Natural Resource Management: The importance of good policy makers
- Policy makers and their decisions matter much more than a supposed resource curse, says Ricardo Soares de Oliveira. As East Africa booms with oil, he urges international actors and donors to repoliticise the international reform and financial agenda.
For the past ten years, countries like Angola and Nigeria have benefited from spectacularly high oil prices. Angola’s GPD has grown from 11 billion $ in 2002 to 114 $ in 2012, Nigeria’s GDP from 59 $ to 243 $. Yet, the poor population has not benefited from the oil money. With some exceptions, the money has been spent on extravagant sports stadiums, shopping malls and skyscrapers, or funneled abroad. The political elite has used the money to show off what has become their personal wealth.
-The petroleum boom represented an unprecedented opportunity to build welfare and strong institutions, but West African decision makers squandered it, says Ricardo Soares de Oliveira, Research Fellow and University Lecturer at Oxford University and Associated Senior Researcher at CMI.
Tanzania, Mozambique, Uganda and the Democratic Republic of Congo have made major oil and gas discoveries, and are in for a surge similar to the West African one. Will they learn from the past mistakes of their neighbours in the West?
Cherry picking reforms
Although the overall picture may seem grim, there have been changes in West Africa’s oil states. The Politicians and policy makers have used oil money to tame inflation, stabilize economies and wipe debt burdens clean. Higher education has disciplined African economists and decision makers. The professionalization is apparent and needs to be recognized. However, the key challenge has not primarily been lacking skills or structures to manage the boom, argues Soares de Oliveira.
-Western donors have developed a habit of saying that if only these political leaders and policymakers had the right experience, they would have spent the revenue differently and behaved more rationally. This is a misjudgment. We are dealing with political leaders and policymakers who are completely rational in their self-interest. They have instrumentalised the capacity of reform, and choose reforms which benefit them and their stronghold over national companies. They skip policies that can loosen their grip, says Soares de Oliveira.
Paying lip service to reform agendas
Capacity building has been turned into an industry, and international financial institutions and their reform agendas have been depoliticized, holds Soares de Oliveira. Political leaders in many African and Asian countries are simply paying lip service to internationally initiated transparency and accountability agendas.
-They have realized that it is not that demanding to join the transparency agenda. Azerbaijan is thriving in this scheme. Would it if the scheme worked the way it is intended to, asks Soares de Oliveira.
He urges donors and international organisations not to tick the box too soon. Civil society actors in many African countries have raised concerns that partial reforms have perverse effects, and that there is a need for large-scale activism against bad governance. They urge Western donors to use aid as a leverage. Donors still provide budgetary support or project aid to some countries in East Africa, and can encourage strong regulatory and institutional oversight mechanisms.
-The net loss of West Africa’s petroleum boom is strengthened regimes and entrenched elites. If history is not to repeat itself, East Africa needs to learn from the West African experience, warns Soares de Oliveira.
A large share of the West African oil money has ended up in tax havens all over the world, where the money is being managed for the West African political elites.
-Talking about oil, you need to address capital flight. London, New York, Paris, Zurich, Dubai, Hong Kong and Lisbon are amongst the prime beneficiaries of the West African oil surge. If Western countries close their gates to illicit financial flows, it will be a major contribution, says Soares de Oliveira.
The defining moment is yet to come
If East Africa is going to succeed in spending its oil money wiser than countries like Angola and Nigeria, now is the time to assert pressure argues de Oliveira. There is still time to make a difference in countries where the institutions are in flux and where the social contracts are being renegotiated.
-The institutional patterns are not yet cemented in countries like Tanzania and Mozambique. There is a window of opportunity for the next ten years or so. The status at the time when the money starts flowing in is the defining moment, says Soares de Oliveira.
He stresses that capacity building is still necessary, but argues that solutions need to go beyond the organizational reform.
-The problems in Africa’s oil rich states are political, and solutions to these problems need to be more than technical. We have to address the nexus of interests of political leaders and their global networks, not to continue with even more technocratic reforms, says Soares de Oliveira.
Political change versus commercial interests
Stopping illicit financial flows and encouraging strong institutions are only part of the solution. An increasing focus on commercial interests in aid and bilateral agreements complicates the picture. The slogan ‘trade not aid’ resonates well in many donor countries. Soares de Oliveira suspects that many of them may be going too far in their search for new trade partners and lucrative trade agreements.
-Civil society activists are worried that Western donors will not use their leverage because they are starting to think of these countries as commercial opportunities. Donors need to decide whether they want to use their shaping capacity or not. Their normative and commercial capacities used to be separate, but are now mixed up. In the long term, this is a risky strategy. For a country like Norway, such a strategy creates the image that it is just another player. A lack of boundaries between “Oil for development” and narrower commercial interests will cheapen the brand of Norway, says Soares de Oliveira.