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ABSTRACT Countries rich in natural resources tend to experience less economic growth and democracy than resource-poor countries; this phenomenon is known as the “resource curse”. The paradox is partially caused by macroeconomic inconveniencies such as volatility, the “Dutch disease” and corruption. In 2007 the Jubilee Oilfield was discovered in Ghana. The aim of the essay is to investigate whether Ghana can break the mould and use its oil wisely based on lessons from the Nigerian experience. The analysis will examine four different actors: international oil companies, national oil companies, governments and the citizens. This paper concludes that if the Ghanaian government adopts suggested political and economical strategies the oil can become not a curse but a blessing, a potential catalyst for achieving its development needs. Keywords: Nigeria – Ghana - resource curse - volatility - Dutch disease - corruption – institutions - oil companies

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TABLE OF CONTENTS ABSTRACT.........................................................................................................................................1 1.INTRODUCTION .............................................................................................................................3 2.HISTORY ........................................................................................................................................9 Revenue Watch Institute, 'Nigeria - 1969 Petroleum Act.' [web page] (2010] <http://www.revenuewatch.org/training/resource_center/nigeria-1969-petroleum-act>, accessed 15 Feb. 2013.......................................................................................................................................9 Augustine A. Ikein et al., Oil, Democracy, and the Promise of True Federalism in Nigeria. (Lanham, University Press of America, 2008), 81. ..........................................................................................11 2.1.2 CORRUPTION IN UPSTREAM PETRULEUM CONTRACTS ..........................................................13 A. Osuntogun et al. 'Potentials for diversifying Nigeria's non-oil exports to non-traditional markets', African Economic Research Consortium [web document] (1997), 1 <http://pdf.usaid.gov/pdf_docs/PNADR044.pdf>, accessed 8 Jan 2013. ........................................15 J.I. Guyer, Feeding African Cities: Studies in Regional Social History (Bloomington, Indiana University Press, 1987), 96. ............................................................................................................16 2.2 POST-INDEPENDENCE GHANA ..................................................................................................16 Compliance Advisor Ombudsman, 'Tullow Oil, Kosmos Energy & Jubilee FPSO-01/CAO Vice President Request' [webpage] (2010) <http://www.cao-ombudsman.org/cases/case_detail.aspx? id=166>, accessed 3 Oct. 2012. ........................................................................................................19 3.EVALUATION OF THE RISK OF A RESOURCE CURSE AND PROPOSALS OF POLICY RESPONSES TO MACROECONOMIC INCONVENIENCES – A COMPARATIVE ANALYSIS .............................................20 Akufo-Addo, N., citied in Ghana Web, 'Akufo-Addo: "We Akans Are Not Cowards..."' [web page] (2011) <http://www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=205325>, accessed 15 Nov 2012. ..................................................................................................................................22 Figure 3.4 Corruption scores in Nigeria and Ghana..........................................................................29 3.2 CORRUPTION IN UPSTREAM PETRULEUM CONTRACTS .............................................................29 Voice of America, 'Ghana’s Oil Wealth Not Reaching Poor' [web page] (2012) <http://www.voanews.com/content/ghana-oil-wealth-not-reaching-poor/1510789.html>, accessed 13 Jan. 2013. ....................................................................................................................31 4.CONCLUSION ...............................................................................................................................35 5.REFERENCE LIST............................................................................................................................36 6.APPENDIX.....................................................................................................................................41

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1. INTRODUCTION The term “the resource curse” was first coined by the British economist Richard M. Auty in his book “Sustaining Development in Mineral Economies: The Resource Curse Thesis” (1993). He described a phenomenon (the resource curse) in which countries with natural resources paradoxically tend to experience less economic growth and democracy than countries without.1 Economies such as The Four Asian Tigers (Hong Kong, South Korea, Singapore and Taiwan) that lack large deposits of natural resources have been successful within the manufacturing sector.2 On the other hand, Nigeria with vast oil deposits has suffered from decades of civil war, authoritarian regimes, famine and extreme poverty. As the chart below indicates Nigeria has experienced some economic growth since the oil discovery in 1957, but far from what could have been considering the development potentials and opportunities that comes with oil.

Figure 1.1 Chart portraying the increase in GDP/capita in the resource-poor Asian Tiger economies, which is in contrast with oil rich Nigeria’s slow increase in GDP/capita. 3

However, developed countries rich in natural resources have fared better then their counterparts in the developing region of the world. Norway is one of the world’s largest oil producers, and yet it was ranked as the top country in the 2012 Human Development Index (a statistic considering life expectancy, education and income indices) which was published by 1 2

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Richard M. Auty, Sustaining Development in Mineral Economies: The Resource Curse Thesis (London, Routledge, 1993). M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 1. Gapminder, [online image] (2011) <www.bit.ly/WOI6fR>, accessed 20 Nov. 2012.

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United Nations Development Programme.4 Are poorer countries intrinsically more corrupt? “Corruption has nothing to do with culture. “If Ghanaians move abroad, they will bring the Fufu (traditional staple food of West Africa) with them. Ghanaian companies however will not necessarily engage in corrupt activities abroad, but adjust to the climate in that country” Ron Quist (see below) claims. For instance corruption within Taiwan is relatively low according to Transparency International.5 However, according to the Bribe Payers Index Taiwanese companies often pay bribes abroad.6 This suggests that corruption cannot be equated to morality; it will occur where there are opportunities. Well-established and functioning political institutions have never existed in Nigeria, whereas in Norway they were set up long before the discovery of oil, which has narrowed the corruption space. Underdevelopment fuels corruption and corruption prevents development. Unfortunately, the countries in most need of their natural resource wealth are also the countries less likely to benefit from it. Why does the resource curse phenomenon seem to specifically involve natural resources such as oil and not resources in general? Extraction is all that is required. The sector is capitalintensive and provides little employment. In contrast to a manufacturing economy (eg: the tiger economies), a country dependent on a natural resource does not have to deal with the production process. This means that the government can extract the country’s commodity with less citizenry involvement or support, since they are not needed for labour, as we can see in the case of Nigeria, where protesters have been killed. Neither is the government dependent upon other industries in the country. Furthermore, the government gets its revenues from the commodity and not from taxing its people. These factors weaken the link between the state and its citizens, which is dangerous because it leads to a reduced demand of well functioning and transparent institutions, leading to increased levels of corruption. In the Four Tiger Economies Corruption Perception Index (CPI) score is 70, in Nigeria 27 (0 = highly corrupt 100 = very clean).7 These scores indicate that in a manufacturing country the link between the state and its citizens is stronger; there is a higher demand for transparency and therefore lower levels of corruption. However, there are of course many factors to consider when comparing the corruption levels between the countries.

Oil is a commodity which is non-renewable; one day supplies will run out. Unfortunately, countries tend to not think of oil as an asset, but a source of income that will continue providing revenues forever.8 As there is a movement towards the non-tradable and booming sector oil economies become less diversified. The redevelopment of lost sectors when oil runs 4

United Nations Development Programme, 'Norway Country Profile: Human Development Indicators' [webpage] (2012) < http://hdrstats.undp.org/en/countries/profiles/NOR.html>, accessed 10 Jan. 2013. 5 Transparency International, 'Country Profiles: Taiwan' [webpage] (2012) <http://www.transparency.org/country#TWN>, accessed 12 Feb. 2013. 6 Transparency International, 'Results by country', [webpage] (2011) <http://bpi.transparency.org/bpi2011/results/>, accessed 28 Mar. 2013. 7 Transparency International, 'Corruption Perceptions Index' [webpage] (2012) <http://www.transparency.org/cpi2012/results>, accessed 10 Feb. 2013. 8 M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 8.

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out is a difficult, costly and a lengthy process. For an oil-dependent country an undiversified economy is not only a problem when the commodity runs out, but also when oil prices fall on the world market.9

1.1 PURPOSE Historically, African and other developing countries have not been able to use their rich resources for development. The purpose of this study is to investigate how my chosen country, Ghana, can break the mould and use its newly discovered oil wisely. The following questions will be researched: i) ii) iii)

Which political initiatives are necessary to avoid the “Dutch disease? How can the Ghanaian government smooth out volatility? How can Ghana minimize opportunities for rent-seeking behaviour and corruption?

1.2 THEORY AND METHODOLOGY This is a qualitative comparative study, in which the Nigerian experience with oil serves as a basis for evaluating the risk of a resource curse in Ghana and how to mitigate such risks. Marcartan Humphreys et al in “Escaping the Resource Curse” argue that the resource curse is avoidable, even for a developing country. This deductive study is based on this hypothesis. Therefore, the title of the study is not “Can Ghana Avoid the Resource Curse?” but “How Ghana Can Avoid the Resource Curse”. A qualitative research method was used. In my search for relevant literature I used the database “EBSCO” available at Malmö City Library. Examples of search terms used included “resource curse Ghana” “resource curse Nigeria” “Dutch disease Nigeria” “oil volatility”. In addition, I had access to academic journals at Lund University Library’s catalogue Lovisa, LUP and DOAJ (Directory of Open Access Journals), in which the same search terms were used. I also found various World Bank and IMF reports very useful. The qualitative research method also involved a visit to the International Development Institute for Leadership, Management and Technology (Idilmat) in Accra, Ghana. I participated in the course “Towards Narrowing the Corruption Space” (http://bit.ly/10RmshX). The course is largely based on the premise that corruption is not culture but context based. It covered several areas of potential abuse, including the negotiation of oil contracts and how to narrow opportunities for corruption in these areas. Interviews were carried out with staff-members at Idilmat and participants from different anticorruption organizations such as African Parliamentarians Network Against Corruption (APNAC). 9

Sébastien C. Dessus, 'The Challenges and Opportunities of Ghana’s Offshore Oil Discovery.', World Bank [web document] (2009), 5 <http://w2.vu.edu.au/library/referencing/files/2495%20Oxford%20Guide%20(28%209%2010).pdf>, accessed 11 Nov. 2012.

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1.3 LIMITATIONS OF THE STUDY The study focuses on two countries only, in which the Nigerian experience with oil serves as a lesson for Ghana. Nigeria was selected because it has suffered from the resource curse, probably more than any country in the world. Furthermore, Nigeria has a lot in common with Ghana, it is also a former British colony, it is an ethnic and religious diverse country and it once had a flourishing agricultural sector like Ghana has today. Some of the recommended strategies are uniquely developed for Ghana, however most recommendations are applicable for any developing country. The historical section of the essay focuses on a limited time frame, including events which are most relevant to answer the research questions. The period in question is from around the 1960s, partially because it was around this time both countries became independent and partially because the Nigerian oil boom occurred only a few years later. The essay is limited to the Ghanaian Governmentâ&#x20AC;&#x2122;s role in avoiding the resource curse and does not focus on the role of international influences. The international community has a role to play but has a somewhat limited interest in a successful outcome. Ghanaâ&#x20AC;&#x2122;s national interest can best be guarded by its own people. Ghana therefore has to play the major role in determining its own future.

1.4 RELEVANT TERMINOLOGY Concession is a contract in which an oil company has the exclusive right to produce oil within a certain geographical area. The company pays the government via bonuses, rentals, royalties and taxes. Concession agreements were very common during the colonial era, the Seven Sisters especially exploited oil via this type of agreement. Modern concessions differ from the traditional contracts in that they usually cover a smaller geographical area and last for a shorter period of time. Corruption is the abuse of entrusted power for personal gain. Corruption can occur on all levels of society and includes bribery, fraud, nepotism and embezzlement. The Dutch disease got its name from a phenomenon observed in the Netherlands in the 1970s. The discovery of the North Sea oil led to an undiversified economy as capital and labour moved towards the non-tradable and booming sector. Since then, the term has been used for countries facing the same problems. Horizontal inequality refers to the economic and social inequalities between different regions within a country. Illegal bunkering refers to the stealing of oil from a pipeline or other distribution system. Joint Venture is an agreement in which two or more companies (could be national oil companies) agree to share profit, loss and control. 6


Macroeconomics is the section of economics concerning the economy as a whole, which is in contrast with microeconomics which examines individual markets. Macroeconomics, inter alia, involves concepts such as national income, consumption, inflation, savings and investments. A National Oil Company is a state-owned oil exploration-and production company. An oil block is a parcel which is most often owned by the government. Oil companies compete for the right to explore and develop petroleum in this block. The government can assign oil blocks through auctions, in which the company with the highest bid wins or through discretionary regimes in which the government and company negotiates privately on terms and conditions. The last alternative especially offers opportunities for corruption. Production Sharing Agreement is a type of contract between an oil company and a host country. The host country owns the oil, but allows companies to exploit it. The contract decides on the percentage of oil each party will receive after cost recovery (oil companies are allowed to claim and recover the investments made on exploration, development and production). The oil company pays the host state in the form of royalties (a percentage share of production to the host government) and income tax. The rent is the gap between the value of the natural resource and the cost of extracting it. Corrupt individuals, private sector actors and politicians try to get a hold of this rent. The resource curse is a phenomenon which states that those countries rich in natural resources tend to experience less economic growth and democracy than resource-poor countries. Seven Sisters refers to the companies which dominated the oil market industry in the early years (especially during the colonial era). They include the Anglo-Persian Oil Company (now BP), Gulf Oil, Standard Oil of California (Socal) and Texaco (now Chevron), Royal Dutch Shell, Standard Oil of New Jersey (Esso) and Standard Oil Company of New York (Socony) (now ExxonMobil). Transparency means that procedures are open and that information about activities and decisions (why, how, what and how much) are available for the general public. Transparency reduces the opportunities for corruption among public officials and businessmen and enhances the peopleâ&#x20AC;&#x2122;s trust in institutions. Upstream refers to the initial phases of the oil industry, namely the exploration and production phase. The subsequent sectors include midstream and downstream. Vertical inequality refers to the economic and social gap between the people of a country. 7


Viable Commercial Discovery refers to a situation in which oil reserves are sufficient enough to justify the large investment costs to develop an oil field.

