‘Spends upwards two hours a day browsing random Wikipedia articles’. That’s so me.
Dili, a booming metropolis inhabited by 200,000 people that serves as East Timor’s capital.
What’s in your mind when it comes to imagine how East Timor, as a nation, looks like? A brittle nation struggling to restore its stability? A polity of 1.2 million on the way to lift up widespread poverty and mass unemployment among its youth? A country still in its infancy in attaining long-term stability for future generations after uneasy testaments as seen in the first decade of its independence? They are all correct. Majority of its population earned a mere 0.88 US$ a day; local conflicts still frequently take place, particularly in remote towns and communes; the government’s ability in preserving order and stability is put to test after the departure of the last UN peacekeeping forces, but that might not be for so long.
Despite all the worries and trepidation, East Timor had scored a monumental economic achievement: the country’s economy approximately 10% a year, thanks to the contribution of oil revenues. But the government realizes ‘oil boom’ may only be temporary. Thus, following Norway’s trend, the government set up Timor-Leste Petroleum Fund – a sovereign wealth fund designated as ‘fiscal shock absorber’, and ‘a gigantic piggy bank’ the authority can utilize anytime they need to foster the national development in the country. As of 2013, the funds accumulated have topped nearly 12 billion US$, a ten-fold increase compared to its initial endorsement it received in 2005, the year it was established, and unpredictably, a forty-fold size of Indonesia’s own sovereign wealth fund.
Nevertheless, such amount is also tantalizingly over-sized for a country the size of East Timor; the funds overall are ten times its overall GDP. The government’s current challenges are to combat possible corruption, avoid misuse of the funds, and ensure that the funds be not invested in financial instruments which are extremely volatile; otherwise it may turn out to be another Nauru, once a prosperous nation which in the end fell bankrupt after severely misdirecting its sovereign wealth fund to companies later known to be ‘derelict’.
The passing-out of El Commandante, the all-beloved Hugo Chavez is surely a dolour unimaginable for most of the Venezuela’s population. A leader long rhapsodized by his populace, Chavez’s providential touch and fame has been elevated into something, something so well-revered and eulogized, as though he were a demigod assigned on Earth by the glorious Heaven.
But who could no more discern clearly at the country’s situation than the hangers-on themselves?
In reality, we have to be honest that even Venezuela itself has become, unofficially, ‘the Saudi Arabia of petroleum’. The answer lies on its extensively leviathan oil reserves – exactly the largest on the planet. Orinoco Belt may be the nation’s touch of Midas – it is estimated as many as 513 billion barrels of oil may be deposited throughout the territory. Enumerating that amount, it is almost twice as abundant as Saudi Arabia’s 265 billion barrels. Assume that oil production be maintained at similar output – approximately 2.45 million barrels a day, using 2011 standards – Venezuela should have held on as a prosperous country for 6 centuries.
With reserves estimated at 513 billion barrels of oil, Venezuela could possibly surpass Saudi Arabia – if the country were well-prepared to invest more in improving extracting technology currently existing in the industry.
Even under Chavez’s leadership and superintendence, Venezuela should have stricken the hot iron better than Middle East did.
Truth be told, as of today, nearly 30 percent of the country’s 30 million are critically poor. Crime rates in Caracas, the capital, are exceedingly high, that nearly 120,000 homicides were reported from 1999 to 2010. Transparency International, meanwhile, placed the country’s corruption perception index (CPI) on an average scale of 1.9 out of 10, and ranked the nation on number 164, in 2010 (compared to Indonesia’s 110th rank, our country is, slightly gratefully, better than the former).
Peter Maass, author of Crude World: The Violent Twilight of Oil, recounted his experience while covering the city for his book:
Caracas had a booming business in luxury cars and the highest rate of gun violence in the world for cities not at war. The capital’s infrastructure, ignored during decades of economic doldrums, continued to be ignored during the boom. A highway to the airport had to be rerouted for months due to a bridge that was in danger of collapsing; what had been an hour-long commute to the airport required three to four hours over a zigzag of back roads.
In addition, there was a mismanagement in managing the oil revenues. Not that the bulk went to tower cranes and more skyscrapers; human fallacies accounted for the occurrence. It was good that PDVSA, the country’s sole state oil authority, was obliged to provide much of the perquisite to social programs, ranging from building schools, providing cheap healthcare, subsidizing fuel prices and costs of basic items, and setting up cooperatives. Yet, Chavez made a great mistake: instead of placing such responsibility on the ministries involved, all these tasks were instead accomplished by PDVSA. Peter Maass noted as follows:
Chavez calculated that PDVSA’s revamped staff would be more loyal and more capable than the civil servants whose uninspired presence lent government ministries the aura of early retirement homes for bureaucrats.
One of the PDVSA’s oil refineries.
Worse, Chavez had fired nearly 18,000 managers and engineers working for PDVSA, human resources needed to operate and administer the company’s daily operation, due to 2002-2003 workers’ strike. In consequence, PDVSA encountered numerous difficulties in sustaining their business practices. The situation even festered when most of the social responsibilities were on PDVSA’s hand, not the ministries’. Peter Maass wrote:
Chavez did not just order PDVSA to boost its community spending by a few percentage points; he turned the firm into the engine of revolutionary change. PDVSA allotted more to its social projects in 2006 – nearly US$ 10 billion – than to its operations (US$ 5.9 billion). In a sense, it became a development agency with oil wells. No other oil company, whether publicly-traded or state-owned, spent nearly as much on non-core programs. In Saudi Arabia, Russia, and other oil countries, state-owned firms tend to have modest social programs. Their surpluses are transferred to the Treasury and distributed to ministries that chase the holy grail of sustainable development. Usually they fail. You can build colleges, as Saudi Arabia did, but that doesn’t mean the degrees will count for much or that jobs will await the graduates.
