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Chad Update: World Bank threatens to funding for pipeline
Oct 28, 2005
WB threatens to pull funding for Chad pipeline if Govt Invalidates Anti-Corruption Law
It should probably come as no surprise that the WB is making this threat (see Reuters story below). The Chad-Cameroon pipeline was one of the most heavily-publicized (by the WB itself), highly-praised, and widely-criticized projects. It is also the biggest infrastructure project in Africa. It put a lot of resources -- including flying reporters from the U.S. to Chad for the official launch -- into promoting this new model of WB funding: help the multinationals get their oil, fund "high-risk" projects with extensive safeguards built in to ensure adherence to environmental rules and to prevent corruption from swallowing up the project. It has since emerged that the environmental and social protections for communities in the pipeline?"s path have been less than what was promised, by a long shot. Several Cameroonian groups have documented the experiences of families affected by the pipeline in detail.
And all along the Deby government in Chad, long known as one of the most venal around, was trying to cut corners on the corruption conditions. That government's reputation has now been firmly secured by coming in last (or first, depending on how you look at it) in Transparency International's "corruption perception" ranking for 2005. But it also brings up some of the complex questions that advocates confronted at the time the project was being negotiated.
After fighting against WB/IMF conditions around the world, how much credibility do we want to give to a new set of conditions which do - whatever you think of Chad's government - infringe on the country's sovereignty just as much as classic structural adjustment demands. And what do we say to the argument that the Chadian government is making in this case? It doesn't sound all that unreasonable. But what chance is there that they're being sincere? Perhaps some of our colleagues from Chad, or those who recently visited Chad for a conference on the pipeline, will be able to offer more informed opinions.
Soren Ambrose - 50 Years Is Enough Network / Solidarity Africa Network in Action
Response from a listserv subscriber:
My question is, what difference does it make now if the World Bank pulls out? The pipeline is built, the people are displaced, the oil (I believe) is flowing -- if the WB pulls out now, I'm sure others will step in. It might cause temporary cash flow problems for the project, but I can't imagine that all that infrastructure would not be used to continue pumping oil. In which case, the World Bank would have exactly the same role as in the Narmada dams project -- using its leverage to start a project so bad that not even private finance could manage it, but then disavowing the project later.
World Bank mulls withdrawal from Chad oil pipeline
Thu Oct 27, 2005 5:57 PM ET
By Lesley Wroughton
WASHINGTON, Oct 27 (Reuters) - The World Bank may withdraw from a high-profile oil pipeline investment in Chad and halt lending to the government if it changes a law to access a larger share of oil profits, officials said on Thursday.
The officials, which called it "the nuclear option," said such drastic steps are possible if Chad changes the World Bank-backed oil revenue management law.
The move would be a major setback for the bank's biggest investment in Africa -- one it considered a test case for its strategy for oil investments as a way to benefit poverty-stricken nations.
In exchange for funding the $3.7 billion pipeline, the World Bank told Chad to pass a law ensuring that 10 percent from oil proceeds go into an overseas bank accounts and be spent only on poverty programs.
The government is expected to earn about $2 billion over 25 years from the heavy oil projects developed by an Exxon Mobil-led consortium.
On Monday, oil minister Mahamat Nasser Hassan said Chad was not reaping the rewards of the oil and the government was struggling to pay salaries and pensions.
He said the government needed more funds to cover operating costs for the oil project and wanted its allowance to double to 30 percent of net oil revenue.
"I don't think the World Bank should compromise on the changing of the revenue management law," said Ian Gary, policy advisor on the extractives industry for development group Oxfam. "They should not be negotiating in this situation over a law that was a condition of the loan."
"The 'nuclear option' may be the only option they have left if the government were to change the law," he said.
The bank could also insist that Chad pay back its World Bank loans more quickly.
The officials, who spoke on the condition of anonymity because of the sensitivity of the issue, said the bank was also considering finding a bilateral donor to give Chad extra funding if it did not change the law.
Chad's government has said its budget is being squeezed by the increased security costs related to thousands of refugees fleeing the Darfur conflict in neighboring Sudan.
President Idriss Deby is also facing internal threats from army deserters calling for his resignation and growing political tensions ahead of elections next year.
The Bank's decision last year to fund the 620-mile (1,000 km) pipeline to take crude to market through Cameroon was criticized by aid agencies which warned Chad was marred by corruption, political instability and human rights abuses.
The country was recently ranked as the world's most corrupt in a Transparency International survey of 159 countries.
Oxfam's Gary said Chad would be foolish to change the law and risk losing donor support.
A loan program approved by the International Monetary Fund earlier this year is also on hold because of the government's failure to meet budget targets.
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