Dustin N. Sharp, Requiem for a Pipedream: Oil, the World Bank, and the Need for Human Rights Assessments

• Citation: Vol. 25 No. 1
• Publication year: 2010

REQUIEM FOR A PIPEDREAM: OIL, THE WORLD BANK, AND THE NEED FOR HUMAN RIGHTS ASSESSMENTS

Dustin N. Sharp*

INTRODUCTION

The revenues associated with oil and other extractive industries projects in sub-Saharan Africa—particularly as they are contrasted with the living conditions of those for whom these revenues could provide the greatest benefit—raise the hope of using natural resources to achieve significant poverty alleviation. From the impoverished villages of the Niger Delta to south

Sudan, however, oil wealth has rarely led to widespread poverty alleviation.1

More often than not, the revenues that should in theory be a great boon to development are in practice associated with disastrous human rights fallout as living standards actually decrease and governance indicators worsen, a phenomenon known as the “resource curse.”2

Because the resource curse transcends differences between otherwise dissimilar oil exporting states, its effects and patterns are eminently predictable when new oil is discovered in a poor country.3 However, whether those foreseeable effects can actually be prevented or at least mitigated through

policy interventions is another question. In the late 1990s, the World Bank Group (“World Banks” or “Bank”) served as the architect for a series of legal and policy interventions intended to beat the resource curse by ensuring that the newfound oil wealth of the central African state of Chad be channeled into poverty alleviation efforts.4 The Chadian experiment in general, and its policy

intervention innovations in particular, were held up as models for other extractive industries projects around the world.5

* Assistant Professor, Joan B. Kroc School of Peace Studies, University of San Diego. J.D., Harvard Law School. Francophone West Africa Researcher, Human Rights Watch, 2006–2008.

1. See generally Jeffrey Sachs & Andrew Warner, Natural Resource Abundance and Economic Growth

   (Harvard Inst. for Int’l Dev., Development Discussion Paper No. 517a, 1995) (discussing how the economies of countries with abundant natural resources tend to have low growth rates).

2. See Emeka Duruigbo, The World Bank, Multinational Oil Corporations, and the Resource Curse in

   Africa, 26 U. PA. J. INT’L ECON. L. 1, 2 (2005).

3. See id. (indicating that the discovery of vast amounts of petroleum will have a negative effect on the country).

4. See id. at 39–40.

5. See INT’L CRISIS GRP., CHAD: ESCAPING FROM THE OIL TRAP, AFRICA BRIEFING NO. 55 1 (2009).

Ten years after entering the project in 2000, the World Bank has pulled out of the Chad-Cameroon pipeline project, and its efforts to ensure that oil wealth be translated into poverty reduction are considered to be a failure.6 The resource curse, it would seem, has struck yet again. Notwithstanding the

predictable collapse of the project, the World Bank has suggested it will continue its involvement in extractive industries initiatives in the future, taking the “lessons” of the Chad experience with it.7 However, it is far from clear how exactly it intends to operationalize the key lessons of the Chadian experience in the future. Whether projects can be engineered to overcome the resource curse is, it appears, still an open question.

This Article analyzes the various “lessons learned” that have been articulated in the wake of the Chad-Cameroon pipeline project’s collapse, and argues that many of them miss the mark. Unless the World Bank develops a more cohesive human rights policy with respect to lending decisions and project implementation, the collapse of the Chad-Cameroon pipeline project is an experience that could well repeat itself in the future. A step toward better human rights policy at the World Bank would involve conducting human rights assessments for any potential project, much as the World Bank currently

undertakes social and environmental impact assessments.8 While human rights

assessments cannot prevent the resource curse, they would better steer the World Bank and other development institutions towards those extractive projects where the chances of mitigating the resource curse are the highest.

This Article proceeds in three parts. In Part I, this Article examines the phenomenon of the “resource curse” as it has been developed in the literature in terms of potential causes and effects. It pays particular attention to the resource curse as it has played out in the context of oil extraction in sub- Saharan Africa. Older oil exporters appear to confirm patterns associated with the resource curse, while newer ones raise serious and troubling questions. This Article argues that the region is of increasingly vital importance to world oil supplies, making the question of preventing or mitigating the resource curse more pertinent than ever.

6 Id. at 16, 18.

1. Management Statement on the Lesson from Evaluation of the Chad-Cameroon Oil Development and Pipeline Program, THE WORLD BANK (Nov. 23, 2009), http://web.worldbank.org/WBSITE/EXTERNAL/ COUNTRIES/AFRICAEXT/CHADEXTN/0,,contentMDK:22398488~menuPK:50003484~pagePK:2865066~

   piPK:2865079~theSitePK:349862,00.html.

