Multinationals and Community Development:
The Esso Consortium in Chad
February 24, 2002
· For the consortium: To increase revenues by developing petroleum reserves in southern Chad
· For the local communities: To create economic opportunity by building up local public-infrastructure capacity to support local-commerce participation in the consortium project
· Consortium project: On schedule, now well into the early part of the three-year construction phase
· Community projects: Behind schedule, leaving public-infrastructure capacity at the same weak level while consortium project forges ahead. Road-routes maintenance is also falling behind
· Start-up and operation of FACIL Local Initiatives Development Fund for community-projects
· Inadequate technical planning knowledge-base
Impacts on Local Communities
· Perpetuating public-infrastructure inadequacy and attendant public-health problems
· Causing loss of some economic benefits through reduced participation in consortium project
· Unintentionally and indirectly ‘preferencing’ outside competitors with strong public-infrastructures
· Increasing residents’ and consortium-workers’ safety-risk and ease of movement due to deteriorating road-routes
· Growing sentiments of disenfranchisement and the compromising of a rare economic opportunity
· Increasing concern that the need for the community-projects will soon be obviated altogether
Impacts on Consortium
· Eroding hard-earned goodwill, and needlessly generating resentment towards the consortium
· Creating new risk-factors threatening long-term success of consortium project in later years
· Depriving consortium of more local procurement, increasing outsourcing costs and lead-times
Recommendations for Consortium
· Engage appropriate levels of Chad Government and World Bank to identify and address delays
· Provide technical assistance and resources to help bring community-projects up to speed rapidly
· View local residents and businesses as long-term strategic partners and integrate into business model
· Leverage NGO presence as partners to help drive community-projects forward
· Incorporate delays as formal risk-factors in risk-assessment profiles and long-term risk-management strategy
· Commence risk-mitigation rapidly to ensure that intervention costs are kept low before risk-levels escalate and mitigation complexity and costs rise
Table of Contents
Table of Figures
The Chad portion of the Chad-Cameroon Petroleum Project consists of two separately financed and managed yet closely related projects, both currently underway in the impoverished oil-producing region of Doba, which is situated in remote southern Chad. The private-sector project (the ‘consortium project’), for which the multinational consortium led by a unit of ExxonMobil Corp. is primarily responsible, includes oil-field and pipeline construction, and is designed to bring online a new oil-flow to world markets to create wealth for shareowners of equity in consortium members. The public-sector projects (the ‘community projects’), for which the Government of Chad, in conjunction with local government and communities, is primarily responsible, are designed to improve local living conditions in and around impoverished Doba by protecting and building up the capacity of the very weak local public infrastructure there. The infrastructure-capacity expansion, sponsored by World Bank participation, is also intended to provide an essential economic platform needed to enable Doba-region residents and small businesses to participate more in the consortium project by competing more efficiently with non-local businesses for small works and supply contracts.
There are three community projects in particular which are critical to building local public-infrastructure capacity.
These three community projects, which form the core of the local infrastructure-capacity protection and expansion programme, are also delayed and running well behind the consortium project that they were intended to support. The general impacts of these delays are that local residents and small-businesses are unable to compete efficiently with their non-local counterparts having stronger infrastructures, and this competitive disability is engendering local-community frustration and disenfranchisement sentiments, which are being unnecessarily directed at the consortium. The following diagram provides a conceptual depiction of these three community projects, their relationships with each other, their relationships with consortium project, and the local competitive disadvantage caused by the persisting weaknesses in local infrastructure in the face of outside competitors with the advantage of stronger non-local infrastructures.
Figure 1 — Competitive Disequilibria Caused by FACIL Delays
As the diagram shows, the persisting competitive-disadvantage in the weak local infrastructure can be traced back to the delays in the proper start-up and operation of the FACIL Local-Initiatives Development Fund, which is responsible for funding the Rapid Intervention Measures as well as community micro-projects. As the lynchpin of local progress, the FACIL and its delays are creating a rippling effect impacting a number of stakeholders critically dependent on it. The delay in new infrastructure capacity from the Rapid Intervention Measures is also tying the hands of local businesses and future micro-projects sorely needing the increased capacity to be able to participate in the consortium project more competitively. Less efficient local businesses are now being forced to compete with more efficient subcontractors whose markedly stronger public-infrastructure capacity provides them with a markedly more competitive advantage. In effect, the cascading impact of the FACIL delays are inadvertently serving to hand non-local competitors a free competitive advantage or unintended preference in the consortium project by perpetuating the denial of required infrastructure that local competitors need to compete effectively.
These community-project delays, as well as their many impacts on a broad range of stakeholders, are the focus of this study. Not only do the delays deny the local communities the basic public services that they sorely need to pull themselves up and support themselves adequately; they also deny the them the collective efficiencies and the competitive industrial edge needed by these rural communities to compete fairly and efficiently in the consortium project. It is the avoidance of these consequences, and therefore their causal delays, which is repeatedly stressed in the World Bank planning documents in which all-round local opportunity-creation was meant to be based on an expanded public infrastructure which would enable Doba-region residents to provide the consortium project with more of their own local goods and services.
World Bank planners of the community projects also emphasised that the overall success of the consortium project would depend critically on the early success of its supporting community projects, particularly the three noted above. The planners designed these three core projects to be preparatory in nature, such that they would expand local public-infrastructure capacity ahead of the consortium project to ensure that rural communities in the Doba oil-producing region were ready in time to support the consortium project and to participate competitively in it. These timing requirements, which were built-in to the World Bank planning documents, are not being met as a result of the current delays.
While the consortium project forges ahead more or less on schedule, the supporting community projects have languished because of various political and procedural delays. This has left the local communities feeling left behind and disenfranchised from the only significant economic hope they now have in this remote and impoverished part of the world. Informed community leaders of the Doba region are wondering how their rural communities are to compete with outsiders in providing even basic industrial goods and services without having the sorely needed basic public infrastructure platform called for in World Bank agreements. They also fear that the consortium will not need their local goods and services once the three-year oil-field and pipeline-construction phase has ended, thereby obviating the immediate need and pressure for the community projects altogether.
