World Bank Reassesses Chad Pipeline Deal
© 2000 The Washington Post Company
December 5, 2000
By Douglas Farah and David B. Ottaway
NDJAMENA, Chad -- In June, when the World Bank agreed to back a controversial, 650-mile oil pipeline from this impoverished desert nation to Africa's Atlantic coast, it declared that it had found a way to prevent corrupt officials from stealing the country's new wealth.
Criticized for years over projects in developing nations that failed to return benefits to their populations, bank officials knew that the $3.7 billion pipeline--the most expensive infrastructure project now underway in Africa--would be closely scrutinized. So they imposed strict accounting standards and insisted on guarantees from the Chadian government to ensure that its oil profits--predicted to total as much as $100 million a year--would be spent to improve public health, education and vital infrastructure here, rather than disappearing into secret bank accounts or funding weapons purchases by those in power.
World Bank officials said that their "Chadian model" would prove they could overcome the African nation's endemic corruption and that it might be applied to other corruption-prone oil-producing lands.
So when Chadian President Idriss Deby declared last week that he had used $4.5 million of the government's first oil receipts to buy weapons instead of bolstering social programs, he sent a jolt through the bank. While the amount diverted was relatively small, World Bank officials, diplomats and Chadian advocacy groups expressed shock at its brazenness and concern that it might signal how Deby might deal with future oil revenue.
Robert Calderisi, the World Bank director for Chad and several other central African countries, said he was "sobered and disappointed" by Deby's action, which he called an "object lesson on the need for more transparency." Calderisi warned that the bank and other institutions might disqualify Chad from a program for immediate debt relief that stood to save the country about $12 million a year. He also warned that the bank might simply bar any further projects in Chad, a nation with few natural resources where more than two-thirds of the population lives on an average of less than $250 a year.
"We cannot defend new projects in Chad if they violate agreements with us," Calderisi said. "People are going to be very, very skeptical and reluctant to help Chad if they misuse the money."
The arms purchases "should be a warning to show that when the oil money flows, the World Bank won't have any way to know what Deby will do with it," said Delphine K. Djiraibe, president of the Chadian Association for the Promotion and Defense of Human Rights, which fought the pipeline for years. "Deby feels very powerful and that he has nothing to worry about," she said. While the World Bank is financing only 3 percent of the pipeline project, its participation was crucial in persuading a consortium of three oil companies, led by Exxon Mobil Corp., to invest in it. Southern Chad's oil fields, which hold an estimated 1 billion barrels or more of crude, were discovered more than 30 years ago but were never developed--partly because of the pipeline's cost and partly because of Chadian history.
Even by the standards of Africa's troubled post-colonial decades, Chad has been a particularly bad case. Since its formal independence from France in 1960, it has remained dependent on aid and pervasively corrupt, scourged by 40 years of almost uninterrupted civil war and repressive dictatorships. About 80 percent of Chadians survive by laboring to grow their own food, often in near desert conditions. Less than three in 10 can read and write. Even Ndjamena, the capital, has only a few paved roads and lacks regular electricity and reliable communications with the outside world. Citing Chad's endemic violence and corruption, human rights and development organizations pressed the World Bank to shun the pipeline, which is thought likely to generate $2 billion to $3 billion for the government over 25 years. These groups said the money would only escalate armed power struggles and be diverted by authoritarian rulers to buy guns or to fatten their bank accounts.
To counter those fears, the World Bank demanded guarantees from Deby on how the oil revenue would be spent. In a press release after it approved the project, the bank called the agreement with Deby's government an "unprecedented framework to transform oil wealth into direct benefits for the poor, the vulnerable and the environment."
Deby, a general who seized power in a coup in 1990, accepted two independent boards--one Chadian and the other a World Bank-supervised international body--to audit the spending of all oil revenue. He also agreed that 10 percent of the receipts would be put into a trust account abroad for future generations of citizens.
Deby agreed further to put into law a commitment to spend 80 percent of the oil revenue on health, education, infrastructure and rural development programs--a step that would give Chad its first opportunity to modernize. In May, the government received its first revenue from the project, a $25 million bonus paid by the oil consortium's junior partners, San Francisco-based Chevron and Petronas of Malaysia. Deby publicly promised full disclosure on how the money would be spent even though the formal monitoring mechanisms were not yet in place.
Then, according to government sources, diplomats and World Bank officials, the money began disappearing, just as one of the nation's endless rebellions in the northern Tibesti Mountains was heating up. Despite repeated inquiries from the World Bank and local advocacy groups, Deby did not disclose until last week that he had spent $4.5 million of the initial payment on weapons. "It is patently obvious that without security there can be no development programs," Deby said in defending the purchases. He said the bank knew about the purchases and expressed no disapproval, a statement the World Bank vehemently denied.
"The Chadian government did not provide us with relevant information until after the fact," said Richard Uku, head of the bank's external affairs unit for Africa.
To reassure the World Bank, the Chadian government has told bank officials that it has frozen spending of the rest of the money until the Oil Revenues Control and Monitoring Board begins functioning. It has also promised a full accounting of how it spent the first $15 million at a special session of parliament later this week.
Ottaway reported from Washington.