No amount of foreign aid can offset corruption

The London Free Press
By Rory Leishman

Over the past 30 years, Angola has developed into one of the world’s major oil producers, yet it still ranks among the world’s most impoverished countries. What has gone wrong?
Paul Collier has addressed this issue in Plundered Planet: Why We Must – And How We Can – Manage Nature for Global Prosperity. As Professor of Economics and Director of the Centre for the Study of African Economies at Oxford University, he is widely regarded as one of the leading authorities on the intractable economic problems besetting the world’s least developed countries.
In Angola, most oil production is managed by four major players – ExxonMobil, Shell, BP and Total. Some critics might suppose that these conglomerates have somehow contrived to siphon off most of the country’s oil-export revenues, while leaving little for the government and the people of Angola, but that is simply not the case.
Foreign multinationals could easily plunder the natural resources of less developed countries during the colonial era. Today, these same companies and their successors are usually confronted by independent governments with ready access to an array of international banks and law firms that are eager to help auction off natural resources on the most favourable terms.
In this respect, Angola is typical. In the 1970s, the Angolan government established a national oil-company monopoly, Sonangol, with a mandate to manage the country’s oil resources and acquire a 51 per cent interest in the subsidiaries of every foreign oil company operating in Angola. Since then, Sonangol has garnered huge revenues. Collier notes that in 2008, Angola took in more than twice as much in oil revenues than all the foreign aid dispersed to the world’s least developed countries.
Nonetheless, the United Nations Human Development Report for 2009 lists Angola at 143rd in the world, just three levels higher than Bangladesh. Correspondingly, the Institute for Democracy in Africa reports that while Angola has a GDP per capita of about $4,400(US), “some 70 per cent of the population lives on less than a dollar a day.”
Clearly, some people in Angola are getting hugely rich from oil revenues while the majority of the population subsists in dire poverty. And the main reason for this tragedy is also evident: crooked government.
Most of the billions of dollars paid to Sonangol by ExxonMobil, BP and other foreign companies for the right to produce and export oil from Angola has ended up in the bank accounts of the country’s dictatorial President Jose Eduardo dos Santos and his military and government cronies.
The oppressed people of Angola have no choice but to put up with this transparent plundering of the nation’s oil wealth by the country’s own corrupt politicians and bureaucrats? Dos Santos will not brook any effective opposition. He assures that elections are fixed, the media are censored and public protests are severely curtailed.
A few years ago, some intrepid members of Angola’s generally tame Parliament used to denounce government corruption. But even most of this parliamentary opposition to the regime fell silent after dos Santos started paying members $10(US) for every favourable vote,.
Angola is not uniquely bad. Most other least developed countries are also are ridden with corruption. To combat this evil, former British prime minister Tony Blair began the Extractive Industries Transparency Initiative, an international organization that promotes the voluntary disclosure of the payment, receipt and management of revenues from the oil, gas and mining industries.
While most of the major multinationals in the West have agreed to go along with this initiative, Chinese companies have not. And neither has the government of Angola. In 2004, China’s Eximbank extended a $2 billion loan to Angola for the ostensible purpose of rebuilding the country’s infrastructure, but so far, most of this money has disappeared without a trace.
The sad conclusion is inescapable: Judging from experience in Angola and elsewhere, no amount of foreign aid or natural-resource revenues can eradicate poverty among the hundreds of millions of people trapped in countries, where corrupt rulers enrich themselves at the expense of their deeply impoverished fellow citizens.