Jagdeo’s mis-conceptions of the details of Guyana-Norway MOU source of international embarrassment

The road from Oslo, Norway to Cancun, Mexico has been proving to be a rather rocky one for Guyana’s President Jagdeo. In February 2009, Jagdeo and Norwegian Prime Minister Jens Stoltenberg signed a memorandum of understanding in the Norwegian capital Oslo under which Guyana would receive from Norway up to US$250 million ($51.7 billion) during a five year period ending in 2015 for this country to preserve its forests. In return Guyana has undertaken to accelerate its efforts to limit forest-based greenhouse gas emissions and protect its rainforest as an asset for the world. It was a euphoric moment for Jagdeo, one that placed him in a positive light on the world stage and caused some of his supporters to nominate him unsuccessfully for the Nobel Peace Prize.

As a measure of President Jagdeo’s excitement, in November 2009, he described the agreement as a watershed moment, “another first by Guyana” for which Norway should be commended. One year later at a climate change forum in Cancun, Mexico on Tuesday December 7 when, sitting beside the Norwegian Prime Minister, he tore off at his long-time benefactor the World Bank as well as the Norwegians for what he perceives as delays in the disbursement process of what he described as “our money.” According to Mr Jagdeo, a process that Stoltenberg saw as going well, had turned into a nightmare that could for good measure cost him his presidency. This latter comment clearly indicates that President Jagdeo had overstepped the boundaries and with this had lost the respect of Stoltenberg and the World Bank which was quick to point out the mechanics of the Norwegian deal.

Irresponsibility and immaturity
Mr Stoltenberg’s incredulous look at the iconic moment of his outburst was a defining point for Mr Jagdeo and Guyana, a measure of how one moment of irresponsibility and immaturity can undo a year of good solid and hard work. Suddenly the Champion of the Earth shrank into ordinariness and Guyana was exposed as a country unable to appreciate and demonstrate basic rules of diplomacy and discretion. But those who have observed President Jagdeo over the years would not have been as surprised as Mr Stoltenberg. That has been Mr Jagdeo’s brand of behaviour in Guyana where he could rail, abuse and defame with complete impunity.

By the time the President had returned to Guyana two weeks later his temper had subsided and more calmly he announced that he expected disbursements to take place some time next month. Bad as it, Mr Jagdeo’s conduct in Cancun might have been understandable, except that the display of crassness was not an isolated case of abuse but rather a pattern that has been directed at the British over security, the Americans over drugs, the World Bank over process and Guyanese over the mildest criticism, no matter how justified. This is more than a problem for Mr Jagdeo; it is one for the country, its citizens and its diplomats. Their task of damage control will add to the challenge they face with few and sometimes mixed signals from the Office of the President that is effectively the country’s Foreign Ministry.

Glaring misconception
So what is the problem or are there more than is being let on? President Jagdeo had said in January that Guyana had complied with all of the conditions under the Memorandum of Understanding (MOU) and that the “only outstanding thing” is the settlement of the trust fund mechanism through which the money will flow to Guyana. Even if that was all, a trust fund carries immense legal and other obligations as the World Bank Director for the Caribbean Yvonne Tsikata had to point out in trying to correct our President.

The fund, the Guyana REDD+ Investment Fund, which aims to be a multi-donor financial mechanism managed by a reputable international organization, is to be operational before any contributions can be disbursed from Norway. Describing Jagdeo’s position as “the most glaring misconception,” Ms Tsikata explained that as a trustee, the World Bank cannot disburse any funds to the implementing partners such as the UN and the Inter American Development Bank, before getting the green light from a Steering Committee comprised of Norway and Guyana. She added that up to now, the committee has not instructed us to transfer any funds and as trustee, the World Bank cannot act faster than the Steering Committee. That elementary fact appears to have escaped Guyana’s President.

And as Prime Minister Stoltenberg pointed out in Cancun, his country’s agreement with Guyana is one that is results-based. Knowledgeable persons I have spoken to confirm Mr Jagdeo’s misinterpretation of the agreement which he negotiated.