2. Alex Wilks, At Issue: World Bank Social and Environmental Policies: Abandoning Responsibility?, BRETTON WOODS PROJECT (Sept. 2003), http://www.brettonwoodsproject.org/doc/env/safeguards.PDF.

   In Part II, this Article examines the case of one of sub-Saharan Africa’s newer oil exporters, Chad, with a particular focus on the World Bank’s attempts to beat the resource curse and ensure that newfound oil revenues be used to fuel poverty alleviation. With the recent collapse of the World Bank’s efforts in Chad, this Article places emphasis on dissecting the various lessons learned that have been articulated, and analyzing the proposed modifications to the policy interventions that have been implemented in the course of the Chad- Cameroon Pipeline project. Whatever lessons-learned narrative ultimately carries forward will have great relevance to future extractive industries initiatives across sub-Saharan Africa.

   
   

   In Part III, this Article lays out the heart of its thesis, arguing that the Bank’s continued ambivalence toward greater integration of human rights principles into its assessment and programming is at least partially responsible for the failure of the Chad-Cameroon Pipeline project. Going forward, conducting human rights assessments would be one tool to force the Bank to better grapple with factors that have ultimately doomed the Chad-Cameroon pipeline project to failure, and for predicting where extractive industries projects stand the best chance of being channeled into poverty alleviation.

   
   

   1. OIL AND THE RESOURCE CURSE IN SUB-SAHARAN AFRICA

      
      

      It has long been observed that countries heavily dependent on the export of natural resources perform poorly when it comes to a wide range of social, political, and economic indicators, and that this performance often lags behind their less dependent counterparts.9 The negative relationship between

      endowment with natural resources on the one hand and social and economic development on the other is often referred to as the “resource curse” or “paradox of plenty.”10

      
      

      The resource curse is not a modern phenomenon, nor are its effects limited to a particular region.11 Indeed, one of the most striking features of the resource curse phenomenon is that countries that have little else in common from an ethnic, geographic, cultural, or political standpoint seem to face a common and counterintuitive dilemma: the natural resource wealth that should

      
      

3. See generally Sachs & Warner, supra note 1 (providing a groundbreaking study reviewing the history of the phenomenon).

4. See Duruigbo, supra note 2, at 5–6. See also Michael Ross, The Political Economy of the Resource

   Curse, 51 WORLD POL. 297, 300–05 (1999) (providing a review of the literature on the resource curse).

5. See Duruigbo, supra note 2, at 6 (noting examples throughout history of the resource curse).

   
   

   be a blessing does not bring with it social and economic development.12 While the existence of the resource curse has been disputed,13 the empirical evidence supporting the phenomenon appears to be strong.14

   
   

   Though not limited to oil-exporting countries, petro-states provide a particularly vivid illustration of the paradox of plenty. In theory, oil revenues flowing into a desperately poor country should be able to provide a sorely needed boost, bringing in investors and much needed capital.15 In practice, it is

   often the case that oil not only fails to alleviate poverty, but actually tends to worsen it.16 Between 1965 and 1998, for example, oil-exporting countries grew more slowly than their non-oil-rich counterparts, experiencing an average decrease in their per capita GNP of 1.3% per year, while their non-oil counterparts grew by an average of 2.2% per year.17 Oil-exporting countries tend to have higher levels of poverty, decreased spending on social sectors such as health and education,18 and increased military spending.19

   
   

   The resource curse is a global phenomenon, but there are reasons to be especially concerned about its effects in sub-Saharan Africa. Of the thirty lowest countries on the Human Development Index, only two are located outside of sub-Saharan Africa.20 Over half of all sub-Saharan Africans continue to live on less than one dollar per day.21 Given the endemic poverty,

   
   

6. Id. at 8.

7. See Graham Davis, Learning to Love the Dutch Disease: Evidence from Mineral Economies, 23 WORLD DEV. 1765, 1776 (1995) (arguing that the resource curse is not a widespread and general

   phenomenon).

8. See Sachs & Warner, supra note 1 (analyzing ninety-seven countries over a nineteen-year period, and concluding that states with a high ratio of natural resource exports had abnormally slow growth rates even controlling for a wide range of variables); Terry Lynne Karl, Oil-Led Development: Social, Political, and Economic Consequences 7–10 (Ctr. on Democracy, Dev., and the Rule of Law, Stanford Univ., Working

   Paper No. 80, 2007) (reviewing data indicating that oil exporting countries grow more slowly than their non-...