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2. HISTORY 2.1 POST-INDEPENDENCE NIGERIA 2.1.1 CORRUPTION BASED VOLAITILITY Nigeria became independent from Britain 1st October in 1960. Modern African boundaries derive from the colonial era in which little or no attention was paid to the existing ethnic/tribal, religious and political structures. A “divide and rule” policy was often used by Britain to avoid facing a unified people It’s power remained unthreatened and it could maintain its control over Nigeria and its natural resources. In 1920 Sir Hugh Clifford, the colonial governor of Nigeria, promised that his administration would “secure to each separate people the right to maintain its identity, its individuality and its nationality, its own chosen form of government; and the peculiar political and social institution.” 10 Socioeconomic inequality between groups and regions (particularly between the North and South) widened as a result of the divide and rule policy. In the Muslim north, Christian missions were restricted, opportunities for education were limited and feudal rulers were empowered. Furthermore, slavery in northern Nigeria was not abolished until 1936. Larger investments were made in the southern regions, because conditions for exploitation and exportation of natural resources and agriculture were favourable there.11 At independence, Nigeria consisted of three separate federal regions, which consisted of the three major ethnic groups, the Eastern (Igbo), Western (Yoruba) and Northern (Hausa). There was great fear of southern domination among the northerners, not only because the south was much more developed by Western standards, but it also possessed a newly discovered wealth: oil (Royal Dutch Shell plc discovered onshore and offshore oil in the Niger Delta region in 1956).12 Tensions between the ethnic groups gradually escalated and after a series of massacres and two coups Biafra (the south-eastern region) declared itself independent on 30th May 1967, which eventually lead to the outbreak of the Nigerian Civil War. The war ended in 1970 with a Nigerian government victory but left 1-3 million people dead. 13 A year before, the “Petroleum Decree” was passed, which meant that control and ownership of the oil in the Niger Delta region solely belonged to the federal government. 14 The military government promised to invest in reconstruction; however, little was done to improve the lives of the people in the former Biafra region, despite increased levels of oil extraction and rising oil 10

O. Nnoli, 'Ethnic violence in Nigeria: A historical perspective.', Indiana University [web document] (2003), 2-3 <http://www.indiana.edu/~workshop/papers/nnoli_021003.pdf>, accessed 15 Dec. 2012. 11

Nigeria Infonet, 'A Brief description on the History of Federal Republic of Nigeria' [webpage] (2010) <http://www.nigeriainfonet.com/nigeriahistory.htm>, accessed 15 Dec. 2012. 12 E. M. Akpabio and N.S. Akpan, 'Governance and Oil Politics in Nigeria’s Niger Delta: The Question of Distributive Equity.', University of Uyo [online journal] (2010), 118 <http://www.krepublishers.com/02Journals/JHE/JHE-30-0-000-10-Web/JHE-30-2-000-2010-Abst-PDF/JHE-30-2-111-10-1983-Akpabio-E-M/JHE-30-2-111-101983-Akpabio-E-M-Tt.pdf>, accessed 8 Jan. 2013. 13

Michael Stewart, Biafra: Fighting a War without Guns, [online video] (1995) <http://www.youtube.com/watch? v=J3ReFoFp0Gs>, accessed 15 Mar. 2013. 14

Revenue Watch Institute, 'Nigeria - 1969 Petroleum Act.' [web page] (2010] <http://www.revenuewatch.org/training/resource_center/nigeria-1969-petroleum-act>, accessed 15 Feb. 2013

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prices. Why has the region, particularly the Niger Delta seen so little in return although it has produced most of the countries wealth? Records show that oil revenues have been unequally distributed between the regions because of ethnic tension and corruption, causing horizontal inequality. 15 Southerners have seen little representation in the federal government and never in the history of Nigeria has a president from the Niger Delta served the country.16

Figure 2.1 Presidential representations by region.17

The oil from the Niger Delta has been under the control of a very centralized government (especially when under military dictatorship), consisting of major ethnic groups from the North, east and west regions, serving and protecting the interest of these ethnic, tribal and religious groups. For instance, much of the investment has been targeted towards these regions. Figure 2.2 Nigeria’s Third National Development Plan for In the Third National Development investments on roads. Plan the South South region (the Niger Delta) received only 9.2% of the Federal budget for road development, whereas other regions received between 16-19.5 %.18 Take into consideration that the southern region was in special need of infrastructure improvements since much was damaged during the Civil War. Unfair 15

K. Higgins, 'Regional Inequality and the Niger Delta' , Overseas Development Institute [web document], <http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/3383.pdf>, accessed 10 Nov. 2012. 16 E. M. Akpabio and N.S. Akpan, 'Governance and Oil Politics in Nigeria’s Niger Delta: The Question of Distributive Equity.', University of Uyo [online journal] (2010), 118 <http://www.krepublishers.com/02Journals/JHE/JHE-30-0-000-10-Web/JHE-30-2-000-2010-Abst-PDF/JHE-30-2-111-10-1983-Akpabio-E-M/JHE-30-2-111-101983-Akpabio-E-M-Tt.pdf>, accessed 8 Jan. 2013. 17 Presidential representation by region, [online image] (2010) <http://www.krepublishers.com/02-Journals/JHE/JHE-30-0000-10-Web/JHE-30-2-000-2010-Abst-PDF/JHE-30-2-111-10-1983-Akpabio-E-M/JHE-30-2-111-10-1983-Akpabio-E-MTt.pdf>, accessed 3 Nov. 2012. 18 E. M. Akpabio and N.S. Akpan, 'Governance and Oil Politics in Nigeria’s Niger Delta: The Question of Distributive Equity.', University of Uyo [online journal] (2010), 116 <http://www.krepublishers.com/02Journals/JHE/JHE-30-0-000-10-Web/JHE-30-2-000-2010-Abst-PDF/JHE-30-2-111-10-1983-Akpabio-E-M/JHE-30-2-111-101983-Akpabio-E-M-Tt.pdf>, accessed 8 Jan. 2013.

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distribution of oil revenues and environmental degradation led to several protests in the Niger Delta region. For instance, in 1994 a mass-protest in Ogoniland caused oil production to decline significantly, which affected not only the oil industry itself but also the rent-seeking leaders. Therefore, the Federal Nigerian Military staged a clampdown on the protesters, razed 30 villages and killed approximately 2000 people.19 Unfair distribution has lead to illegal bunkering. Some groups have justified such criminal activity believing that the oil belongs to them. Illegal bunkering has helped fuel armed groups and lead to more environmental degradation. The estimated loss due to bunkering in Nigeria is 30 000- 40 0000 barrels a day. At current barrel price ($88) Nigeria loses $2 640 000-$3 520 000 per day, losses are immense. In 1973 Egypt and Syria attacked Israel (Yom Kipur War). The United States delivered weaponry to Israel, which was an action that the Arab nations did not accept. Syria, Egypt and the Arab members of Organization of the Petroleum Exporting Countries (OPEC) proclaimed an oil embargo which caused oil prices to increase from $3 per barrel to $12 per barrel. The outbreak of the Iran-Iraq War in 1979 again caused prices to increase to $35 per barrel.20 The oil boom of the 1970s had a great impact on the Nigerian economy. As oil prices skyrocket the credit worthiness of Nigeria improved, despite the volatility of the commodity. This resulted in an increased access to international loans with lower interest rates.21 Borrowing against future oil revenues financed foremost consumption, but also public investments in infrastructure, education, construction etc. However, many of these projects and programmes were affected by corruption. In construction for instance, bribes are paid in the initial building stages. Therefore there was little interest in maintenance, and there were many unfinished projects. These served mainly as white elephants (costly and too ambitious and generated low rates of return). For instance, the government invested $8 billion on the Ajaokuta steel plants, but they failed to ever produce any steel.22 Furthermore, educational indicators did not show any significant improvements. The low rates of return consequently reduced the countries repayment capacity of loans. 23 During the period of 1981-1985 the international price of oil dropped from $38 per barrel to $28 per barrel. Simultaneously, Nigerian oil production dropped from 2 million barrels per day to 1.5 million dollars per day.24 As a result, the creditworthiness of Nigeria also fell. The foreign exchange reserves were largely exhausted and the need to borrow was urgent, in order to continue financing development projects and programmes. The paradox is that the access to loans is reduced 19

Vanity Fair, 'Blood Oil' , [web page] (2007) <http://www.vanityfair.com/politics/features/2007/02/junger200702>, accessed 15 Dec. 2012. 20 CBC News, 'The Price of Oil', [web page] (2007) <http://www.cbc.ca/news/background/oil/>, accessed 18 Jan. 2013. 21 M. Rewane et al., 'Overrated? The Impact of Oil Revenue on Nigeriaâ&#x20AC;&#x2122;s Creditworthiness, Debt Profiles and Sustainability', Stanford University [web document] (2007) <http://economics.stanford.edu/files/Theses/Theses_2007/Rewane2007.pdf>, accessed 13 Nov. 2012. 22 Augustine A. Ikein et al., Oil, Democracy, and the Promise of True Federalism in Nigeria. (Lanham, University Press of America, 2008), 81. 23 N. Budina et al., 'Nigeriaâ&#x20AC;&#x2122;s Growth Record: Dutch Disease or Debt Overhang? ', World Bank [web document] (2006), 14 <http://siteresources.worldbank.org/INTDEBTDEPT/Resources/20061012_06.pdf>, accessed 5 Jan. 2013. 24

United Nations Environment Programme, 'Nigeria Study' [web document] (2010) < http://www.unep.ch/etb/events/events2003/pdf/FinalDraftofNigeriaStudy.pdf> , accessed 17 Feb. 2013.

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when a country is most in need of them, and that is what happened in Nigeria. 25 The country was trapped by an overhanging debt problem. Lenders became afraid that a projectâ&#x20AC;&#x2122;s rate of return would finance old debts, rather than the new. Although loans from bilateral and multilateral sources were unavailable due to falling oil prices, loans from private sectors became increasingly omnipresent, but at much higher interest rates. After 1985, the debt increased due to arrears and penalty interest of unpaid loans. The correlation between oil prices and public debt is portrayed in the chart below.

Figure 2.3 Correlation between oil price and public debt.

As a result of heavy debts, many developing projects and programmes had to be abandoned, which hampered potential poverty alleviation efforts. It is evident that the Nigerian government by its heavy borrowing contributed to macroeconomic volatility. The procyclical policy has been made even worse, by increased money supply from loans in good times and repayment requirements in bad times. 26 To address this problem, a Stabilization Fund (a type of Natural Resource Fund) was established in 1989. During booming years the government was supposed to place oil revenue surplus in this fund to avoid overspending and inflation. When oil prices were low, money would be taken from this fund to finance budget deficits. The aim was to reduce the dependency on international borrowing during bust years and to reduce the correlation between international oil prices and public expenditure. However, the chart portrays that the correlation between expenditure and revenues from oil remained very strong indeed, which suggests that the stabilization fund was not very successful. In 1989 the Nigerian government earned on an average $21.50 per barrel and placed 14.6 billion naira in the stabilization fund, however the same year, the government withdrew 41 % from the fund. Since the Stabilization Fund had no legal backing, there were no penalties for unwarranted withdrawals.27 A major reason to why the Stabilization Fund failed was because parties did 25

M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 8. N. Budina et al., 'Nigeriaâ&#x20AC;&#x2122;s Growth Record: Dutch Disease or Debt Overhang? ', World Bank [web document] (2006), 13 <http://siteresources.worldbank.org/INTDEBTDEPT/Resources/20061012_06.pdf>, accessed 5 Jan. 2013. 26

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C. C. Ugwuibe, 'Strengthening the Nigerian Sovereign Investment Authority: A Policy Analysis of the Nigerian Excess Crude Account and the Nigerian Sovereign Investment Authority Act', University of California [web document] (2012), 18 < http://www.escholarship.org/uc/item/5zn1h1d6#page-38> , accessed 8 Jan. 2013

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not want to save revenues for the future which a competing party with competing interests could get a hold of and spend. This lead to a “spend sooner than later mentality” as will be explained (“situation 2”).

