Chad’s corruption struggle
By DONNA BORAK
Mar 22, 2006 (WASHINGTON) — Chad has been under intense media scrutiny in recent weeks following the World Bank’s decision to suspend all loans to its government on charges of rampant corruption. But as reports mount that the Saharan country has funneled oil revenues to fight an insurgency on its eastern border with Sudan — with no intention of using profits to lift its 9.8 million citizens out of poverty — Chad maintains there is an untold side to the story.
The regime of President Idriss Deby repudiates claims by the World Bank that the decision to redistribute oil funds was not in fact a “unilateral” decision, contending that both sides were in regular communication for nearly a year after the deal to build a $4.2 billion oil pipeline from Cameroon to Chad was hatched.
Moreover, Chad claims to have had discussions with the World Bank on “practical difficulties” with the deal — given the volatile political and military situation in the landlocked country — expressing a desire to revise its distribution of funds to reinforce internal security.
The lapse, Chad argues, was in fact a “misinterpretation of the intentions of the Chadian government,” which in turn precipitated the World Bank’s move to suspend all loans to the country last month.
“These are very compelling realities that the Chadian government is confronted with,” Chadian Ambassador Mahamoud Adam Bechir told United Press International in a recent interview. “We have asked the World Bank continuously… but there has been a misunderstanding. It’s still not too late. The Chadian government has continuously said we want a peaceful, negotiated, civilized, transparent resolution to this impasse.”
The World Bank confirmed to UPI that it had been made aware of the Chadian government’s intentions to amend its law to re-allocate funds to include security. However, it said it was clear in expressing its concerns to the government that revising the law without a structured review of the implementation of the oil revenue management scheme would only end up watering down the main objectives of the deal: reducing poverty.
“We never questioned Chad’s decision to amend its national law, but we were concerned that changes made were not addressing the core issue of fiscal pressure on their budget,” Marco Mantovanelli, spokesman for the World Bank’s Africa region, told UPI. “We would have objected amendments that fundamentally undermine the oil revenue management agreement and poverty focus that was originally put in place.”
Instead, the World Bank offered to have discussions with the government to look at the nature of the fiscal pressure of their current situations and offered alternative solutions on technical support to do so.
The Chadian government entered the deal with the three-oil company consortium, led by ExxonMobil, under the former regime in 1989 hoping to bring commercial interests into a land-locked region where investors were unwilling to take risks.
Exxon, for its part, initially resisted building the 665-mile pipeline without the backing of the World Bank due to Chad’s history of ethnic strife and corruption.
One of the conditions of the deal proposed by the World Bank was that revenues would be used for poverty reduction and the bulk of direct revenue would be used in priority sectors like health, education and rural development to improve the standard of living. The law also required a creation of a special fund to ensure benefits for future generations once the oil reserves were exhausted.
The government of Chad agreed to the conditions, and has argued that its decision to hand over its sovereignty to the World Bank only exemplifies its commitment to uplifting its people.
But while the bank recognizes that a country has the right to amend laws, it argues that broadening the definition of priority sectors to include security and eliminating the future generations fund reneges the Chad’s agreement with the bank.
“The law created a framework for some assurances in transparency and oversight, and most important were directed to poverty reduction. The moment that Chad included security as a priority sector to receive oil revenues earmarked for poverty reduction, the entire agreement became meaningless,” said Mantovanelli.
The Chadian government, already under dire fiscal constraints, contends that with insufficient funds to help its people it should be able to allocate funds as it sees fit. Under the terms of the deal negotiated, Chad receives 12.5 percent of the profits from its oil fields, while the consortium reaps the rest of the 86.5 percent of the profits. It has received $399 million in oil revenue since mid-2004.
“The government wants to fight corruption but you have to pay the people. Most of the corruption is coming from civil servants who are not paid,” said Bechir, adding that workers routinely go for months without a paycheck, making it harder to bring much needed services in health, security, education and welfare.
It is for this reason, Chadian officials say, that they decided to amend the law and revise the distribution of state funds, arguing that under the current law the situation was simply “unworkable” and there was “an imbalance in appropriation.”
Under the old law, oil revenues from the Doba Basin oil project are sent to an offshore account in London, where the funds are allocated into separate funds as agreed to by the World Bank. Ten percent is put into a future generations fund; 80 percent goes to health, education, infrastructure and development; 5 percent goes to oil producing regions; and 15 percent goes to national territory sectors.
The Chadian government is seeking to make “readjustments” to the allocations, raising the 15 percent, which goes to national territories to 30 percent and lessening the funding to priority sectors, which cover health and education, to 70 percent. It would also temporarily drop funding for future generations, in order to alleviate some of the more pressing concerns.
A delegation from the World Bank is expected to travel to Chad in the coming week, marking the first step of a possible resumption of loans.
(UPI)