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Opinions of Saturday, 16 October 2010

Columnist: Amponsah, John

Discussing the Petroleum Revenue Management Bill of 2010


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By John Amponsah

This article seeks to discuss the Petroleum Revenue Management Bill (PRMB 2010). The 48-page document can be found on the website of the Ministry of Finance and Economic Planning. I would suggest to readers to start by reading the "Memorandum" section of the bill (pages 39 to 48) to obtain an overview before proceeding to the specifics of the bill. As of 10th October 2010, the copy of the document on the MOFEP’s website has some pages out of order in the memorandum section of the document. There are also some typos in this part of the document. These editing errors may be corrected in the future – maybe even on the day this article is published online.

Alternatively it may be easier to read a July 2010 copy of the document featured on the revenuewatch.org website or found elsewhere online since this earlier version of the document is more logically organized in my view. It is the version I primarily referred to while writing this article.

The memorandum clearly gives the impression that the Petroleum Revenue Management Bill is of significant importance to the future direction to be taken in the management of oil resources by the current government. 2011 is going to be a key year as it marks the beginning of harvesting the oil and managing revenue generated from it, which is why parliament should thoroughly discuss the document and related issues and why interested members of the public should remain abreast with developments concerning this issue as we approach next year.

The initial stimulus that caused me to pay close attention to this bill came from a call by the leader of the opposition NPP government for all concerned Ghanaians to look at this document. In his speech delivered at the 39th faculty week celebration of the faculty of social sciences, KNUST, on the 6th of October, Nana Akuffo Addo said:

“The current Petroleum Revenue Management Bill before Parliament is replete with clauses that need to be reviewed carefully to avoid traces of possible pitfalls embedded in them so that we can completely stave off the slippery slope towards making the discovery a curse. The entire nation must be involved in this debate to ensure that together we make this discovery a blessing.”

The full text of the speech can be accessed at a website address at the end of this article.

As I began to learn more about the bill, it very quickly emerged that this debate concerning the PRMB has been going on for the better part this year among politicians and specialist individuals and groups. Let us now consider what some other commentators have said about it.



PERSPECTIVES OF VARIOUS COMMENTATORS AND GOVERNMENT ON THE BILL

Mohammed Amin Adam, a lecturer in Petroleum Economics at Kings College, wrote an article in January 2010 entitled “Country's Oil Revenue Management - Transparency or Prudence? ” where he said “it appears the debate and consultations so far, have weighed on the side of prudent management of oil revenues, with little attention paid to transparency and broad governance concerns. But, how can resources be managed prudently without transparency?” This seems to me to be a valid question that must be addressed by the government. Much may have changed since January 2010, or has it? It appears that clause 7 and particularly clause 8 as well as clauses 51 to 59 of the bill attempt to address questions of transparency. Mohammed Adam has written other articles related to the oil discovery which can be found archived on Ghanaweb.

Mr Bentil of IMANI wrote a comprehensive analysis of the Bill back in May 2010, unfortunately it appears that at the time the article may not have had as much attention as it deserved. In fact the same could be said of a number of other specialist articles written on this very subject. Now that the issue has been brought to the public arena once again, I would entreat Ghanaians to visit or revisit these earlier write-ups. IMANI’s article entitled “The Problems With Ghana’s Proposed Oil Revenue Management Bill” outlined 5 undesirable consequences that may result from the bill as it currently stands.

In July 2010, Mr Ayamdoo of CHRAJ is reported in an article entitled “Ghana's Petroleum Management Bill is not original” to have described the bill as “‘cut and paste’ versions from international best practice laws on oil management” after analyzing the preliminary proposal. By this, he probably meant that the framework of bill appeared more generic than tailor-made for our particular needs.

It was reported only a couple of weeks ago, on 29th September 2010, that the National Civil Society Organization on Oil and Gas (CSO) “has slammed the Petroleum Bill currently before Parliament describing it as ‘hollow and ‘incomplete’”. The statement may have been a reaction to one made on the 23rd of September by the Chairman of the Joint Parliamentary Select Committee on Mines, Energy and Finance, Mr. James Avezi, that “the proposed Petroleum Revenue Management Bill...is based on sound and sustainable fiscal policies that transcend political regimes”.

