Development Economics

General Definitions:

Development Economics: Development that focuses on sustainable economic growth through capacity building, good governance and economic reform.

See http://www.oxy.edu/~gsecondi/dev.html for an extensive list of sites pertaining to development economics.

See the World Institute for Development Economics Research (WIDER) for a more comprehensive discussion on development economics: http://www.wider.unu.edu/welcome.htm

See the World Bank page on development economics: http://www.worldbank.org/knowledge/

International Monetary Fund (IMF): The IMF's primarily purpose is to promote the macroeconomic growth and stability of member countries as well as general international financial stability. This mandate is met through the promotion of international monetary cooperation, exchange stability, orderly exchange arrangements, and temporary financial assistance.

See the IMF homepage: http://www.imf.org/

For more informational relating specifically to Chad and the IMF see: http://www.imf.org/external/country/TCD/index.htm

The World Bank: The World Bank focuses its economics development efforts on the reduction of poverty and the improvement of institutions within a country.

See the World Bank homepage: http://www.worldbank.org/

Questions to Consider:

What will the economic and political impact of the project be on the various actors, including the government, the general citizen of Chad, civil societies, and the Esso-Chad consortium?

How will the project be funded? Is it in Chad's best interests to increase its debt to international lenders?

How will the amount of revenue be decided and how will that amount be distributed? What safeguards are in place to prevent mismanagement of funds by the Chadian government?

What plans to further the economic and political development of Chad have been laid out? Have those plans been carried out?

What other aid components have been designed to supplement the project?

Have oil projects in African countries historically been beneficial to the individual citizen, the local communities,the government and the oil companies?

Has Esso-Chad adequately compensated local communities affected by construction of the pipeline? What sort of redress do individuals and communities have if they are negatively affected by multinational companies?

Who has voiced concern about this projects? How has the World Bank and Esso-Chad responded to those concerns?

The Project's Development Economics Aims

The Chad-Cameroon Pipeline is intended to accomplish two main objectives. First, it will be profitable for the three oil companies involved in the project. Second, it will improve Chad's economy, political environment, and the quality of life of the Chadian people.

According to Esso-Chad expected revenue from the oil fields will be $2.5 to $8.5 billion for Chad and up to $900 million for Cameroon over 25 years. The remaining revenue will go to the consortium of international oil companies led by Exxon Mobil Corporation, to the international banks financing the project, and to the World Bank for brokering the deal and putting up 3 percent of the initial financing. Other sources are less optimistic about revenues for the host countries.

See Business Week article "Commentary: This Clean Oil Project is Already Tainted:" http://www.businessweek.com/magazine/content/01_15/b3727010.htm

See "Play IT Again, Sam," by Robin Hahnel: http://www.zmag.org/ZMag/articles/jan01hahnel.htm

The Chadian Authorities were required by the IMF and the World Bank to prepare an Interim Poverty Reduction Strategy Paper (IPRSP). This paper was an initial step in identifying and clarifying the Chad's economic and social policy decisions related to poverty reduction. After the IPRSP a final Poverty Reduction Strategy Paper (PRSP) will be submitted.

Interim Poverty Reduction Strategy Paper: A document prepared by member countries that summarizes the current knowledge and assessment of a country's poverty situation, describing the existing poverty reduction strategy, identifying gaps in poverty data, diagnostics, and monitoring capacity, and laying out the process for addressing these gaps and producing a fully developed Poverty Reduction Strategy Paper in a participatory fashion. (Definition from: http://www.imf.org/external/NP/prsp/2000/tcd/01/INDEX.HTM)

An Interim Poverty Reduction Strategy Paper (IPRSP) was accepted by the IMF and World Bank in July 2000. The Final Poverty Reduction Strategy Paper (PRSP) was released in the Fall of 2001.
See Chad's ISRSP: http://poverty.worldbank.org/files/chad%20iprsp.pdf

Poverty Reduction Strategy Paper: After the IPRSP is filed a country then submits its PRSP, which describes the country's macroeconomic, structural and social policies and programs over a period of three year or longer. This paper is produced by the country's authorities and external parties such as the IMF, World Bank and domestic and international shareholders. (Definition from: http://www.imf.org/external/np/prsp/prsp.asp)

See Chad's PRSP: http://www.imf.org/External/NP/prsp/2001/tcd/01/113001.pdf See the IMF and World Bank's response to Chad's Poverty Reduction Strategy and the government's ability to meet its goals. http://www1.worldbank.org/prsp/PRSP_
Policy_Papers/progressreport041801.pdf

