Slow progress on oil policy

Ghana needs to do more to ensure that revenue from oil production, due to start later in the year, successfully reduces poverty and avoids a “resource curse”, according to civil society leaders worried that safeguards are either inadequate or absent.

Oil revenue is expected to add up to US$1 billion per year to the country’s economy. Some 28 percent of Ghanaians currently live on less than US$1.25 per day, according to the World Bank.

The government on 20 January released a draft oil and gas regulation bill for consultation, which requires oil companies to consider independent Ghanaian operators when awarding contracts, and calls for the creation of an agency to monitor oil revenue spending.

But staff at the non-profit Integrated Social Development Centre (ISODEC) say while the draft bill has its strengths, it does not spell out poverty-reduction measures; they worry that time is running out to revise the document.

“The legal and regulatory framework is absent, the policy is yet to be finalized, so contracts are hanging, nobody is monitoring and it’s looking like a perfect setting before an oil curse strikes,” ISODEC campaign coordinator Steve Manteaw told IRIN.

“We need to move quickly to finalize the legal and policy frameworks before the industry becomes active in nine months.”

Resource curse

A strong body of evidence on the "resource curse" indicates that developing countries that produce oil have a higher risk of corruption, conflict and a rise in poverty than oil-free states.

Countries whose natural resource exports are equal to at least one-third of their gross domestic product are 22 percent more likely to see conflict according to Oxford University Economics Professor, Paul Collier.

Between 1960 and 1990 developing countries without natural resources to exploit developed two to three times faster than resource-rich ones says the CGD in a 2009 report.

Todd Moss, senior fellow at US think-tank Center for Global Development (CGD) , says that though Ghana has not yet begun to see oil revenues, the government is “already changing the political dynamics and leading to some less-than-responsible economic policies.” He pointed to the government’s 14-percent 2009 fiscal deficit up from 5 percent in 2006.

But Ghana could still avoid the resource curse, says CGD, if the government reinforces peace and stability, democratic institutions, governance, corruption controls, macro-economic management systems and poverty-reduction measures, says CGD.

Pro-poor

Deputy Energy Minister Emmanuel Kofi Buah told IRIN the government will set up local development funds to build up basic public services in oil-producing areas.

The government is committed to using oil revenues to push industrialization and poverty reduction, he said.

Since the discovery of oil Ghana’s government has issued several statements that it would set up a strong legal framework so the country could benefit from oil and avoid the mistakes of others.

See timeline of recent unrest in Nigeria's oil-rich Niger Delta region

But local communities in oil exploration areas say they have not yet been consulted on the government's plans.

For some, oil exploration is already posing a problem. Awulae Adjahe Anor III, traditional chief of Nzema Western region, told IRIN: “Our fishermen can no longer fish where they used to because of the oil rigs and that is why we need a policy document that spells out clearly how we will benefit. We are tired of the rhetoric.”

The Alaska model

Ghana should take an innovative approach to making oil work for development by looking to Alaska, said CGD’s Moss.

Alaska set up a permanent fund dividend programme in 1982 which gave cash transfers to state residents to give them an interest in protecting oil revenues. On average six percent of households’ income comes from this fund, says CGD.

“When individuals receive cash directly, they immediately see the benefits; plus it creates strong incentives to hold the government accountable for getting a good deal from the oil companies and not wasting the funds,” Moss told IRIN.

The scheme cannot eradicate fraud altogether, he said. “But it will certainly be much better than the leakage under the current spending system.”

The idea is being considered in Bolivia, Papua New Guinea, Libya and even Nigeria, said Moss. “Ghana could help to show them the way.”

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