Dubai by night

One way to fight the oil curse is to look for models, countries who have managed to use oil revenues for the benefit of their citizens. The secret for success is to use the oil money to strengthen other sectors of the economy, rather than undermine them, as has been the case with African oil so far, where agriculture in particular has been devastated. And most critical for long term success, is to make health care and education available to all citizens.


Some countries have used their petrodollars to actually improve the lives of their citizens. In the Arab world, the Emirates of Dubai and Bahrain have utilised their petrodollars to diversify their economies.

In 2006, oil and gas revenues accounted for only around 3 percent of Dubai’s gross domestic product (GDP) of 46 billion US dollars. It is expected that the country’s oil reserves will run out within the next two decades. Yet the economy is booming thanks to the promotion of tourism and the positioning of the country as a shoppers’ paradise.

In Bahrain, 30 percent of GDP is derived from the oil industry. Structures are in place which see huge amounts of money being poured back into education, the tourism sector and health services. This has created jobs and investment opportunities for the local people.

In Norway, with around 50 percent of its exports consisting of oil, the government has secured the income for citizens by investing it in a national pension fund. Since 1990, the fund has seen dramatic growth and, with 200 billion US dollars, it is the largest pension fund in Europe.

‘‘These countries have realised that oil is a finite resource,” said Athmani. ‘‘They have diversified their economies. They are not overly dependent on oil. If this resource does run out, the other sectors will be strong enough to support the economy.”

. . .
Mary M’mukindia, an independent Kenyan analyst for the oil industry . . . argued that governments have to put in place structures which ensure that citizens benefit from oil wealth. She supports initiatives such as ‘‘Publish What you Pay” which forces international oil companies to publish the amounts of money they pay to governments.

Cesar Chelala, the award-winning writer on human rights issues, wrote in an article in the ‘‘Gulf Times” on 16 May this year that oil companies, the World Bank, the International Monetary Fund and powerful governments should demand transparency from African governments.

In 2002, British Prime Minister Tony Blair launched the Extractive Industries Transparency Initiative (EITI). Under the regulations of this initiative, countries rich in mineral and oil wealth as well as the companies extracting the wealth have to publish payments received and made.
. . .
M’mukindia says there should be three-way compliance. First: governments should ‘‘want to have” a transparency model. Second: extractive companies should be keen. In this regard, governments can implement laws which force companies to comply.

Third: Civil society organisations (CSO) should be involved. ‘‘They represent the people who are the real owners of the resources,” said M’mukindia.

But for CSOs to have an effect, they need to be well-informed. ‘‘They need to be brought up to speed with international standards and the intricacies of the industry.

The most curious feature of this article is that it reports Nigeria, and oil companies working there, are the only ones who have indicated willingness to submit their accounts. Since transparency, both in federal and state government, and from the oil companies, has been completely lacking in Nigeria, and a source of much of her problems, I’m extremely doubtful about EITI having that much effect as yet. If it is, that would be a very good sign. Transparency, accounting for money coming in, and money spent, is critical to anything resembling an equitable distribution of profits.

There isn’t a chance of the US putting any pressure, or making any push for transparency. Bush/Cheney are the most secretive and imperial of any US government to date. They refuse to share information with their citizens, and both Bush and Cheney are part of the oil industry. Their foreign policy and flair for incompetence have severely undermined US credibility, and the credibility of institutions associated with the US, such as the World Bank. The US is likely to provide more hindrance than help. Its recent actions in Somalia, its support for Nguema in Equitorial Guinea show behavior and motives more sinister than friendly. And rather than working for an equitable solution in Nigeria, the US seems to be supporting the Nigerian government in treating the Niger Delta as a military problem.

If Ghana, and other African countries rich in resources, can support and diversify their economies, and establish some financial transparency, they will be in a good position to develop themselves. They won’t get much outside support, and the dangers are many.