World Bank Bets on Chad and Loses

This story isn't getting much play in the US media, but it's been on the radar of World Bank watchers for a while:

BBC NEWS | Business | World Bank warns Chad on oil law: "The World Bank has warned that it could take action against Chad after the country's parliament changed a law governing the use of oil revenues.

World Bank President Paul Wolfowitz said the law was a deciding factor in the bank's financial support for a massive oil pipeline project in 1999.

It guaranteed that oil revenues were used to help reduce poverty in Chad.

The new legislation gives the Chadian government more control over how it uses the money.

It abolishes what was known as the "future generations fund", which had kept 10% of the country's oil revenues for use in tackling poverty in Chad.

The government wants to use the $36m (£21m) held in the fund to deal with some of the country's financial problems, which include months of unpaid salaries."

That's not the only thing the government wants to use the money for. According to a BBC report I heard on the radio last night, the government's security forces -- which have been locked for years in a quiet and brutal struggle with rebellious groups in the country's south -- will assume "priority" status for funding alongside health and education under the new legislation. This was emphatically not the deal that the Bank signed onto.

We can all hope for a forceful response from the World Bank, but the history of this particular deal gives little reason to expect one. The Bank proceeded with this project despite Chad's use of its "signing bonus" to purchase arms, and despite Deby's imprisonment and persecution of his political opponents in the 1999 "elections." It should have been starkly clear at that point that Deby's government was not to be trusted and that the oil revenues were unlikely to bring real benefits to the impoverished people of Chad. But with multinational profits, a major oil reserve, and no doubt plenty of Bank careers in the balance, the Bank failed to act on the obvious when it had the most leverage.

How the Bank responds in these circumstances may be the first high-profile evidence of Wolfowitz's leadership style and his approach to difficult political-economic development issues. Stay tuned for more news.