ExxonMobil announced the discovery of two more massive oil fields off the coast of Guyana last month. The news has reignited questions about how the South American country’s 780,000 citizens can most benefit from these resources.
If back-of-the-envelope estimates of around $5 billion of oil revenue per year are correct, that equates to around $6,410 USD per person—far more than the current GDP per capita of $4,655 USD. This wall of cash could be transformative or it could create a rash of new problems. Equatorial Guinea is an example of a country that lucked out with a huge oil windfall, but the money entrenched a repressive family oligarchy and poverty remains high despite GDP per capita of around $10,000 USD.
Guyana should instead learn from other countries that are distributing windfall revenues and letting citizens make investment choices for themselves. Bolivia, for example, already uses its hydrocarbon rents to fund several targeted social safety net programs, and some of us have argued elsewhere that it should adopt an approach to biometric identification based on the Indian model to deliver benefits directly to recipients. Optimistically, at a recent panel at Rice’s Baker Institute Guyanese Minister of Business Dominic Gaskin stated a clear commitment to move the government bureaucracy towards digitization and automation to reduce inefficiencies.
Other steps Guyana has already taken include:
Publishing the existing oil extraction contracts. In December 2017, Guyana released the Petroleum Agreement with Exxon to the public.
Starting the process of joining the Extractive Industries Transparency Initiative (EITI). Guyana’s candidature application was accepted in October 2017. It is now required to publish its first EITI report by April 25, 2019.
To maximize citizens’ benefits from the newfound wealth, Guyana should also:
Establish a Sovereign Wealth Fund to mitigate risks of volatile revenue and unsustainable spending. Guyana has already laid out the policy framework for a SWF. By creating a strong institution to manage a portion of the oil revenues, Guyana can set itself up for long-term sustainable growth.
Provide biometric IDs for its entire population... According to the World Bank’s ID4D, only four percent of Guyana’s population lacks a formal identification, so its ID infrastructure is already functioning. With a small population spread over a small geographic area, upgrading those IDs to a biometric platform is very feasible. (By comparison, Malawi achieved universal ID coverage of over nine million adults in less than six months in 2017.)
… and use them to deliver citizen dividends and other benefits. India’s Aadhaar platform provides biometric identifiers for state governments to deliver cash benefits to segments of the population. Being able to individually identify each citizen ensures that everyone could receive an equal share of the natural resource dividends based on a revenue sharing formula—or, like Alaska, a profit sharing from the SWF. For an even more progressive policy, Guyana could use the ID and payment systems to target the poorest citizens with even larger benefits.
Commit to a modern power system for the capital Georgetown and major towns. One of the limitations of an oil-driven economy is the typical lack of domestic jobs created directly by the petroleum sector. One way to enable employment and provide a highly visible benefit from oil wealth is electrification. While 15 percent of the population of Guyana is still without access to even basic energy, those with access suffer from inadequate supply and frequent outages. In fact, Guyanese businesses face more outages than the rest of Latin America. The government could work with Exxon Mobil to invest in infrastructure to deliver affordable, reliable, and abundant energy services. A modern power system that worked 24/7 in all the major urban centers would drive higher consumption for households, deliver better public services, and help to sustain higher non-oil economic growth.