2.1.2 CORRUPTION IN UPSTREAM PETRULEUM CONTRACTS When oil was discovered in commercial quantities in 1957 Nigeria was still under British colonial rule. The terms of the concession agreements were worked out between Shell-BP, which essentially had a monopoly on the oil in Nigeria, and the British government. After independence the Nigerian government encouraged more oil companies to compete, but oil contracts were generally a zero-sum game, in which the multinational oil companies made massive gains at the cost of Nigeria. A turning point came with the establishment of the Petroleum Decree in 1969, which stated that the oil belonged to the federal government, and the membership of OPEC (Organization of the Petroleum Exporting Countries) in 1971. OPEC was formed to counter the situation in which the oil market was dominated by multinational oil companies and states had little control over their own resource. Following the example of other OPEC member states Nigeria established the “Nigerian National Oil Corporation” in 1977. On behalf of the government it signs the contracts with the multinational oil corporations. There are today different types of contractual systems, for instance Joint Venture Agreements and Production Sharing Agreements, a common feature is that the state has more control over the oil and is able to participate more extensively than during the traditional concession agreements. One might assume that contracts today are a result of a compromise; the government’s aim is to maximise its revenues and to minimize the profit of the multinational oil companies. The interest of the company is the opposite. Unfortunately, the interest of a governmental official does not always coincide with those he/she is supposed to serve (the country). Governmental officials have abused entrusted power to enrich themselves, corruption remains a serious problem and reduces the amount of oil revenues to the Nigerian people.28 When the country was under military rule, a majority of the contracts were awarded directly by the president. For instance, the military governments awarded the licenses to senior military offices.29 When President Olusegun Obasanjo came to power in 1999, the official policy became to make the allocation of oil blocks more open and competitive. For the very first time the Nigerian government publicly advertised the oil blocks. However, the major bid rounds (2000, 2005, 2006 and 2007) were tainted by corruption. In 2005, the government announced that bigger foreign oil companies should partner with Nigerian companies known as “local content vehicles! (LCVs). The aim was to give opportunities to local investors, which otherwise had a hard time competing against these foreign companies that had vast capital resources, technical equipment and know-how. By working alongside, the LCVs would acquire know-ho. However, the unofficial aim of the policy became to distribute to and reward political patronage. There were strong links between companies that won oil blocks and the government. For instance, Lee Maeba was Chair of the Senate Committee on Petruleum Resources Upstream, which had jurisdiction over oil block allocation. In 2005 the company “Conoil Producing Limited” won an offshore block (namely: OPL 257). The 28

M.M. Gidade et al., 'Petroleum Development Contracts with Multinational Oil Corporations: Focus on the Nigerian Oil Industry', The University of Warwick [web document] (1992), 276 <http://wrap.warwick.ac.uk/4320/1/WRAP_THESIS_Gidado_1992.pdf >, accessed 27 Feb. 2013. 29 A. Gillies, 'Reforming corruption out of Nigerian oil?', Chr. Michelsen Institute [web document] (2009), 2 <http://www.cmi.no/publications/file/3295-reforming-corruption-out-of-nigerian-oil-part-one.pdf>, accessed 2 Apr. 2013.

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company’s LCV partner was New Tigerhead PSTI Limited. This company was owned by two other companies, in one of which Lee Maeba owned 80 % of the shares. 30 It is reasonable to suspect that he used his position for private gains, violating “The Corrupt Practices and Other Related Offences Act 2000” which states that “any public officer who uses his office or position to gratify or confer any corrupt or unfair advantage upon himself or any relation or associate of the public officer or any other public officer shall be guilty of an offence and shall on conviction be liable for five (5) years without option of fine.” 31 Due to lack of transparency it is impossible to prove that the company were given any advantages Often though, secrecy is a way to hide corrupt behaviour. Since it is legal in Nigeria for a public official to own a company, it is impossible to determine whether Lee Maeba has engaged in corrupt activities. The case of Lee Maeba is not unique; this is and has for long been a very common pattern in Nigeria. It has not necessarily been the case that a governmental official has held a share in an oil company, but that he or she have given advantages to companies owned by cronies, and then received a repayment. How then have public officials managed to win these licenses? One strategy has been to not be transparent and open. A firm can access an oil block at one-tenth of market price by paying a bribe. Another effective method has been to reduce competition by setting up criteria for qualification. For instance, in 2005 foreign companies were made to partner with LCVs. Another criteria could be environmental requirements, which only certain companies could live up to. This has allowed preferred bidders to compete, companies in which public officials hold shares.32 A “successful” strategy has also been to provide a preferred company with geological information, that is to say an insight into the real value of the oil block, information which is not available to other companies. The informed company could bid the highest, because they knew the actual value. If the other companies knew that they were in the dark they suffered from a “winner’s curse”. They reasoned that they would only win the auction if they bid too much, if they bid higher than the companies with insider information. A consequence has been that companies have not bid as high as they otherwise might have done. To make things worse the company that had an informational advantage knew it could win the oil block at an even lower price. 33 After contracts have been awarded, they have in some instances been renegotiated, although such an initative is sometimes necessary, it offers opportunities for corruption or is a direct result of corruption. The benefits multinational companies have obtained include lower taxes, adjustment to annual license fees, exemptions from work commitments, extensions of contracts etc. The benefits of competitive bidding for Nigeria have often been lost and the direct result has been reduced state revenues from oil. When a commercial discovery has been announced the next step is the development phase. Governmental officials have often “encouraged” multinational oil companies to award government-favoured suppliers. In 2000 the company “Nigeria Liquefied Natural Gas Limited” employed Technip, Snamprogetti, JGC and Kellogg, Brown & Root to build a production facility in the Niger Delta Bonny Island. A subsidiary to this consortium paid a company called TriStar $171.5 million. The owner of TriStar has very close ties with Nigerian governmental officials.34 Similarly the awarding of oil blocks and, development 30

Global Witness, 'The scramble for Africa’s oil, gas and minerals' [online journal] (2012), 20-23 <http://www.globalwitness.org/rigged/rigged.pdf>, accessed 2 Apr. 2013. 31 Policy and Legal Advocacy Centre, 'Corrupt Practices and Other Related Offences Act' [web page] (2012) <http://www.placng.org/lawsofnigeria/node/67>, accessed 2 Apr. 2013. 32 Farouk Al-Kasim, 'Grand corruption in the regulation of oil', Chr. Michelsen Institute [online journal] (2008), 23-24 <http://www.u4.no/publications/grand-corruption-in-the-regulation-of-oil/>, accessed 03 Apr. 2013. 33 M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 33-34.

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contracts and the awarding of oil production rights are prone to corruption. The strategies are the same, eliminating competition to make “preferred” companies compete and pay bribes. Since institutions are underdeveloped in Nigeria, the review procedure of contracts is constantly delayed and inefficient. Contracts require NNPC approval (it must be approved by: NAPIMS, the NNPC Group Executive Council and the NNPC Board), larger awards also require Federal Executive Council approval. Currently, the average rime for a contract review in Nigeria is 2 years, whereas the global average is only nine months. Such delays encourages multinational oil companies to pay bribes to speed up the procedures. The result is that there is little incentive to improve the system and make it more efficient, since officials are making profits by keeping to the status quo.35

2.1.3 THE DUTCH DISEASE The boom also affected the Nigerian agriculture. Prior to the oil boom the agriculture sector was the primary sector for export and employment, producing cocoa, palm, oil, groundnuts and cotton36. As the country become more dependent on oil, the agriculture sector became increasingly neglected as demonstrated in the chart below, agriculture contributed less and less to total GDP whereas oil contribute more and more.

Figure 2.4 Agricultural- and petroleum contribution to Nigeria’s GDP. 37

Economy before the oil boom

Economy after the oil boom

34

A. Gillies, 'Reforming corruption out of Nigerian oil?', Chr. Michelsen Institute [web document] (2009), 2 <http://www.cmi.no/publications/file/3295-reforming-corruption-out-of-nigerian-oil-part-one.pdf>, accessed 2 Apr. 2013. 35 A. Gillies, 'Reforming corruption out of Nigerian oil?', Chr. Michelsen Institute [web document] (2009), 2 <http://www.cmi.no/publications/file/3295-reforming-corruption-out-of-nigerian-oil-part-one.pdf>, accessed 2 Apr. 2013. 36 A. Osuntogun et al. 'Potentials for diversifying Nigeria's non-oil exports to non-traditional markets', African Economic Research Consortium [web document] (1997), 1 <http://pdf.usaid.gov/pdf_docs/PNADR044.pdf>, accessed 8 Jan 2013. 37

B. Adedipe, Agricultural- and petroleum contribution to Nigeria’s GDP, [online image] (2004) < http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/events-documents/117.pdf>, accessed 5 Oct. 2012.

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Figure 2.5 Geometry of the Dutch disease.38

(Note: straight line at point E = the real exchange rate. The steeper this line is, the more depreciated the exchange rate is.) Consider the following example: Let’s say that 2 Nigerian Naira (NGN) equalled 1 US dollar ($) to make things easy (note that this was not the real exchange rate). Prices on traded goods are internationally set whilst prices on non-traded goods are set on the local market. A taxidriver who belongs to the non-tradable sector charged 1 NGN for a journey. A farmer charged 4000 NGN (2000 $) for a ton of cacao, which is a tradable good. At this stage it did not matter if you were a taxi driver or a cocoa farmer, you would earn equal in accordance with the value of the service/goods which you provided (see equilibrium at point E). During the oil boom (see H), there was a large inflow of foreign exchange which caused the local currency’s real exchange rate to rise (notice that the straight line has become less steep). Nigeria had become a richer country. Lets say that 1 ½ NGN now equalled 1 $. With more money the demand for non-traded goods increased. On the local market the taxi driver could charge more for a journey. However, the cocoa farmer who sold his goods on the international market now only got 2000 $ = 3000 NGN. If he increased the price, he would not be competitive on the international market. Additionally, the appreciation of the currency made imports cheap, in the mid 1970s food imports increased by 700 %, 39 which of course made it very difficult for these farmers to compete against foreign products; this is referred to as the “spending effect”. With an increased influx of oil revenues the Nigerian government practically ignored the agricultural sector, only three percent of public expenditures were invested within the sector. 40 It was more profitable for the farmer to enter the non-traded sector; this is known as the “resource movement effect”. This caused a rapid urbanization in Nigeria. As you can see in the chart the non-oil traded goods has been reduced to E*T. The effect of the lost sector became evident as oil prices fell; there were no additional sectors to rely on. The Nigerian agriculture experience also portrays that once a sector is lost; it is very hard to regain it. For instance, the cocoa industry never recovered from the oil boom.41

2.2 POST-INDEPENDENCE GHANA 2.2.1 POLTICAL HISTORY Kwame Nkrumah was a nationalist leader who led the country towards independence on March 6th, 1957. 38

M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 182. 39 J.I. Guyer, Feeding African Cities: Studies in Regional Social History (Bloomington, Indiana University Press, 1987), 96. 40 C. C. Ugwuibe, 'Strengthening the Nigerian Sovereign Investment Authority: A Policy Analysis of the Nigerian Excess Crude Account and the Nigerian Sovereign Investment Authority Act', University of California [web document] (2012), 15 <http://www.escholarship.org/uc/item/5zn1h1d6#page-38> , accessed 8 Jan. 2013 41 Sébastien C. Dessus, 'The Challenges and Opportunities of Ghana’s Offshore Oil Discovery.', World Bank [web document] (2009), 5 <http://w2.vu.edu.au/library/referencing/files/2495%20Oxford%20Guide%20(28%209%2010).pdf>, accessed 11 Nov. 2012.