In January 2000, the IMF entered into a three-year arrangement under its Poverty Reduction Growth Facility (PRGF) to provide Chad with approximately $50 million to support structural adjustment. The funds were disbursed in phases (the first payment was $13 million). In May 2001, after the completion of an IMF review of the PRGF arrangement, the IMF and Chad updated their agreement on the terms of the PRGF loan in a Letter of Intent (LOL). Note that provisions of the Memorandum of Economic and Financial Policies that is part of the LOL relate to the oil bonus money and the Collège de Contrôle et de Surveillance des Revenus Pétroliers, CCSRP ( 7 and 31). Other provisions detail efforts to increase accountability (through audits), transparency and good governance. As a result of this agreement, the IMF approved the release of $14 million under its PRGF. The next IMF review of the PRGF arrangement was completed in December 2001. The IMF noted that budget implementation in 2001 and actions in the governance area needed further consideration.

See the IMF Poverty Reduction and Growth page: http://www.imf.org/external/np/exr/facts/prgf.htm

See the Letter of Intent (LOL): http://www.imf.org/external/np/loi/2001/tcd/01/

See Global News article for brief commentary on Idris Deby's use of oil contract bonus money to purchase arms: http://www.pbs.org/newshour/health/
aids_in_africa/africaaids.php3?country=8

In May 2001, the IMF and World Bank approved debt reduction for Chad under the Heavily Indebted Poor Countries (HIPC) Initiative in the amount of $260 million. The World Bank issued a press release describing this action.

Heavily Indebted Poor Countries (HIPC) Initiative: http://www.worldbank.org/hipc/

World Bank Press Release number 2001/344/S: http://wbln0018.worldbank.org/news/pressrelease.nsf/673fa6 c5a2d50a67852565e200692a79/45e6864ab70f030985256a55006d8e13

The World Bank is currently supporting four capacity building projects in Chad. These projects are introduced below:

1. Management of the Petroleum Economy Project ($17.5 million, approved January 2000, to end June 2005): As described by the World Bank, the project aims to help Chad build the capacity to implement its petroleum revenue management strategy, to enable it to effectively absorb and allocate expected oil revenue, and thus pursue the poverty-reduction objective of petroleum resources development. The project has five components:

a) Strengthening the public financial management component will support and prepare for a consolidated budget, manage budget expenditure, manage treasury and public accounting, and develop financial management information system.

b) The poverty database and strategy component will support activities to develop a poverty database, produce a poverty profile, and formulate a participatory strategy for poverty reduction.

c) The human resources development component will help to improve the competence and quality of civil service.

d) The oversight and control component will support the said functions mandated by the law on petroleum revenue management.

e) The monitoring economic reform and coordinating capacity building component will support the pursuit of macroeconomic stabilization and privatization agenda, preparation and negotiation of adjustment programs with external partners, and monitoring of, and reporting on, the implementation of adjustment programs.

See Management of the Petroleum Economy Project: http://www.worldbank.org/afr/ccproj/project/mpep.pdf

See World Bank report on the importance of capacity building in Africa: http://www.worldbank.org/afr/findings/english/find196.pdf

See the African Capacity Building Foundation homepage: http://www.acbf-pact.org/

2. The Petroleum Sector Management Capacity Building Project ($23.7 million, approved June 2000, to end in December 2005): As described by the World Bank, the project aims to strengthen the petroleum resources' management capacity, within environmental, and social sound practices, and establish a framework for private sector investments in the petroleum sector. The components will:

a) strengthen the Government's capacity to manage, and mitigate the impact of the Doba Petroleum Project - implemented in parallel to the petroleum project in Cameroon - by building the technical capacity to enable legal, financial, and environmental aspects to support project coordination. Training to government staff will be provided, in coordination with that for Cameroon counterparts; likewise, an International Advisory Panel will provide expertise on biophysical impacts, preventive health management, and socioeconomic aspects of petroleum projects. Technical assistance, and logistic support will focus on the engineering monitoring, and evaluation of the Doba oil field area, and elsewhere along the pipeline, and, include sponsoring for private investments. Infrastructure improvement will include water supply, and sanitation works, and the expansion of health services.

b) build the Government's capacity to manage the development of the petroleum sector, providing legal assistance, and training on the implementation of the National Environmental Framework, and on data management of geological information.

