Affordable Housing Institute : US

“Mycroft has been at work again,” chuckled Holmes after a glance at the latest stock prices. “Imagine what he could accomplish if, in addition to intellect and patriotism, he also had ambition.” Then he straightened as his eye fell on a small item. “I say, it appears our friend the worldly philosopher has been taking steps.”

Watson asked, “that intent charitable fellow who consulted us?”

 

Paul Wolfowitz, President of the World Bank

 

“Not well spoken of at the Reform Club, but I thought him a good egg.”

 

“That’s the man,” nodded Holmes. “You recall his charity was providing essential capital to the funding of an oil pipeline from Chad, across Cameroon, to the Gulf of Guinea.”

 

 

“After his predicament had been reported in two parts (Part 1 and Part 2) on a particularly astute blog — a technological innovation,” he said, seeing Watson’s look of utter incomprehension, “he visited us.” He sighed. “I wish we had been able to do more for him.”

 

The matter admitted of no easy answer.

 

“Still, he seems to be managing fairly well on his own. He took our advice and refused to fund the scoundrels.”

The oil royalties have been frozen for five months in a dispute with the World Bank after Chad changed an oil revenue law which earmarked a share of oil revenues for social spending for future generations.

 

That left the malefactors with no alternative but to escalate their threats even as their bluffs were repeatedly called. Progress of a sort has now been made. Consider this brief mention.”

 

The central African nation of Chad, which had tried to violate its agreement with the World Bank to dedicate most of the revenues from a bank-supported oil pipeline to poverty reduction, reached an interim deal with the bank yesterday [April 27, 2006 — Ed.] that would give the bank and Chad three months to reach a final settlement, a bank official said.

1. Chad agreed that for the next three months it would spend 70% of its oil revenues on poverty reduction, not on combating rebels trying to overthrow the government.

2. The bank will also release a third of the oil revenues that have accumulated since January — as much as $130 million — in each of the three months that this interim agreement is in place. The funds were frozen when Chad passed a law to include security among the uses of the oil revenues, breaking its pledge to the bank.

3. As soon as Chad ensures that the money is committed to antipoverty programs, the bank will begin disbursing $124 million in loans to the nation. The bank had suspended the loans in January after Chad’s Parliament voted to allow revenues from the pipeline to be spent on security.

 

Watson knew it was essential to read the fine print.

 

“The bargain is in three parts. First Chad proves its good faith by funding poverty programs. Then the bank unfreezes money in its escrow, and finally the bank completes disbursing its original commitment. Here is our friend’s statement:”

 

“The Government of Chad has agreed to take steps to restore the confidence of the international donor community,” Wolfowitz said, “including specifying in a new budget law that 70% of oil proceeds in the escrow account will be used for poverty reduction. A final agreement is still to be reached but I welcome the Government’s efforts to address these issues. We believe the steps outlined in this accord provide a way forward to ensure that the people of Chad see the benefits of the aid and oil revenue their country receives.”

“It seems something,” Watson acknowledged. “But can one do business with a government one does not trust?”

 

 

Then there are some tyrants with whom one can never do business.

Holmes laughed heartily. “That, my good fellow, is the essence of business — finding workable economic relationships with people whom one presumes to be untrustworthy. Not for nothing is ‘Trust me just this once’ considered the ultimate in real estate jokes. One plays the cards one is dealt, and one strengthens one’s hand whenever one can.”

 

The Chadian authorities also agreed to parallel actions to strengthen the monitoring, transparency and accountability of not only direct but also indirect oil revenues and development aid.

Implementing these monitoring plans will provide greater assurance that public resources can be tracked and spent well. The Bank’s proposed partial resumption of loan disbursements under approved projects will take place in parallel with the new procedures.

 

“Evidently you approve,” said Watson, “but clearly not everyone does. Here, for instance, is an angry letter to the Times from a passionately committed Miss Daphne Wysham about our worldly philosopher.”

 

The African nation of Chad has forced the World Bank to back down in a dispute that illustrates the problems with lending to poor nations for oil and gas production.

 

“‘Back down,’” murmured Holmes with a sniff. “Whom does the writer think blinked here?”

 

Occasionally one must demonstrate the alternatives to agreement.

None of this oil money would be flowing to Chad’s “president-for-life,” Idriss Deby, if it weren’t for the World Bank’s initial investment. Chad’s oil remained untapped for nearly a quarter century after Chevron first discovered the nation’s reserves in the 1970s. The country’s civil war, human rights abuses, and rampant corruption were serious enough to convince oil companies that investing there wasn’t worth the risk. Then in 2000, the World Bank approved $365 million in loans for the $3.7 billion Chad-Cameroon pipeline project, the largest construction project in Sub-Saharan Africa. Hundreds of millions in bank loans from private and other public sources followed in rapid succession.

 

“Nine to one private to public capital,” Holmes observed. “A favorable ratio.”

 

“Even before recent developments, the people of Chad were among the poorest of Africa, with the bleakest prospects,” said World Bank President Paul Wolfowitz. “Our aim has always been to help the Government improve the basic services Chad’s people desperately require, from HIV/AIDS projects to schools and roads. Suspending aid was a difficult decision but one the Bank had to take given developments that undermined the original agreement to ensure that resources went to benefit the poor people of Chad.”

 

“It was the only action, not just for Chad, but also for the observant herd of other potential World Bank borrowers.”

 

The World Bank built into the loan requirements that much of the money be spent in ways that would benefit the broader population. It claimed that simply by changing the rules surrounding revenue generated from the project,

 

“Simply by changing the rules?” Holmes came as close to a guffaw as Watson had ever heard.

 

Those who do not read the rules can expect to lose the game.

 

“Let her never play Monopoly with brother Mycroft.”

 

and placing it in a London bank account, it could induce the government of Chad and Deby, its corrupt leader, down the path of democracy.

 

“No, it did not,” said Holmes with some asperity. “The bank claimed only –”

Will Holmes ever be able to finish his sentence?

[Continued tomorrow in Part 2.]

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