If The Bahamas is to truly benefit from the financial windfall that could come from oil drilling, government’s institutional structures for managing natural resources and their proceeds, accountability and oversight structure must undergo substantial improvements, former Central Bank Governor Julian Francis told Guardian Business yesterday, adding that the discovery of commercially viable quantities of oil in this country could greatly benefit the country’s fiscal position.
While the government’s contractual arrangements with Bahamas Petroleum Company (BPC) are largely unknown, and with more negotiations likely to come should the company find commercial quantities of oil in The Bahamas by the first or second quarter of 2021, Bahamians are not likely to know soon what such a discovery could mean financially for the country.
However, as BPC is confident of its prospects for up to 1.44 billion barrels of oil at its first site, and is preparing to drill in December, Francis said a windfall that could come from The Bahamas becoming an oil-producing country would boost the country’s development.
“If it’s a significant find, inevitably it is going to benefit the fiscal position of The Bahamas,” said Francis.
“Even apart from where we are right now with the very challenging period through which we are going, even in normal times, one of the huge challenges of the government of The Bahamas, like any developing country, is where you find the resources to fund the development you really want to do, namely infrastructure development, etc.
“We have got a huge gap between the development objectives that intuitively we have for The Bahamas and how it works, and the resources which are available today.
“Nobody would argue that we wouldn’t want to see as much of that kind of development in the way of new resources to the government as would be possible.”
Francis, though, said he is not convinced that the systems that are in place, and have been in place for some time, are capable of managing a resource that could be so large, as to turn the tide of the country’s development.
“I believe that the institutional structure and the arrangements that exist in our country today to manage this kind of asset is weak or non-existent,” he said.
“We don’t have the institutional infrastructures to properly oversee the way we would manage this kind of newfound revenue income, and where we would prioritize its use, how it would be overseen adequately, how transparent that process would be, and all those kinds of things.
“One is not trying to be critical. One is just describing what we have in place and what we don’t have in place, and I think most Bahamians would agree if they stopped and thought about it.
“We don’t have a framework within which to manage these kinds of things.”
Francis pointed to the country’s mismanagement of crown land as a case-in-point. He said the procedures for the management of this particular resource seem to be non-existent or unknown.
He contended that government has to commit to proper governance and transparency before taking on a resource like oil.
“When we have resources like that that become available to us, I think you have to be very optimistic to think that they will be well managed,” said Francis.
“These are the kinds of challenges we have to manage, we have to deal with, if we are going to benefit from these kinds of resources that could come our way.”