77 of the constitution?
The PPP/C government under President Jagdeo has allowed some Asian operators in the forest sector free rein to extract and export forest products under some of the most glaring transfer-pricing arrangements, with minimal returns to Guyana. Yet, the LCDS cannot be a legally acceptable excuse for breaking a binding agreement as the LCDS seems to assume. The same is true in mining which is probably doing as much immediate harm to the Guyana environment as forestry can do.
Image
Internationally Guyana has established quite a leadership role in forestry preservation due to the Iwokrama project, established under President Hoyte, whose foresight in all of this goes unacknowledged. With President Jagdeo’s promise to the world of what amounts to several more Iwokramas, our international image has been enhanced. But image is not enough. Clout is, and that would have come from the combined efforts of the six or eleven countries with rainforests, depending on definition. Brazil’s is infinitely larger than Guyana’s and surely it would have been to our advantage to team up at least with our neighbour and others in the hemisphere. Assuming there are funds for REDD which would be necessarily limited, criteria for entitlement will have to be established and instead of Guyana and Brazil being on the same side, they may be competing for the same funds.
The difficult questions
Nor is the REDD to be taken for granted, and while there is a recognition that rainforest countries should be rewarded for preserving their forests, the how, the how much, who receives and who pays and whether under a multilateral facility through the UN, or by way of bilateral arrangements as Guyana seems to be working towards with Norway, are still to be decided. Many European countries other than Norway have already entered into arrangements with developing countries. There is Plan Vivo under which donors channel money to Mexico, Mozambique and Uganda to protect forests and plant trees. External inspectors verify the results and issue credits which the UN has chosen not to recognise. Combining these into a ‘Kyoto 2’ will not be easy nor will an agreement be helped by reported corruption in the Office of Climate Change in Papua New Guinea.
Who pays and who benefits are also unresolved questions with one side effectively arguing in Guyana’s favour that those who have a good track record of forest management should be rewarded ahead of those who exploited and now want to re-forest. But the ‘who pays’ is even more controversial. China and India, despite their economies growing at a rapid rate and creating emissions in the process, consider themselves as developing countries and argue that they are not really ready to forgo development for the environment. Why not America? they ask, but America’s own recent climate change legislation shows that while preserving the environment is a universal issue, domestic politics dictate what can be agreed and delivered. And is Canada a special case for its vulnerability arising from the melting of the ice? To crown it all, the conference will be taking place in the year of the world’s worst economic crisis since WW 2.
For me the biggest question mark about the LCDS is its failure to consider a Plan B which hopefully is not the threat that President Jagdeo issued a couple of days ago – let’s continue cutting our forests under the prevailing lopsided arrangements with the Malaysian and Chinese operators who just could not give a damn about Guyana. One thing is for sure: the money he hopes to receive under REDD is several times more than the country currently earns from the sector.
Next week we take a break from the LCDS to cover some topical financial issues and return with a concluding part the following week.