Technical and scientific issues
Persons familiar with the agreement point out that its technical and scientific issues and Guyana’s spending proposals under its hurriedly cobbled up LCDS are distinct issues which have been distorted and conflated by Mr Jagdeo. The Verification Report for Norway is not final – Rainforest Alliance has been contracted to undertake this verification of compliance with the enablers (progress indicators) in the Joint Concept Note attached to the Norway-Guyana MOU. I understand that the report is not yet finalised.

Also incomplete is a report by Poyry, a New Zealand management consulting firm that specialises in forest and related industries and which is conducting a study into the technical and scientific issues of monitoring, reporting and verification system (MRVS) for carbon emissions. So, there is no verified performance, and consequently, the Norwegians have no obligation to pay in advance of the agreement on verification.

A separate issue is the proposals for spending. President Jagdeo is confusing these two issues. He said that all spending proposals will be run past the MSSC, which is different from the Steering Committee under the GRIF. According to the LCDS website, the MSSC is not recorded to have met since August, and there is no evidence that MSSC has considered any of the proposals on spending – these are Mr Jagdeo’s proposals.

Then there still remains the anomaly that this is a REDD scheme. REDD is about reductions in carbon emissions. But Guyana is increasing emissions – from increasing gold mining and gold exploration, road-building and associated land-clearing, increasing log exports. So that paradox remains unresolved.

Cancun was a failure for Guyana which was represented by Andrew Bishop but who was effectively silenced by Mr Jagdeo. How fast we have lost ground in terms of our credentials as a climate change champion is demonstrated in the recent UNASUR communiqué, in which there were prominent mentions of Ecuador’s Yasuni initiative to keep oil in the ground but no mention of Jagdeo’s LCDS, even though the summit was held in and financed by Guyana.

Money, money, money
President Jagdeo’s performance also vindicated the view of many here that his only interest in climate change was in the money it could bring. Had the McKinsey study been done by any lesser known consultancy it might have been described as bogus, valuing the retention of our forests at US$580 million annually, when we settled for an average of less than 10% of that for each year over the next five years. And at a very practical level, if Mr Jagdeo really believed in the dangers of climate change, the rise in ocean levels and the overtopping of our sea defences, would he have allowed an entirely new community involving some of his close colleagues to be established right on the shores of the Atlantic knowing that it is the state that will have to come to the rescue of the property owners if the fears were to be realised?

And some of President Jagdeo’s LCDS proposals are equally spurious as the World Bank and Norway would discover with minimal research of the Amaila Falls hydro-project and his land titling for the swing voters in next year’s elections. We are told that just when the 2011 elections are around the corner, Mr Jagdeo wants to spend some $1.6 billion on land titling. Not only has the process of land titling for Amerindians been greatly simplified under the 2006 Amerindian Act which his government was finally forced to bring into law four years late. In fact for several years the national budget has easily provided the money for land titling exercises and there is no evidence of any major backlog of applications that are outstanding. Some fear that without campaign financing laws and no financial controls, the bulk of the $1.6 billion will simply be used for political purposes.

The LCDS Unit in the Office of the President has been busy spending money while some of its key players have been engaging in private consultancies. They should have been sent home a long time ago. Ram & McRae had cautioned about including in the 2010 Budget money from Norway but instead of cutting back on expenditure we now have the Finance Minister going to the National Assembly for $6 billion including $4 billion for Irfaan Ali’s ministry. One can only hope that on this occasion, he has fewer difficulties with the truth than he had with a similar sum around the same time last year.

And finally there is an element of governance in the agreement. That is another word that makes Mr Jagdeo see blue.

Have a happy and peaceful Christmas.

Transparency, accountability underpin Guyana and Norway MOU

President Jagdeo was obviously pleased about the Memorandum of Understanding (MOU) signed by him and Norway’s Minister of the Environment and International Development Erik Solheim under which Norway agrees to provide defined financing for Guyana’s evolving Low Carbon Development Strategy (LCDS). For the President it is vindication of his huge investment in time and money pursuing LCDS funding, in exchange for a commitment to drastically restrict the exploitation of the country’s forests, described by him as the country’s most valuable resource. The signing comes within three weeks of a United Nations Conference scheduled for Copenhagen, Denmark to consider a replacement for the international treaty on the environment called the Kyoto Protocol. In fact President Jagdeo was so excited at a post-signing press conference that he called the MOU “our Copenhagen.”