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Ghana was the first sub-Saharan country to gain independence from a colonial power, in this case Britain. At independence, there was a clear North-South divide as in many coastal countries in West Africa (in Nigeria for instance). The south had many advantages over the north. The south possessed dense forests and fertile soil, whereas in the North (Northern, Upper West, and Upper East Regions), the short growing season (partially due to erratic rainfall) limited the opportunities for agricultural production. Furthermore, most of the mineral deposits were discovered in the south. Therefore, more investments were targeted towards the southern part of the country, in which southerners had access to western-style education. As in the case of Nigeria, the underdeveloped northern region feared domination by the south if the country was to gain independence, and as a response the Northern Peopleâ&#x20AC;&#x2122;s Party (NPP) was formed in 1954 in Ghana. In Nigeria, the northerners managed to take control of the government and major institutions as a result of its large population. In Ghana, the Northern region only possessed 20 % of the total population and has therefore seen relatively little representation in the government and investments targeted towards the region. The northern region is still lagging behind in many areas.42

Figure 2.6 Literacy (% above 15 years) by region in Ghana (2005/2006).

Figure 2.7 Poverty rates by region in Ghana (2005/2006).

On several occasions ethnic violence has broken out over land- and resource ownership and due to calls for political representation, both on a local and national level, especially in the northern regions. The most devastating conflict occurred in 1994, between the Konkomba and the Nanumba. The conflict involved 2 million people and left 1000-2000 dead. 43 However, it should be noted that ethnic violence in Ghana has been rare in comparison to other African countries, despite the fact that there are over 100 different ethnic groups (the Akan, Ewe, Mole-Dagbane, Guan, and Ga-Adangbe being the major ones). 44

42

D. Tsikata, 'Identities, Inequalities & Conflicts in Ghana', Oxford University [web document] (2004) <http://www.qeh.ox.ac.uk/publications/wps/wpdetail?jor_id=359>, accessed Nov. 14 2012. 43 Ghana Web, 'Ethnic Groups' [web page] (1994) <http://www.ghanaweb.com/GhanaHomePage/tribes/>, accessed 5 Dec. 2012. 44 Central Intelligence Agency â&#x20AC;&#x201C; The World Factbook, 'Ghana' [web page] (2013) <https://www.cia.gov/library/publications/the-world-factbook/geos/gh.html>, accessed Mar. 15 2013.

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Ghana has witnessed several coup d'etats since the rule of Kwame Nkrumah. Often these were ostensibly motivated to end corruption; however military regimes ended up very corrupted themselves. In 1993, President Jerry John Rawlings went from being a military ruler to an elected president. Since then, Ghana has been a democracy, with free elections and a constitution dividing the power between the president, parliament, cabinet and the council of state and judiciary which is independent. 45 The quality of governance has been measured by Worldwide Governance Indicators (WGI) which are based on research by the World Bank and includes six separate dimensions: Voice and Accountability (Percentile Rank 0 (bad governance) - 100 (good governance) In 2011 Ghana scored: 62.4), Political Stability and Absence of Violence (51.4), Government Effectiveness (53.6), Regulatory Quality (55.5), Rule of Law (54.5), Control of Corruption (62.1).46 Since the rule of Jerry Rawlings power has changed hands peacefully, for instance in the 2008 election, Atta Mills (National Democratic Party) won 50.7 per cent of the votes and AkufoAddo (New Patriotic Party) received 49.74 per cent.47 Although the election was so close th NPP chose to step down, which is very rare in Africa.

2.2.2 AGRICULTURAL SECTOR The red in the Ghanaian flag represents the blood which was sacrificed on the path towards independence, the yellow symbolizes the mineral wealth of the country (gold and diamonds) and the green represents the rich agriculture, including cocoa (Ghana is one of the worlds top producers of cocoa and has a comparative advantage on the Figure 2.8 The correlation between GDP growth and Agricultural crop), kola nuts, yams, palm oil GDP growth in Ghana (1966-2006). and timber). Agriculture has throughout recent history been the dominant sector. As you can see on the chart there has indeed been a strong correlation between the GDP growth and agriculture growth. This sector currently accounts for more than 50 % of the country’s GDP, and is the major source for foreign exchange. 56 % of the country’s labour force works within the sector and it provides job opportunities for the manufacturing sector too, since 2/3 of the enterprises within the manufacturing sector depend on agricultural products. Therefore, agriculture has been an important contributor to poverty reduction, although 28 % still live below the poverty line (2007).48 45

S. P. Leite, 'Ghana: Economic Development in a Democratic Environment', IMF [web page] (2000) <http://www.imf.org/external/pubs/nft/op/199/>, accessed 8 Jan. 2013. 46 World Bank, 'Country Data Report for Ghana, 1996-2011' [web document] (2011) http://info.worldbank.org/governance/wgi/pdf/c82.pdf, accessed 14 Dec. 2012. 47 Ghana Broadcasting Corporation, 'The Fourth Republic of Ghana' [web page] (2012) <http://www.gbcghana.com/? launch=fourth_republic>, accessed 10 Jan. 2013. 48 Central Intelligence Agency – The World Factbook, 'Ghana' [web page] (2013) <https://www.cia.gov/library/publications/the-world-factbook/geos/gh.html>, accessed Mar. 15 2013

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2.2.3 OIL DISCOVERY A modest quantity of offshore oil was discovered in the 1970s. In order to encourage oil exploration and production the Ghanaian National Petroleum Corporation was established. In September 2007 Tullow Oil plc and Cosmos Energy discovered “The Jubilee field”, with an estimated potential of 3 billion barrels, with production starting on 15 December 2010.49 President John Atta Mills happily announced that "Oil is money, and we need money to do the schools, the roads, the hospitals. With oil as a shot in the arm, we're going to fly." 50 Although oil provides great opportunities for Ghana, the government also realized that many challenges awaited. In 2011 the government passed the “Petroleum Revenue Management Act”, with the goal of managing oil revenue in a “responsible, sustainable, transparent and accountable” manner. There are several clauses regarding openness, for instance clause 8 demands that expenditure of oil revenues must be published in at least 2 national newspapers and online. Clause 52 criminalizes the act of a person not complying to publish information in accordance with the petroleum law.51 According to the law, 70 % of the oil revenue should go to the government budget, whereas 30 % should go to a newly established the Heritage Fund (aim: providing future generations a proportion of the oil wealth even when oil reserves are exhausted) and a Stabilization Fund (aim: avoiding strong pro-cyclical spending).52 However, the procyclical spending already seems to be a great challenge, as the country’s access to international loans has increased after the oil discovery (as in the case of Nigeria). For instance, in 2012 the government announced a loan from China Development Bank worth $3 billion. 53 Furthermore, there are concerns that the Figure 2.9 Structure of how the oil revenue is split up agricultural sector will be neglected due to under the “Petroleum Revenue Management Act”. the oil production, as was the case in 49

Compliance Advisor Ombudsman, 'Tullow Oil, Kosmos Energy & Jubilee FPSO-01/CAO Vice President Request' [webpage] (2010) <http://www.cao-ombudsman.org/cases/case_detail.aspx?id=166>, accessed 3 Oct. 2012. 50 BBC News, 'Ghana will be an African tiger' [web page] (2007) http://news.bbc.co.uk/2/hi/africa/6766527.stm, accessed 22 Oct. 2012. 51 Oxfam America, 'Petroleum Revenue Management Act 815' [web document] (2011) <http://politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act8152011-.pdf >, accessed 7 Dec. 2012. 52 Oxfam America, 'Petroleum Revenue Management Act 815' [web document] (2011) <http://politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act8152011-.pdf >, accessed 7 Dec. 2012. 53

Ministry of Finance and Economic Planning, 'US$ 3 billion term loan facility agreement between China Development Bank (CDB) and Government of Ghana (GOG)' [web document] (2012) <http://www.mofep.gov.gh/sites/default/files/reports/CDB_Loan_Summary_050112.pdf>, accessed 3 Feb. 2013.

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Nigeria. When the U.S. President Barack Obama visited Accra in 2009, he announced that “Oil cannot simply become the new cocoa.”54

3. EVALUATION OF THE RISK OF A RESOURCE CURSE AND PROPOSALS OF POLICY RESPONSES TO MACROECONOMIC INCONVENIENCES – A COMPARATIVE ANALYSIS 54

Obama, B., citied in BBC News, 'President Barack Obama Ghanaian Parliament, Accra, Ghana' [web document] (2009) <http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/obama_%20accra_110709.pdf>, accessed 10 Nov. 2012.

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3.1 CORRUPTION BASED VOLATILIY Some ethnic tension exists in Ghana and incidents do occur. However, the ethnic situation in Ghana is far away from that in Nigeria. In Nigeria each region is relatively homogenous with a specific ethnic group, which is not the case in Ghana, where ethnic groups are somewhat more integrated. This is partially explained by a more harmonious co-existence between groups in Ghana.55 Therefore, a politician targeting investments towards a specific region, as has been the case in Nigeria, is somewhat less likely to occur. Furthermore, whereas Nigerian oil is located both on land and offshore, oil in Ghana is only offshore. Offshore oil makes small scale illegal bunkering, land disputes and environmental degradation (on land) less likely to occur. However, large scale bunkering is a risk in Ghana. In Nigeria the volume produced has been underreported and it is not unusual that there is a difference in volume between producing fields and export measurements points. The oil metering has often been manipulated, which has reported a lower mix of oil than water than has really been the case. The stolen oil has often been destined for the international market. Illegal bunkering has been very difficult to tackle in Nigeria since governmental officials and highly placed persons have benefitted from such activity. Ibrahim Babangida and Sani Abacha virtually turned a blind eye to bunkering which therefore continued to flourish. In the Ghana-Tullow agreement is was stated that “Crude Oil shall be metered or otherwise measured for quantity… for all purposes of this Agreement. Any Party May request that measurements and tests be done by an internationally recognised inspection company”.56 The Ghana Revenue Authority (GRA) however has a limited control over its inspection. For instance, the only way to visit an oil rig is to go there by a ship or helicopter, The GRA does not own either which means that they have to hitch a ride with the oil company which means that inspections are never a surprise. The contract further states that “the contractor shall arrange and pay for the conduct of any measurement where the test demonstrates that such devices are accurate within acceptable tolerances”. One might wonder what acceptable tolerances are. Such vague statements open up opportunities for corruption. Avoiding bunkering will be one of the major challenges for Ghana since it is so difficult to control such activities.57 One way to reduce the risks of environmental degradation is to extensively cover environmental sustainability issues in oil contracts. This has often been ignored when negotiating with oil companies in Nigeria. This is something Ghana has already taken into consideration, for instance article 17 in the Ghana-Tullow agreement deals with environmental protection: “Contractor shall take all necessary steps, in accordance with accepted Petroleum industry practice, to perform activities pursuant to the Agreement in a safe manner and shall comply with all requirements of the Law of Ghana, including labour, health safety and environmental laws and regulations issued by the Environmental Protection

55

R. Asante, 'Ethnic Structure, Inequality and Governance of the Public Sector in Ghana', United Nations Research Institute For Social Development [web document] (2004), accessed 4 Oct. 2012. 56 Tullow Oil Ghana, 'Deepwater Tano Contract Area, PA', [web page] ( 2011) <http://www.tullowoil.com/ghana/index.asp? pageid=62>, accessed 15 Apr. 2013. 57 R. Quist, 'Corruption in Oil and Mining Contracts', International Development Institute for Leadership, Management and Technology (Idilmat) [lecture] (2012).

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Agency”.58 Environmental pollution has been a source of conflict in Nigeria. If Ghana can manage to escape the social and material costs that come with violent conflicts volatility risks will be reduced. In Nigeria, oil production has constantly been interrupted and rarely has the industry lived up to its full potential. The uncertainty that conflicts in Nigeria have generated has led to fiscal imbalance and made economic planning very difficult. It is important to understand that oil has contributed to the ethnic tension in Nigeria, so therefore it is reasonable to predict that ethnic tension may increase in Ghana. In the race for the presidency in 2012 Nana Akufo-Addo referred to his supporters as “We Akans” 59, although the 1992 Constitution (Article 55) states that: "Every political party shall have a national character, and membership shall not be based on ethnic, religious, regional or other sectional divisions".60 Furthermore, campaign expenditures of the 2012 election were the highest in the Ghanaian history, about $12 per person. The American election campaign in 2012 was also the most expensive in the US history, about $18 per person. Take into consideration that Ghana is a poor country (the US GDP per capita is 25 times that of Ghana).61 In other words, we can already witness an increased tension in the political climate in Ghana. In Nigeria overspending was a serious problem; the policy has been to spend sooner rather than later. Furthermore, the oil revenue was not equal distributed between the regions. This occurrence can be explained by the following model: The population is divided into two ethnic groups, a and b. There are two different political leaders, a and b. The politician a belongs to the ethnic group a and the politician b belongs to ethnic group b. These policy makers must decide on how to spend oil revenues in two different periods (period 1 and period 2). During period 1 politician a is in power and politician b is the challenger. Now, consider “Situation 1” and “Situation 2”. Situation 1: It is certain that politician a will be in power during period 2 too. The ethnic group a will get the largest share, how large this share is depends on the degree of rivalry between group a and b. The more rivalry the greater is the share for group a. The spending of oil revenues will be relatively equal between period 1 and period 2, because the politician is aware over the fact that he will be in power during period 2 as well. This awareness leads to a better fiscal balance.62 Situation 2: It is not certain if politician a will be in power in period 2. If the government under politician a is very unstable and the chances for a change in government is high politician a will spend more during period 1. How much he (a) will spend depends on how high the chances of a shift in government are and to what degree the policy priorities differ 58

Tullow Oil Ghana, 'Deepwater Tano Contract Area, PA', [web page] ( 2011) <http://www.tullowoil.com/ghana/index.asp? pageid=62>, accessed 15 Apr. 2013. 59 Akufo-Addo, N., citied in Ghana Web, 'Akufo-Addo: "We Akans Are Not Cowards..."' [web page] (2011) <http://www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=205325>, accessed 15 Nov 2012. 60 Politics Resources, 'The Constitution of The Republic of Ghana 1992' [web document] (2009) <http://www.politicsresources.net/docs/ghanaconst.pdf>, accessed 2 Dec. 2012. 61 Peterson Institute for International Economics, 'How the “Resource Curse” Affects Stability in Africa' [web document] (2012) <http://www.petersoninstitute.org/publications/interviews/pp20121211noland.pdf>, accessed 15 Jan. 2013. 62

M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 201.