As local prices rise due to the increased regional industrial activity, and as the new faces of outsiders and newcomers become more visible in these communities, long-time residents are growing impatient with what they perceive as both a failure to follow through on specific pledges and a gradual evaporation of their only significant economic opportunity. Elder residents are echoing old stories of les fils de Doba (the Sons of Doba) who, having returned home to Doba after working in the petroleum projects of the nearby Niger Delta, had little or less to show for it. Folkloric or factual, such recollections nonetheless form a part of the collective psyche and only fuel negative perceptions of the consortium. Despite the underlying causes of these perceptions stemming largely from a resource-starved government trying hard to implement the public-infrastructure projects with weak institutional capacity of its own, disappointed residents nonetheless perceive the owner of these delays to be the visibly resource-rich consortium, omnipresent around the Doba region with new vehicles, new machines, and new buildings. If enough residents adopt this perception, then the collective perception eventually fuses to become the new reality that the consortium will be forced to face. This fact points to the increasing need for the consortium to treat growing perceptions—and their underlying causes—as real risk-factors which must be formally assessed and properly addressed as a normal part of necessary risk-management to protect its vital investment and community interests.
Today, the Consortium might well believe that the overall petroleum project will still succeed, even if the community projects, for which it is not directly responsible, continue to falter and do eventually fail. But continuing to ignore such faltering and failure will only fuel the nascent discontent directed at the consortium, a discontent which already risks threatening the long-term success of the still-new petroleum project, unless the consortium acts now, for solid business reasons, to protect overall project success by helping to link the progress rates of both consortium and community projects, and to ensure their equal and timely success during the many years that the consortium intends to operate in these communities.
The geographical scope of the Chad-Cameroon Petroleum Project is very large, with the span of the pipeline itself stretching across two countries. This study focuses on only the Chad portion of the project, specifically within the oil-producing region where the actual oil-fields are located around the towns of Doba, Bébédjia, and Komé in southern Chad.
The scope of the subject-matter is focused on the interdependencies between the main pipeline and oil-field construction project run by the consortium and the community-infrastructure projects run by local and national agencies of the Chad Government. The analysis explores the causes of the delays in the community projects in relation to the progress of the consortium project, and the impacts that these delays are having on the communities and various stakeholders as well as the potential effects on the long-term success of the consortium project. The study outlines a set of cost-controlled recommendations for the consortium to consider in helping to address the community-project delays, and a set of recommendations for future project planners to reduce the risk of such delays in future multinational projects in developing countries.
This work is based on observations and informal interviews with a broad cross-section of the project community conducted during a three-week visit in August, 2001 to N’Djamena, the capitol of Chad, and to Doba, the main township in the oil-producing region. The field visit was funded independently to fulfil the requirements of a year-long Columbia University research seminar exploring new cooperation strategies amongst multinational companies with projects in developing countries, the national and local governments of developing countries, and local and international NGOs and civil society in such project regions.
Business Dialectic. Rather than relying on the more debatable forms of rationale for undertaking corporate action, this work instead grounds its arguments and recommendations more in business-logic and economic reasoning to produce more a compelling motivation for the private sector to explore new ways of improving such cooperation mechanisms. The choice of using the more business-like dialectic was not only based on the need to communicate better with the business and investor community. It was selected also to facilitate developing more familiar arguments which demonstrate more clearly how such improved cooperation models will bring tangible benefits to both investors and local communities mutually, not only through increased local operational efficiencies in the field, but especially through better long-term risk-management strategies.
The new dialectic also comprehends the increasingly vital role of local and international NGOs, which are currently under-utilised as potential partners in all aspects of community development related to multinational investment in such regions. With a rich knowledge-base and broad experience-domain in specific project regions, NGOs are a natural and optimal choice for a strategic partner in community development related to multinational projects in developing countries.
Sustainability. Other key features of the study approach include an emphasis on sustainable solutions for eager communities actively seeking to capture rare self-help opportunities, which, like Haley’s Comet, often present themselves for only limited windows of time before disappearing forever without being fully utilized. This is a particularly important feature of large industrial projects taking place in small rural communities of developing countries where rural infrastructure capacity hinders industrial-productivity levels and quality standards needed to be industrially competitive. The temptation is to accept willingly that this rural-industrial misalignment is an unchangeable and embedded reality. But the negative effect of this unsound justification is that it hides the true long-term potential of an eager local community as a strategic partner in a long-term investment project, needlessly allowing a rare opportunity to slip away ostensibly well justified. A long-term sustainable approach mutually beneficial to both investment consortium and local community leverages the local communities as a business-model asset and a strategic long-term partner.
Long-Term Risk-Management Strategy. Particular attention is also paid to the rise in negative public sentiment towards the consortium. While difficult to measure and frequently underestimated, public sentiment is nonetheless not only a perception-based reality that an investment consortium must inevitably face, but also a concrete risk-management factor that a consortium can readily address early on and cost-effectively by implementing such recommendations as those outlined below, which are designed to enhance community cooperation and prosperity. The following diagram, which is purely illustrative and not based on empirical data, underscores the benefits of early risk-mitigation intervention versus the higher costs and compounded risks of late intervention.
Figure 2 — Risk Levels for Early vs Late Intervention
As the diagram suggests, risk levels will begin to rise even more rapidly towards the end of the three-year construction phase, a climactic point when local residents come to evaluate what real benefits the completed construction phase has brought to the region. At this point of reckoning, any culminating sense of an opportunity lost forever will likely be the most acute here. This is also the critical point in time at which the cumulative sunk fixed-costs (thick curve) of the consortium are at their peak, and the point at which the petroleum project is just on the verge of beginning to produce revenues to offset sunk fixed costs. Therefore, the transition point from construction to production phases is critical precisely because of the coincidence of these two events. If local residents feel that the consortium project has not delivered the expected benefits at the point when the construction phase is wound down and demand for construction goods and services evaporates, then risk-levels will begin to rise even more quickly just when the first revenues are set to being flowing.
