Chad Guinea Promises Superior Transparency Research Paper

  • Length: 20 pages
  • Sources: 18
  • Subject: Literature - African
  • Type: Research Paper
  • Paper: #16804062

Excerpt from Research Paper :

S., France and publicity, Chad was able to renegotiate more favorable contracts with the Bank, expropriate over $450 million in taxes from the private Consortium firms which they claim they had already paid, under the threat of replacement with Chinese firms. Global oil prices spiked, and Chad cleared over $1 billion in revenues in the last year of the Bank's project in 2008. Much of this increased income coincided at least with increased arms imports (Winters & Gould 2011: 240), no-bid contracts awarded to tribal Deby allies, pork projects like a new stadium and "inferior goods purchased at inflated prices" (Winters & Gould 2011: 236). The Bank itself admits its objective of "reducing poverty and improving governance in Chad" with the revenues from the pipeline "was not achieved" (Thomas 2009: n.p.). "[T]he principal reason for its overall disappointing outcome was the lack of government ownership," concludes independent evaluator Vinod Thomas in the Program Performance Report transmission letter to World Bank executives (2009).

Guinea does not report similar military, political or geographic disruption

What is to prevent the same situation from happening in Guinea? Cameroon, Niger and the Central African Republic all have domestic track records of executive concentration, military takeover, human and civil rights violations, and economic collapse similar to Chad's, according to the U.S. Department of State (2011b; 2011c; and 2010 respectively). These countries are even more politically and economically fragmented than Chad, however, and the missing factor is the active warfare or rebellion on the scale of Darfur, Sudan and now Libya faced by Chad on two active fronts, as well as the cross-border ethnic and hereditary alliances so prevalent in Chad's institutional culture of clan-based patronage. Governance in Gabon appears to be balanced and checked beyond one single executive with more democratic, decentralized and transparent institutions for the moment at least (U.S. Department of State 2011e) although some authors argue the entire region shows symptoms of "Dutch Disease," i.e. unbalanced domestic factor allocation, overappreciated currency and excessive debt from procyclical fiscal spending after the burst of a local export commodity bubble like falling global oil prices (Frankel 2010: 33). Both Chad and Guinea have in fact shown the procyclical tendency to increase government wage bills on rising oil revenue which Frankel (2010) and others include as symptomatic of this basket of economic policy mistakes (21). Guinea at least seems to have repented this common mistake (Nabe and Yansane 2011: n.p.) even if neighboring executives find this type of patronage helps consolidate power along lines Deby may have employed in Chad (Winters & Gould 2011: 236). This type of categorical renunciation of the mistakes that brought Guinea to complete institutional collapse does however constitute evidence of attempts toward transparency, especially when the goal is to stimulate continued investment in primary resource extraction once institutions have been reconstituted.

Admitting former policy mistakes is endemic throughout Guinea's appeals for support to international development and aid organizations. The Governor of the Central Bank and Guinea's Minister of Economy and Finance have requested oversight by IMF staff "so as to pave the way for a formal Fund arrangement later in the year, also in view of our objective to attain the completion point under the Enhanced Heavily Indebted Poor Countries' Initiative"; to comply, they "intend to further strengthen our policies during the second half of the year," in the June 2011 Memorandum of Understanding (Nabe and Yansane: n.p.). They promise to consult the IMF before implementing any policy change, and hold Legislative elections by the end of 2011, apparently by the very end. Deby probably made many similar promises on his way to autocracy but the difference is that he has a demonstrable track record breaking contracts and while the Guineans or newly-elected President Alpha Conde certainly could be setting up the global development community for similar nasty surprises, Conde et al. have not done such yet, while Deby clearly has. Nor does Guinea have hot wars spilling over or pushing tens of thousands of refugees into its country on two borders. The coastal situation is relatively docile compared to the Chadian strategic environment.