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from politician b. For instance, if it is certain that politician b will invest heavily in group b, politician a will overspend on group a during period 1. Furthermore, the chances of a remaining in power during period 2 are correlated with overspending. People want to see visible changes sooner rather than later according to the concept of “hyperbolic discounting” within Social Psychology. Spending in, for instance, public employment could increase political support.63 This behaviour is inefficient in the long run, foremost for politician b and group b, but also for politician and group a. If politician a remains in power during period 2 too, there will be less revenues for him to spend, and chances are high that investments during period 1 were not consistent with the country’s absorptive capacity. If politician b wins power, he will too have little to spend due to overspending by politician a during period 1. The uncertainty regarding who will be in power results in a no-win situation for both parties and increased volatility for the country itself.64 Nigeria has experienced “situation 2“ throughout its history. Even if politician a knew that his successor would come from his own party, overspending has occurred. Creating friends and establishing good relations whilst holding a high official position results in returns when politician a was out of office, and can therefore be seen as a form of personal investment. Nigeria has for decades been struck with endemic corruption, which has caused vertical inequality. According to the World Bank, 80 % of the oil revenue benefits only 1 % of the Nigerian population.65 The uncertainty whether one will remain in power or not has not only come from the fear of not being re-elected in the case of Nigeria, but also from the fear of being overthrown in a military coup (since 1966 the country has witnessed ten such events). Increasing oil revenues lead to increased militarization in Nigeria. Politician a, with the aim of remaining in power and politician b to overthrow politician a in power, to get a hold of the oil revenue. Records show that countries with oil have military expenditures’ are 2 to 10 times higher than countries without. 66 As we could see in Nigeria, the leading party tended to overspend when the policy priorities between different parties were widely different and when the chances of a shift in government were high. Considering that the previous elections have been very close it would be reasonable to predict that overspending will occur in order for the sitting party to remain in power. As we have learned from the Nigerian experience, overspending leads to fiscal imbalance and is damaging for all parties. A solution would be for the parties to negotiate on policies that should be implemented in period 1 and 2 whoever wins (ex ante). For instance, if politician a is assured that if politician b wins he will invest a certain percentage is his group or in his policy priorities in period 2, spending “may” be reduced in period 1. Politician a and 63

M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 202-203 M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 204. 65 G.O. Odular, 'Crude Oil and The Nigerian Economic Performance', Oil and Gas business [web document] (2007), 2 <http://www.ogbus.ru/eng/authors/Odularo/Odularo_1.pdf>, accessed 6 Jan. 2013. 66 M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 13. 64

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group a would benefit because politician a can make spending more efficient over time and will receive more favourable treatment by politician b compared to if the ex- ante agreement was never made. Politician b (the challenger) and group b would also benefit because politician b has more money to spend in period 2 if he wins the election. However, this exante strategy is very difficult to implement in reality, once it is determined who will be in power these ex-ante negotiations tend to be abandoned by the winning side.67 The general public will also contribute to overspending in Ghana. People want to see improvements sooner rather than later. A way to reduce unrealistic expectations is for politicians to be more transparent. If a government is considered opaque, citizens will develop unrealistic perceptions about how much oil revenue there is. If documents however are made available the public will become more informed, and therefore the pressure for increased spending will be reduced.68 This would be a definite advantage for Ghanaian politicians since oil quantities and revenues are not as large as in Nigeria. It is important that politicians realize that there is, from their perspectives’ too, an advantage of being open and transparent. It is also important for Ghana that it maintains a strong linkage between the citizens and the state. Therefore, oil revenues should be considered as a complement, not a substitute for existing tax systems. History shows that the collection of taxes is very important for a democratic and open society. If people have to pay taxes, they will feel more connected to the state, demand services and hold officials accountable if they suspect that they misuse their positions’. 69 This is a problem in Ghana today; with only 20 % of the Ghanaian population contributing to direct taxes. Instead as in many other developing countries, the Ghanaian government has imposed a value added tax (VAT). Firstly, the consumption tax is a bit unfair, it affects the poor more than the rich. The buyer does not really realize that this tax goes to the government and will therefore make less demands for service delivery and accountability. Ghana should therefore try to collect direct taxes. This is a huge challenge considering that a large percentage of the population is impoverished and will have a hard time accepting new taxes so soon after the discovery of oil. However, widening the direct tax base by demanding just a very small tax will have great impact on anti-corruption efforts.70 Furthermore, the country has an adult literacy rate on 71.5 %. Internet users amount to only 1,297,000 (the total population of Ghana is 25,199,609).71 If people cannot read or get access to the information published, how then can they hold the government accountable? A weak principal (the citizens) will enable corruption to occur between the agent (the government) and a third party. To strengthen 67

M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 205-206 M. Humphreys et al., Escaping the Resource Curse (New York, Columbia University Press, 2007), 223. 69 aa. 260-261 70 R. Quist, 'Tax Collection and Corruption', International Development Institute for Leadership, Management and Technology (Idilmat) [lecture] (2012). 68

71

Central Intelligence Agency – The World Factbook, 'Country Comparison – Internet Users' [web page] (2013) < Figure 3.2 Relationship between the principal, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2153rank.html? the agent and the third2013. party. countryName=Ghana&countryCode=gh&regionCode=afr&rank=93#gh>, accessed 2 Apr.

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the principle, especially in times when oil is produced and risks for corruption are higher, Ghana should invest in education, infrastructure and demand tax from its citizens. A strong principle will have high demands for service delivery, accountability and transparency.72

72

R. Quist, 'Tax Collection and Corruption', International Development Institute for Leadership, Management and Technology (Idilmat) [lecture] (2012).

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When investigating the scatter diagram one must also consider additional factors to why spending is higher in countries with few checks and balances other than the one of remaining in power and having access to the oil. Countries with few checks and balances tend to be poor; in these countries there is probably a need to spend sooner rather than later to finance urgent investments as compared to richer countries with stronger checks and balances. For many people, it might not make sense why Nigeria spent and borrowed so much during its Figure 3.1 Diagram demonstrating the correlation between oil boom, but remember that it spending and checks and balances. was/is a really poor country and needed money to finance development programs. It is however unfortunate that much ended up in the pockets of a few and that much was invested in white-elephant projects, which resulted in that the government was not capable of repaying debts. The Ghanaian government must ensure that projects generate high rates of return (higher than the interest of the debt). In addition, when borrowing and investing in projects the government must take into consideration both increasing but more important declining oil prices. Nigeria was too positive when forecasting future oil prices and the consequences were devastating. Ghana should, if possible, avoid borrowing against future oil assets. According to the Petroleum Revenue Management Act which was established in 2011, the government is allowed to borrow against 10 years of oil revenues (section 18 (7)). 73 The original provision of the law prohibited any borrowing against future assets, which would have been a preferable option, considering Nigeria’s indebtedness. Even though the law “only” allows borrowing against 10 years of oil revenues, only one year after the law was enforced, the government announced a loan from China Development Bank worth $3 billion, secured by a 15 years’ worth of oil revenue. 74 This is deeply regrettable and sends the wrong message, if it is so easy to break a law, how can we be sure about that other sections of the law, such as those regarding transparency and accountability will be implemented in reality and not just written on paper? The Petroleum Revenue Management Act established two Natural Resource Funds. The Stabilization Fund will hopefully smooth out volatility and reduce the need to borrow. The aim is that oil price and expenditure are two variables which should not be correlated (see graph below), as has been the case in Nigeria (see figure 2.3), when oil prices were high spending increased and vice versa. The main concern is that oil revenue is not transferred to 73

Oxfam America, 'Petroleum Revenue Management Act 815' [web document] (2011) <http://politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act8152011-.pdf >, accessed 7 Dec. 2012. 74 Ministry of Finance and Economic Planning, 'US$ 3 billion term loan facility agreement between China Development Bank (CDB) and Government of Ghana (GOG)' [web document] (2012) <http://www.mofep.gov.gh/sites/default/files/reports/CDB_Loan_Summary_050112.pdf>, accessed 3 Feb. 2013.

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the fund or that withdrawals from the “save it for the rainy days fund” are made on “sunny days”, because of political rivalry. However, the Petroleum Revenue Act has set up penalties for such acts75; this was not the case in Nigeria in the 1970s. Volatility, not from overspending, but due to international oil prices, is the form of volatility a small country like Ghana cannot affect. Therefore, it is especially important initiatives are made to tackle the avoidable forms of rapid fluctuations.

Figure 3.3 Graph demonstrating the optimal pattern, where oil price does not affect expenditure rates.

There are reasons for being more critical about the Heritage Fund, which is a savings fund to finance future public expenditure. Is it reasonable to save oil revenues for future generations when 28% of the population today lives below the poverty line? For a rich country like Norway with well-functioning physical and human capital it makes much more sense to save revenues for the future (see: The Government Pension Fund of Norway). However, for a poor country like Ghana the Heritage Fund will affect the country’s ability to develop in the shortterm. If the government instead invested in projects generating high rates of returns with long lasting benefits this would produce economic advantages for future generations too. For instance, if a new road is built, it will not only benefit the people of today, but also future generations. If investments in human capital and education (in the non-oil industry too, to diversify the economy) are made, this will benefit the country in the future when oil deposits dry up. On the other hand, pushing money into the system will create a inflationary pressure and increase the risks for the Dutch disease. 30 % of all total oil revenues is to be allocated to the two petroleum funds. The May 2011 proposal stated that 70 % of this amount should be allocated to the Heritage Fund and the remaining 30 % to the Stabilization Fund. This would have limited Ghana’s ability to respond to volatility. A subsequent and a preferable decision was made to reverse this distribution, giving 70 % to the Stabilization Fund and 30 % to the Heritage Fund.76 The Stabilization Fund and the Heritage Fund are managed by the Investment Advisory Committee. Members of this committee are appointed by the president. This creates opportunities for corruption. The committee may form its policy and invest in projects that are in the interest of the president. Perhaps his family, friends or tribe would benefit from a 75

Oxfam America, 'Petroleum Revenue Management Act 815' [web document] (2011) <http://politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act8152011-.pdf >, accessed 7 Dec. 2012. 76 J. C. Bell et al., 'Comments on Ghana’s Petroleum Revenue Management Bill' [web document] (2010) <http://www.revenuewatch.org/sites/default/files/Ghana_revenue_management_brief_final.pdf>, accessed 10 Jan. 2013.

