World Bank responds to criticism of the Chap pipeline project

Marco Mantovanelli, Africa region, World Bank answers to critics of Chad pipeline project;

"In a number of respects, Daphne Wysham's article "World Bank OK with Blood for Oil" is both misleading and inconsistent with the facts.

First, the original agreement between the World Bank and Chad comprised a complex formula that essentially required that about 85 percent of the royalties and dividends be devoted to defined poverty reduction programs, to communities living near the production field and to future generations. As a number of international NGOs pointed out, the agreement didn't include the taxes that oil companies would pay the Chadian government out of their profits—which in the current oil-price environment, turned out to be substantial.

This gap was addressed in the new agreement reached with the Chadians last summer. Under that accord, the government of Chad agreed to devote 70 percent of all revenues, irrespective of the source—including the taxes that weren't included in the original agreement—to poverty reduction programs, plus some badly needed work to strengthen governance. By including the taxes, the new agreement directs more revenues to development this year than would have occurred under the old agreement. The Chadian national assembly has just ratified a 2007 budget in which 70 percent of all revenues are devoted to domestic programs that advance economic development, reduce poverty and improve governance.

Second, the World Bank decided last year to suspend its portfolio and any new lending in Chad after the Government enacted legislation which, if carried out, would have undermined the poverty focus of the original agreement by allowing much higher amounts of Chad's oil revenues to be allocated, for example, to military and security activites. Moreover, to make sure that no money was actually spent in violation of that agreement, the Bank froze the royalties and dividends that were accumulating in a London escrow account established at the outset of the project. Those monies weren't made available to Chad until the government agreed to respect the poverty reduction focus of the original agreement..."

Daphne Wysham responds;

"Mantovanelli claims that “an Independent Advisory Group (IAG) regularly reviews the revenue management program [for the Chad-Cameroon pipeline] and has never found evidence of monies allocated for poverty reduction—either under the original agreement or the new formula—being used for military purposes.”

Again his assertion is neither credible nor verifiable. If the IMF cannot track expenses in Chad, how then can a small team of advisory group members undertake the sort of forensic accounting to determine what the budget of Chad actually contains? No one can get a copy of the budget, let alone records of expenditures.

Furthermore, the report issued following the IAG’s most recent visit to Chad last year was damning, showing that all well-laid plans made by the Bank were either failing or lagging, including the lack of a “regional development plan” for the oil-producing zone of Doba, which was supposed to be place in 2000, prior to Bank approval of the loan for the pipeline..."

Related;
Chad: 2006 Article IV Consultation - Staff Report