The reason engaging outside parties supports oil transparency is because international financial firms, NGOs and development agencies can attempt to undermine the type of executive takeover Deby and many of the states surrounding Chad and Guinea have invariably fallen into. While Amnesty International "has no presence in" Guinea or Chad yet (Amnesty International 2011a and 2011b respectively) and the World Bank is prevented by mandate from intervening in domestic politics, Guinea is a candidate country in the Extractive Industries Transparency Initiative (EITI) (Balde 2011), and presumably will "Publish What [they] Pay" back from oil revenues into poverty-remediating infrastructure development like schools and hospitals once this initial infant period of institutional chaos is overcome. Existing publications promoting Guinean mineral endowment like the 2010 Malabo report (Republic of Equatorial Guinea Ministry of Finance and Budget National EITI Coordination Office 2010), and the fact they have an EITI Coordination Office at all, support Guinea's intent and demonstrate practice toward oil transparency. Chad also has candidate status with the EITI and will hopefully publish what they pay too once that membership is approved. Deby has directed oil revenue into poverty mitigation projects and agreed to conform to the World Bank's renegotiated terms after bluffing them down at the negotiating table before the original contracts expired (Winters & Gould 2011: 237). This points to the salient difference between these two nations even though one demonstrates far superior balance sheet performance than the other, the fact that they both say they intend to apply development revenue to poverty mitigation, but one of them has a demonstrated history of successful international brinksmanship violating contractual obligations and the other does not, yet. Nor do NGOs always have power affecting even the international development institutions their own home countries allegedly oversee within the international community, like the Bank and the IMF. Winters and Gould (2011: 231) cite prolonged and broad nonprofit sector resistance to the Chad-Cameroon Pipeline Project the World Bank simply ignored, with results approximating those the humanitarian groups predicted.

Does Guinea's international integration contribute to oil transparency?

Some authors question whether such aid organizations and even donor nations exercise any real power within host countries after DFI has been put in place. Chad for example has spent decades under Deby at the bottom of the UN Development Programme's Human Development Index for over a decade (Winters & Gould 2011: 231), and undercut Guinea in the 2010 Corruptions Perception Index (Tranparency International 2010: 3) by two points closer to lowest, at 171st and 168th (Guinea tied with Angola so there is no 169th); the point is, what if these negative indicators provide leverage for free or low-cost donor nation patronage that generates revenue strongman dictators then use to consolidate political domination (Frankel 2010: 15) rather than mitigate the poverty that put them on the list for international strings-free infrastructure development? If having consistently low quality of life indicators attracts effectively free infrastructure development for the poorest countries, perhaps a type of moral hazard is at work undermining incentives to improve. Frankel (2010) points out such an incentive to spend, if "well-intentioned politicians spend oil wealth quickly out of fear that their successors will misspend whatever is left" (32), which IMF oversight, and thus transparency, may help to counteract.

Guinea is controlling spending and diversifying beyond oil

Guinea signed a $700 million mining contract with firm Rio Tinto, which carries lucrative royalty and tax revenue as well as direct investment benefits like a railroad which the government will have a majority share in and which it can then use for passenger traffic (Ross and Martijn 2011: 10). "However, despite the country's immense needs," pondered the Guinean finance ministers, "these funds have been put aside for the moment so as to be able to reflect, in cooperation with our international partners, how best to use them for the development of the country in the context of a medium-term framework" (Nabe & Yansane 2011). This diversification points out the numerous other primary resource endowments the country can exploit in order to hedge oil price volatility, and holding the revenue demonstrates fiscal discipline, especially when it could quickly be spent on arms for the President's retinue. Military spending has allegedly been reduced to 1% of GDP, compared to 3% of GDP earmarked for "restoring critical infrastructure and promoting agriculture with an emphasis on creating employment opportunities for youth and women" and "facilitate imports of rice and agricultural inputs" (Ross and Martijn 2011: 11). The reductions to government employment were mentioned above although both Frankel (2010) and the IMF fail to mention that these are some of the best-paying jobs that directly recirculate revenue into local markets via goods, services and housing consumption, perhaps with a multiplier. Likewise the new government has cancelled probably overblown procurement contracts from the military regime's…

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