See The Petroleum Sector Management Capacity Building Project: http://www.worldbank.org/afr/ccproj/project/smcb.pdf

3. Parliamentary Economic Capacity Building Project

a) $320,000 grant from Institutional Development Fund, approved March 2000, to end in August 2002. No description on web.

See link for the Parliamentary Economic Capacity Building Project: http://www4.worldbank.org/sprojects/Project.asp?pid=P071986

4. Civil Society Capacity Project

a) $380,000 IDF grant, approved November 2000 to end in March 2003. No description on web.

See link for the Civil Society Capacity Project: http://www4.worldbank.org/sprojects/Project.asp?pid=P073995

See the Bebedjia Declaration (in French), a document drawn up by civil societies in Chad: http://www.erdoel-tschad.de/dokumente/decla.html

See CIEL summary of situation in Chad and concerns put forth in the Bebedjia Declaration: http://www.ciel.org/Ifi/chadcamsummary.html

It will be difficult for the general citizen of Chad to be guaranteed a cut of the oil profits. Corruption in the government is well known, human rights abuses are prevalent and Chad remains a nation divided by ethnicity and race. Esso-Chad and the World Bank believe they can either circumvent or confront these difficulties using various strategies including independent advisory groups (IAG) and community consultation. Esso-Chad began the consulting phase of the project in 1993, six years before construction on the pipeline began. Esso-Chad estimates that the total estimated economic development value of the project for Chad, including compensation and costs to Chad and its people, has an approximate Net Present Value of $1.3 billion (780 billion CFA). What this means is that over the course of the project's twenty-five year life it will have $ 8.5 billion in revenues that have a value of $1.3 billion in today's dollars.. This estimate may vary due to changes in the oil market, where $5 billion of that $8.5 billion will be generated. The rest will be the result of indirect economic activities such as employment, business opportunities and trade.

See links to multiple World Bank site containing information the International Advisory Groups (IAG): http://www.worldbank.org/afr/ccproj/project/pro_monitor.htm#iag

See January 30, 2002 letter to IAG: http://www.environmentaldefense.org/documents/1050_IAG_Jan2002.pdf

Chad's revenues from the pipeline project are intended to reduce poverty and aid the country's poorest citizens. Improvements in health, education and employment are projected. The World Bank and the IMF have created a complex plan to insure that the government's management of oil revenues are transparent and fair. Whether these revenues will ever leave N'djamena for the Doba region remains to be seen, as does whether those revenues will outweigh costs. Some residents in the Doba area will have to be relocated, compensation will have to be paid for livestock and agricultural crops destroyed be the pipeline, job-seeking migrants from other regions of Chad may inundate the region, searching for Esso-Chad jobs, potentially driving up the cost of living and spreading HIV/AIDS.

See UNAIDS Inter-Country Team for West and Central Africa report on HIV in the region: http://www.onusida-aoc.org/Eng/Publications/West%20African%20Initiative.htm

The total cost of the project is expected to be $3.5 billion. Chad and Cameroon have to cover 3% of the estimated project cost of that $3.5 billion. As a result both Chad and Cameroon have had to apply for approximately $115 million ($45 million for Chad and $70 million for Cameroon) from the International Bank of Reconstruction and Development (IBRD) and the European Investment Bank (EIB). Both countries are already indebted to various lenders, including the IMF and the World Bank. The rest of the funding will come from the oil consortium.

See the International Bank of Reconstruction and Development: http://www.worldbank.org/html/extdr/backgrd/ibrd/

See the European Investment Bank: http://www.eib.org/

Agreements have been made between the Chadian government, the World Bank and Esso-Chad to use Chad's portion of the oil revenues for poverty relief programs developed under Chad's new Revenue Management Plan. Once these funds have been received their allocation, according to Esso-Chad and the World Bank, will be as follows:

-72% of the funds will be allocated to high priority national programs for public health, education, infrastructure, agricultural development, environmental improvements and water resources.
-4.5% of the revenues will be specifically dedicated to development programs for the communities in the oil producing region.
-10% will be invested in a savings account held in an international financial institution and dedicated to the benefit of future generations.
-The remaining 13.5% of the oil revenues will fund Chad's operating and investment expenses associated with the development of the oil.

Large scale natural resource projects that have occurred elsewhere in Africa have met with various levels of success. Whether it be diamonds, oil, or mineral deposits a wealth of natural resource richness is frequently associated with conflict in African countries.

