Today's Challenges on the Chad-Cameroon Pipeline

	Ali Khadr, World Bank Country Director for Chad
		Country Background
		Chad is one of the poorest countries in the world, where 80 percent of the population (some 6 million people) gets by on less than $1 a day. Infant mortality is high, access to basic social services is limited and nutrition is extremely poor. As a result, each year 60,000 children die before they turn five. The country's opportunities for growth are limited: The country lacks a skilled workforce, economic base is low, and some 90% of the land is a desert.
		Projected Earnings
		Oil revenues are expected to amount to about US$110 million in 2004. According to estimates, about US$64 million will be spent on priority sectors for poverty reduction such as infrastructure, education, health and social affairs, rural development, including agriculture and livestock, and environment and water resources. Half of the revenue, US$38 million, will be used to construct roads. Detailed information --> Oil production and revenues should bring the overall rate of growth of Chad's national income to about 31 percent in 2004, according to the latest estimates. Double-digit growth in national income is expected in 2005. Detailed information -->
		Program Investments
		• Building of two road sections (one in the North, the other in the South) to improve commerce and travel • Constructing and providing equipment for three nursing schools and ten health centers • Constructing some 130 classrooms around the country, providing desks and textbooks, and recruiting 900 new teachers. Chad has one of the world's most acute shortages of primary teachers.

The Chad-Cameroon oil pipeline gives Chad an opportunity to reduce rampant poverty and improve living conditions by using oil revenues to fund development (social) projects.

The 1070 km pipeline has been in operation since July 2003, when oil began flowing from the fields at Doba in Chad to Kribi, Cameroon.

Oil revenue began to accumulate in the Chadian Government's escrow account at Citibank in London. The first payment, US$32 million was transferred to Chad in July 2004, and a second transfer of $24.8 million came in August.

Now, the central challenge is how to efficiently and transparently use these oil revenues to finance key development projects identified in Chad's poverty reduction strategy, such as building roads and water supply, and improving education, health and welfare services.

Ali Mahmoud Khadr, Country Director for Chad, talks about this challenge and the immediate impact of the project.

What is the capacity of the Chadian government, and the other institutions in the country, to bring this whole program to fruition?

The premise that underlies this project and the associated oil revenue management program was not that the World Bank Group or any other donors would come in and take oil money and manage it on behalf of the Chadians. The premise was always, we're not going to fish for them; we're going to teach them how to fish. I think that's very important. That is a much more difficult process-the country beginning to put together its own institutional arrangements; beginning to put together structures that are staffed by its own people; to take all of this onboard and make it work.

I think we've gone through a phase over the past three years where the predominant challenge was one of putting together the relevant structures and institutional arrangements for the oil revenue management. This includes the multitude of accounts and different agreements that actually make the money flow all the way from the Consortium (of oil companies), through the escrow account in London; then through commercial banks in Chad to the regional Central Bank; back through accounts held by the Chadian Treasury in local commercial banks, from where it is spent on the allowed items.

There was a pre-existing system for spending public money. But there are now a lot of transparency arrangements that are relatively new to Chad. There is a new procurement code that has been put together and approved. The Chadians are now working on putting together things like standard bidding documents and the detailed implementation arrangements. It's a huge task. Another one was establishing the Petroleum Revenue Oversight Committee, known as the College de Controle et de Surveillance. Three or four years ago it was just a glint in somebody's eye. Now it's operating-with a staff, equipment, and brand new premises in N'Djamena.

Today, Chad is ready now to turn to a capacity-building phase-to think about what skills, knowledge, and incentives people who work within the institutions need in order to function. The Bank is assisting with formal training, on-the-job learning and technical assistance. It hasn't been easy, and there is frequent criticism that capacity-building has lagged behind the physical aspects of the project. But this is different from what Exxon was doing in terms of physical construction. The Chadians are in the driver's seat here; the Chadians are the ones who have to go through contracting procedures, the disbursement application procedures, and so forth. The country is trying to build know-how and new ways of doing things.

So, when can Chadians expect to benefit from the revenues emerging from the oil pipeline?

Now is the time when the oil money would actually begin to find its way to some uses that have direct impact on the people. Under the Petroleum Revenue Management program, approximately 85% of the direct revenues-this is royalties and dividends-will be used for what we call priority poverty-reduction. Therefore, sectors typically associated with basic services for the population will receive attention first: education, health care, infrastructure, including roads, and rural development-meaning agriculture, livestock, water and environment. These are the priority sectors as laid out in Chad's revenue management law, which was passed by the Chadian parliament. Oil revenue-driven projects planned for this year include constructing stretches of trunk road to augment Chad's very sparse road network; providing health centers with medicine and equipment; building new, well-supplied classrooms; and establishing well-run orphanages.

What is the biggest challenge that you're facing in working with your partners in Chad in this revenue management phase of the program?

Over the construction period, I think, the biggest challenge was to demonstrate that a huge infrastructure investment of this kind, largely driven by private capital, could actually be undertaken responsibly, observing environmental, social, and technical safeguards.

The key challenge now is the revenue management-translating these oil revenues into concrete projects that benefit people, and most of all, the less well-off people. This is one of the world's poorest countries, with an average life expectancy of less than 50 years. A huge proportion of the population is illiterate, with no healthcare access; dying of diseases that are basically curable; and no access to clean water and sanitation. We need to be realistic about what can be done, over what timeframe. We need to focus on concrete results that materialize gradually over time-people with access to more and better roads; more and better sources of clean water; more and better equipped health centers; more and better schools.

Visit the Chad-Cameroon oil pipeline official web site for more information.