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Should oil producing areas get special treatment?

By Vision Reporter

Added 21st July 2009 03:00 AM

Since the existence of commercial quantity oil reserves was confirmed in 2006, the excitement caused by the prospect of huge revenues associated with oil exports has been narrowed by the fear of what many call the ‘oil curse.’

Since the existence of commercial quantity oil reserves was confirmed in 2006, the excitement caused by the prospect of huge revenues associated with oil exports has been narrowed by the fear of what many call the ‘oil curse.’

Asuman Bisiika and Phionah Kesaasi

Since the existence of commercial quantity oil reserves was confirmed in 2006, the excitement caused by the prospect of huge revenues associated with oil exports has been narrowed by the fear of what many call the ‘oil curse.’

There is no quote that captures the cynicism associated with high-value natural resources than a line from the movie Blood Diamond: “I hope they don’t discover oil. Then we will be in real trouble.”

It is true the control of economic resources has now become a motivating and staying factor of new armed conflicts. This is a departure from the ideological armed conflicts of the Cold War era.

Yet high-value natural resources are actually not a curse. They are simply resources. The problem of persistent poverty in Africa, even with these high-value natural resources, is mainly attributed to lack of visionary leadership coupled with inept management of state resources.

With this ‘oil curse’ mentality, is it surprising that even before production starts, Uganda’s oil industry has already claimed life? A Canadian national was shot and killed in August 4, 2007, by Congolese soldiers who accused the Heritage Oil prospecting team of veering into Congolese territory.

The idea that high-value natural resources like oil, gold, diamond or gold can be a curse began to emerge in the 1980s.

From 1965 to 1998, gross national product per capita growth in Oil Producing and Exporting Countries (OPEC) decreased average by 1.3%. It is interesting to note that per capita growth in the rest of the developing world was on average 2.2%.

However, there are other challenges. In the 1960s, The Netherlands experienced an increase in its wealth after discovering large deposits of natural gas in the North Sea. Unexpectedly, this positive development had serious repercussions on important segments of the country’s economy. The guilder (Dutch currency) became stronger, appreciating 30%, making Dutch non-gas exports less competitive.

Uganda is advantaged by the fact that the leadership has the opportunity to learn from the mistakes made by older members of Africa’s oil-producing countries.

Studies have shown that oil dependence may lead to a ‘re-arrangement’ of political socio-economic and political dynamics.

Indeed, in what can only be viewed as indicative of ‘the re-arrangement’ of socio-political dynamics, President Yoweri Museveni has sought to court Bunyoro Kitara Kingdom; thereby drifting away from Buganda Kingdom.

This may have emboldened Bunyoro Kingdom officials to make what Hillary Onek, the energy minister, called sectarian demands.

Shem Byakagaba, the Kitara Heritage Development Association president, says Bunyoro Kitara Kingdom should be given ‘a good share’ since her people will be the most affected by the oil exploitation. The law provides for royalties to the ‘administrative local government authorities, the districts and sub-counties.

Although kingdoms in Uganda are not in the administrative structure of government, their influence on social and political trends is palpable. Their voice is sometimes treated as the legitimate voice of the people under their influence.

Onek says the Oil Policy and the Mineral Exploration Act provides for the allocation of royalties to districts where the mineral resources are located. The law also provides for a percentage of the royalties to the land owners, in which category Bunyoro Kingdom might fall.

George Tinkasiimire, the Hoima district chairperson, says the people in the region want to get royalties as Bunyoro Kingdom and not as districts or sub-counties.

To achieve this, districts of Bunyoro-Kitara support the constitutional provision for a regional tier that would enable kingdoms operate as provincial local government administrative units.

But Onek is discouraging what he calls “sectarian demands” for oil benefits.

“Oil, like other natural resources should be treated as a national asset,” he was quoted as saying.

Justifying Bunyoro’s demand for a ‘good share’ of the oil revenue, Tinkasiimire says, the minister should recognise the reality that ‘the environment in the region will be greatly be affected by oil production activities.

“Agriculture productivity will reduce, yet most of the people in the oil producing area depend on agriculture,” he argues.

The debate in government circles has been reduced to whether we should export crude and import refined oil products or we refine crude and sell the final product.

However, the Government seems to have settled for building a refinery and export refined oil products. This fits well with the year for production.

Should oil producing areas get special treatment?

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