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certain decision. Members can hold office for two or three years and can be re-appointed. Staying friends with the president and making decisions which corresponds with his wishes, is important for remaining in office during the next term. The president can even at any time revoke the appointment of a member. 77 Separation of power in Ghana, making the Investment Advisory Committee independent is necessary to narrow the corruption space in the country. As we have learnt, there has been great horizontal inequality in both Nigeria and Ghana. A way to reduce horizontal inequality in Ghana is for the central government to fairly share its oil revenues with regional administrations. The benefit of such a policy is that these local governments are more aware of which investments are suitable for their particular region. It is reasonable that poorer regions (especially the northern regions) receive a greater share to reduce the inequality between regions and to alleviate poverty. The Nigerian governments have failed to fairly distribute its oil revenues between its regions, the Niger Delta regions has often been neglected, which explains why poverty in especially prominent there. Especially during military rules the governments were very centralized a small percentage of the budget was allocated to the sub national governments. This weakened the principle; the power was too far away to demand accountability and service delivery. It is therefore good news that Ghana is undertaking a decentralization programme in which approximately 45 % of the governmental budget is to be allocated to the sub-national governments. 78 However, there are drawbacks with decentralizing oil revenues; firstly the central government has a much more diversified income base than regional governments. This means that regional governments are much more vulnerable to the highly volatile oil revenue. Central governments are also generally better equipped to implement countercyclical policies, partially (again) because they have a more diversified income base. This would seem to suggest that oil revenues would be best split between different levels of governments.79. Now when oil has been discovered political officials in Ghana will probably try to exploit their positions for personal gains, not only in terms of seeking oil rents, but also establishing good relations that could result in returns when being out of office. This was a common pattern in Nigeria. The UN Convention against Corruption (2003) has also stated that it is: â&#x20AC;&#x153;Concerned further about cases of corruption that involve vast quantities of assets, which may constitute a substantial proportion of the resources of States, and that threaten the political stability and sustainable development of those States.â&#x20AC;? 80. When looking at the picture below, one might draw the conclusion that Ghana is in a better position to manage its oil wealth well, considering its lower corruption levels and better established institutions (note that Nigeria was under military rule when oil was discovered). This is true to some extent. However, it is also important to understand that corruption scores in Nigeria has largely been affected by oil. Now that oil has been discovered in Ghana it is not unreasonable to fear that 77

Oxfam America, 'Petroleum Revenue Management Act 815' [web document] (2011) <http://politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act8152011-.pdf >, accessed 7 Dec. 2012. 78 R. Quist, 'Introduction and Overview', International Development Institute for Leadership, Management and Technology (Idilmat) [lecture] (2012). 79 M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 248-249. 80 United Nations Office On Drugs and Crime, 'United Nations Convention Against Corruption' [web document] (2004), 5 <http://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf>, accessed 23 Nov. 2012.

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scores will worsen. It is also reasonable to believe that undiscovered and untapped oil in Ghana before 2007 has helped the country to avoid upswings of massive corruption. However, The Petroleum Revenue Management Act sets high standards for transparency and will hopefully help mitigate corruption. In Nigeria it took too long before proper corruption safeguards were put in place, partially due to continuous changes in government and the uncertainty each government had about remaining in power. Furthermore, the establishment, and more importantly the implementation of tough anti-corruption laws will help reduce vertical inequality. In Nigeria the gap is very wide between the rich and the poor due to ingrained rent-seeking behaviour.

Figure 3.4 Corruption scores in Nigeria and Ghana.81

3.2 CORRUPTION IN UPSTREAM PETRULEUM CONTRACTS There are reasons to be concerned about corruption in the allocation of oil blocks in Ghana since the Ghana National Petroleum Corporation awards the licenses. The Board of Directors are appointed by the government, which undermines the independence of the organization.82 Ghana has a lot to learn from Nigeriaâ&#x20AC;&#x2122;s mistakes in regards to this issue. To provide the Ghanaians with a fair share of its resources the government should work to increase competition in the awarding of exploration, development and production contracts. Auctions should be open and competitive and Ghana should try to limit opportunities for renegotiations as such procedures remove the benefits from competition in the first place and offers opportunities for corruption. Advertisements should be up and running for some time, to increase the numbers of bidding companies. In the awarding of oil blocks the GNPC should 81

Corruption Perception Index, [online image] (2012) <http://www.transparency.org/cpi2012/results>, accessed 2 Feb. 2013. 82 GNPC Ghana, 'Organisational Structure' [web page] (2013) <http://www.gnpcghana.com/aboutus/orgStructure.asp>, accessed 3 Apr. 2013.

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avoid asymmetric information by providing all bidders with full geological information concerning the oil blocks. This would reduce the risk of other companies suffering from the winner’s curse and thereby increase the revenues to the Ghanaian people. In Nigeria the government put in place pre-qualification criteria that enabled corrupt activities; such activities should be actively discouraged. Ghana should set up anti-corruption requirements, for instance, companies which have previously been found guilty of corruption should not be allowed to take part in an auction.83 The government must publish the details of the final contracts. Transparency is not a new.. Aristotle stated that “to protect the Treasury from being defrauded, let all money be issued openly in front of the whole city, and let copies of the accounts be deposited in various wards”.84 The companies who lose a bid should be given a valid explanation of why they did not measure up. The public must know why a certain company won and who will benefit from the contract. Although there are good reasons to encourage the involvement of local companies and suppliers, it is important to understand that such rhetoric opens up opportunities for corruption, such as local content rhetoric in Nigeria did. If a government official holds a share in an oil company he or she must provide sufficient evidence (through transparency) that he or she has not used his position to win the bid. 85 Ron Quist, chairman and Chief Executive Officer of ”International Development Institute for Leadership, Management and Technology” (Idilmat), said that “Tullow Oil recently floated shares on the Ghana Stock Exchange which did not place any restriction on government officials purchasing shares. I would consider the stock exchange a fairly transparent and well regulated platform and so I do not see a huge risk in government official participation through stock exchanges. The only reservation would probably be due to conflict of interest considerations as they pertain to his or her job.” The government should ensure that whistleblowers are well protected. This would increase the chance of being caught when engaging in corrupt activities. Penalties must also be significant. If the penalty is small, it doesn’t really matter that much being caught. Likewise, a harsh penalty may not be a deterrent if the chance of being detected is low. The government must increase penalties as well as the probability of being detected and prosecuted. 86 It is alarming that even credible allegations of corruption in Ghana are ignored and rarely lead to any investigation.87

3.3 DUTCH DISEASE 83

Farouk Al-Kasim, 'Grand corruption in the regulation of oil', Chr. Michelsen Institute [online journal] (2008), 23-24 <http://www.u4.no/publications/grand-corruption-in-the-regulation-of-oil/>, accessed 03 Apr. 2013. 84 Aristotle, citied in Anwar Shah et al., 'Combating Corruption: Look Before You Leap' [web document] (2006), 1 <http://www.12iacc.org/archivos/WS_6.2_CLIFF_ANWAR_SHAH_AND_MARK_SCHACTER.PDF>, accessed 02 Apr. 2013. 85 Global Witness, 'The scramble for Africa’s oil, gas and minerals' [online journal] (2012), 20-23 <http://www.globalwitness.org/rigged/rigged.pdf>, accessed 2 Apr. 2013. 86 Odd-Helge Fjeldstad, 'Revenue Administration and Corruption', Chr. Michelsen Institute [online journal] (2005), 8 <http://www.u4.no/publications/revenue-administration-and-corruption/ >, accessed 03 Apr. 2013. 87 R. Quist, 'Corruption in Oil and Mining Contracts', International Development Institute for Leadership, Management and Technology (Idilmat) [lecture] (2012).

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For decades, the agriculture sector has been the primary source of income for Ghana and it is also provides employment for more than half of the labor force. Nigeria was in this position at independence, but when oil was discovered the agriculture became increasingly neglected. With Ghana’s new oil there is indeed a risk that Ghana’s agriculture sector will suffer from a setback as well. This would have negative consequences on poverty alleviation, considering agriculture provides job opportunities and provides food. The manufacturing sector would also suffer from setbacks, not only the tradable section but the whole sector because it is very dependent on agricultural products. Oil reserves in Ghana are expected to last for about 20 years.88 If the agricultural sector is neglected now, the country will be in deep trouble when oil reserves are depleted and when oil prices are low. In Nigeria, the cocoa industry has not yet recovered, which demonstrates that once a sector is lost, it is hard to regain both physical (processing plants) and human (knowledge and skills). How then can Ghana mitigate the effects of the Dutch disease? The government cannot afford to neglect the agricultural sector in terms of investments, as was in the case in Nigeria which only invested three percent of public expenditures in the agricultural sector during the 1970s. The government should give subsidies to agriculture for inter alia mechanization, fertilization and pesticides to fight pests to reduce costs of production. Such initiatives will make it more attractive for Ghanaians to stay within the agricultural sector. In developing countries subsidies are very common. During election campaigns reducing taxes is not an attractive argument, since a very low percentage pay taxes. Instead promising subsidies is much more common, since these policies affect the population at large. Subsidies are often criticised, in some cases with justification. In Nigeria for instance, the government have put subsidies on petroleum, reasoning that cheaper oil prices would reduce the cost for the transportation of agricultural products. However, this has made financial planning difficult since oil is a very volatile commodity, in comparison to fertilizers for instance. The section “Use of Annual Budget Funding Amount” including that the budget should give priority to agriculture (21:3:a) of the “Petroleum Revenue Management Act” was an important step.89 It demonstrates that the risk of a neglected agricultural sector due to oil is taken seriously! How the employment rate will be affected is hard to predict. The booming oil sector is capital intensive. In Nigeria a very low percentage of the work force is in the oil sector. Furthermore, foreigners possess the skills which are required on the oil rigs, so the chances for locals to get jobs within the industry are low (especially in the initial years).Therefore the government should use oil revenues from the sector to produce jobs in other sectors to help diversify the economy and to compensate for job losses in the tradable sector (an option would of course be to recreate jobs within the tradable sector). 90 However, the government should of course not ignore the importance of local involvement in the oil industry. The presence of multinational 88

Voice of America, 'Ghana’s Oil Wealth Not Reaching Poor' [web page] (2012) <http://www.voanews.com/content/ghana-oil-wealth-not-reaching-poor/1510789.html>, accessed 13 Jan. 2013. 89 Oxfam America, 'Petroleum Revenue Management Act 815' [web document] (2011) <http://politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act8152011-.pdf >, accessed 7 Dec. 2012. 90 M.M. Gidade et al., 'Petroleum Development Contracts with Multinational Oil Corporations: Focus on the Nigerian Oil Industry', The University of Warwick [web document] (1992), 276 <http://wrap.warwick.ac.uk/4320/1/WRAP_THESIS_Gidado_1992.pdf >, accessed 27 Feb. 2013.

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Oil Companies is important because they possess large capital and technological know-how which can gradually be transferred into the country. Furthermore, the government should engage in educating locals to work within the oil sector. In 2012 the “Local Content and Local Policy” was established specifically for the oil industry with the aim of more local expertise, goods, people and businesses involved. An additional alternative for localizing the industry is to incorporate local content requirements in oil contracts; this is the case in the contract with the Ghana-Tullow Deepwater Tano Contract Area. “In the acquisition of plant, equipment, services and supplies… Contractor shall give preference to materials, services and products produced in Ghana.”91

91

Tullow Oil Ghana, 'Deepwater Tano Contract Area, PA', [web page] ( 2011) <http://www.tullowoil.com/ghana/index.asp? pageid=62>, accessed 15 Apr. 2013.

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If Ghanaian workers are not able to move from the tradable to the nontradable sector, poverty may increase. Women who had good jobs prior to the oil discovery will perhaps become more vulnerable after. The potential real exchange rate appreciation will most likely affect the already most disadvantaged in society (women and people living in rural areas). However, using oil revenues for investments in construction could increase income for both the nontradable and tradable sector. A Figure 3.5 Graph demonstrating that a country can experience currency appreciation of the Cedi both an expanding tradable-and non-tradable sector through (Ghanaâ&#x20AC;&#x2122;s local currency) does not public investments. necessarily have to lead to a reduced size of the tradable sector (see graph), which was the case in Nigeria. For instance, if more roads and power grids are built in rural areas, this will make rural areas more attractive and may increase agricultural production and (again) make it more attractive for Ghanaians to stay within the agricultural tradable sector.92 As we learned from the Nigerian experience, construction is very corruption prone (see Figure). It requires large capital, know-how and technology. Only a few companies in a developing country like Ghana have the ability to actually build a major road, which reduces competition and enhances collusion and corrupt activities. Since bribes are paid at the initial stage, there are great risks that many projects in Ghana will turn out unfinished.93 In addition to tackling corruption it is important that projects are closely evaluated in advance, ensuring that they generate adequate rates of return, so that Ghana doesnâ&#x20AC;&#x2122;t end up with white-elephant projects. Nigeria was not able to repay debts partially because of the low rates of return produced by expensive investments.

92

M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 184-185. R. Quist, 'Corruption in Oil and Mining Contracts', International Development Institute for Leadership, Management and Technology (Idilmat) [lecture] (2012). 93

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Figure 3.6 Result by sector in the “Bribe Payers Index”. 94

Education and investments in human capital is very important for diversifying the economy away from the oil sector. Nigeria during the oil boom to some degree neglected the educational sector. A possible explanation is that a country rich in natural resources does not rely on an educated and skilled workforce, the country will make money anyway, since the oil industry is so capital intensive.95 In the four Asian tigers the governments heavily invested in education, because they are manufacturing countries.96 However, Ghana does not produce as much oil as Nigeria does and is therefore still dependent on an educated population for other sectors and considering that oil is only expected to last another 20 years, the country cannot afford to forget to invest in human capital.

