Can Ghana withstand the resource curse?
Few developing countries succeed in spending oil revenue in a way that creates a fair and equal distribution of wealth in the population. Instead, the money frequently ends up in the pockets of the ruling elite. Many resource rich countries are also characterized by authoritarian rule and get poor scores on indexes measuring transparency and accountability. The high revenues increase state power and enable the ruling elite to buy off rivals and manipulate state institutions.
-Big oil income gives an authoritarian government the incentives and the means to hold on to power forever. A country like Angola is a good example. Oil revenue has created possibilities for personal enrichment and increased state autonomy to the point where there is little need to tax ordinary citizens. This has led to a loss of the so-called social contract between the government and the general public. Angola is now in a situation where the government does not even know how many people live in the country. It does not need to know, says Inge Amundsen, senior researcher at the Chr. Michelsen Institute.
So what separates the countries that are blessed with natural resources like oil and gas from the countries that are cursed? According to Amundsen, the answer to this question can partly explain why Ghana, as one of the newcomers among the oil producing countries, most likely will avoid falling prey to the resource curse.
Ticks all the boxes
For a country to be resource blessed, a wide range of institutions is crucial. On the one hand, institutions of extraction are needed. These are institutions like the petroleum ministry, national oil company, tax authorities, ruling party and the coercive apparatus (police, military). These are usually strong in any petroleum producing country. But to handle the revenues properly, and to distribute these in a fair and developmentally oriented manner, institutions of revenue management, economic redistribution and redistribution of political power are essential, and these must be fully established and have administrative as well as professional capacity and competence before the oil boom sets in. Beneficial use of oil revenues depends on institutions of oversight and control; of horizontal accountability in the form of institutions of checks and balances and vertical accountability in the form of free and fair elections and strong civil society and media organizations.
-Ghana can tick off all the institutions that are generally necessary to control the petroleum sector. The country has had regular elections and a multiparty system since 1992, and the incumbent president has stepped down twice as a result of free and fair elections that brought a new party in government. It also has a strong civil society and vibrant media organisations, says Amundsen.
In a seminar recently organized by the Chr. Michelsen Institute and the University of Bergen, Amundsen presented statistics from the World Bank. Here, Ghana scores quite similar to countries like Australia and Canada on important indicators like accountability and rule of law.
-Basically, the statistics put Ghana in line with the resource blessed countries. The governance indicators are positive, and the legal and institutional framework is there, says Amundsen.
So far, so good for Ghana. But are there any signs of danger? Already, sectors outside the petroleum industry get less investments. A one-sided focus on investments in the oil sector is a common pitfall along with a loss of competitive power of other sectors . Pre-petroleum age, Norway had a thriving textile industry that basically disappeared after massive investments in the oil sector. In Ghana, there are also clear signs of corruption. Businessmen are working hard to position themselves with the oil companies. Politicians have established private companies that have been allocated public contracts. The pressure on public servants and the possibilities for personal enrichment will most likely increase. Yet, chances are that Ghana will avoid falling prey to the resource curse.
- Oil revenue can undoubtedly reinforce negative developments and destabilize a fragile system, but Ghana has the prerequisites for success. At the moment, the country is not dependent on oil like Angola or Iraq. Ghana’s known oil reserves will last only 20 years, so the government cannot afford to stake everything on the oil sector. Chances are small that oil will have a big, negative impact on Ghana’s political system, says Amundsen.