Watchdog Calls for Transparency As Oil Boom Takes Off
3 Aug 2006
Madagascar is becoming the next staging post of Africa's energy boom as oil conglomerates descend on the poverty stricken island to contend for a share of the recent discovery, but a global watchdog cautions that the windfall could challenge the island's fledgling democracy.
At current prices, industry estimates were that the oil could translate into annual revenue of one billion dollars for the Indian Ocean island. Energy analysts are predicting an oil price of US$100 in the short term, caused by a combination of geopolitical tensions, diminishing world reserves and high demand that has sent oil prices soaring.
Gavin Hayman, spokesperson for the anti-corruption watchdog Global Witness, warned that oil revenue did not automatically lead to poverty alleviation.
"President Marc Ravalomanana has taken a strong public stand against corruption, but the problem remains with members of the government. Our fear is that oil revenues will be squandered easily unless the international community steps in to guarantee transparency and accountability of oil revenues."
The threat of a privileged elite benefiting from huge oil wealth, while the majority remained excluded has been played out in other oil-producing nations. Oil revenue in Angola, the continent's second largest producer, has not benefited the poor. Britain's Department for International Development noted that "although growing revenues from oil and diamonds have boosted the country's economy, extreme poverty is still a daily reality for 68 percent of Angolans".
Hayman said some of the smaller oil companies rushing to secure concessions in Madagascar had been "soiled by corruption and bribery in Africa and Asia in the past. Government officials in Madagascar may be tempted into murky deals that may never benefit the millions of poor people."
Among the global oil giants scrambling for a share of Madagascar's oil resources are US-based Exxon-Mobil and Chevron Texaco; British-based Madagascar Oil and British Petroleum; Total, a French company; Royal Dutch Shell, Stat-Oil of Norway, China's National Offshore Oil Corporation and South Korea's SK Corporation.
Initial projections were that Madagascar could produce 60,000 barrels per day in three to four years, which would quickly make the oil industry the main contributor to the country's gross domestic product (GDP). In 2003 Madagascar's GDP was $5.5 billion dollars, or $240 per person annually.
Hayman said it was imperative that Madagascar join the international Extractive Industries Transparency Initiative, a forum of oil producers and consumers seeking to promote accountability in oil revenues.
Under the transparency initiative, governments, civil society and oil producers are required to make public details of financial deals, exploration rights and profits.
"Such open records enable civil society organisations to play their watchdog roles in judging if state revenue is indeed spent according to developmental needs. Madagascar needs to put such accountability measures in place before it can begin full production," said Hayman.
The promise of billions of petrodollars for a country the World Bank ranks at 146 out of the world's 177 poorest countries could place immense pressure on the fragile democracy.
In 2001 Madagascar was on the cusp of a civil war after the former president Didier Ratsiraka refused to accept Ravalomanana's presidential victory. The island was cut in half, with two capitals, two governments and a divided army. It was not until the following year that the crisis was defused, after Ratsiraka fled to France.
The next presidential polls are scheduled for December this year. Among the 10 declared candidates so far is Phillipe Tsiranana, son of the country's first post-colonial president. Talks between Ravalomanana and opposition parties to defuse rising political tensions ahead of the December elections fizzled out in June, and Ravalomanana has yet to announce whether he will contest the poll.
The government has already begun auctioning oil-drilling rights. Hugues Rajaoson, head of the energy ministry, told the media recently that "the potential for production is very, very high. The sector could contribute up to 15 percent of GDP within five years." Official estimates put offshore reserves as high as five billion barrels of oil, but the exact size remains unknown.
According to the World Food Programme (WFP), 70 percent of the population live on less than a dollar a day and the country has to contend with regular occurrences of natural disasters such as drought, cyclones and floods. WFP information officer Patricia Lucas said 300,000 people could need food aid before the end of the year because of a drought.
This week, the International Monetary Fund injected more than $80 million into the country's Poverty Reduction and Growth Facility, the fund's concessional facility for debt support to low-income countries. Under the facility, beneficiaries can repay the loan over 10 years at an interest rate of 0.5 percent.