Fred Nkayi Mbagadhi, a member of Uganda's parliament has recently written an opinion piece, arguing that his country is not going to fall prey to what has come to be called the ‘oil curse.’

“The recent announcements by Tullow Oil that it made a potential multibillion-barrel oil discovery in western Uganda have exhumed memories of the oil curse amongst some Ugandans,” he says.

The curse is described as part of the more general resource curse theory which is a paradox of plenty. Under that paradox, nations well-established with abundant natural resources may fail to develop in other sectors, ending up with socio-economic and political problems.

Mbagadhi notes that proponents of the oil curse, including the Nobel prize-winning economist Joseph Stiglitz have used valid and statistically robust empirical evidence that indicate an inverse relationship between high natural oil resources dependence and economic growth.

“Moreover,” he says, “this is reinforced by the abject poverty, autocracy, instabilities, corruption opaqueness and slow growth rates exhibited by some of the oil rich nations such as Sudan, Angola, Chad, Saudi Arabia, Venezuela, Nigeria, Iraq, to mention but a few.”

However, it is also empirically true that there are many oil rich countries like Norway, Canada, Mexico, and United Arab Emirates among others that have beaten the odds of the oil curse.

“This makes me believe that Uganda of today has the potential to do the same,” he writes. Here are his reasons:

1. Remember that Uganda has struck oil after two decades of established democracy, accountability, rule of law, macroeconomic stability and unprecedented growth rates only rivaled by Dubai and some Asian tigers.

2. The other ray of hope for Uganda comes from the oil production sharing agreements (PSAs) with Tullow oil and Heritage oil and Gas. Reliable information indicates that government is to bag 80% of all oil revenue.

3. Moreover the drilling companies have been tasked to initiate development projects for the local communities hosting oil to avoid a replica of the Niger Delta and Darfur scenarios in Uganda.

4. The fact that Uganda is moving towards fully funding her budget for the first time in history is in itself an assurance that it can easily survive the oil curse as oil revenue is most likely to play a supplementary role.

“This, coupled with government's massive investment in technical human resource and the rejuvenated fight against corruption is all but an indicator that the risk of oil curse for Uganda is far-fetched,” says Mbagadhi.

So, what’s your view about the so-called ‘oil curse’? Is there such a thing or are various experts just off-base? If there is an oil curse, do you think it will apply to Uganda or does Mbagadhi have too rosy a view of his country?

Until today, the Ugandan government has refused to publish the PSAs, or even the terms contained within the PSAs, covering the Lake Albert oil developments. Even Azerbaijan published the Contract of the Century signed with BP et al in the 90s.
Having any chance at avoiding the resource curse requires high levels of transparency & accountability prior to oil development. The govt's refusal to share the contracts shows that Uganda is clearly not going to become the next Norway.

Tue Nov 03, 01:07:12 AM CST