The Black Informant | African American Commentary, News and Community Building

First, the news…

Chad: Government Denounces Move to Freeze Oil Account

UN Integrated Regional Information Networks (found on Allafrica.com)

The Chadian government has reacted angrily to Citibank’s freezing the escrow account for the country’s oil revenues – a move resulting from Chad’s recent changes to poverty reduction laws integral to a loan agreement with the World Bank.

“It is inadmissible that a country be blocked from accessing revenues generated by the sale of its own natural resources,” Chad Finance Minister Abbas Mahamat Tolli said in a communique on Friday.

The World Bank last week halted all new loans to Chad and suspended the disbursement of US $124 million already earmarked for the country, after the government scrapped key parts of a law designed to ensure that oil profits be used to help the poor.

Citibank’s action is the automatic consequence as laid out in Chad’s agreement with the World Bank, Bank spokesperson Marco Mantovanelli said on Friday.

The poverty reduction measures – including a trust fund for future generations – were required by the World Bank for support of the US $3.7-billion oil pipeline that snakes from southern Chad to a mooring buoy in the Atlantic Ocean off Cameroon. (more…)

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Nancy Birdsall (founding president of the Center for Global Development) wrote an op-ed in the LA Times on 1/2/06 that shines some more light on this issue:

Chad and the Oil Curse

WHEN THE World Bank agreed to finance an oil pipeline for Chad four years ago, it went in with eyes wide open. Mindful of the possibility that the oil profits might be squandered — or stashed in overseas bank accounts by corrupt officials — the bank required Chad to agree to put aside the profits in special funds for education, health and other poverty-reduction programs. Ten percent was to be stashed in a rainy-day fund to help the country once the oil ran out.

Chad agreed, and the pipeline was built. But last week, the government of Chad announced that it was reneging on its promise — and there’s almost nothing the World Bank can do about it. That puts Chad on its way to becoming another victim of what has come to be known as the “oil curse.”

The curse of being blessed with natural resources is a problem not just in Chad but in Bolivia, Venezuela and Nigeria. The evidence is overwhelming that oil and mineral wealth hurts growth in developing countries. It generates more corruption than good jobs, and it undermines the development of property rights, responsive local government and the other political institutions that a successful economy requires.

Some months ago, an independent study board concluded that the World Bank should halt the financing of oil and mining projects in developing countries because they too often end up hurting the poor, harming the environment and failing to contribute to economic growth. The bank ultimately rejected that recommendation, arguing that it couldn’t simply stop helping poor countries finance these projects. If it did, multinational companies would be happy to step in and the investments would be made anyway.

But without the bank and the scrutiny and supervision it brings, the risks to the poor and the environment on which they rely for their livelihoods would be greater, not smaller.

So the issue is not whether the bank and other international lenders should step in, but how they can finance responsible development.

The problem is that whatever leverage the World Bank has is only temporary. Its clout runs out with its last check. Even special oil funds, such as the one established in Chad, turn out to be a poor and only temporary substitute for the public accountability and the checks and balances provided by a healthy democracy. In Chad, the corruption should have been obvious early: Despite oversight by nongovernmental organizations, the president of the country managed to use the first wave of revenue to buy a presidential airplane. (more…)

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Later in her piece, she offers this recommendation:

“THERE IS an alternative. The bank should link its upfront support for investments in oil and mining industries to long-term supervision, say for 10 years, of distribution of most of the revenue directly to a country’s citizens.”

I agree. As long as the body doing the supervising has a proven track record of success in similar projects, this is much needed plan that should have been implemented a long time ago. Apologists for the African poor should take note yet again that dumping money alone in African countries like Chad does more harm than good.