One
year later
Trinidad Express
Petroleumworldtt.com
03 30 08
Today marks the first anniversary
of the passing of Lloyd Best.-economist, political
scientist,
independent thinker and the quintessential Caribbean
man. Last week we also observed the first anniversary
of another significant and not unrelated "passing".
On March 15 2007, the House of Representatives
accented to the Heritage and Stabilization Fund
Bill.
Yes the Heritage and Stabilization Fund (HSF)
is officially one year old! What do these two events
have in common? Well, one of Lloyd Best's major
concerns in his last days was the issue of managing
this hydrocarbon based economy in a golden age
of plenty. Among his many recommendations was the
need to have not one, but several funds.
Best argued for (1) a Heritage Fund separate from
(2) a Stabilization Fund and most importantly (3)
a Provident Fund .
The latter was his main instrument for sequencing
the timing of expenditure over the longer term
in a manner consistent with the country's productive
capacity.
Central Bank Governor Ewart Williams
This strategy was meant to avoid the rapid expansion
of aggregate demand, supply bottlenecks and the
consequent overheating that the economy is currently
experiencing. That this proposal never saw the
light of day is not surprising.
However, what is very disappointing indeed is
the apparent limited progress made in putting in
place the operational aspects of the HSF.
Following the passage of the Act in March 2007,
the Central Bank through its outreach programme
made a conscious and deliberate effort at a wide
dissemination of the information on the Fund.
Apart from the seminar hosted at the Bank in April
2007, the Central Bank Governor has spoken at several
for a on the subject, the very latest being the
South Chamber Petroleum Congress in February this
year.
Notwithstanding the gallant efforts of the Governor,
there has been very little information forthcoming
on the HSF.
The country should not lose sight
of the fact that the HSF represents accumulations
of "the
people's money."
Therefore the people have a right to know on a
frequent periodic basis what is happening. So what
are some of the questions that people would like
to have answered?
Against the historical background of widespread
corruption in some oil exporting states, perhaps
the first question that comes to mind concerns
the management of the Fund. Who is managing the
money? The Act provides for a five member Board
of Governors, three of whom must be appointed by
the President.
The Board in turn shall designate the Central
Bank to be the Fund Managers responsible for the
day to day management of the Fund including investment
decisions etc.
While it is comforting to know that the Central
Bank is by law the designated Fund Manager, there
seems to be widespread public ignorance surrounding
the membership of the Board of Governors.
I have been able to learn the appointed members
of the Board are: Sam Martin, chairman, Central
Bank Governor Ewart Williams, Alision Lewis, Permanent
Secretary Ministry of Finance and Dr Michelle Scobie
- Corporate Secretary. Since the Act specifies
that a quorum is three members, the current slate
of appointees is sufficient to conduct the business
of the Fund. One wonders, however, why the Board
has not been fully constituted after a full year
in operation. The composition of the Board also
raises interesting questions. Shouldn't this Board
have at least one representative of civil society
to guard the interest of the people? Can the current
membership be considered to be independent of the
direct influence of the Government?
A second question relates to the reporting obligations
of the Fund. When and through what media are we,
the people, to know about what is happening to
the money? How much has been deposited over what
period? What is the size of the Fund? What is the
composition of the investment portfolio?
The Act provides for the Board to provide reports
on Fund performance on a quarterly and annual basis.
It is also obligated to respond to any Ministerial
request for a special report at any time.
The audited financial statements of the Fund must
be laid in Parliament within four months of the
close of the financial year. Note that it is unclear
whether the financial year coincides with the Government
fiscal year or whether it is on a calendar year
basis.
By virtue of the provisions in the Act, there
is no obligation to report to the people on the
people's money apart from the audited financial
statements being laid in Parliament once annually.
We would expect the Central Bank, as Fund Managers,
to meet its statutory obligations as it has throughout
its 40-plus years.
But is this sufficient? In the interest of transparency
shouldn't the Board voluntarily make relevant information
easily accessible to the general public on an ongoing
basis? After a full year under the Act and nine
years since the initial deposits into the then,
Stabilization Fund, the public still has no knowledge
of the distribution of the Fund's investment portfolio,
or of its interest earnings.
The act provides for excess revenues to be deposited
into the Fund on a quarterly basis.
Yet, in a fiscal year in which the price of oil
is nearly double the budgeted price, there has
been no disclosure about the amount of money deposited
into the fund over the last three quarters.
Are these demands premature? I think not. There
is sufficient evidence of best practice in the
management of sovereign wealth funds to inform
the Board of what is an acceptable level of public
disclosure and information.
Internet technology and mass media provide limitless
avenues for the dissemination of information. In
that context, the absence of timely information
from the Board of the HSF is unsatisfactory at
best.
Moreover, any decision to stick only to statutory
reporting obligations is contemptuous of the rights
of the people of Trinidad and Tobago to know what
is happening with their money.
Hopefully we would see some improvement over the
course of the next year.
Meanwhile, the people of Trinidad
and Tobago should heed the words of Thomas Jefferson- "the price
of freedom is eternal vigilance" .
Story by
Energy
Correspondent from
The Trinidad Express
The
Trinidad Express
Wednesday, March 19th 2008
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