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21aug06


Norway breaking the 'oil curse'.


Norway is using its oil expertise to help similarly oil-rich, yet often poor and corrupt states that want to pass on more of their vast revenues to their citizens.

In theory petroleum-based economies are well placed to support higher standards of living than those countries with less lucrative resources. The reality is quite different. Most such economies instead serve to enrich small elites while engendering widespread corruption, poverty and conflict.

Oil-rich countries such as Nigeria, Chad and Angola have lower rankings on the United Nation's Human Development Index, analyzing some indicators of development and life quality, than do countries with virtually no natural resources such as South Korea, Japan and, with its large population, China.

Chad received large development loans from the World Bank on condition that oil revenues would be used to combat poverty. Last autumn Chad announced that it would spend the money on defence and weapons instead, prompting the World Bank to temporarily cease payments in January 2006.

In contrast Norway, which began producing oil in 1971, has been remarkably successful at harnessing profits to help build one of the world's wealthiest and most equitable societies.

"We have possibly the most successful petroleum sector in the world," Norway's Development Minister Erik Solheim told IPS.

The Norwegian model has attracted particular attention for its 'petroleum fund', which sets aside a portion of profits from petroleum activities for future generations. At the end of the first quarter of 2006, the fund was valued at 236 billion dollars.

The expertise Norway has gained has been used to support oil industries in developing countries since the early eighties. Norway is the largest bilateral donor in such assistance.

The efforts centre on the Oil for Development programme launched in September 2005. Whereas technical and institutional questions received most attention in earlier years, the new drive enhances the focus on good governance, transparency, anti-corruption efforts and environmental challenges.

"There are few donor countries involved in oil assistance, possibly because prerequisites are both the existence of an oil sector, experience, and enough resources," project manager Leiv Lunde told IPS. "But countries like Canada, the United Kingdom, the Netherlands and Australia are becoming more active."

Lunde hopes that Norway can cooperate on oil governance challenges with countries that have significant petroleum sectors.

Norway's own institutional model distinguishes clearly between key petroleum sector management responsibilities, from political, regulatory and commercial, to combating corruption and aid transparency, political independence and effectiveness.

In most countries Norway has worked with there has been little or no such distinction, with all encompassing state oil companies blending regulatory and commercial functions.

Establishing transparency and clear distinctions between key roles is a priority for Norway. However, such strongly centralised institutional arrangements have proven resistant to change in many countries by those that profit from the current arrangements..

A December 2005 report commissioned by the Norwegian Agency for Development (NORAD) states that, based on the examples of Angola and Bangladesh, "major institutional changes are almost impossible to implement in countries with an established petroleum sector where major revenues are being generated."

Calling such attempts "na´ve", the report recommends that better institutional models be in place before Norway agrees to get involved via the Oil for Development programme.

"Good governance is extremely important," Solheim said. "It is at the core of the entire Oil for Development' programme. It is not a technical question, but a question of how to establish institutions, and how to establish a culture."

In most countries some sectors want to fight corruption, while others are less eager, he said. "I expect this to be a continuous struggle for the duration of the programme. We are not providing this assistance because we believe it is the easiest thing we can do, it may be the most difficult, but it is probably also the most important."

The World Bank wants to cooperate with Norway.

According to the NORAD website, formal agreement with the World Bank on a programme and trust fund covering petroleum sector governance, revenue management, environmental challenges and community development approaches is expected within the next few weeks.

"The World Bank has many more contacts than Norway in many countries. Such cooperation can also be useful when providing assistance in areas where some might think there are hidden agendas protecting Norwegian self-interest," Solheim said.

In May 2006 the Financial Times newspaper in Britain printed an article referring to misgivings by anonymous sources in the World Bank and developing countries that Norway will use the 'Oil for Development' programme to gain sensitive information and a competitive advantage in oil markets.

Solheim insists that Norway will be open in its dealings through the programme.

"There are clearly many areas or countries or situations where people see a conflict of interest. The only way to handle that is complete transparency. Governments, NGOs, the media and anyone who wants to look over our shoulders will be welcome to do so," he said.

Norway is also in discussions with the United Nations Development Programme (UNDP) to provide assistance that complements cooperation with the World Bank, according to Lunde.

"The aim is activities that focus more on political governance, where UNDP is an important player, addressing overall societal sustainability, and looking at the roles of actors such as parliament and civil society, " Lunde said.

Norway is currently engaged in petroleum assistance to more than 20 countries. The largest recipients of Norwegian oil assistance during the past two years have been Angola, Nigeria, Mozambique, Vietnam and Timor-Leste (East Timor).

Solheim has been touring Latin America to strengthen ties between Norway and the region, including possibly making Bolivia one of the latest beneficiaries of the Oil for Development programme.

"Our current focus on Latin America is due to the democratic revolution towards the left we are now seeing in country after country in the region," Solheim said. "We want to support these democratic revolutions because we believe they will enhance development and bring marginalised power structures into government."

[Source: By Tarjei Kidd Olsen, IPS, Oslo, Nor, 21Aug06]

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