NGOs Keeping an Eye on the Money

Angola's missing $4 billion shows why pressures continue to build for developing countries to make their oil deals public.

Last Tuesday, Human Rights Watch issued a report that more than $4 billion in state oil revenue disappeared from Angolan government coffers from 1997 to 2002, and demanded that the Angolan government account for the money. The HRW report said the missing $4 billion is roughly equal to the entire sum the Angolan government spent on all social programs over the same five years.

HRW is an independent organization, funded by individual contributions. It is probably best known for its zealous advocacy of the rights of prisoners and the individual liberties of people living under oppressive rulers. It is one of scores of NGOs (Non Governmental Organizations) focusing on issues from deforestation to whaling.

The report, titled "Some Transparency, No Accountability: The Use of Oil Revenue in Angola and Its Impact on Human Rights," runs to 93 pages. It details how much money was generated by oil, how much disappeared from public coffers, and how this shortfall undermined Angolans' civil, political, economic, social, and cultural rights.

Angola is sub-Saharan Africa's second-ranked oil exporter after Nigeria and consistently ranks high on the list of corrupt governments. Oil companies such as BP, ExxonMobil, and Total expanded Angolan operations in the late 1990s. "Oil revenues totaled U.S. $17.8 billion from 1997 to 2002, or about 85 percent of total government revenue," the report says. "But an analysis of figures from the International Monetary Fund (IMF) shows that U.S. $4.22 billion of that total has gone missing, or roughly 9.25 percent of the country's gross domestic product (GDP) annually."

"In those same years," the report continued, "total social spending in the country--including Angolan government expenditures as well as public and private initiatives funded through the United Nations' Consolidated Inter-Agency Appeal--amounted to $4.27 billion."

Poor Record
Angola has ignored public opinion and pressure to change its ways for 30 years. It has also been the site of horrendous suffering.

A 27-year civil war ended in 2002, leaving untold dead and an estimated 900,000 Angolans still internally displaced. Millions more have virtually no access to hospitals or schools. According to United Nations estimates, almost half of Angola's 7.4 million children suffer from malnutrition.

"While ordinary Angolans suffered through a profound humanitarian crisis, their government oversaw the suspicious disappearance of this truly colossal sum of money," said Arvind Ganesan, director of the Business and Human Rights program at HRW. "This seriously undermined Angolans' rights."

"The government has refused to provide information about the use of public funds to its population, thereby undermining the right to information," he said further. "It has failed to establish hundreds of badly needed courts and allowed the judiciary to become dysfunctional, undermining Angolan's ability to hold government officials and others accountable. And it has not fully committed to free and fair elections."

"The Angolan civil war--fought between the government and the National Union for the Total Liberation of Angola (UNITA)--subsided from 1994 to 1998," Ganesan explained, "then resumed. Two months after UNITA leader Jonas Savimbi was killed in combat, a peace agreement was reached in April 2002."

"The Angolan government says the international community should do more to fund schools, hospitals and courts, but it refuses to explain where billions of dollars of government revenue went," said Ganesan. "Any further aid to Angola should be conditional on very strict requirements for transparency in the government budget."

The HRW report examines the Angolan government's failure to implement International Monetary Fund (IMF) reform programs that could have led to greater transparency and accountability. Human Rights Watch also looks at the progress of the "Oil Diagnostic" study, commissioned by the government and the World Bank and conducted by the accounting firm KPMG to determine how much oil revenue is actually deposited into the Angolan central bank.

Stalled Reforms and Transparency
The report tracks reform programs and programs to increase transparency that have been agreed to but either failed or did not happen at all.

"Beginning in the mid-1990s, the government and the IMF negotiated four reform programs to increase transparency," the report stated. "Three were implemented, but ultimately failed because of the government's lack of commitment to reform. Similarly, there have been several international initiatives--notably the Extractive Industries Transparency Initiative (EITI) led by the British government, and the Publish What You Pay (PWYP) campaign organized by a coalition of NGOs which are intended to promote greater government and corporate transparency over revenues. The Angolan government has not committed to either initiative."

