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Report: Oil Revenues May Not Reach Chad's Poorest


Inaugurated amid much fanfare in July 2003, the Chad-Cameroon pipeline delivers oil from the landlocked African country of Chad to ports on Cameroon's Atlantic coast. The World Bank-financed project aims to ensure that oil revenues are distributed across Chadian society instead of benefiting the ruling elite.

The Chad-Cameroon oil pipeline has been held up as an example for other African countries facing the challenge of transforming their oil wealth into benefits for their people. However, a new report cautions that the World Bank-financed pipeline may be failing in its attempts to use oil revenues to alleviate poverty in Chad.

Ian Gary, strategic issues advisor to Catholic Relief Services, co-authored the report:

"With billions of dollars falling outside the revenue transparency safeguards, limited government capacity to spend the money effectively and ongoing problems within Chad with human rights, democracy and the rule of law, we are concerned that poverty reduction objectives may not be achieved," said Mr. Gary.

A consortium led by ExxonMobil Corporation developed the 1000 kilometer pipeline, which currently pumps 225,000 barrels per day. Oil revenues from the project are estimated at five billion dollars over the next 25 years.

The World Bank financed the pipeline on the condition money it generated would go to the poor. A law Chad passed requires the majority of direct revenues from oil production to be spent on poverty reduction.

According to Ian Gary there are numerous loopholes in the law, which are undermining the country's plans to use oil revenues for social development programs. For instance, the pipeline's success is spurring new oil production and exploration in Chad, meaning overall oil revenues are likely to exceed original predictions by as much as $4 billion. That seemingly good news is troubling to Ian Gary.

"One of the most serious loopholes in Chad's oil revenue management system is the failure to apply a requirement regarding transparency, accountability, and pro-poor expenditures to all oil developments in the country," he explained.

ExxonMobil is developing five new fields that are not affected by the revenue management system. Those new oil revenues will go directly into government coffers without any oversight by the joint government-civil society petroleum revenue committee, known as the Collège. The Collège was set up under the World Bank-plan to play a watchdog role.

Chad's ambassador to the United States, Mahamoud Adam Bechir, calls the report one-sided. He says it does not take into account the precedent set by Chad's petroleum revenue system, in particular the establishment of the Collège.

"[The Collège] has access to the accounts, all the accounts of petroleum revenues. So this is a step in a country in the Third World, in sub-Saharan Africa that should at least be credited," he said.

According to Ambassador Bechir, there is no evidence that any of the 2004 oil revenues were misappropriated, a point seconded by Jerome Chevallier, former Chad-Cameroon pipeline coordinator for the World Bank.

Chad remains one of the poorest countries in the world, where 80 percent of the population lives on less than $1 a day. Mr. Chevallier argues that without the Bank-financed pipeline the country would be mired in extreme poverty for decades.

"Of course the challenge of using efficiently oil revenues for lifting the country out of poverty is a huge one,” said Mr. Chevallier. “It will not be solved in three years, four years, 10 years, even 50 years."

Mr. Chevallier says the international community should give Chad the benefit of the doubt, while continuing to support efforts to build capacity and encourage transparency.

Non-governmental organizations active in Chad admit they have not found any examples of embezzlement or misuse of funds in 2004. However, according to Nikki Reisch, co-author of the report, earlier this year the Collège documented cases of irregularities in the execution of oil revenue-funded poverty-reduction projects and submitted a report to the government.

"But, in fact, to date no action has been taken,” said Ms. Reisch. “No apparent action has been taken to rectify or to sanction violators of the laws in terms of the use of money. So this comes back again to our overarching point that so much hinges on the enforcement of law."

Ms. Reisch, who serves as Africa coordinator for the Bank Information Center, a nonprofit organization in Washington that lobbies the World Bank in favor of policies that help the developing world, says Chad's government has a long way to go before being fully capable of enforcing this law.

To prevent this model project from failing, the report calls for a series of steps to be taken, including the independent funding of the Collège so that it can carry out its oversight and advisory role. The report also urges the Chadian government and ExxonMobil to make public all oil contracts and revenues.

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