Eq. Guinea struggles towards life after oil

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Fifteen years of oil production have helped the tiny African state of Equatorial Guinea pay for roads, glass and steel ministry buildings and no fewer than two conference centres in its mist-shrouded island capital Malabo.

But uncertainty over how long the oil and gas will keep flowing has focused attention on whether fundamental progress has really been made in preparing the 700,000-strong nation for the day the hydrocarbons run out.
“Infrastructure development has happened and we see it around us. But it is not enough,” Obiageli Ezekwesili, vice president of the World Bank for the Africa region, told Reuters in Malabo this month, Reuters reports.
“What is missing (are) the institutional reforms, the kinds of governance systems … that enable you to achieve value for money when you are building your infrastructure and then, under that big block, investment in social sectors.”

The energy ministry says the Gulf of Guinea nation produces around 400,000 barrels of oil equivalent a day, generating some $3-3.5 billion a year in revenues.

Estimates for how long this will last vary widely from 10 to 30 years. Some of the original fields are maturing but there are hopes of new oil finds while gas prospects are being developed, including a second Liquified Natural Gas (LNG) train.

The government plans to use the petro-dollars to lay the foundations for a diversified economy, targeting agriculture, fishing and high-end tourism. The road and port investments are meant to create a regional transport hub.

Yet some question the feasibility of this goal in a nation where agriculture, in recent years, has rarely extended beyond subsistence farming and which rights groups say has one of the worst records for human rights in Africa.
“They talk about fisheries, tourism and services … but the nature of the regime is repressive … and suspicious so they are not equipped for this,” said one diplomat.

Noting the fertile nation’s need to import basics like tomatoes from Cameroon, the diplomat called it “a classic case of Dutch disease” — the phenomenon observed in the Netherlands in the 1960s when the local gas sector grew to the detriment of other exporting industries.

HOPES FOR TOURISM, AGRICULTURE

A certain reserve in dealing with the outside world is not surprising given that President Teodoro Obiang Nguema Mbasogo has since 1994 had to deal with two attempts to depose him, both involving foreign mercenaries.

Yet last month’s African Union summit, a gathering later this year of Latin American leaders and the hosting of Africa’s top soccer tournament in 2012 may lead to the easing of restrictions and fear of foreigners.

Ironically, construction workers from Turkey, Egypt and China are working on many of the Malabo developments, prompting concerns that locals are missing out on any trickle-down effect.

On paper, Equatorial Guinea’s average per capita national income is around $24,000 — on a par with that of Saudia Arabia — yet many Equatoguineans are on starkly lower incomes than that would suggest.

Oil funds have been used for social housing projects, and neat rows of houses and appartments have risen in parts of the capital. However, along crumbling roads, there remain neighbourhoods where residents still fetch water in buckets, power is sporadic and dwellings cling to deep, dirty streams.

Francesca Tatchouop Belobe, the minister of economy, commerce and business, said the construction projects were part of the diversification plan and would help the economy, estimated by the World Bank at about $10.5 billion in 2009, reach a growth rate of about 7 percent next year.
“It is nothing extraordinary,” she said of the policy, arguing the infrastructure was needed for farming and to lure top-end tourism.

Tatchoup acknowledged the dependence on energy, which she said accounted for about 93 percent of revenues. But she said tourism would be boosted by new ties with foreign airlines while the government has turned to Germany for help in developing agriculture.

INVESTOR “EL DORADO”?

Despite the years of oil production, many of the benchmark development and business indicators remain stubbornly low.

Around the AU summit, international broadcasters carried adverts touting the nation as “The new El Dorado of investors”. Yet, in 2010, it slipped three places to 164 out of 183 in the World Bank’s Doing Business index.

According to the study, starting a business in Equatorial Guinea still takes three times as long as the African average and 10 times that in developed countries of the OECD club. Companies face 46 different taxes every year.

Corruption remains a major concern, with the country languishing in the bottom 10 of anti-graft watchdog Transparency International’s corruption perception index in 2010.

Equatorial Guinea’s government challenges figures about the country, saying they are based on old data and stressing that steps are being taken to provide more accurate information.

But in its most recent publication, the International Monetary Fund flagged that high levels of spending are eating into the country’s reserves and warned the slow pace of reforms was delaying preparations for life after oil.
“The medium-term outlook is clouded by the onset of declining hydrocarbon production,” it said in a May 2010 country report that described the non-oil sector as “nascent” and warned that the prospects for rapid export diversification were “low”.
“Staff calculations indicate that planned expenditure would exceed expected revenue over the medium term, leading to a near- depletion of the stock of government savings by 2015 and a significant weakening of external stability,” it said.

These concerns were echoed by a second diplomat who has followed the country for years and suggested that a power system revolving around one man — the president — and the lack of an ingrained enterprise culture meant change was some way off.
“It is going to take a shock to the system for them to diversify,” he said.