General Information about Natural Resource Exploitation:

See "The Dark Side of Natural Resources:" http://www.globalpolicy.org/security/docs/minindx.htm

See article on Tony Blair's views on resource revenue transparency in Africa: http://allafrica.com/stories/200202080575.html

See article, "Will Oil Be Less Vile for Africa?," on oil production in Africa post September 11th: http://allafrica.com/stories/200201300367.html

Nigeria:

See the UN Integrated Regional Information Networks report on Nigeria at allafrica.com: http://allafrica.com/stories/200112310006.html

See article on lawsuits against oil companies and ethnic conflict in Nigeria:http://www.csmonitor.com/durable/1998/08/13/p5s1.htm

See findings on oil projects in Niger delta: http://www.essentialaction.org/shell/report/intro.html

Angola:

See article on expropriation of oil revenue in Angola: http://allafrica.com/stories/200112130651.html

The "Oil Diagnostic." In Angola: http://www.hrw.org/backgrounder/africa/angola/index.htm

Sudan:

See article on oil and civil war in Sudan: http://allafrica.com/stories/200201240002.html

See article on use of Sudanese oil revenues: http://www.irinnews.org/report.asp?ReportID=13800
&SelectRegion=East_Africa&SelectCountry=SUDAN

See Inspection Panel Report and Recommendation on Request for Inspection: http://wbln0018.worldbank.org/IPN/ipnweb.nsf/
70c64086027c73ba8525686e00020040/9125b1
93d2f8240e85256ae0006e8216/$FILE/Eligibility%20Report.pdf

See summary of request for inspection: http://www.worldbank.org/afr/ccproj/news/ispr41121.htm

Many NGOs, civil societies, human rights and environmental groups, and individuals have voiced their objections to and concerns about the Chad-Cameroon pipeline. An incomplete list of some of these various positions is below in the section entitled: Alternative Perspectives

Alternative Perspectives:

Whereas Esso-Chad and the World Bank have opted for very optimistic economic outlook for Chad other organizations have been more critical. Looking to examples from other African countries with similar oil projects may help elucidate the cynic's position. Non-governmental organizations interested in human rights, the environment, law and Africa have voiced great concern about the potentially negative impacts of the project. These organizations oftentimes believe that damage caused by the pipeline will nullify any economic benefits to the general Chadian citizen.

See "The Chad-Cameroon Oil and Pipeline Project: Putting People and the Environment at Risk:" http://www.pipelinewatch.org/archives/Pr%E9sentation
%20g%E9n%E9rale/rapport%20EDF/EDF%20report.pdf

See Environmental Defense paper discussing the impacts of the pipeline: http://www.environmentaldefense.org/article.cfm?ContentID=1019&Page=1

See Human Rights Watch report on Nigeria for a description of similar oil projects in Africa: http://www.hrw.org/reports/1999/nigeria/

See Christian Aid report on oil and war in Sudan:http://www.christian-aid.org.uk/indepth/0103suda/sudanoil.htm

See Human Rights Watch industry report on Corporations and Human Rights: http://www.hrw.org/worldreport99/special/corporations.html#oil

See the Interfaith Center for Corporate Responsibility discussion: http://www.iccr.org/products/proxy_book/accountability/chad.htm

See Economic Justice Now position on the Chad-Cameroon pipeline:http://www.economicjustice.org/chadCameroon.html

See World Bank Bonds Boycott article on the Chad-Cameroon pipeline: http://www.econjustice.net/wbbb/brokenpromises.htm

See IMF Memorandum of Economic and Financial Policies: http://www.imf.org/external/np/loi/2000/tcd/01/

See economic commentary on debt, Chad verses corporate revenue and oil in Africa: http://www.cepr.net/columns/weisbrot/world_bank_oil_pipeline_project.htm

See updated information on Chad and the IMF: http://www.ran.org/ran_campaigns/citigroup/cs_chadcam.html

See the Social Justice Committee report on World Bank funding for the Chad-Cameroon pipeline: http://www.s-j-c.net/new_page_9.htm

See Environmental Media Services overview of the projects: http://www.ems.org/banks/chad_cameroon_oil.html

See World Rainforest Movement commentary: http://www.wrm.org.uy/bulletin/41/Chad.html

See "Oil Exploited, Nature Disturbed," by Rachel Naba: http://www.theearthcenter.com/chad.html

See The Africa Newswire Network article on Chadian groups appeal to World Bank to stop funding on the grounds of human rights violations: http://www.africanewswire.com/annews/categories/chad/story4220.shtml

See Amnesty International USA Just Earth article on human rights violations and accusations of oil company payoffs: http://www.amnesty-usa.org/justearth/countries/chad-cameroon2.html