Under the MOU, Norway will pay US$30 million (approximately $6.2 billion) next year and potentially up to US$250 million ($51.7 billion) by 2015 for Guyana to preserve its forests. According to the President the figure committed by Norway “is more than the combined loans and grants Guyana receives on an annual basis from the World Bank, the Inter-American Development Bank, the Caribbean Development Bank and the European Union.” If not inaccurate, that statement is terribly misleading since it compares an annual amount with a five-year sum. We have also had debt write-offs, loans and grants from countries and institutions in some years, in net present terms, in excess of the total amount committed by the Norwegians. Notwithstanding this, the agreement is indeed an achievement and needs no exaggeration or misrepresentation, even if it comes at a huge cost to the country. Some time soon we will need a thorough evaluation by the experts, academics and economists to assess the cost/benefit of the agreement to the country.

McKinsey and the US$580 million
In response to the President’s comparison between Norway and the rest of the donor community – excluding significantly individual countries and the International Monetary Fund (IMF) – his critics might add that the agreement comes with more strings than those that have ever been imposed by the International Monetary Fund, the World Bank, the Inter-American Development Bank, the Caribbean Development Bank and the European Union, all combined. More significantly, the critics might suggest that a far more meaningful comparison is between what the Norwegians have committed and what McKinsey, the government’s LCDS consulting guru, has told them, quite unrealistically, that our forests are worth to the world.

Essentially the LCDS is arguing that since the world benefits, according to McKinsey, by US$40 billion dollars per year from the conservation of our forests, and since to Guyana the annual worth of the forest in economic terms is US$580 million, then the world must pay us that sum. Accordingly McKinsey, in a document which has not been released despite calls for this to be done, has appears to have convinced the government of the country’s entitlement of annual payments by the international community in the following four phases.

Phase 1 (2009) – No sum indicated but the Draft LCDS refers to interim payments to launch the LCDS and funding for Monitoring, Reporting and Verification (MRV).

Phase 2 (2010 – 2012) – US$60 million to US$350 million annually for capacity building, human capital development and the investment required to build a low carbon economy.

Phase 3 (2013 – 2020) – US$350 million to US$580 million annually for essentially the same purposes in Phase 2 and for payments to avoid deforestation and climate change adaptation.

Phase 4 (2020 [sic] and onwards) – Greater than US$580 million annually, providing incentives at or above the McKinsey’s annual economic valuation of the country’s forests.

Who will join Norway?
Critics should not however jump to the conclusion or their calculator to prove that the amount committed by Norway is negligible and a mere fraction of what McKinsey had led the government to believe it should receive from the world in return for strict limits on forestry exploitation. The total amount committed by the Norwegians through to 2015 is indeed US$100 million less than the amount of the lower range McKinsey told the government it should expect during the seven-year Phase 3. In fairness, however, the LCDS is premised not only on inflows from Norway but from other countries that either historically caused much of the world’s pollution, such as the US, Europe, Japan and Russia or the newer, large-scale polluters such as China and India.

That is why I think President Jagdeo is wrong to have exulted that the deal with Norway is “our Copenhagen.” Perhaps the President is not optimistic that much will come out of Copenhagen and in any case for the first time he told the nation this week that even if agreement is secured in Denmark, it would take almost four years before funds would flow to countries like Guyana. What that means is that unless there are other ‘bi-laterals’ such as the Guyana-Norway deal, Guyana cannot look forward to similar funding for at least another four years.

Under the Draft LCDS, Guyana had identified more than US$1 billion in “essential capital projects” that can be fully or partially funded through private investment assisted by an in-country infrastructure investment fund built from forest compensation payments. The Norwegians are clearly not interested in any such in-country fund, and if we accept the President’s four year prediction, then there is a huge financing gap to be filled. Now that the Norwegians have put down their marker, the Government of Guyana has a lot of work to revise the LCDS and make it more realistic. Hydro-power which appears as a centre-piece of the LCDS will now have to be financed from other sources, the private sector will have to come up with quite a lot of money and the government too can do its part. The money pledged in the first year equates to less than 6% of the national budget for 2009 and with proper financial management and a commitment to collect the taxes legally due by the army of tax evaders out there, we can easily raise more than what the Norwegians have committed in the first year of their programme.

