World Bank announces withdrawal from Chad-Cameroon Pipeline after...

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World Bank announces withdrawal from Chad-Cameroon Pipeline after...

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World Bank announces withdrawal from Chad-Cameroon Pipeline after early repayment
12 September 2008

The World Banks request amounts to an admission of failure in one of its most controversial and disastrous projects once touted as a model for high-risk projects - after the Chadian government repeatedly used its newfound oil wealth in contravention of its agreements to invest in poverty reduction.
The World Bank announced on September 9, 2008 that it was ending its support for the controversial Chad-Cameroon pipeline. The announcement came after the Chadian government repaid $65.7 million in outstanding loans to close out its debt to the Bank for the project. This development comes as the tenth anniversary of the inauguration of a project that has attracted intense controversy since its inception, and the fifth anniversary of its first oil exports approaches. In 2001, the World Bank agreed to help finance the pipeline after ExxonMobil, the leader of the consortium of oil companies, requested Bank assistance as a precondition for pursuing the project, knowing that the project could become a serious reputational liability. The pipeline, which constitutes one of the largest on-shore investments in Africa, is routed through areas with delicate environments and indigenous groups already wary of their governments. Both the Cameroonian and Chadian governments were widely considered corrupt and repressive dictatorships with questionable capacity to manage such large investments. By agreeing to support the project, the World Bank catalyzed finance for the construction of the pipeline, turning Chad into Africas newest oil producer. Facing stiff resistance from civil society, the Bank went to great lengths to promote the pipeline as a model for using revenues from high-risk projects to reduce poverty. It instituted an unprecedented, elaborate system for ensuring that revenues were devoted to social spending. Since it was commissioned in 2003, however, the project has been fraught with persistent problems, and the financial system put in place to manage Chads oil proceeds never worked as intended. The bellwether for the system was President Idriss Debys use of a $25 million signing bonus for re-arming his military; civil society complained heavily, but the Bank ultimately decided that the signing bonus was not covered by the terms of its contract with the Chadian government. In 2006, then-Bank President Paul Wolfowitz abruptly suspended the Banks lending to Chad after Deby orchestrated an amendment to the countrys oil revenue management law that allowed it to redirect funds to security spending to quell increasing unrest in the country. In response, the World Bank suspended its loans to Chad, triggering a freeze of the offshore escrow accounts holding oil revenue payments. Facing a standoff in which the government threatened to halt oil production, the Bank backed off, signing an agreement that allowed the resumption of its lending and granting the government even greater discretion over the revenue than before. As the conflict in the Darfur region in western Sudan has heated up, refugees and the conflict itself have spilled across the border into Chad, reigniting the same disputes that originally led to the coup that brought Deby to power. The Deby government has never been especially stable, and the reinvigorated rebel groups supported, apparently, by the Sudanese government, have markedly increased the turmoil in Chad. But many observers note that the conflict has equally been fuelled by the injection of oil revenues into Chads treasury, suggesting that the pipeline has been less a tool for development than an incitement to greater instability. Indeed, several of the civil society leaders who have played crucial roles in raising awareness of problems with the pipeline in Chad were forced to flee into exile earlier this year when the Deby government used a threatened rebel attack on NDjamena to crack down on critics and political opponents. The Bank grappled to find an effective response but, as Reuters reported at the time, an unnamed analyst countered that the World Bank can do nothing, their role has become almost nil in Chad. In announcing its withdrawal from the pipeline which is misleading since the Bank is still invested in the ExxonMobil-led consortium to the tune of $100 million through its private investment arm, the International Finance Corporation, and presumably reaping significant profits - the World Bank appears to have come to terms with the fact that its only remaining move is largely symbolic, since its leverage and credibility have diminished: the $65-odd million that the government was asked to repay ahead of time is a pittance compared to the $1.4 billion in oil revenues expected during this year alone. However, the Bank has been careful to emphasize its hope that the move will open the door to new negotiations with the government that could result in a more comprehensive engagement. According to the UN news agency IRIN, the Bank's operations director for Africa, Michel Wormser, has indicated that "if the Chad government changes tack and implements a plan to invest more from oil revenues to fight poverty, the Bank would be willing to revise its decision." The Bank's press release also notes that the countrys prime minister will be visiting Washington later this month, and expresses the hope that a meeting with the World Bank may constitute a new beginning. A confidential communication dated June 27 from the World Bank to the Chadian government indicates that the Bank set a number of preconditions before agreeing to the meeting, including that the government agree to repay the project loans, strengthen the oil revenue oversight committee, and request that the Bank "assist Chad in the area of good governance and management of the public sector." It remains unclear whether the government acceded to the Bank's demands, nor what the government seeks to achieve in meeting with the Bank. Meanwhile, IRIN reports that while disappointed by the Banks decision to withdraw, long-time Chadian anti-poverty advocate Delphine Djiraibe notes that the damage has already been done since the oil

2 of 3

28-09-2011 15:11

World Bank announces withdrawal from Chad-Cameroon Pipeline after...

http://www.bicusa.org/en/Article.3892.aspx

3 of 3

28-09-2011 15:11