However, as the early-intervention (dotted) curve shows, the trajectory of such risk-levels will be much milder for the consortium only if (i) delays in community-projects are addressed quickly, (ii) the new local-infrastructure capacity is applied to enable more competitive local participation in the consortium project, and (iii) local residents, at the close of the construction phase, feel that the consortium project has in fact brought tangible and sustainable benefits to the community. On the other hand, as the late-mitigation curve shows, if the infrastructure capacity is left as it is and the community is not satisfied with the benefits of the consortium project at the end of the construction phase, not only will risk-levels eventually multiply, but mitigation complexity and costs will also rise. The accelerating rise shown in the late-intervention curve reflects the fact that latent intervention is inherently risk-prone itself precisely because it must often be undertaken in a reactive or crisis mode, which creates its own secondary risks compounding the original risks. Fortunately, since the consortium project is still in its early stages, the strongest positive point to be made here is that there is now a window of time left to address the community-project delays, and to help the local community rapidly increase its participation in the consortium project before the end of the construction phase arrives.
The study is organized first by an identification of the stakeholders in the oil-producing region, followed by an analysis of each of the three core community projects underway there, including a project-status assessment for each one and a set of business-justified recommendations for the consortium to consider in helping to move each of these projects forward with the help of local and international NGOs. The work concludes with analysis and recommendations for planners of future investment projects to ensure that the design of such projects better integrates the implementation of it into the economics and interests of the local community.
The scale of the Chad portion of the Chad-Cameroon Petroleum Project, the largest foreign direct-investment project ever to be undertaken in Chad, involves a cast of many stakeholders. This section identifies key interested parties who have a role and a stake in the three core community projects in and around the oil-producing region of Doba, and the very different impacts that the community-project delays are having on each stakeholder.
Roles: –Participate in consultation process to identify community needs; –Provide at least 20% sponsorship in kind, labour, or cash for funding for their community micro-projects applied for through the Local-Initiatives Development Fund; –Participate in the design and implementation of micro-projects and community projects; –Also participate in implementation of the consortium project by leveraging the new capacity of new infrastructure created by the community projects and micro-projects; –Integrate into the economics of the consortium project efficiently and competitively.
Impacts: –Residents are losing some of a golden opportunity to energise the local economy by not being able to participate more in the main petroleum project; –With respect to local road-routes, residents are, at best, being inconvenienced, and, at worst, are having to foot the costs of various roads-related problems, and are exposed to even poorer road-safety conditions; –Residents’ frustration is needlessly building towards consortium, which should be considered as a strategic community-development partner.
Roles: –Administer Rapid Intervention Measures approval and funding process in accordance with the FACIL Manual; –Perform project-implementation monitoring; –Receive and review eligible community micro-project proposals submitted in accordance with the FACIL Manual, determine appropriate funding level for each one, and authorise incremental appropriations linked to demonstrable progress and performance; –Provide technical assistance to micro-project leaders.
Impacts: –Funding held up in FACIL delays is perpetuating the current shortfall in public infrastructure capacity projects, and consequently, residents’ competitive edge and economic integration into the main project; –Work backlog is increasing, and cooperative atmosphere is being diminished; –Credibility of the FACIL as a neutral and reliable credit facility is being compromised.
Roles: –Provide community vision, leadership, and organisation; –Prepare community-project proposals on behalf of community with very poor literacy rates; –Assist in managing implementations; –Capture and leverage synergies across various NGO projects; –Liase with the consortium and government.
Impacts: –NGOs do not view FACIL as a reliable funding source for their local projects, with neutrality concerns also sometimes cited, resulting in under-utilization of NGOs as local consortium partners in community-development; –NGO workload burden also increased due to population influx drawn to oil-fields construction project; –Duration of original NGO burden of dealing with original effects of weak infrastructure (e.g., public health, sanitation, water, etc.) is being drawn out by the consortium project while community projects intended specifically to reduce these infrastructure-based problems are delayed.
Roles: –Provide business and artisan leadership and coordination for local entrepreneurs and aspiring micro-project entrepreneurs; –Prepare project proposals and assist in their technical implementations; –Liase collectively with the consortium.
Impacts: –Local informal associations (e.g., womens’ food-growers and preparers collectives) are often unaware of FACIL facility, and would not have a chance to leverage it until FACIL delays are resolved; –Inadequate public-infrastructure capacity deprives local collectives from ramping up stocks and productive capacity to meet needs of consortium demand; –Performance and efficiency of local commerce is impacted by deteriorating sections of road-routes.
Roles: –Bid competitively and transparently, following fairness, equity, and priority guidelines, for works contracts in consortium and community projects; –Deliver works on time, on specification, and within expected budget variances; –Liase with the consortium and government monitoring agencies.
Impacts: –Worker-safety is impacted by unsafe sections of road-routes, especially workers who make long-haul commutes each day to oil-field sites; –Higher operational and logistics costs caused by more outsourcing outside of oil-producing region.
Roles: –Coordinate residents, NGOs, and commercial associations; –Prepare proposals for and operate the larger public-works projects; –Ensure compliance with Regional Development Plan and Urban Reference Plan; –Liase with the consortium.
Impacts: –Community views local government as out of touch with project, and failing to represent them effectively in petroleum project; –Future community-development project-sponsors could assess past performance of government leadership unfavourably.
Roles: –Coordinate local governments; –Elaborate Regional Development Plan to ensure consistency across the regions, and adjudicate controversies arising therein; –Construct and operate pipeline (see TOTCO below); –Liase with and monitor the consortium.
Impacts: –Stagnant public-infrastructure development in oil-producing region is unnecessarily leading to local perceptions focusing more closely on the nature of relationship between the national government and the consortium; –Perceptions also inadvertently focusing more on ideas of regional favouritism; –Local confidence in national government as the people’s advocate-of-last-resort is diminished.
Roles: –Oversee community projects, and the FACIL Steering Committee and its institutions; –Liase with and monitor consortium.
Impacts: –CTNSC seen as not monitoring FACIL start-up and operation adequately as chartered, although this view would not necessarily be pervasive among residents of the oil-producing region where the work of the national-level CTNSC is not very visible. –Reflects national-government institutional and technical capacity limitations in seizing development opportunities and maximizing their benefits.
