INTERNATIONAL POLICY CONFERENCE “COMPETITIVENESS & DIVERSIFICATION: STRATEGIC CHALLENGES IN A PETROLEUM- RICH ECONOMY” The Resource Curse, Corruption and Institutions Inge Amundsen 14 – 15 March 2011, Accra, Ghana

The Resource Curse, Corruption and Institutions Dr Inge Amundsen, senior researcher, Chr. Michelsen Institute Competitiveness & Diversification: Strategic Challenges in a Petroleum-Rich Economy UNIDO and Ghana Ministry of Trade and Industry International Conference Accra, Ghana, 14 th March 2011

The Dutch Disease The Paradox of Plenty The Rentier State model The resource curse is a political problem –The rents give the motive and the power –Rent-seeking undermines institutions Corruption adds to the resource curse –Political corruption –Extractive and power-preserving political corruption Which institutions are affected? –Institutions of extraction –Institutions of redistribution Institution building and transparency –Institutionalisation in Ghana The Resource Curse, corruption and institutions

The Resource Curse: Economic factors Relative price effect –Higher currency value –More imports (cheaper) –Competition difficult Volatility –Uncertainty for businesses –Low investments in alternative production The ‘Dutch Disease’ –Over-invest in extractive industries –Under-invest in manufacture, agriculture –De-industrialisation Crowding out –Concentration, contraction –Productive sectors Weak redistribution –Increasing inequalities –Increasing poverty –Grandiose projects –Pocketed, “privatised” –Capital flight

The Resource Curse: Political factors The prise increases –Higher government revenues –Larger benefits for the “state elite” State autonomy increases –Off-Shore, foreign, hinh-tech –“Un-earned”, easy, rents –Little taxation of domestic economy –No “social contract” –Less influence of business, middle class –Less influence of CSOs State powers increases –Means to manipulate institutions –Means to buy (off) rivals –Means to buy instruments of coercion Consequences –Uneven distribution –Increasing conflicts –Increasing inequalities –Increasing poverty –Increasing authoritarianism –Violent defence of privileges

Corruption adds to the Resource Curse Political corruption pressure –Extractive –Power-preserving Embezzlement Bribery “Commissions” “Privatisations” Tax systems Concessions, licences “Freedoms” Monopolies Favouritism, cronyism Nepotism Co-optations Manip’d institutions Manip’d elections Vote buying Impunity syndrome Political corruption Extraction Power preservation Abuse of public power for private benefit

Petroleum contracts –Legal framework or contract based –“Royalties” directly to politicians, presidents, ministers, political parties –Political interference and favouritism in individual cases National (state) oil company –As a private purse –Tool for enrichment and empowerment –“State within the state” Private oil companies –“Dead meat” private local oil companies –Service companies Extractive political corruption

Power preserving political corruption Favouritism, cronyism –Nepotism, co-optations –Patronage, rent-seeking –From politics to business Manipulated elections –Vote-buying –Manipulating Election Commissions Impunity syndrome –Somebody above the law

What institutions? Petroleum revenues Economic monopolisation Political monopolisation Political corruption Weak institutions Democracy first !

What institutions? Some institutions are strengthened (the institutions of extraction) Resource extraction -The Executive -National oil company -Ministries (finance, petroleum/energy/resources, internal affairs) -Revenue and tax authorities -National bank, development and investment banks -Police, security services, military

What institutions? Some institutions are weakened (the institutions of redistribution) Economic redistribution -Parliament Making the budget Public accounts committee -Judiciary The legal framework Enforcing contracts Conflicts of interest Economic crime/corruption -Supreme audit institutions -Specialised anti-corruption agencies Political redistribution -Parliament Establish institutions -Judiciary Integrity and independence Democratic elections (complaints) -Ombudsmen -Elections -Civil Society and NGOs Monitor government incomes and expenditures Monitor public service delivery -Media Checks and balances

Institutionalisation in Ghana Institutions of extraction –The Executive –National oil company Ghana National Petroleum Company –Ministries (finance, petroleum/energy/resources, internal affairs) Ghana Ministry of Energy –Revenue and tax authorities Ghana Revenue Authority –Police, security services, military –National bank, development and investment banks

Institutionalisation in Ghana Economic redistribution –Parliament –Judiciary –Supreme audit institution –Specialised anti-corruption agencies –Serious Fraud Office (SFO) –Commission on Human Rights and Administrative Justice (CHRAJ ) Political redistribution –Parliament –Judiciary –Ombudsmen –Elections –Civil Society and NGOs –Media

Institutionalisation in Ghana Transparency International’s Corruption Perceptions Index World Bank’s World Governance Indicators Existing statistics on corruption and governance in Ghana: slow but steady progress

Institutionalisation in Ghana International Budget Partnership’s Open Budget Index (OBI) Ghana scores 54 (in a range from 0 to 100) “Ghana is still in the large (middle-range) group of countries that provide some information, scoring between 41 and 60, though this information is far less than what is required to obtain a clear understanding of the budget and to provide a check on the executive”. This makes it challenging for citizens to hold the government accountable for its management of the public’s money” Revenue Watch Institute (RWI) “Ghanaian authorities are making progress in improving expenditure transparency, and the country has introduced targeted legislation in recent years designed to ensure accountability, transparency and efficiency in public resource management, including the Financial Management Act of 2003 (which regulates the public sector to ensure transparent and effective management of state revenues and expenditures) and the Public” Extractive Industries Transparency Initiative (EITI), Ghana is one of only five compliant countries in the world