The options for achieving that are available, but are not new, neither has there been any commitment to a national response to global warming or to responsible financial management. Only this week we saw the Minister of Finance presenting his mid-year report that was due at the end of August but conveniently misdated. We have never been an environmentally conscious people and the economy is based on the most inefficient and unfriendly use of energy whether in vehicle fuel consumption or electricity; we have no policy on recycling and fail to manage our water resources efficiently or exercise proper flood control measures.

The cost
In return for the less than required funding for the LCDS the country is giving up a lot, including control over the money we receive and sovereignty over our forests, contrary to what the government had been assuring Guyanese. The Norwegians have obviously been tougher in their negotiations than many feared they might be, and may have taken on board several of the concerns raised by the groups and individuals from the political parties and civil society whom they canvassed or who canvassed them. While the documents they have signed stay clear of the domestic issues such as the improper and unlawful use of funds, it is quite likely that those issues have informed some of the conditions they have imposed, conditions that show that the Norwegians are not taking any chances with the money they are prepared to give to Guyana.

Financial safeguards
The deal is a carrot and stick arrangement but with more emphasis on stick than carrot. The maximum we can receive under the MOU is fixed but the stick is that the amounts which we will receive are results-based according to how well we measure up to the terms and conditions set out in the document which themselves require considerable resources to ensure compliance. In fact, in the early stages of the implementation of the deal, a disproportionate amount of the funds will be used to set up the administrative and oversight arrangements which could see huge sums going to consultants. The costs to be met in the first two years include those for the establishment of the Project Management Office; the Office of Climate Change (operational costs); the multi-stakeholder consultation process and annual verification by neutral experts that the enabling activities have been completed.

What is particularly noticeable are the financial conditions set out in the Joint Concept Note (JCN), conditions that might otherwise be considered draconian but which many Guyanese bloggers seem to welcome. The JCN covers not only the Norwegian funds but other similar funds as well, raising the possibility that the Norwegian conditions are baseline, to be supplemented by any conditions imposed by other donors. The funds will go into a Guyana REDD-plus Investment Fund (GRIF), managed by a reputable international organisation and responsible for ensuring full oversight of the GRIF’s operations, including fiduciary obligation as trustee, and providing technical support as agreed with Guyana. Significantly the Joint Concept Note specifies that the GRIF must be operational before any contributions can be disbursed from Norway (emphasis mine). Safeguards, including social, economic and environmental safeguards, as well as the fiduciary and operational policies of the organisation selected, will apply, as appropriate, to all activities to be financed by the GRIF.

Technical conditions
The conditions applying to the technical, forest-related issues are no less stringent. Before any money is disbursed Guyana will have to take formal steps to establish independent forest monitoring by a credible, independent entity. Almost immediately the government is required to prepare an outline of Guyana’s REDD-plus governance development and no later than October 2010, a more detailed plan setting out clear requirements and timelines for its implementation. Additionally the country is required to show evidence of entering a formal dialogue with the European Union with the intent of joining its Forest Law Enforcement, Governance and Trade (FLEGT) processes towards a Voluntary Partnership Agreement (VPA), with its resonance with the EU EPA which the President had railed about. Government also has to show evidence of its decision to enter a formal dialogue with the Extractive Industries Transparency Initiative (EITI) or an alternative mechanism agreed by Guyana and Norway to further the same aim as EITI.

Transparency and accountability underpin the entire arrangement and the JCN requires that information regarding the initiative be publicly available. As if to show its immediate commitment to these concepts, the government has posted both the MOU and the JCN on the Guyana LCDS website.

One of the questions that none of our journalists appears to have raised with the President is whether he consulted with anyone – including his Cabinet, the Leader of the Opposition and the LCDS Steering Committee – before agreeing to the terms set by the Norwegians. That of course is not the President’s style and he might have considered that given how much he had invested in the LCDS, he needed something – anything – to show for his efforts. He has expressed confidence that Guyana will be able to meet its obligations both under the technical as well as the financial provisions of the deal. Recent experiences with the UK on security sector reform and the EU on funding to agriculture suggest that more than words will be necessary.