A point well noted.
Much of the oil revenues also went up into subsidies of basic items’ prices; Chavez’s administration had even set up Mercal, a chain of supermarkets ‘extraordinarily’ dedicated to selling all basic items at a cost 50% lower to all Venezuelans. But even the mushrooming number of such stores – numbered at thousands throughout the country – could not help solving the country’s long-term problems.
Peter Maass summed up as follows:
In Venezuela, it was as though a well-meaning doctor [referring to Chavez] was using the wrong instruments and wrong procedures to operate on a sick patient. Even during the boom years, signs of failure were ample – price controls on foodstuffs were leading to shortages [due to excess in demand], and the government was spending so much on subsidies that it was running into deficit problems, which is a striking achievement when large amounts of revenues are being received from oil sales. Chavez’s policies, intended to break the resource curse, seemed likely to prolong it………They did an awful job, but giving away money is not going to solve people’s problems. We have a saying here: ‘Bread for today and hunger for tomorrow’.
And what can Norway offer to teach Venezuelan government? Allocate more of the oil money, instead of petty subsidies which only offer short-term solution, to sovereign wealth fund.
One of Statoil’s main refineries. Through The Government Pension Fund of Norway (GPF), the sovereign wealth fund is committed to maintain the integrity of being a pro-sustainability advocate; one of their regulations includes blacklisting companies which they deem ‘having pursued ecologically disadvantageous business practices’ for investment.
What is a sovereign wealth fund (SWF)? To make it easier to comprehend, just consider this analogy: every household, even a big nation, needs savings. When money is earned, it is important that some bits of the coming-ins are saved to appropriate adequate funds for future generations. Imagine that your dad toils in the office, earns a typical salary, say, 500 dollars a month, and makes use of one-fifth of the income for family savings. But what if your dad, rather than save 100 dollars to anticipate possible events in the future, instead spoil you and your siblings (exclude your mom) with ‘subsidies’ worth 490 dollars, where you can shop and buy whatever you need? That is the case Venezuela is being faced. Chavez is generous, but he’s been way too free-handed that he now spoils the citizens’ needs.
Norwegian government, in this context, is far much wiser. They realize that ‘oil boom’ is no more than a temporary, fast-come-fast-go phenomenon, that they need to save up such golden opportunity to entirely improve their nation’s living standards. But that does not mean they are overlooking the people’s education and healthcare needs. They do still fully pay the citizens’ education and healthcare fees, but unlike Venezuelan government, they are not subsidizing prices of consumer goods. They realize such policy only yields more kief among the citizens.
Here is their scheme: portions of Statoil’s – Norwegian state-owned oil and gas corporation – revenues will go to the The Government Pension Fund of Norway (GPF), the state’s sole SWF. When money is collected, the government hires individuals to manage those funds. But that also does not imply that the managers may run the money at their own will. The government sets up a conservative regulation – most of the funds shall not be invested into stocks, but obligation, as stocks tend to be more volatile and riskier than the latter.
As of 2013, the total funds managed by GPF, mostly from oil revenues, have surpassed nearly 716 billion US$. If it were divided equally among its 5 million Toms, Dicks, and Harries, every individual could attain an additional of nearly equivalent to 143,200 dollars. Even though Norway still primarily depends on oil production to account for its GDP (oil exports contribute to 45% of the GDP), Norway, also itself a socialist economy, shows virtually no signs of contracting a possible recession. While most of its counterparts in European Union are struggling against double-digits unemployment and possibly double-dip recession, most Norwegians remain calm, stable, and unaffected (except for the 2011 massacre, an ‘unlikely’ event).
In fact, the government of Norway does not only compensate its citizens for education and healthcare; they also provide all-expenses-paid tour overseas packages for the country’s elders.
Substantively, it is not that the Venezuelan government has no comprehension of what SWF is; they even have one, namely Fondo para la Estabilizacion Macroeconomica (FEM – Macroeconomic Stability Fund). Nevertheless, the funds accumulated reach no fewer than 800 million US$. If spread across its 30 million inhabitants, every person would procure only 26 dollars and 70 cents, an amount adequate enough to rear food supplies a full week. Even to reach a minimum level, the amount saved should be 100 billion US$ for an energy superpower wannabe like Venezuela.
With Hugo Chavez passing away and Nicolas Maduro, his vice, being sworn in as ‘temporary President’, such tasks prevail the government’s challenges to manage such abundance – whether it will be a mirage for its people, or worse, nothing more than a deadly, contaminating black liquid.
Let the stick figures do the burlesque. Visit www.explosm.net.
Explore more for funny life cartoons (though most of them may be cynic, sarcastic, and depressing): www.explosm.net
“For those who believe in God, most of the big questions are answered. But for those of us who can’t readily accept the God formula, the big answers don’t remain stone-written. We adjust to new conditions and discoveries. We are pliable. Love need not be a command nor faith a dictum. I am my own god. We are here to unlearn the teachings of the church, state, and our educational system. We are here to drink beer. We are here to kill war. We are here to laugh at the odds and live our lives so well that Death will tremble to take us.” Charles Bukowski (1920-1994), American author.
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