Allow Museveni set a strong foundation for the oil sector

By Mulindwa Birimumaaso

SATURDAY Vision of July 28, quoted me saying ‘the oil industry in its infancy stage requires an experienced leader who understands the manipulations of the oil companies otherwise we may end up with an oil curse’.

This was in response to the questions New Vision asked me on phone whether Museveni should contest in 2016.

I came to that conclusion after observing and reading extensively, among others, Peter Maas’ book ‘The Crude World’ from Nigeria through Equatorial Guinea to Russian Oligarchs, from American generals in Iraq to environmentalists in Ecuador, Venezuela, Angola to oil executives, Peter Maas states that, ‘oil makes the world work but it destroys those who produce it.’

His book offers a passionate look at the countries where oil is extracted and follows the oil journey, showing how it poisons the land and waters, promotes political instability, creates corruption on a staggering scale and rarely creates employment or offer the people either wealth or freedom.

Oil tends to benefit only the companies and corrupt government officials that will do anything to sustain the flow of the money. 

Exception is recognised in countries like Norway, Canada, USA with mature democracies and strong national institutions while countries like Nigeria, Angola, Equatorial Guinea, Iraq, Ecuador, Sudan, Congo (gold & diamond), Saudi Arabia, Venezuela, etc are described as very rich countries with very poor people.

Some are big oil exporters with long queues of people lining for gasoline on fuel stations.

Why is the situation especially in developing countries so appalling to the extent of terming the discovery of oil, gold and diamond, a “resource curse?” Below are the major causes for the above scenario;

 Unequal partnerships: Oil discovery, exploration and extraction require a lot of capital and highly skilled manpower, which developing countries don’t have. 

This lives the oil companies with an unfair advantage to manipulate the poor countries with no skilled manpower as to the quantities, qualities and the weak laws regarding taxation that the oil companies manipulate in their favour.

You can imagine an oil company that invested $100m and sells at $1.5b refusing to pay taxes to Uganda and opts for arbitration in London, even with the establishment of a state oil company to partner with, the foreign oil company, still, because of the imbalance in technology and capital, remains the operating company managing all major activities while creating employment for the nationals of the oil company.

A job advert in the New Vision of July 27, by CNOOC Uganda tickled me.

The job requirement were “Bachelor’s Degree or above in Petroleum Engineering, minimum eight years working experience in the oil and gas industry.”

Can Uganda boast of having 100 student engineers outside majoring in gas and oil in preparation for a strategic partnership at least in skills? Is Kigumba well equipped to provide the industry with middle range skilled man power? Or we are waiting to see floods of all types of experts including welders from foreign countries to operate our oil industry?

 Corruption is both an economic and moral issue when oil is found and confirmed. The most important question to the oil companies is who decides who to award the contract. 

Because profits are in billions, it is not difficult for the oil companies to know who is who in the government as far as the chain in decision making is concerned.

In some countries, the oil companies can even influence who will be appointed to which position through their contacts with king makers in the government.

One observer said that, “oil companies can do anything to win and corruption is their major protector and keeps them safe, and at times, with the knowledge and backing of their home governments, can go for regime change if the leadership is stubborn (incorruptible) as the case was with Mossadegh Mohammed of Iran, half a century ago or with Hugo Chavez attempted coup twice in Venezuela.

 Greed by oil companies: Someone described those companies as the most greedy corporations; they do not want to pay taxes even when they make super profits; they under declare and want to take everything including jobs. They leave the countries poorer, politically destabilised and environmentally contaminated. Their undeclared code is “Do your best to get around the law.”

Environmentally, oil extraction can be disastrous especially with “produced water” which is a mixture of oil, salts and metals, some of which are very hazardous like mercury, benzene, chromium 6 etc, which can be poured in rivers and lakes or left exposed in man made lagoons. 

Natural gas that accompanies oil, while coming out of the ground, is just burnt off by companies operating especially in 3rd world countries which emit green gases.

Lack of strong environmental laws for the oil sector can be disastrous to the producing country, combined with youth unemployment around the producing areas because the oil industry is highly expertised, plus lack of interdependence with what the local population and what the oil companies produce and consume, oil can be a violence-inducing intoxicant for the people who live around it, save for a few specialised services like prostitution to oil workers.

Such situation can lead to destabilisation and political manipulation resulting into political resentment against a well-meaning government.

In most developing countries, oil revenues have been plundered by leaders like in Equatorial Guinea, Nigeria and Angola to some extent while in Iraq and Libya it benefitted the people but suppressed any criticism from political elites. 

While in Russia and Venezuela, it has enhanced personal power but also benefitting the general population.

In Kuwait and Saudi Arabia, it has strengthened dynasties of clans at the expense of others. In others, it has killed both the agricultural and industrial sectors exposing the economies to the highs and lows of the oil prices but in countries like Norway, Canada and UAE, it has had an all round success.

Which way Uganda and why Museveni? 

A strong foundation for this infant industry is what we need and Museveni knows best how these companies can arm twist to the level of blackmail.

He has managed to stand his ground for Uganda’s benefit because unlike some other ambitious leaders, he is incorruptible. 

He has made it clear to oil companies that before Uganda begins extracting oil, we should have a refinery to boost other sectors of our economy.

Lastly, Uganda should invest its oil revenues in science based and technical education, agricultural and tourism sectors where it has comparative advantage to employ its youthful population plus creating an oil fund to invest in infrastructural development and industrialization for prosperity.

Writer is a Senior Presidential Adviser