Roles: –Monitor all projects for compliance with the provisions of the Environmental Management Plan and adjudicate controversies arising therein.
Impacts: –Delays in community-infrastructure projects designed to improve local water and sanitation are preventing MEWR from fulfilling its mandate in the oil-producing region.
Roles: –Construct and operate oil-delivery pipeline to the Chad-Cameroon border; –Liase with the consortium and the Government of Chad, its participants-in-equity.
Impacts: –Similar to impacts on sub-contractors (worker-safety in relation to road-routes, higher non-local outsourcing costs, etc.)
Roles: –As the multinational consortium operator, construct oil-field petroleum-production facilities during the three-year construction phase; –Operate oil-production plants thereafter; –Provide focused political advocacy and support for community projects and micro-projects only where appropriate and only to address specific issues currently related directly to the consortium project (the consortium operator periodically undertakes this extra role only on an ‘as-needed’ basis).
Impacts: –Delays related to FACIL and dependent micro-projects are needlessly nourishing public sentiments of impatience and mistrust for consortium, which, when extrapolated over the years that the consortium intends to operate in the regions, risks multiplying to a level requiring serious outlays and secondary risks for security; –Deteriorating road-route surfaces expose consortium and sub-contractor workers to more road hazards unnecessarily; –Project delays in public-infrastructure capacity expansion deny field managers more local sources of goods and services, especially during the construction phase when raw materials and such other local goods are in higher demand, all leading to more outsourcing, which drives operational costs higher and draws out delivery lead-times; –Unforeseen eventualities in the Chad project will also reflect poorly on consortium members, particularly the operator, during competitive negotiations for future multinational projects with governments of developing countries.
Roles: –Plan financial structure and controls of petroleum project in conjunction with Chad Government and consortium; –Provide stewardship for community-development agenda; –Provide strategic advocacy for the community-development interests of local residents; –Participate in petroleum-project and community-projects funding; –Audit consortium project and oversee consortium activity in the field.
Impacts: –Stated community-development goals are not being adequately met in the Doba region, creating in many quarters around the world perceptions relating the compromised effectiveness of the World Bank as the motor of development that its charter mandates; –Claims that the design of the Chad-Cameroon Petroleum Project should become the model for future multinational investment-plus-development projects are being undermined as the development component of the Doba region is slipping behind the investment component.
Roles: –Participate in investment syndicate; –Oversee its long-term investment interests and monitor long-term risk-management practices of the consortium designed to guard the vital investment interests and sunk fixed-costs of the investor group long-term; –Audit the books and records of the consortium.
Impacts: –Lender group might not perceive the granularity of rising risks levels present in the field today, but its interests will be affected by them in the future unless the consortium acts now to prevent risk-exposure from magnifying over the years.
The foregoing analysis of stakeholders’ roles and impacts underscores the broadness of the range of impacts that the community-project delays are having on the many stakeholders. As the analysis makes clear, the delays are in no stakeholder’s interest, and are presenting a particularly negative long-term impact on the vital business interests of the consortium and the lender group. The following sections deepen the analysis to discover project-delay causes and to outline simple remedial actions that the consortium can take now to mitigate long-term risks, which risk inevitably snowballing and threatening its vital business interests and the interests of the local communities in the long years ahead.
This section provides analysis of each of the three core community projects currently delayed. For each project, the analysis outlines the project goals, project accomplishments to date (as at August, 2001), the major obstacles delaying the project, and the impacts that the delays are creating. Each analysis concludes with an outline of cost-controlled recommendations for the consortium to consider in helping to move each project forward.
The Fonds d’Actions Concertées d’Initiatives Locale, also referred to as the Pilot Development Fund or the Local-Initiatives Development Fund, was designed by World Bank planners to be the constitutive body for administering community-development projects in the oil-producing region.
Goals. The World Bank Project Appraisal document identifies the goals of the FACIL as follows.
The Pilot Development Fund (FACIL) is a facility established to finance social and economic infrastructures and to promote income-generating activities in the region, while contributing to the mitigation of possible negative impacts; it is also a vehicle to promote a consensus-building framework for the producing region with the active participation of local stakeholders. The specific objectives of the FACIL are to:
· Improve the living conditions of the local population by contributing to providing them with better access to basic socio-economic infrastructure and services.
· Enable improvement of the population’s income through creation of temporary and permanent employment, development of income-generating activities, creation of economic opportunities, and strengthening of the capacities of local micro- and small enterprises.
· Enable local institutions to better respond to unforeseen situations as needed to mitigate the social and environmental impacts of the Doba Petroleum project.
· Create an institutional and operating framework for other donors’ further support to the development of the region.
· Facilitate, by its pilot nature and rapid implementation, the preparation and updating of the [Regional Development Plan] (RDP), enabling harmonization of the local actions with the medium and long-term regional and sector development policies. [Page 38, World Bank Project Appraisal Document PAD19342-CD]
Accomplishments and Current Status. As at the end of August in 2001, the FACIL had completed some initial consultations with civil society to identify some community-infrastructure needs. The FACIL Procedures Manual has also been prepared and distributed, albeit to a more limited circle of potential micro-project leaders than was anticipated. Some micro-project proposals were in the process of being prepared, more are planned, and some have already been submitted to the FACIL Steering Committee for its consideration. However, infrastructure proposals remain as proposals, and the activity has not yet produced much concrete and visible results on the ground because of the incomplete formation of the FACIL Steering Committee, which has also delayed the Rapid Intervention Measures (see below) and micro-project proposals. The Steering Committee had not yet convened in quorum as of August in 2001, and, as a result, the greatest achievement for the Rapid Intervention Measures at that time was the selection of the site for the new public markets in Doba.
Obstacles. The nomination of the chair of the FACIL Steering Committee is up to the members of that body and has been the gating factor to date. Until the Committee names its chair, funding for even its own operation cannot be released. The nomination is believed to be caught up in local, and, to some extent, regional and possibly national politics as well. Although some delay is to be expected, and is appropriate in reasonable measure, this consensus mechanism, originally intended to provide checks and balances, is now working to block not only the Steering Committee itself, but also the progress of the Rapid Intervention Measures and the micro-projects, which are both pivotally dependent on it. At the national level, the role of the CNSTC in overseeing the FACIL does not seem to have been very effective to date in providing the leadership to move along the nomination process.
