Control given to Museveni,minister is open to abuse

Since the discovery of oil in Uganda, pundits have speculated about whether or not the country will manage to free itself from the so-called resource curse. Oxford University Professor Paul Collier has pointed to checks and balances in petroleum governance as a crucial factor if a country is to escape this phenomenon.

Checks and balances protect natural resource money from embezzlement, allowing oil payments to make it back into the national economy instead the pockets of politicians.

Unfortunately, checks and balances are exactly what is missing from Uganda's proposed Petroleum Bill 2010. The Bill, which has been approved by Cabinet and is due to be presented to Parliament, grants the newly created Minister of Petroleum sweeping powers to license, regulate, and determine payments due from companies.

Although the legislation establishes an enforcement and monitoring body, the Petroleum Authority of Uganda, and a national oil company, both are subject to ministerial and, ultimately, executive control. No checks on executive power are included in the Bill and there is little direction on how ministerial duties are to be discharged. Within a national context exemplified by the CHOGM and other scandals of ministerial corruption, this represents a dangerous concentration of power.

Institutional Framework

Despite ostensibly establishing the Petroleum Authority as "not subject to the direction or control of any person," the minister appoints its five board members are appointed by the minister and can be removed by him at anytime. The authority is to take direction from the minister and report to him. Dependent on allocations from parliament, grants and donations and funds from the sale of property for its operation, the agency does not have an independent and reliable source of funding.

Dickens Kamugisha, CEO of the Africa Institute for Energy Governance (AFIEGO), says such a lack of independence has already rendered regulatory bodies such as the Electoral Commission and the Uganda National Bureau of Standards impotent. "If you want these institutions to fulfill their roles, you need to protect them from political pressures."

The National Oil Company too comes under the auspices of executive power. The two commissioners charged with overseeing the operations of the company are to be appointed by the president and the minister determines what the state share of any licenses or joint operating agreements should be.

Charged with overseeing commercial interests and participating shares of the state in petroleum activities, the company will play a crucial role in the management of Uganda's revenue from oil. Despite this, or perhaps because of it, the Bill leaves the governance of the company vague. It's silent on the question of who the company will report to, if anyone.

Invitation to abuse

The lack of limits and oversight on ministerial power in the Bill leave the door open for corruption to occur on a scale never before seen in Uganda. The government estimates that US$8 billion dollars of investment will be needed to develop the industry in the next 10 years. The money that could be diverted from that inflow could make the US$250 million that the World Bank estimates are lost yearly to corrupt officials in Uganda look like small change.

Due to the likelihood of corruption during the allocation of rights to natural resources, Collier recommends that this process take place through open auctions. Under Uganda's Bill however, it would be up to one person, the minister, to grant lucrative petroleum exploration and production licenses. According to the legislation, the minister must advertise available blocks. Once that is finished, however, the process is closed. There is no requirement that the selection criteria or the final bids be made public.

In 2005 the Nigerian newspaper This Day observed of the allocation process in that country: "Perhaps there is no other segment of activity in the oil sector that was subjected to abuse like the allocation of oil licenses." Favouritism and nepotism resulted in many oil blocks allocated to senior military officials and their allies. Recently the country has moved towards greater transparency; in 2005 and 2007, the government publicly advertised the available blocks and selection criteria and after receiving them, the various bids.

Another major lacuna in Uganda's legislation is the lack of a fiscal regime for determining the state's share in oil profits. Ghana's proposed petroleum fiscal regime was criticised by Oxfam America for similar reasons. "While a degree of flexibility may be needed, too much latitude may be an invitation to corruption," said the organisation of Ghana's legislation. The Ghanian bill set a minimum royalty rate of 10%; Uganda's doesn't even do that. Royalties are to be determined by petroleum agreements. By leaving these important numbers open to debate, Uganda risks being forced to accept weaker terms due to negotiators' corruption or incompetence.

According to Minister of State Simon D'ujanga there's nothing wrong with granting a newly appointed minister of petroleum all-encompassing power over the industry. After all, ministers are democratically elected, he pointed out. "In this country it's the people who put the ministers in place. If you misbehave then they won't vote you back into power again." D'ujanga takes issue with the assumption that the proposed legislation is an invitation to graft. "In this country you're innocent until you're proven guilty."

However, leaving aside the question of elctoral irregularities in Ugandan democracy, scandals such as CHOGM have proven ministers certainly have a propensity for taking advantage of their positions.

Environment gaps

Gaps and lack of restraint on ministerial power also show up in the area of the environment. Flaring and venting are prohibited under the legislation except by consent from the minister. However, it is not specified under which circumstances the minister should consent to these practices, which have been a source of considerable environmental degradation elsewhere. Giving the minister that power without setting out limits is dangerous, according to Onesmus Mugyenyi, a research fellow at ACODE, the Advocates Coalition for Development and the Environment. "When you give people discretion that discretion is always abused."

Penalties for pollution are all together left out of the Bill. The Bill confers "liability regardless of fault" to licensees for any pollution in the environment without specifying any fines. Mugyenyi explained that penalties for pollution need to be strong and specific to have an effect. "One of the things that have undermined environmental conservation in this country is that the environmental penalties are miserable. People don't have a disincentive to avoid degradation."

Minister D'ujanga says the National Environment Act, which the Petroleum Act Bill states will apply to activities under it, will fill in these gaps. "If it's already in one law, there is no need to put in another law." Mugyenyi though warns that the Environment Act is not tailored to the industry and development is moving too fast for lawmakers to catch up.

Secrecy

In the absence of other checks on executive power, media and civil society might have acted as guardians of the public good in the oil industry. However tough sanctions against the release of information ensure that much will never make it to the public eye.

Disclosure of documents under the Access to Information Act remains subject to the confidentiality of the data and commercial interests. It's a loophole that the government has already used to justify rejection of applications for the release of Production Sharing Agreements with companies.

But the Bill goes farther to create actual criminal offenses for revealing information about the industry. Disclosure of information covered by the act to anyone who other than the minister or a public official is punishable by up to five years in jail.

Perhaps the most compelling argument against secrecy in petroleum governance is the experience of another country now learning from its mistakes. The Petroleum Industry Bill 2008, now before the Nigerian National Assembly, makes a commitment to the Extractive Industries Transparency Initiative (an international set of standards on transparency) and declares confidentiality clauses contained in contracts null and void. Later drafts require the publication of contracts and mandates that companies submit information on their revenues and production costs for publication on the web.

Without such provisions for openness, money can easily disappear into the pockets of officials. The latest report by the Nigeria Extractive Industries Transparency Initiative found a discrepancy of US$800 million between what the Nigerian government said it received and what companies reported paying in 2005 alone.

Parliament possible solution

Providing a role for Parliament would be one way to introduce oversight and accountability into governance of the industry. However in the expansive piece of legislation, Parliament is not granted any responsibilities besides passing the Bill in the first place. "Generally, you find that the whole of this Bill gives power to the President to manage the industry. He is doing everything. Where do you see parliament ensuring that there is accountability and transparency?" says Kamugisha.

Criticisms about a lack of checks and balances have also been leveled at Ghana's proposed petroleum legislation. In its analysis of the country's draft Ghana Petroleum Regulatory Authority Bill, Oxfam America recommended Parliament be given tasks such as debating and approving petroleum agreements, monitoring the country's regulatory authority and approving appointments to the authority's board.

Uganda too should consider this. The country must not wait for fat cats to feast on its oil wealth and then send Parliament in to examine its corpse in a CHOGM Report like postmortem. By then the spoils will have already been digested.

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