So the government is saying one thing and CSO is saying another. The same CSO in April this year applauded MOFEP for making the text of the bill available to all interested parties. Interestingly both CSO and the government are calling for the public to be more involved in this debate. The CSO in April “invited all Ghanaians to access the draft Petroleum Resource Revenue Management Proposal at the Ministry's website and fill the accompanying questionnaire on how they expect future oil revenue to be managed” while in an article entitled “Parliament Urges Ghanaians To Pay Active Role In Oil Discovery” published at the end of September 2010, the government stated that “views on the Petroleum Revenue Management Bill and the Petroleum Exploration and Production Bill will be collated and drafted into a final document to be forwarded to parliament for passage into laws.” For all those who are interested, now is the time to make your views become a part of this process as this is a current issue as of October 2010 and the bill is currently before parliament.

Let us once again return to this issue of possible inadequacies in the PRMB. A question one might ponder is, should Ghanaians take the statement of a ‘hollow and incomplete’ bill in the same vein as the statement made by Nana Akuffo Addo that the PRMB “is replete with clauses that need to be reviewed carefully”? If these two similar-sounding statements are actually coming from two independent perspectives then does the PRMB really have to be more carefully scrutinized? Let us now take a look at some of the clauses in the bill.



EXAMINING SOME OF THE CLAUSES IN THE BILL

It may be best for the reader to peruse or better yet treat the Memorandum of the bill to a detailed reading in order to get an overview of how the current government of Ghana intends to manage harvesting the petroleum resource in the medium to long term period. The clauses I address below are some of the ones that caught my attention while I read through the document.

Clause 2 “establishes the Petroleum Account to be held at the Bank of Ghana”. From my understanding, the Petroleum Account is the first point of collection of revenue due to the country’s equity share in the oil resource. From this account, funds then get transferred to the “Ghana Petroleum Funds” which is a subject of further clauses in the document.

Clause 4 is one that merits attention. This clause “deals with the form of petroleum payment, specifically when payment is made in petroleum instead of cash”. With recent big deals being made by the current government of Ghana with interested parties of certain Asian countries, the stipulations of clause 4 may have to be made very clear in the bill.

Clause 5 “prohibits the use of the Petroleum Account for the provision of credit to the government, public agencies, and private sector entities, and adds that there is not to be borrowing against proven petroleum reserves”. It seems this clause means that the funds from the account will be reserved only for the special purpose funds: the Education Fund, the Health Fund, the Industrialization Fund and the Infrastructure Fund.

Clause 7 and clause 8 deal with issues of transparency. In particular clause 8 “provides for the publication of all petroleum receipts into the Petroleum Account on quarterly basis in the Gazette and in at least two national daily news papers”. This sounds like a great idea. In addition to publishing these in national papers, I would suggest that the Ghana Revenue Authority provide these quarterly figures on their website (www.gra.gov.gh/) in PDF or Word Document form so that they can be downloaded by any Ghanaian at any time. Over a period of time, the GRA could even add some documents showing trends obtained through statistical analyses of revenue data. I imagine this will interest many people.

Clause 9 deals with the “Ghana Stabilization Fund”. The concept of this fund is one that sounds sensible to me. What remains to be seen is the actual implementation and management of the fund, if it survives the final version of the bill.

Clauses 17 to 21 outline the operation of the Petroleum Account and the Ghana Petroleum Funds. The Ghana Petroleum Fund comprises the Ghana Heritage Fund and the Ghana Stabilization Fund.
The transfer of funds from the Petroleum Account to the Petroleum Funds and what happens to those funds once they are transferred is one area where there could be some disagreements. For one, clause 17 says there will be “disbursements into the Ghana Petroleum Funds for savings”. “Savings” could take a number of forms so this is one area that can be further discussed.