In October, the financier George Soros and his Open Society Institute negotiated an agreement with the Angolan government to implement a wide-ranging set of reforms to increase transparency of oil revenues. But the government has delayed signing the agreement, which is currently in limbo.

"There have been many initiatives to promote transparency in Angola, but each time, the government walks away," said Ganesan. "It's an issue of political will."

Human Rights Watch called upon the Angolan government to publish all of the "Oil Diagnostic" reports, conduct audits of the state-owned oil company Sonangol, and participate fully in international initiatives to promote transparency.

Donor governments and international financial institutions, such as the IMF and World Bank, should include stringent measures to improve transparency as preconditions to any future agreements with the Angolan government, Human Rights Watch urged. In a related development, World Bank Group and The Extractive Industries Transparency Initiative, EITI, agreed to collaborate to prevent siphoning of revenues from extractive industries and developing countries.

World Bank, EITI Join Forces
The World Bank Group (WBG) formally endorsed EITI in December and pledged to work with several developing nations, as well as companies, on ways to publish revenues accruing from oil, gas, and mining sectors.

EITI was launched in September 2002 by British Prime Minister Tony Blair at the World Summit on Sustainable Development in Johannesburg, and is part of the U.K. Department for International Development. Its mission is what its name suggests: to make extractive industries transparent financially.

"We believe this step will both underscore and expand the leadership role that the Bank Group has had in fostering transparency, ensuring accountability, and contributing to sustainable development impact," said Rashad Kaldany, director of the WBG's Oil, Gas, Mining, and Chemicals Department.

In recent years, WBG said it has pioneered revenue transparency frameworks in several high-profile extractive industries projects including the Chad-Cameroon pipeline and the Baku-Tbilisi-Ceyhan (BTC) pipeline.

Kaldany cited several factors leading to the decision to participate in the EITI. "We have gained more experience in working with companies and governments on these issues, most recently through the BTC pipeline. New research in this area has created more momentum in the international community to focus on these issues," he said. "And the Extractive Industries Review, which is now winding down under the leadership of Dr. Emil Salim, has very clearly signaled that this is, and will be, a high-priority issue for our stakeholders in civil society."

The specific aspects of the World Bank Group's collaboration with the EITI remain to be negotiated. However, Kaldany said they could include the following:

  • A formal initiative within the World Bank Group, funded jointly by the Bank and a multi-donor trust fund, to promote the transparency agenda in extractive industries, compile research and lessons of experience, and disseminate best practices.
  • Pilot programs with several developing nations and companies that are willing to pioneer transparency programs.
  • Convening of stakeholders--including governments, industry, and civil society--to help raise awareness and define and implement viable approaches.

  • Kaldany said, "This is the next evolutionary step in our role as a neutral broker on these complex issues and we are prepared to make a long-term commitment."

    Other recent actions involving transparency include the following:

  • Convening of stakeholders--including governments, industry, and civil society--to help raise awareness. In December Nigerian president Olusegu Obasanjo included Anti-Corruption, Transparency and Accountability as one of four broad areas of reform presented to the Nigerian National Assembly in the 2004 Appropriation Bill. Obasanjo is pursuing perhaps the most vigorous anti-corruption program in Africa.
  • Current reports from Azerbaijan indicate that a commission under the EITI has been set up by the Cabinet of Ministers.

  • Somebody's Going to be Looking
    Certainly the program in Nigeria and the stirrings in Azerbaijan signal a positive momentum for transparency. Corruption has a way of retreating and then slinking back when nobody's looking. But actions like The Human Rights Watch report on Angola and the collaboration between the World Bank and EITI are only two of many moves by NGOs now focusing on transparency. Now those who would make off with oil money from the public treasuries of developing countries may find that somebody's always looking.


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