94

Results by sector, [online image] (2011) < http://bpi.transparency.org/bpi2011/results/>, accessed 28 Mar. 2013. M. Humphreys et al., Escaping the Resource Curse [image] (New York, Columbia University Press, 2007), 10. 96 P. Morris, Asia´s Four Little Tigers: A Comparison of the Role of Education in Their Development (London, Taylor & Francis Group, 1996), 95-109. 95

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4. CONCLUSION Macroeconomic lessons to learn from Nigeria include how to smooth out volatility and avoid the Dutch disease. Conflicts which affected extraction rates negatively will be less of a problem in Ghana as all of the oil is offshore. To smooth out volatility political parties should, if possible, negotiate long-term policies that could be implemented regardless of who is in power. An open and transparent system of awarding contracts is essential. Public disclosure of oil documents should limit unrealistic expectations and hopefully limit public pressure to overspend. Direct taxation will establish a strong link between the citizens and the state, with citizens putting high demands on an open and transparent government and thereby curtailing corruption. The establishment of Petroleum Revenue Management Act sets high standards for transparency, which will be very important, as the likelihood for ethnic tension, political rivalry and corruption is likely to increase in the scramble for the distribution of the oil wealth. Under the petroleum law the Stabilization Fund will be an important tool for smoothing out volatility and to reduce the need to borrow. To avoid the Dutch disease the government cannot neglect the agricultural sector as it is very important for diversifying the economy and alleviating poverty. To avoid the â&#x20AC;&#x153;resource movement effectâ&#x20AC;?, the government should use oil revenues to give subsidies to farmers to help reduce production costs. Public investments, for instance in construction in rural areas could increase the attractiveness of remaining in the agricultural sector. A currency appreciation of the Cedi does not necessarily have to lead to a reduction of the tradable sector. Investments in human capital and education will be very important for the country to diversify its economy away from the oil industry. Importantly, when Nigeria discovered oil, concepts such as the Dutch disease and other microeconomic inconveniences were unknown. Today, we have an increased understanding for these phenomena and various economists have put forward strategies to mitigate their effects. As a burgeoning democracy Ghana stands in a better position for managing its oil well. The challenges are extraordinary, but if right policies are adopted, the oil can become a blessing and not a curse, a potential catalyst for achieving Ghanaâ&#x20AC;&#x2122;s development needs.

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<http://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/0850026_E.pdf>, accessed 23 Nov. 2012. VANITY FAIR, 'Blood Oil' , [web page] (2007) <http://www.vanityfair.com/politics/features/2007/02/junger200702>, accessed 15 Dec. 2012. VOICE OF AMERICA, 'Ghana’s Oil Wealth Not Reaching Poor' [web page] (2012) <http://www.voanews.com/content/ghana-oil-wealth-not-reaching-poor/1510789.html>, accessed 13 Jan. 2013. WORLD BANK, 'Country Data Report for Ghana, 1996-2011' [web document] (2011) http://info.worldbank.org/governance/wgi/pdf/c82.pdf, accessed 14 Dec. 2012. COMPLIENCE ADVISOR OMBUDSMAN, 'Tullow Oil, Kosmos Energy & Jubilee FPSO01/CAO Vice President Request' [webpage] (2010) <http://www.caoombudsman.org/cases/case_detail.aspx?id=166>, accessed 3 Oct. 2012. ADEDIPE, B., Agricultural- and petroleum contribution to Nigeria’s GDP, [online image] (2004) < http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/events-documents/117.pdf>, accessed 5 Oct. 2012. ADEDIPE, B., 'The Impact of Oil on Nigeria’s Economic Policy Formulation', Overseas Development Institute [web document] (2004) <http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/events-documents/117.pdf>, accessed 27 Oct. 2012. AKPABIO E.M. AND AKPAN N.S.,'Governance and Oil Politics in Nigeria’s Niger Delta: The Question of Distributive Equity.', University of Uyo [online journal] (2010) <http://www.krepublishers.com/02-Journals/JHE/JHE-30-0-000-10-Web/JHE-30-2-0002010-Abst-PDF/JHE-30-2-111-10-1983-Akpabio-E-M/JHE-30-2-111-10-1983-Akpabio-EM-Tt.pdf>, accessed 8 Jan. 2013. AL-KASIM, F., 'Grand corruption in the regulation of oil', Chr. Michelsen Institute [online journal] (2008), 23-24 <http://www.u4.no/publications/grand-corruption-in-the-regulation-ofoil/>, accessed 3 Apr. 2013. ASANTE, R., 'Ethnic Structure, Inequality and Governance of the Public Sector in Ghana', United Nations Research Institute For Social Development [web document] (2004), accessed 4 Oct. 2012. AUTY, R.M, Sustaining Development in Mineral Economies: The Resource Curse Thesis (London, Routledge, 1993). BELL, J.C. et al.,'Comments on Ghana’s Petroleum Revenue Management Bill' [web document] (2010) <http://www.revenuewatch.org/sites/default/files/Ghana_revenue_management_brief_final.pd f>, accessed 10 Jan. 2013. BUDINA. N. et al., 'Nigeria’s Growth Record: Dutch Disease or Debt Overhang? ', World Bank [web document] (2006) 38


<http://siteresources.worldbank.org/INTDEBTDEPT/Resources/20061012_06.pdf>, accessed 5 Jan. 2013. DESSUS, S. et al., 'Economy Wide Impact of Oil Discovery in Ghana', World Bank [web document] (2009) <http://siteresources.worldbank.org/INTGHANA/Resources/EconomyWide_Impact_of_Oil_Discovery_in_Ghana.pdf>, accessed 3 December 2012. DESSUS, S., 'The Challenges and Opportunities of Ghana’s Offshore Oil Discovery.', World Bank [web document] (2009), <http://w2.vu.edu.au/library/referencing/files/2495%20Oxford %20Guide%20(28%209%2010).pdf>, accessed 11 Nov. 2012.

FJELDSTAD, O., 'Revenue Administration and Corruption', Chr. Michelsen Institute [online journal] (2005), 8 <http://www.u4.no/publications/revenue-administration-and-corruption/ >, accessed 03 Apr. 2013. GIDADE, M.M. et al.,'Petroleum Development Contracts with Multinational Oil Corporations: Focus on the Nigerian Oil Industry', The University of Warwick [web document] (1992), 276 <http://wrap.warwick.ac.uk/4320/1/WRAP_THESIS_Gidado_1992.pdf >, accessed 27 Feb. 2013. GILLIES, A.,'Reforming corruption out of Nigerian oil?', Chr. Michelsen Institute [web document] (2009), 2 <http://www.cmi.no/publications/file/3295-reforming-corruption-out-ofnigerian-oil-part-one.pdf>, accessed 2 Apr. 2013. GUYER, J.I., Feeding African Cities: Studies in Regional Social History (Bloomington, Indiana University Press, 1987). HIGGINS, K., 'Regional Inequality and the Niger Delta' , Overseas Development Institute [web document], <http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publicationsopinion-files/3383.pdf>, accessed 10 Nov. 2012. HUMPHREYS, MACARTAN, et al, Escaping the Resource Curse (New York, Columbia University Press, 2007). IKEIN, A.A. et al. Oil, Democracy, and the Promise of True Federalism in Nigeria. (Lanham, University Press of America, 2008). LEITE, S.P. 'Ghana: Economic Development in a Democratic Environment', IMF [web page] (2000) <http://www.imf.org/external/pubs/nft/op/199/>, accessed 8 Jan. 2013. MORRIS, P., Asia´s Four Little Tigers: A Comparison of the Role of Education in Their Development (London, Taylor & Francis Group, 1996). NNOLI, O., 'Ethnic violence in Nigeria: A historical perspective.', Indiana University [web document] (2003) <http://www.indiana.edu/~workshop/papers/nnoli_021003.pdf>, accessed 15 Dec. 2012.

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ODULAR, G.O., 'Crude Oil and The Nigerian Economic Performance', Oil and Gas business [web document] (2007), 2 <http://www.ogbus.ru/eng/authors/Odularo/Odularo_1.pdf>, accessed 6 Jan. 2013. OSUNTOGUN, A. et al., 'Potentials for diversifying Nigeria's non-oil exports to nontraditional markets', African Economic Research Consortium [web document] (1997), 1 <http://pdf.usaid.gov/pdf_docs/PNADR044.pdf>, accessed 8 Jan 2013. REWANE, M. et al., 'Overrated? The Impact of Oil Revenue on Nigeriaâ&#x20AC;&#x2122;s Creditworthiness, Debt Profiles and Sustainability', Stanford University [web document] (2007) <http://economics.stanford.edu/files/Theses/Theses_2007/Rewane2007.pdf>, accessed 13 Nov. 2012. SHAH, A. et al., 'Combating Corruption: Look Before You Leap' [web document] (2006), 1 <http://www.12iacc.org/archivos/WS_6.2_CLIFF_ANWAR_SHAH_AND_MARK_SCHAC TER.PDF>, accessed 02 Apr. 2013. STEWART, MICHAEL, Biafra: Fighting a War without Guns, [online video] (1995) <http://www.youtube.com/watch?v=J3ReFoFp0Gs>, accessed 15 Mar. 2013. TSIKATA, D., 'Identities, Inequalities & Conflicts in Ghana', Oxford University [web document] (2004) <http://www.qeh.ox.ac.uk/publications/wps/wpdetail?jor_id=359>, accessed Nov. 14 2012. UGWUIBE, C.C., 'Strengthening the Nigerian Sovereign Investment Authority: A Policy Analysis of the Nigerian Excess Crude Account and the Nigerian Sovereign Investment Authority Act', University of California [web document] (2012), 18 <http://www.escholarship.org/uc/item/5zn1h1d6#page-38> , accessed 8 Jan. 2013. UMARU, A. et al. 'An Empirical Analysis of the Contribution of Agriculture and Petroleum Sector to the Growth and Development of the Nigerian Economy from 1960-2010', International J. Soc. Sci. & Education [web document] (2012) <http://ijsse.com/sites/default/files/issues/2012/Volume%202%20Issue %204,%202012/paper%2022/Paper-22.pdf>, accessed 12 Dec. 2013.

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6. APPENDIX 6.1 INTERVIEWS WITH STAFF MEMBERS OF IDILMAT AND PARTICIPANTS OF THE COURSE Ron Quist is from Ghana but has worked with Public Finance Management, Money Markets, Project Finance, System Design and Energy systems in 30 different countries. He has developed many courses, training a total of 9000 participants, from different organizations (including the World Bank and the European Commission). Nowadays, he is the chairman and Chief Executive Officer of ”International Development Institute for Leadership, Management and Technology” (Idilmat), and is responsible for the course “Towards Narrowing the Corruption Space, which I participated in .97 What will be the one most important strategy for Ghana to avoid the resource curse? - I am not sure that one can speak about one specific strategy. The first question one must ask is: where is Ghana now? We have free and fair elections; whoever is in power has the mandate from the people. The principle can diminish the agency problem by holding agents more accountable and demanding greater transparency. There is a broad promotion of democracy. The budget is open and transparent. The country is undertaking an ambiguous decentralization programme, which will hopefully improve service 97

International Development Institute for Leadership, Management and Technology (Idilmat), 'Who we are: Ron Quist' [web page] (2013) <http://www.idilmat.com/Profiles/Ron-Quist.aspx>, accessed 12 Jan. 2013.

delivery. We are progressing well on the millennium development goals. The background is positive, but Ghana needs to do more. It will have to improve its public finance management, especially public procurement, disposal of public assets and revenue management. Ghana needs to promote transparency, pay more attention to discretionary elements in tax revenue, allocation of oil blocks and in the operation of the oil sector. Furthermore, the office of auditor-general must be independent. Considering Ghana’s urgent development needs, do you think that it is reasonable to save oil revenues for the future in the so called “Heritage Fund”? - I understand that for a poor man this makes no sense, while he is starving we are saying “save the money”. But yes, it is reasonable. It is indeed necessary to foresee the end-result, from an oil economy to a non-oil economy. It serves as a good buffer for balancing the Dutch disease risks, avoiding pushing too much money into the system. It also improves the country’s sovereign debt restructuring. Considering the Nigerian experience, do you believe it was good that it took a few decades for Ghana to discover oil, so that democratic and functioning institutions could be established first? - I find it hard to argue that it was better that we found oil later, but yes we were luckier!

