When the highly-anticipated ‘Green’ Paper for the establishment of the Sovereign Wealth Fund (SWF) was laid in the National Assembly on Wednesday, Finance Minister Winston Jordan declared it was an example of the administration’s commitment to good “governance and accountability.”Jordan told the National Assembly that the Green Paper, which sets out preliminary proposals to stimulate discussion, also points to possible courses of action open to the SWF legislation.Saying he anticipates the proposals would be supported by both sides of the House, given the crucial role the fund would play, he noted stabilisation, savings and domestic development are key objectives of the fund and the fiscal rule options provided. And given the uncertainty surrounding the future of fossil fuels, Jordan emphasised the need for savings to begin from the first day of production.“To achieve this function, revenues will be invested in diversified portfolios comprising financial assets external to domestic, with long investment horizons,” he explained. He added that the paper also focused on why the Fund is necessary, and how it can help to protect Guyana against Dutch Disease.One way of doing that, the minister noted, is by sterilising boom revenues and ensuring that export earnings from petroleum only enter the economy at a rate at which the economy can absorb.In the short-run, resources are overemployed, but this cannot be sustained indefinitely. One way of preventing overheating, according to the paper, is to scale the investment expansion — for example, developing infrastructure — in a constant pace to increase the economy’s productive capacity sustainably.Single fundWhile noting that establishment of the SWF is relatively complex, and there can be substantial administrative costs, the paper noted that if two completely separate funds are established, then this implies that there are two governance structures, two investment policies, and two external audits.At present, the Government is touting the Natural Resources Fund, which is focused on the management of the oil resources but with specific attention to how this will tie in to Government’s Green State Development Strategy, a document that is yet to be completed and presented in Parliament.The Government said in its Green Paper that it would be an unwise decision to spread the limited expertise and experience in fund management in Guyana across two separate funds. The costs of managing two funds would be much higher than those of managing a single fund.As such, the Government considers that it is most efficient to have a single fund (the Natural Resource Fund). It said both economic theory and case studies of Botswana, Norway and Timor-Leste demonstrate that a single fund can effectively achieve multiple objectives.Economic modelling also demonstrates that with the proposed fiscal rule for Guyana — the Economically and Fiscally Sustainable Amount rule — a single fund will lead to economic stabilisation and substantial long-term savings, while avoiding increased administrative costs that establishing multiple funds would entail.ManagementIn relation to management of the Fund, the Green Paper has recommended that Parliament be responsible for passing the Natural Resource Fund Act; approving the Annual Budget, which would include the annual withdrawal from the Natural Resource Fund; and reviewing the Annual Report.“The Ministry of Finance would be responsible for overall management of the NRF, including requested withdrawal in the Annual Budget Proposal; calculating the Fiscally Sustainable Amount; drafting the Investment Mandate; entering into the Operational Agreement with the Bank of Guyana; and drafting the Annual Report and reporting on the NRF through the Annual Budget,” it explained.Also, a Sovereign Investment Committee (SIC) would be responsible for advising the Finance Minister on the investment mandate, and would consist of seven members appointed by the Finance Minister.The SIC would comprise of a representative of the minister; an ex-officio representative nominated by the Minister of Natural Resources; an ex-officio representative nominated by the Governor of the Bank of Guyana; a representative nominated by the Institute of Chartered Accountants of Guyana; a representative nominated by the Guyana Association of Bankers; a representative nominated by the Leader of the Opposition; and the Senior Investment Adviser and Analyst.The BoG’s role would be the operational manager of the fund, which will manage it in accordance with the operational agreement and investment mandate. The BOG would also draft quarterly reports and annual accounts, procure private managers, and draft management agreements and investment instructions.