Clauses 19 and 21 are the two that Nana Akuffo Addo’s speech mentioned in the spirit of “clauses that need to be reviewed” (and I suppose debated), specifically due to the issue of earmarking funds from petroleum revenue to be included in the budget. The IMANI article written earlier this year highlighted this issue (referred to by some as the “Dutch disease”) when it was stated that

“We need to separate all Oil revenue from our current inflows, and treat it as a special fund for special purposes. This ensures that Governments are not slack in developing other areas of the economy and collecting taxes, which will avoid the Resource Curse and Dutch Disease. Putting oil revenue in the consolidated fund or spending it as part of our annual budget will bring us the problems others have suffered from treating their oil revenue as another regular source of government income.”

That is an IMANI point of view which I think is worthy of discussion. As far as this point of view is concerned, oil revenues will not have a significant impact on the rest of the budget.

Clauses 26 to 30 outline a three-prong structure, where (presumably) the finance minister has to consult with both the Bank of Ghana and the Investment Advisory Committee when it comes to management and investment of the Ghana Petroleum Funds. I think there should be room for the members of the opposition to have a voice in this process. Could there be a Parliamentary Advisory Committee with MPs from big and small political parties who are well qualified to give advice in addition to the Investment Advisory Committee? As it presently looks, it seems as if the Investment Advisory Committee only includes people from Bank of Ghana or the Ministry of Finance (see section 33(1) of the bill). So in the end this three-prong structure which is meant to check the Minister will just have people who either work with him/her or under him/her? Maybe a Parliamentary Committee may not be a bad idea? A few clauses further in this article we will also discuss the Public Interest and Accountability Committee.

The subject of the Investment Advisory Committee is covered by clauses 33, 34 and 35 (see the details in the actual bill).

NOTE: Clauses 51 to 59 deal “with matters of transparency and accountability as well as public interest”. The details in the main document are well worth the read. Section 56 (1) of the Bill states that “The Accountability Committee consists of eleven members including:
a) A member to represent independent policy research think tanks nominated by the think tanks,
b) A member to represent civil-society organizations and community-based organizations nominated by civil society,
c) A member each nominated by
i) Trade Union Congress
ii) National House of Chiefs
iii) Association of Queen Mothers
iv) Association of Ghana Industries and Chamber of Commerce
v) Ghana Journalist Association
vi) Ghana Bar Association
vii) Institute of Chartered Accountants
viii) Ghana Extractive Industries Transparency Initiative
ix) Academia

Presumably all of these members will have the requisite background to be able to function effectively on the Committee.

SUGGESTION: It is important to consider having a Parliamentary Committee with government and opposition MPs work along with the Public Interest and Accountability Committee and the Investment Advisory Committee to advise the Minister of Finance. This will also ensure that the Public Interest and Accountability Committee members get to work directly with elected officials on a regular basis and that the voices of the common people can be heard through their elected officials (MPs) on such a Parliamentary Committee. So far there is no mention of any such Parliamentary Committee in the bill (that I have been able to ascertain). I think it is worth considering unless there is already a Parliamentary body capable of performing such a role.



CONCLUSION
Some interested parties have argued that the PRMB have so far has some inadequate aspects to it. I imagine that these criticisms are efforts to actually improve the bill so that the final product that affects laws and policy will be well developed. The debate surrounding the PRMB has been going on for a while now however it appears that contributors to this debate have largely come out of small organizations and the opposition. What does the general public think about this issue? Perhaps it is time for the general public to take a more active role in this debate as well. Opposition (which includes all parties) in any country can play a viable role in ensuring that the sitting government is checked. Without active participation by a significant portion of the public, efforts of politicians in and out of government may not be enough to maintain accountability. Ghanaians need to pay careful attention to this bill which has not yet been passed into law at the time of writing.


SOURCES:
www.mofep.gov.gh/documents/Petroleum_Revenue_Management_Act%20_2010.pdf
www.revenuewatch.org/files/Final Petroleum Revenue Mgmt Bill July.pdf
www.thestatesmanonline.com/pages/news_detail.php?newsid=9824§ion=1
www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=182876

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