Wednesday, March 7, 2012

Liberia’s emergence as a petro-state: Who licks the oil?

The recent news of the discovery of oil and hydrocarbons off the coast of Liberia has been welcoming, and many analysts are already critical of not just how the newfound wealth in oil will lead to economic growth, but also how it will be managed to avoid the curse of being a rich nation. This is the curse that most developing countries have suffered despite the resource endowment. In some cases the curse have not just been limited to poverty, but had also extended to large scale armed violence as a result of neglect of people in the resources abundant areas.

Natural resources have turned to curse rather than blessing in third world countries–mostly in sub-Saharan Africa due to the weaknesses of African regimes in doing due diligence and enforcing compliance laws. The roots of these weaknesses are in the greed and corrupt character of politicians and their corporate partners who have presided over those nations. Resources have been exploited in most instances to the disadvantages of local populations. The disadvantage talked about here refers to the condition in which local people see politicians and corporation owners getting extremely wealthy from resources extracted from their (local people) territories while they the local people lack basic amenities of life such as schools, hospitals, and public infrastructures and utilities like roads, clean water and electricity.

The other major part of the disadvantage is where, in addition to the social neglect of local communities, resource exploitations inflict environmental harms through pollution, environmental degradation and contamination of water sources, and the long term effect of unsustainable use in which future generations are deprived of the same resources. Cases of such are replete in Africa and other third world countries. In Liberia for example the excesses of mining companies like the former Liberia Mining Company in Bomi Hills is conspicuous with the underdevelopment and poverty of the county. The unsustainable mining practices have left the county to be nick-named ‘Bomi Hole’. A second and most recent example is the poverty of the people of Margibi County that have hosted the world’s largest rubber plantation for decades. Local communities around the Firestone Plantation in Margibi have accused the company of environmental pollutions and the dumping of chemical pollutants in water sources used by the people.

In other countries, disadvantaged people have risen up against the state and corporations. This is currently the case in the oil-rich region of Nigeria’s Niger Delta where militant groups, supported by local people have staged several insurgencies demanding dividends from their resources. The case of the newly independent state of South Sudan is also important to mention here. South Sudan has a huge deposit of oil and served as a source of most of Sudan’s oil wealth over the years. The neglect of the southerners by the state, concentrated in the North, led the southerners to decades of civil conflict and eventually succeeding from the North. Today, the southerners have full ownership of their oil wealth which accounts for 90% of the budget of the South Sudan.

With these cases cited, it is important for Liberia to begin to design strategies in answering the key questions surrounding natural resources exploitation and management: Who benefits and who loses? In the recent case of oil discovery, the specific question is: Who licks the oil and who washes the dishes? In the abstracts of social contract and political economy theories, resources of a state are to be used to the benefit of all its citizens and managed by a responsible government amenable to the people.

Can the current state in Liberia survive the pressure of managing a petro-state? Of course we know that most petro-states lack technology, and capital and skill to find and extract the products, least to speak of a technically-deficient postwar country. Foreign firms from industrialized countries therefore take over to do the business. It is under the concessions with foreign firms that things mostly go wrong; this is where Liberia needs to be careful as it tries to go into oil deals with international corporations. The mistakes made in other resource areas like the granting of land, forestry and mineral concessions are worthy to learn from. Critical to the development and management of Liberia’s oil resources is first the strengthening of the oil regulatory agency and transparency in implementing the petroleum law and other public contract laws. The next thing will be developing a local labor market for the emerging oil industry. This will require technical education for young Liberians. While it remains the obligation of the government of Liberia to provide education as a public or good or at least the conditions for quality education for every citizen, it is strongly recommended that young Liberians pursue careers in this industry so as to meet the labor market demand in the next few years. Without training and education and the development of local labor market for this industry much of the gains from this sector will be repatriated to other countries by foreign workers and corporation owners.

As most nations in sub-Saharan Africa including petro-states like Nigeria are moving towards manufacturing and planning to replace reliance on resource exportation to industrialization, Liberia needs to develop trade policies towards the same end. How can Liberia’s oil industry produce more jobs than the level required for extraction and how can the dividends from the oil trade increase economic growth? This will require more technical planning and strategic policy that will require oil companies to do some local productions home at least at some intermediate levels in the long term. Development from Ghana, a new petro-state, indicates that the economy has experienced double-digit growth since the first barrels of oil were poured in 2010. This, development we believe was the result of careful planning and effective management which Liberia will want to benefit from.

With reference to welfare gains, it is good to reemphasize here that oil business arrangements take seriously into consideration the need of local populations equally as it considers the revenue generation requirement of the government of Liberia. Environmental issues and social development for local communities should not be underestimated. The failure to consider local development concerns and to do long term plans that will maximize gains from the oil industry may keep Liberia in the state of a primary exporting country which will see growth without development, unemployment and the perennial tragedies of the resource curse as seen in other sectors.

The challenge now for progressive activists is to seek the expertise in monitoring the sector for transparency and accountability, and to advance the cause of local communities. At the heart of the advocacy should be the welfare argument: that the resources be used to the benefit of all citizens of the state, and that there should be no loser. If progressive forces neglect to champion this cause, politicians and corporate owners will lick the oil, while the ordinary Liberians remain in the kitchen to wash the dishes.

In the Cause of Democracy and Social Justice the Pen Shall Never Run Dry