Impacts. The less visible consequences of the Steering Committee formation delay revolve around lost economic opportunity and its ripple-through to a range of stakeholders. Firstly, the public-infrastructure capacity-building goals, envisioned by World Bank planners to be met ahead of the main petroleum-project construction phase in order to support it, are now running well behind schedule and squarely contrary to agreements. Secondly, residents’ opportunities for economic participation in the consortium project are being lost to more competitive outsiders with stronger public-infrastructure capacities. This is one aspect of a general ‘outsourcing’ phenomenon. Thirdly, as local capacity-building falls behind the main consortium project and logistics-sourcing for its construction phase turns elsewhere, residents’ impatience with the consortium is growing and counterproductive perceptions based on economic disenfranchisement are being formed. Fourthly, and even less visible, is that NGOs and micro-entrepreneurs are increasingly viewing the FACIL as an overly politicised source of funding which might not be as reliable as need be. This is a subtle but critical side-effect, which, while difficult to measure, undermines community confidence in not only the FACIL but also the consortium indirectly.
The outsourcing phenomenon is also manifesting itself in other ways. One international NGO currently plans not to use the FACIL at all and has sought funding elsewhere to run local projects in order to avoid the appearance of entanglements with Steering Committee nomination issues. The secondary unintended effect of this result is that NGOs are now being significantly under-utilised as consortium partners when the consortium should be engaging them more actively to leverage FACIL resources for community-development projects. Another view of this impact is that NGOs are now having to carry some of the extra burden for the consortium generated by the increase in public needs due to the increase in consortium-project activity.
Recommendations. The consortium is not only justified in, but also very capable of, taking an appropriate ‘coordinating-partner’ role to help unblock FACIL delays and to drive local capacity-building forward. Its justification is based on its vital business interests. Firstly, its long-term risk-management strategy is to mitigate the potential consequences of community disenfranchisement, real and perceived, by truly integrating the community into the economics of the consortium project before too much more of this rare opportunity is lost. Secondly, its short-term financial strategy is to control procurement, operating, and security costs by drawing more on locally provided goods and services. Finally, its reputation-risk strategy is to mitigate the potential of being ‘tainted’ and thereby excluded as a future partner of choice by other developing-country governments and international lending agencies, by demonstrating strong community-partnership performance in the Chad project today. Its capability credentials are based solidly on its strong technical expertise and unique working relationships with all accessible levels of government. Given this unique and effective combination of justification and capability, as its top priority of a necessary risk-mitigation effort, the consortium should:
The need for the consortium to contribute to help drive FACIL success is matched by its unique capability for doing so. Not only would the direct impacts outlined above be addressed, new avenues for NGO partnerships will also be created, better community relations will create a more certain atmosphere for long-term project success, and short-term operational costs for goods and services will be reduced through increased local procurement made possible by better public infrastructure. In terms of effective risk-management and necessary mitigation measures, a little effort made now by implementing these recommendations rapidly, while there remains a window of time, will significantly reduce emergent risks potentially threatening the success of the petroleum project in the future.
The Rapid Intervention Measures consist of a targeted package of small- to medium-scale public infrastructure projects designed to ‘jump-start’ the infrastructure capacity of the oil-producing region (i) to ameliorate impoverished conditions in this remote area, (ii) to help local communities participate more competitively in the consortium project, and (iii) to support the population increase due to worker influx stimulated by the three-year construction phase of the consortium project. It is important to note that the progress of the Rapid Intervention Measures is directly dependent upon the successful functioning of the FACIL and its Steering Committee whose initial order of work is to administer these Rapid Intervention Measures.
Goals. The set of targeted project components of the Rapid Intervention Measures are enumerated in the following excerpt from the World Bank Project Appraisal Document:
· Construction of health center in Doba
· Rehabilitation of health center in Bébédjia
· Rehabilitation of Doba hospital
· Construction of public market in Doba
· Construction of public market in Bébédjia
· Construction of slaughterhouse in Doba
· Construction of slaughterhouse in Bébédjia
· Construction of cattle market in Doba
· Rehabilitation and enlarging of sewerage facilities in Doba
· Construction of sewerage facilities in Bébédjia
· Addition of 10 water-supply bore-holes in Doba
· Delivery of health equipment and medications in Doba and Bébédjia
· First sensitization campaign on STDs and AIDS completed by January 1, 2002.
· Adoption of forest resources management plan for the producing region by January 1, 2002.
· FACIL Activities : (i) first update of Regional Development Plan by July 1, 2001; (ii) Number of cumulative micro projects approved: 5 by July 2001; 10 by July 2002; 20 by July 2003; and 30 by July 2004.
The Rapid Intervention Measures also call for the drafting of a small Urban Reference Plan to serve as a strategic public-infrastructure framework for long-term development in the oil-producing region. The reference plan will ensure an orderly implementation of not only these immediate tactical measures for the consortium project, but also of subsequent strategic measures eventually required as the towns of the oil-producing region expand over the next fifteen years during the production phase of the consortium project.
As can be seen from the rudimentary nature of the list above, the Rapid Intervention Measures were designed to realign quickly an impoverished remote rural economy with the sudden needs of a new techno-industrial enterprise. This striking contrast, and the abruptness of the change required of a small community where even stagnant waters pose significant health risks, underscores the critical need for a speedy implementation of the Rapid Intervention Measures, and also points to the pitfalls of operating such a modern industrial enterprise as an island isolated amidst an agro-economy unprepared for it and not well integrated into it.
Accomplishments and Current Status. As of the end of August in 2001, some planning for the economic infrastructure components (markets, etc.) has taken place. Consultations with the Mayor of Doba have been held, and, as mentioned, physical site-selection for the new market-places has been completed, although these developments are not well known by the Doba community in general. On the ground, though, there is little visible progress seen in actual commencement of construction activity, while the construction phase of the consortium project is clearly moving forward.