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The quantities of oil discovered is relatively modest compared to Nigerian standards, some say that this could be good and limit the risks of an undiversified economy, do you agree? - There is a good chance that Ghana will find more oil. It is not yet clear what Ghanaâ&#x20AC;&#x2122;s oil story is going to be. Because we are in a time of transition, we have time to address Dutch disease effects. We are also given the chance to narrow the opportunities for corruption before more oil is discovered. How should the oil revenues be used to improve living standards and boost the economy in Ghana? - Education and infrastructure! Both sectors possess a high absorptive capacity, even in a relatively poor country like Ghana. Both sectors are labour intensive, which provides great job opportunities. Both sectors are directly linked with economic growth. An educated people and a well functioning infrastructure would be a wonderful heritage to leave for future generations. However, there are also great challenges in these sectors. Ghana has suffered from huge losses of payroll within the education sector because of â&#x20AC;&#x153;ghostsâ&#x20AC;?. Furthermore, construction is the most corrupt prone industry. These areas of concern must be fixed! Recent elections have been very close, but transitions have been peaceful. Is there an increased chance of political rivalry in Ghana with oil revenues flowing into the government budget? And is there a chance for increased ethnic tensions in the country? - Absolutely! As an official you are in a comfortable position, so there is a high incentive to stay in power. Since you are

controlling the resources, you can use the revenues to fight the opposition. The National Democratic Congress (NDC) has evolved into more of an umbrella party. Presidents from all around the country have served the country from the party. The New Patriotic Party (NPP) remains less of an umbrella party, which is of some concern. However, there are reasons to be hopeful, we have had successful transitions since 1992, that is not a long tradition but seeds of democracy has taken place. Obviously, governmental officials make private gains from corruption, but are there any incentives for them to make procedures open and transparent? - The official has little incentive to be transparent. However, there are other levers Ghana can rely on, the oversight institutions. The office of auditor general, the parliament, civil society organizations, development partners (the donors) all play an important role. The officials must be pressured to review laws and to strengthen the auditor general. Can Ghana learn anything from its history of mining management? - The answer is yes. The mining sector has been considerably successful. In 1986 Ghana enacted a Minerals and Mining law and since then the mining industry has contributed to economic growth. There is no proof that these variables are linked, but it is likely that this is the case. However, there have been some negative experiences too. For instance, the industry has caused environmental degradation. Furthermore, discretionary elements of the mining law have lead to abuse and reduced the economic contribution the government. A lesson for the oil industry is to reduce discretion. 42


In my essay I have limited my discussions to governmental strategies to avoid the resource curse, what is the role of the international community? - The international community has an incentive to narrow the corruption space. Taxpayers in donor countries don’t want to lose money to corrupt politicians, so there is an interest from their side. Through The Paris Declaration and Accra Agenda for Action donors have made a commitment to work with governments to improve the quality of aid and its impact on development. Aid donors and the international community could do more to reduce corruption. Do you see any faults with Ghana’s oil Petroleum Revenue Management Act which was established in 2011? For

Naana Quashie is responsible for the co-ordination of training programmes at Idilmat. She holds a Diploma in Bilingual Secretaryship at the Alliance Francaise, Accra, Ghana and a certificate in International Public Relations at the Westminster University. Her vision is to be a part in capacity development in developing countries.98 How do you experience corruption in Ghana? How does it affect you as an individual? - Corruption in Ghana I would say has 98

International Development Institute for Leadership, Management and Technology (Idilmat), 'Who we are: Naana Quashie' [web page] (2013) <http://www.idilmat.com/WhoWeAre/KeyStaff.aspx>, accessed 12 Jan. 2013.

instance, are there any loop holes which could enable corruption? - Yes, there are some loop-holes. One is the allocation of oil blocks. The other is that the investment authority of the Stabilization Fund and the Heritage Fund is not independent. These give opportunities for corruption. Do you personally think the oil will be a blessing or a curse for Ghana? - Overall, I think oil will become more of a blessing than a curse, but a very qualified blessing. I think corruption is already so ingrained in society, therefore I foresee corruption to continue, especially when oil flows in. Laws are good, but not optimal. I don’t expect chaos, but I do not believe that the oil industry will live up to its full potential.

been in existence since independence as history puts it. My personal experience with corruption in Ghana has been mainly observing clear abuse of power and funds in corporate businesses in the country. This clearly affects one's career performance as there is an increasingly high rate of bias within the ranks. How can the corruption space be narrowed in Ghana? - In Ghana, in my opinion sensitization workshops or seminars on relevant yet broad topics such as 'Meet the anti-bribery act' or 'Protect your company and community - Make sure you're covered' should be organised within the activist groups, corporate institutions and government institutions alike to build capacity from the 'grassroots' to the 'elite' alike. 43


- Recent elections have been very close, but transitions have been peaceful. Is there an increased chance of political rivalry and corruption in Ghana with oil revenues flowing into the government budget? And is there a chance for increased ethnic tension? - Political rivalry in my opinion will remain an issue in Ghana but I sincerely do not envisage this being a negative catalyst to the growth of the oil revenue in Ghana if managed efficiently. Yes, there is a chance of increase in ethnic tension. Ethnic tension in Ghana mostly arises from personal views of the leadership within chieftaincy affairs and methods of resolving disputes. If the government pays more attention to minority issues and makes general recommendations on such minority-related issues like education, use of language, participation in public

Fabrice Fifonsi (MA SociologyAnthropology, University of AbomeyCalavi in Benin, 35 years old and over 8 years experienced in the field of governance and development) is currently working with the Parliamentary Centre serving as Program Officer at the APNAC Secretariat (described earlier in point 1.). He is citizen of Benin Republic (West Africa) and bilingual (French & English). Presently living in Ghana for about 4 years now and is interested in not only the field of good governance but also with the ambition to become a specialist belonging to a team

affairs, and the dangers of extremism, it is certain there will be some level of decrease in ethnic tension. The best means to prevent conflict is to integrate diversity. Since most societies are multi-ethnic, the Leaders must find ways of accommodating minority interests in a way that neither encourages violence, on one extreme or forceful assimilation on the other. The Leaders must ensure respect for standards to guarantee minority rights protection and encourage dialogue between communities, to create opportunities for minority language use, to protect cultural identity, and to encourage minority participation in public affairs. Do you personally think the oil will be a blessing or a curse for Ghana? - In my view it will be a blessing for Ghana if methods pertaining to management is properly instituted.

willing to perform changes for a better world. How does your organization (APNAC) work to narrow the corruption space? What impact has the organization made so far? - The African Parliamentariansâ&#x20AC;&#x2122; Network Against Corruption (APNAC, www.apnacafrica.org), for the past three (4) years, since 2009, has been operating under the Parliamentary Centreâ&#x20AC;&#x2122;s (www.parlcentafrica.org) African Parliamentary Strengthening Program (APSP) for Budget Oversight. The APSP is a 5-year project funded by CIDA and it involves 7 African Countries (Benin, Ghana, Kenya, Senegal, Tanzania, Uganda and Zambia). The Network counts today more than twenty countries 44


(National Chapters) across Africa. The Secretariat supports mainly National Chapters in their works through Members Capacity-Building strategies and various legal instruments improvement and enforcement (review mechanisms, bill drafting, etc). The example of Ghana in the Public Procurement Act review process (Law reviewed with inputs from members and specialists, weaknesses identified in the law, communiqué issued, etc). In the case of the APNAC-Zambia National Chapter, the focus was on the development of a Code of and Ethics & Conducts and a Handbook against Corruption for Parliamentarians. Members had publically pledged to affirm their commitment to the fight against corruption. With the APNACBenin Chapter, in order to reduce the corruption and its effects on the populations and the nation’s development, Members initiated the drafting of 2 Bills on the Public-Private-Partnership after series of capacity-building sessions. The Bills were meant to reorganize the legal framework of Requisition power of the Executive and also the Build-OperateTransfer financing mechanisms for “big public works” (infrastructures, etc). These, we hope, will influence the mentality of the people in dealing with various corruption matters, as we acknowledge that “impact” on the governance sector is a longer term results especially when it comes to human beings as a variable and a complex actor in the process. Your organization (APNAC) is operating in several African Countries. Are you seeing a pattern in which countries with more natural resources tend to be more corrupt? - In the case of the Ugandan Oil (among the 7 countries in which we are involved)

there has been a lot of allegations and accusations without any genuine evidence of Corruption. Media houses have been reporting cases about Ministries and Public Servants been involved in several acts of corruption in the domain of Oil and Gas. In the case of Nigeria and others, maybe I will advise to read as well (if it is not yet done) the book of Nicholas Shaxson on “Poisoned Wells”. It speaks a lot and brings more insights about the same issue of corruption. For such cases, we still need to look for evidence in the situation where the “modifiers elements” are truly and genuinely from the said natural resource. They may be other factors, but at rest, the verity is there that it is a nebulous to think for development. Even in many countries in Africa where there is no or little (negligible) natural resources such as oil, gas, cotton, or others (exportable) in the same range to grow the economy of the country, it is a fact that rulers, decisionmakers, leaders are more keen to serve themselves (selfish) instead. Recent elections have been very close, but transitions have been peaceful. Is there an increased chance of political rivalry in Ghana with Oil revenues flowing into the budget? And is there a chance for increased ethnic tension in the Country? Risk for corruption? - I will start by saying “risk for corruption” cannot be avoid in this current context where laws are weak with lots of windows anybody can exploit to benefit himself. In Ghana, efforts are ongoing to strengthen the institutions with laws review mechanisms and some attempts to employ or post the right person at the right place; but it is never enough to be attentive. 45


From the civil society perspective, there are efforts to introduce complementary accounts mechanisms with 13 CSOs Coalition or Group in the oil and gas sector. And I believe this move is with the view to put in place a check & balance instrument to make the rulers more accountable for the people. This may reduce significantly what we can call “political rivalry” in Ghana, since various stakeholders are taking part of the consultation process with many dialogues going through. And in fact, the known patriotism of Ghanaians and the strong will to build a sturdy and stable Nation are some parameters we count on to minimize any “ethnic tension” in the country. It may happen if and when the people of Ghana get to realize that they have been betrayed by a certain particular ruling tribe or group of persons. But again, I believe that a regional representative balance is also guiding the political strategy of the current “man of the situation”, winner of the recent elections who is somehow representing new hope despite the fact that the management of oil revenues flowing are always questionable where people

don’t see any direct impact or change in their daily life with the basic needs basket. Do you personally think oil will be a blessing or a curse for Ghana? Why? - It is all depends on the real ambitions of the one in Power and the counter-balance Institutions (Parliament, Media people, CSO groups, etc). Obviously, it should be a blessing or at least an open gate for HOPE. But we know that bad management to suit particular groups of people can change dangerously the game which may become a curse for Ghana and will destroy the whole pride of the West-Africa region and the entire continent. We saw in many countries, this became war territories and other conflict zones because of the same oil bad management, awful redistribution of oil revenue, lack of transparency at the discretion of the leaders, and then no accountability. But again, so far, rules, laws mechanisms, accountability, integrity of actors, transparency in the entire process should guide so that at the end of the day, we read more blessings than something else.

6.2 SCHOLARSHIP FROM OLOF PALME MEMORIAL FUND In order to participate in the course “Towards Narrowing the Corruption Space” at the “International Development Institute for Leadership, Management and Technology” (Idilmat) I applied for a scholarship from the “Olof Palme Memorial Fund for International Understanding and Common Security”. I was very lucky to receive the 10 000 SEK scholarship! For more information about the Palme scholarship visit: http://www.palmefonden.se/index.php?sid=2&pid=9 To access my personal page visit: http://www.palmefonden.se/index.php? sid=2&pid=60&sp_id=10&sc_id=3375

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6.3

IDILMAT CERTIFICATE

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6.4 PICTURES FROM GHANA 1. Me outside a petrol station in central Accra. The price of oil has just gone up due to the removal of the subsidy on oil. 2. Group photo at Idilmat. 3. Since the discovery of oil there has been a massive construction boom in Accra. 4. Me and Fabrice Fifousi (Benin) from African Parliaments Network Against Corruption (APNAC). 5. Instructor Ron Quist. 6. The infrastructure is very poor; hopefully oil revenue will be used for road-building. 7. Me outside the Idilmat building. 8. Cape Coast. 9. Me at my grandmotherâ&#x20AC;&#x2122;s cocoa farm in Agona Duakwa, Ghana. Will the agricultural sector, and especially the tradable cocoa industry, be neglected for oil? 10. Will future generations also benefit from oil via savings in the Heritage Fund? 11. Will these cocoa farmers be affected by the Dutch disease? 12. How will the fishing industry be affected by the oil discovery?

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