Guyana now satisfies governance principles of Sovereign Wealth Funds worldwide – Financial Analyst

Following legislative changes made by the government within three years of assuming office, Guyana has joined the many countries whose sovereign wealth fund is compliant with the 24 Generally Accepted Principles and Practices (GAPP) for sovereign wealth funds.

This is according to Guyanese Financial Analyst, Joel Bhagwandin, who published the information in a technical analysis of Guyana’s Natural Resource Fund on August 2.

The principles and practices, more commonly known as the “Santiago Principles”, are voluntary guidelines designed to promote effective governance, prudent investment practices, transparency, and accountability, while encouraging a more open dialogue and deeper understanding of sovereign wealth fund activities.

They are observed by more than thirty countries’ Sovereign Wealth Funds (SWFs) and currently form the cornerstone of the International Forum of Sovereign Wealth Funds (IFSWF).

In his report, Bhagwandin highlighted that the implementation of the principles can be grouped into three key areas: legal framework, objectives, coordination with macroeconomic policies, institutional framework and governance structure, and investment and risk management framework.

In Guyana’s case, the objectives of the Natural Resource Fund are set out in the Natural Resource Fund Act and are aligned with the economic policies and developmental agenda of the current administration.

As it pertains to the institutional framework and governance structure for Guyana’s NRF, the country’s institutional framework is the operationalisation of the fund, which is held in the Federal Reserve Bank.

It is governed by the Bank of Guyana, which has responsibility for the operational Management of the Fund, the Board of Directors, the Public Accountability and Oversight Committee, the Ministry of Finance, and then ultimately, the National Assembly.

The investment and risk management framework comprises the investment committee, the investment adviser(s), the private manager(s), and the investment advisory company.

The 2019 Natural Resources Fund Act, implemented by the then APNU+AFC Administration, aimed to serve as a framework for the management of the Natural Resource Fund.

That act delegated full management responsibility of the fund to the government minister responsible for finance.

However, Bhagwandin’s report highlighted that that decision is a deviation from the Santiago Principles, which can effectively compromise transparency, accountability, and good governance of the Fund.

In 2021, the current administration tabled the amended NRF Act in the National Assembly and successfully passed the legislation, which delegated governance of the fund to a Board of Directors comprising a minimum of three members and a maximum of five members appointed by the president.

The report further details:

“With respect to transparency and accountability, the NRF Act mandates monthly, quarterly, and annual reporting. The annual report has to be tabled in the National Assembly, and the Fund is subject to both internal and external audits.”

Further, the management of the fund is not to be determined by the Board of Directors, but rather, the Board has management responsibility for the fund and is guided by the legislation on how the Fund ought to be managed.

The board, therefore, cannot legally deviate from the investment mandate of the fund as stipulated by the act.

Guyana’s 2021 NRF Act is therefore more in line with a prudent structure from a transparency and accountability perspective as well as a governance standpoint, the report disclosed.

Regardless of the appointing authority and the composition of the Board and its committees like the investment committee, these individuals cannot act independently or based on orders from the president or any political party.

Those persons, instead, must perform their duties in accordance with the legal parameters set out in the NRF Act as it pertains to the investment mandate and overall management of the fund.

In December 2019, under the previous administration, Guyana was approved to become an associate member of the International Forum of Sovereign Wealth Funds.

According to the IFSWF, associate members are institutions that are still in the process of being established as sovereign wealth funds, or national government institutions of countries that are actively developing arrangements for the creation of a sovereign wealth fund.

IFSWF also grants associate membership to those SWFs that require an amendment to national law to become full members.