In the World Bank Project Appraisal Document, the originally scheduled commencement and completion dates for the Rapid Intervention Measures seem to be inconsistent. Reasonable variances in target dates are to be expected to address unforeseen project contingencies. However, on page 24 of the document, the date of July 1, 2001 is the targeted completion date for the physical infrastructure components of the Rapid Intervention Measures, while page 48 indicates that mid-2001 is the targeted commencement date for these components. This inconsistency in the documentation itself would suggest that World Bank planners would need to place more emphasis not only on linking development project schedules to investment project schedules more firmly, but also in more precise terms to assure a minimal skew in their rates of progress. Nonetheless, even under either target-date scenario in the document, implementation of the Rapid Intervention Measures on the ground remains delayed, and the local infrastructure remains weak, leaving local residents and small businesses much less attractive to the consortium project than their outside competitors.
Obstacles. Delays in the FACIL Steering Committee formation, addressed above, have directly affected the implementation schedule of the Rapid Intervention Measures. Another issue, which is not strictly an obstacle to the Rapid Intervention Measures but distinctly has the effect of one, is related to the relative public unawareness of the deliverables and timetable of these measures. Without the public having knowledge of estimated target-dates for what new infrastructure capacity is scheduled and when it is to become available to the public, the Rapid Intervention Measures are effectively deprived of a healthy and eager public voice which would otherwise be very instrumental in helping to push them and the FACIL Steering Committee nomination forward. This public-information issue is connected with other issues surrounding the Communications Plan.
Impacts. Without the increased local capacity in even these very basic elements of public infrastructure, public health and sanitation remains a concern, particularly more visible now with the influx of construction-phase workers and their attendant population. Additionally, the local communities cannot be expected to deliver productivity and quality levels in their locally produced goods and services to the consortium project, and the consortium, currently only loosely bound to capacity-building project schedules, will turn elsewhere to possibly higher priced sources for basic logistics needed to meet its immediate needs, which, in turn, will not only increase its operating costs but also create the economic disenfranchisement and impatience directed at it.
The secondary effect of the lack of public knowledge about the schedule of the Rapid Intervention Measures is that local entrepreneurs and artisans will not have as much latitude to plan and to prepare themselves ahead of time to leverage these new capacities as soon as they become available, and thereby to seize competitively some economic opportunities in the consortium project before others do.
If this pattern of missed economic opportunities persists, the ensuing frustration will form more unfavourable perceptions toward the consortium and will continue to become more pervasive. It risks materialising into a more concerted public opposition to the consortium project in the long run. However, the consortium has the chance to act now by making a modest effort to help mitigate the potential of such eventualities, and should do so as normal part of necessary risk-management. Acting now will avert the need for having to exert a much greater effort in the future to deal with the consequences of such eventualities, and for having to deal with the secondary eventualities that belated remedial actions, inherently risk-prone themselves, will create.
Recommendations. The motivation for the consortium to take an appropriate role in helping to press the Rapid Intervention Measures forward rests on the same vital business-interests and technical abilities of the consortium noted earlier. On this basis, as a second-level priority for any risk-mitigation effort, the consortium should:
This package of recommendations, based clearly on business logic and quiet modest in terms of outlays on the part of the consortium, will go a long way to draw public attention to the new possibilities that the increased capacity brought by the Rapid Intervention Measures will bring to many stakeholders, including the consortium. Coupled with the ‘coordination-partner’ role of the consortium and NGOs, this renewed public interest will itself help drive the projects forward, and the new capacity will energise local commercial activity to the benefit of the operating costs and risk-mitigation strategy of the consortium as well as to the well-being of the community mutually.
The impetus for this project derives plainly from the needs (i) to keep public roads safe, easily traversable, and productive for both consortium-workers and community-members alike, (ii) to protect public-property from private overuse without compensatory maintenance, (iii) to protect private-property (residents’ private vehicles using public roads) from unreasonable wear-and-tear and undue damage caused by the lack of roads maintenance, and (iv) to protect the environment where roads and routes impinge upon it.
The impetus for this project becomes clearer when considered in the historical context of roads in Chad generally. Sealed roads in Chad are renown not only for their fewness but also for their poor condition. None of the sealed roads are in the oil-producing region, which has only dusty road-routes to support all vehicular traffic. The routes in the oil-producing region were initially poorly constructed, starting long ago mainly as foot-paths for connecting communities or trails for herding livestock. Over time, these paths and trails were beaten back and cleared into road-routes to carry light vehicular traffic for connecting the communities. Today, these still-fragile routes, and the mostly old and fragile vehicles laboriously plying them, are also the backbone of local trade and commerce, connecting the cotton-fields, the lifeblood of these communities, with processing plants and marketplaces. During the rainy season, potholes fissure into large craters filled with mud, and, in some cases, create small streams crossing, and often closing down, the route to all vehicular traffic. Old vehicles trapped in deep mud or caught in water-streams reduce overall local transportation capacity and increase ‘lost time’ in productivity until they are extricated, an operation which is difficult and costly without machines, and repaired with whatever parts and materials are on hand in these remote areas. The frustration and cost of such bother is often directed at the consortium.
Today, these rural road-routes must also carry an industrial traffic-load generated by recent consortium construction activity, with heavy earthmoving machinery moving around the region and heavy commuter-transport vehicles ferrying workers to and from the oil-field work-sites each day. This recent traffic-load increase has two distinct components: Traffic-load is increased not only in terms of the increase in the number of daily vehicle traversals, but also in terms of the increase in the size and weight of consortium vehicles in relation to the old vehicles of the community, which are much more susceptible to adverse road conditions than the newer and stronger vehicles of the consortium. Given that rural road-routes with limited capacity must now also carry this industrial traffic-load, the need for a more direct consortium participation in road-route capacity preservation and bolstering has become more pronounced among leaders of the local communities.
Goals. The goals of this project are simply to ensure road-safety for all, to protect public and private property and the environment from accelerated degradation due to consortium activity, and to preserve and enhance existing transportation-productivity levels for both consortium and community alike, since both must rely upon the condition of the same road-routes to achieve their respective goals. The primary objective is to restore and preserve the existing rural road-route capacity now used to support industrial traffic. The secondary objective is to put in place a self-sustaining roads-maintenance programme operated by the community with appropriate consortium participation.
