GOVERNANCE IS KEY
Oil and gas: value of historic developments and new paths
Today, we find ourselves at a pivotal moment in Suriname’s history. The ongoing developments in oil and gas have opened up new paths, yet they also intersect with aspects of our past.
We are familiar with exploitation of minerals because for over a century, bauxite has been the main industry. Through collaboration with the international business community, including multinationals, we did build a wealth of knowledge and experience. Suriname has consistently upheld its reputation as a reliable partner, honoring agreements. That bauxite industry provided us with results that we continue to benefit from, today. The hydroelectric power station is a good example of that. However, we were not able to sustain all the wealth and prosperity once generated by the bauxite industry.
Our independence in 1975 came with a substantial amount of development aid, but the focus of the debate was primarily on money. Regrettably, here too maintaining the progress proved to be difficult.
During its nearly half-century of independence, Suriname went through several periods of severe political, economic and social turbulence and decline. Neither the bauxite industry nor the ample Dutch development resources were able to guarantee sustainable development.
The hard conclusion: governance matters
Natural resources and financial assets undoubtedly play pivotal roles in a nation’s progress. However, the hard conclusion we draw is this: sustainable development directly depends on good and effective governance. How countries are governed—their policies, transparency, the commitment to the welfare of their citizens—determines their trajectory; it is not in the natural resources or money.
We can also witness this lesson across the globe. Countries blessed with abundant natural wealth, often fail to put them to work in favor of their citizens, because of governance issues. Yet, there are shining beacons—Japan and the Asian tigers—where good governance has propelled sustainable development, irrespective of the availability of resource.
With the phasing-in of the offshore oil and gas developments, we are entering a new era. Our small, self-developed onshore oil industry has provided us invaluable startup knowledge and experience for the larger-scale phase we are entering. It adds up to our familiarity with international business practices, our commitment to international agendas such as the SDG’s, environment, and labor rights that we take seriously.
Our journey of over half a century, underscores the most fundamental truth: governance is the key to sustainable development, whether we possess vast natural resources or not. It transcends mere management; it embodies transparency, accountability, and ethical decision-making.
Suriname’s resilience: a journey of governance and economic recovery
Today, I want to share with you, a remarkable chapter in Suriname’s recent history—a story of resilience, collaboration, and effective governance.
Four years ago, our nation suffered its most severe macroeconomic crisis. Alone, we could not unravel the complexities that threatened our stability. So, we turned to the International Monetary Fund (IMF), seeking a lifeline.
The program we embarked upon in 2021 was no easy road. It demanded sacrifices, strategic decisions, and unwavering commitment. Yet, it has proven effective, breathing life back into our macroeconomy and restoring international confidence.
Over these four years, we achieved remarkable and significant milestones.
- Balanced budget: We steered an unprecedented budget deficit of about 20%, back within normal limits.
- Debt management: All debts were rescheduled, and a sustainable debt management plan emerged and was agreed through consensus with all stakeholders.
- Banking system health: We strengthened the independent policy and operations of the Central Bank. And the commercial banking sector is being revitalized and steered out of risk zones.
- International reserves: Our international reserves, which were as good as depleted, have been rebuild and are above international standards.
- Inflation control: Inflation, once soaring above 60%, now hovers around an expected 14% this year, and probably lower.
- Stability: Exchange rates and prices stabilized, eliminating the scarcity of foreign and local currency.
- Social programs: A robust social program is being implemented, targeting subsidies to identified groups.
- AML/CFT measures: We are implementing a stringent Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) set of measures.
- Electoral reform: For the first time in history the electoral system now ensures that every vote carries equal weight.
- Government efficiency: For the first time in history the public sector saw a 5% reduction in civil servants during the last year, cutting back over 2.400 positions, without a single forced layoff.
- Tax reforms: We shifted the tax burden from incomes to consumption and private wealth.
- Growing confidence: International confidence in Suriname is on the rise, reflected in improved credit ratings.
In fact, this was a testament of leadership, dialogue and unwavering commitment. How did we do this? The government entered into an intensive and continuous dialogue with the leadership in parliament, the business community, trade unions, religious organizations, the civil society and the media. And apart from the IMF, we gained valuable support from the international community.
Here is an extraordinary aspect in our IMF cooperation program. In no way did the program hinge on oil and gas prospects. It underscores that the economic restoration will rest on governance, irrespective of resource availability. While investment decisions will enhance our outlook, governance remains paramount.
Managing surplus resources
Today the county’s budget is tight, but we are quickly approaching significant surpluses, which will pose new challenges. Managing this asset require distinct economic skills. We must prevent that sudden resource abundance trigger increases in prices of food, housing, services, in fact, from triggering inflation and unintended consequences.
The sovereign wealth fund must be put in place and activated, so it becomes our shield — a policy instrument to channel large inflows wisely, safeguarding predictable and steady progress for today and for the future.
Lessons from around the globe
Over the years, I have learned from remarkable people across the globe, and their practical and valuable insights have shaped my perspective. I want to share some of them with you.
Last year, being in Dubai, I asked a sheikh about their journey in oil & gas. He answered: ‘In the beginning we lacked knowledge, we had to bring in foreigners, and we paid a lot of money to learn, but we invested to build the capacity and the institutions so we could manage our industry.’
I asked a good friend from Saudi Arabia, who is president of a multilateral development bank, ‘How did Saudi Arabia do it.’
He emphasized two critical steps: ‘Ringfence your central bank so it can operate independently from undesirable political influence. And secondly, ringfence your oil company. In our country, not even the royal family can touch the oil company.’
Independence ensures stability.
During the SEOGS last year, the CEO of an oil multinational shared a simple but valuable truth: ‘Don’t presell your oil. We are working in a country where the oil was traded before the first barrel was lifted, leaving the local community impoverished.’
The president of an African development organization recently explained to me a dramatic situation. ‘One of the major exporters of crude oil in Africa has to import all its refined oil and depends on third countries and price volatility, because their lack of investment in processing.’
National vision and strategy
As we embrace oil and gas becoming the largest industry, we remain committed to an integrated economy, with agriculture, banking and services. Local content and local people are important.
We stand as one of the world’s few carbon negative countries. We want to maintain that status even amidst the oil and gas development; we want to remain the greenest country in the world.
My grandson’s dream
Two years ago, at the second SEOGS, I promised my then three-year-old grandson – who is crazy about technology – to take him to the exhibition. That did not happen. But then his mother explained him about oil, Staatsolie, and the coming developments. When he had taken it in, he responded:
‘Mom, when I grow up, I want to work at Staatsolie too, just like you. But then I’m going to build my own oil company.’
And from that day on, he started digging for oil in our garden.
We are looking for partners in development, companies with international corporate governance standards. To come with technology, capital and knowledge, but more importantly, to carry compassion. To become the role models and inspire our youth, to be part of their bright future too.
Elections decide the quality of governance
In less than a year Suriname faces elections. Our choices will shape how governance will look. We have to make sure to stay on the path of healthy macro-economic conditions, a sound budget, an independent central bank, strong institutions – so we can continue to transform the minerals and opportunities into blessings.
In closing, we have to ensure, that through good governance, every drop of oil fuels hope and prosperity for generations to come.
Thank you for having listened to me.