Accomplishments and Status. Some of the principal road-routes, such as the one connecting Doba and Moundou, were never very good and safe, and have been deteriorating at a somewhat accelerated rate since the construction phase of the petroleum-project began. Deterioration is expected to continue apace throughout the oil-fields construction phase, perhaps at an aggravated rate due to greater outsourcing, unless there is remedial intervention soon and regular maintenance thereafter. There are efforts underway to plug-up serious road conditions where and when they arise. However, this approach is somewhat reactive and does not produce very durable results. Measured over time, susceptible sections of road can be in a state of disrepair longer than in a temporary state of good condition. Popular sentiment holds that the roads effort is currently more focused on the routes needed more by the consortium than by the consortium and communities jointly.
Obstacles. The potential cost of roads maintenance is perhaps one of the main obstacles which makes a comprehensive roads initiative difficult for the consortium to embrace. A related concern is that local expectations might unexpectedly rise to a level where the scope of any roads initiative would unreasonably include a network of sealed roads of very good quality for a region which has never had even one. Yet another obstacle is that roads maintenance is best viewed as a government responsibility. However, even in light of these realities, the consortium has much to gain in participating in a modest roads initiative focused on safer roads to protect its employees who must use them each day, to protect the communities who also use them daily, and to maintain transportation productivity.
Impacts. Local residents who do happen to own cars or lorries keep their old and dilapidated vehicles running with ad-hoc welds, wire, and whatever else is on hand in this remote region to keep these valuable instruments of their livelihood running. Residents’ vehicles, used to transport goods to market and bring supplies back, are placed under ever greater stress today as they try to navigate recent road degradation, particularly in the rainy season when routes can be closed by water-streams and flooding unexpectedly. Road-safety risks are also increased for consortium-workers and community-members alike, though to a lesser extent for consortium-workers as consortium vehicles are new, better maintained, and therefore less susceptible to adverse road conditions. The net effect is that the community must work harder to traverse the routes, and transportation problems are sometimes being blamed on the consortium disproportionately.
Recommendations. Given that roads and routes in fair condition are a collective business efficiency needed by both community and consortium, and that a large roads-construction programme is not immediately required to address the current safety and productivity issues, the consortium should play an appropriate role in pressing for and supporting an improved process to address immediate road-route needs based on an proactive spot-repair approach. Based on this business rationale, the consortium should:
This set of recommendations, which does entail some cost, is based very clearly on the joint interests of business and community, would provide a cost-constrained approach for addressing road-safety and productivity issues for both consortium and community, and would also establish a sustainable solution which will last for the long duration of both construction and production phases of the consortium project. In terms of reputation-risk management, since road-route conditions are in plain public view, the intangible benefit for the consortium will be the goodwill to accumulate in its favour, which is currently needed to displace current resentments and its attendant risks.
The design of today’s multinational projects in developing countries is, to varying extends, generally more enlightened by policies and principles of companies and industries with more modern corporate values. The design of the Chad-Cameroon Petroleum Project includes such modern features, even though a few shortcomings in its design detract from the claim that its design should be the model for future projects. This section traces the recent evolution of the planning-principles used in project design to assess where we now are in that evolution story, and to identify the next set of requirements for project planners to meet in order to fine-tune the multinational-project model, which will achieve even greater implementation success for both multinational investors and local communities in developing countries.
In the past, only a subset of multinational projects in developing countries included a distinct community-development component. In such cases, the basis for its inclusion was often informal and quiet varied, ranging from the need (i) to create bargaining chips for negotiation and tendering power before closing the deal, (ii) to show goodwill or political gestures to the local community once ground-breaking work began, (iii) to demonstrate a uniform commitment to corporate philanthropic values to employees and neighbours at home, (iv) to ally moralistic concerns of shareholder or constituent blocs at home, (v) to stage an orchestrated ‘corporate cheque-writing’ event or to run public-relations ‘damage-control’ programmes in the wake of some mishap, or (vi) even to generate marketing hype for local project-region sales campaigns. In terms of long-term development progress, this early model was weak and not sustainable because of the opaqueness of its underlying motives masquerading as real business drivers, and because the pressure to succeed with the community-development component of the project would dissipate soon after the curtains of ground-breaking ceremonies were drawn, or once public-opinion had been stroked or distracted.
Today, this cosmetic approach has been replaced, to varying extents, with more substantive and focused community-development project components. Focus now centres on specific public-infrastructure and institutional capacity-building measures for long-term gains benefiting host-community and multinational investment consortia mutually. This shift is particularly visible in projects which leverage World Bank resources, and which are therefore required to abide by World Bank guidelines on community development.
However, even though today’s project-design and planning principles have been improved, the practice of actually implementation them remains to be improved. The remaining weakness in today’s model is that the progress and economics of the community-project components are still only loosely linked to the progress and economics of the main investment-project component. Today, the main investment project can forge ahead on schedule, and even outstrip the progress of the community projects frozen in a ‘paper’ state. Even though today’s project plans now often include a specific community infrastructure-capacity component, the incentives, and therefore the commitment, to drive forward the implementation schedule of this component is not as strong as the commitment to implement the investment project. In projects designed to integrate the economics of the local community into the investment project by giving the community the role of a key supplier of local goods and services, such a disparate rate of progress tends to undermine or even obviate the need for that local role as supplies are brought in from elsewhere while local public-infrastructure projects are allowed to fall behind.
What is needed, then, are ways to prevent this slippage and gradual obviation by more tightly integrating the implementation schedules and economics of both investment and community projects in a business model which views the local community as a strategic business partner, and the need for its local public capacity as a real asset and business driver. Such firmer linkages would reduce the risk of large schedule slippage in the community projects, and, at the same time, capture the benefits accruing to both project investors and the community mutually.
The ideal but also less practical approach would emphasise quantifiable conditions on the activities of the multinational investor to ensure that specific local supply quotas are met. Such a plan would hypothetically ensure that community-development capacity-building projects would progress on schedule, effectively in lock-step with the investment project, because the investor would now have a direct interest not only in the investment project itself but also in the community-development projects which must support it in order to satisfy the pre-conditions. However, this view has two flaws. Firstly, the unattractive incentive of meeting quotas does not consider the local community as a strategic asset, and hides its true long-term potential as a key business driver, which should, by sound business logic and economic reasoning, be properly integrated as such into the business and operational model formally. Secondly, the risk that delayed community-projects might also delay or even derail the investment project are likely to discourage investors who would view such tight project-schedule linkages as unworkable. This investor-aversion is especially true when considering that project implementation must always involve some variation on the original plan to address unforeseen contingencies. What is required, then, are linkages which are (i) both firmer than the linkages of today but not so firm as to create disincentives for multinational investors, and (ii) view the local community as a strategic long-term partner to be integrated formally into the business model, project plan, and implementation schedule for mutual long-run benefits.
Such firmer linkages also need to address the direction of the dependency relationship and sequencing between the main investment project and the supporting community-capacity projects, which are preparatory in nature. If project designers aim to launch community-development projects ahead of the main investment project that they will support, then project managers running the implementation will need to tighten these special dependency linkages to ensure that specific community-project milestones are actually completed ahead of the commencement of dependent phases of the investment project that they are designed to support. The lead time would also need to allow some time for local communities to plan and position their processes to maximize the application and use of the new capacity. In situations where the investment project commences without adequate local infrastructure capacity in place and ready to serve, multinationals’ field-managers will be forced to outsource their goods and services and bypass the local community in order to maintain their own schedules, and the need for the community projects is lessened, reducing the impetus to implement them. Therefore, planners of future projects should also clarify the direction of project interdependencies and tighten the linkages to ensure that progress in preparatory community-infrastructure projects are not delayed to the degree that they have been in the Chad portion of the Chad-Cameroon Petroleum Project.
As part of a comprehensive risk-management framework, project planners should also explicitly include in their planning documents a set of early-warning indicators, with each metric having a benchmark calibrated to an acceptable range of risk-tolerance thresholds, to signal when community-project progress is at risk. The enhanced framework should also include proactive remedial actions to be undertaken more or less automatically when such an indicator reports risk levels not within its pre-specified tolerance.
The long-term benefits of a project design featuring such firmer yet flexible linkages and an augmented risk-management framework would accrue to both community and investor mutually. Better local public-infrastructure capacity ready on time means better local supply of goods and services, but also lower operating costs, better community relations, and, ultimately, fewer security cost-items and a more certain and stable future within the field-operations area over time. In the long run, increasingly important reputation-risk is also mitigated by such firmer linkages as potential government-partners in future projects will increasingly consider as a key partner-assessment factor the extent to which each potential multinational bidder has performed in community integration and partnering in its past projects. Since this emerging ‘scorecard’ factor is increasingly becoming an integral part of the strategic business model, it should therefore be incorporated integrally into future business models, project plans, and implementation schedules to ensure better community-integration with the project and to capture fully the business and community benefits for doing so.
Therefore, firmer project-schedule linkages properly integrated into the business model and project plans, coupled with an enhanced risk-management framework featuring early-warning indicators and benchmarks for detecting and remedying community-development project slippage or failure, should be the basis of the next set of requirements which need to be met in order to continue the evolution of planning-principles and project-design for multinational projects in developing countries.
As the petroleum-project moves ahead, the delays in the community-projects in the Doba region are leading to the gradual loss of a rare economic opportunity there, which, for whatever reason, is feeding local resentment towards the consortium. The delays in the start-up and operation of the FACIL have hindered not only the Rapid Intervention Measures vitally dependent on it, but also a stream of potential micro-projects likewise dependent on it. The road-routes degradation is even more visible to the public, making it riskier and harder for residents to go about their daily business. The consortium now has the option simply to ignore these rising public sentiments, and the risk-indicators identified in this study as reflecting them, as real signals of growing impatience with the pledges made regarding prosperity flowing from the Doba portion of the Chad-Cameroon Petroleum Project.
However, the consortium also now has the option to accept these risk-indicators and therefore to undertake an appropriate partnering role in helping to address their underlying causes giving rise to these regional sentiments inadvertently being directed towards it. Any consortium participation in this process would be based much less on debatable notions related to paternalism or philanthropy, and much more on concrete corporate action necessary to conduct the mandatory risk-management ordinarily required by its investors. This investor-based justification obligates the consortium to consider the risks related to the impacts of the delays with the Doba-region public-infrastructure projects alongside all other project risks uniformly. Otherwise, the consortium will be operating on an incomplete risk-assessment profile missing key factors, which itself risks underestimating the potential impacts of community-project delays and failures in the many years to come in the long lifecycle of the petroleum project.
There are at least two approaches that the consortium could take to address these risk-factors. The less effective alternative would be to focus on a public-relations approach, which would aim to stress to the Doba-region population that the community-development projects are ultimately the responsibility of the Chad Government, which indeed they are. However, such an approach aimed at ‘converting’ public perceptions would be unlikely to succeed because residents are all too aware of the visible resource-richness of the consortium vis-à-vis the resource-strapped Chad Government. The failure of such a public-relations approach could even generate an unintended negative effect by creating new secondary perceptions based on feelings of failed deception.
The more effective approach would be to undertake an appropriate ‘coordinating-partner’ role such as the one outlined in the tightly cost-constrained recommendations presented in this study. Leveraging the NGO knowledge-base and experience-domain in community-development in the Doba region, the consortium would not only reduce short- and long-run operating costs by pressing to move forward public-infrastructure projects, but would also earn the public goodwill that it will need to operate a successful petroleum-production project at acceptable risk-levels over the many years of its lifecycle. Both operating expenses and goodwill are balance-sheet items.
In the final business analysis, the small effort required now to implement these recommendations as part of an ordinarily necessary risk-management strategy is far less than the much larger and risk-prone crisis-driven effort required later to deal with the contingencies of the community-project failures when the residents of the Doba-region suddenly feel that their only real economic opportunity has been compromised or even lost. Therefore, the best time to move on remediation is now.