Chapter

Chapter 9. Cameroon’s Oil Wealth: Transparency Matters

Author(s):
Bernardin Akitoby, and Sharmini Coorey
Published Date:
August 2012
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Author(s)
Bernard Gauthier and Albert Zeufack 

Ample evidence indicates that natural resource revenue is more likely to lead to rent-seeking and corruption in countries that have not developed sufficient quality of governance before the natural resource discovery (Sala-i-Martin and Subramanian, 2003; and Karl, 2007). Cameroon is no exception. With its abundant natural resource base, varied climate, and diverse population, Cameroon has the potential to be one of the richest countries in sub-Saharan Africa. However, like many resource-rich countries, it has suffered from the natural resources curse.

Using recently available data sets on oil production,1Gauthier and Zeufack (2010) estimate the oil rent effectively captured by Cameroon since 1977, the beginning of commercial exploitation, and find that a large proportion was not properly accounted for in the budget. Using the World Bank’s Adjusted Net Saving series, the oil revenue gap is about US$5.9 billion for the 1977–2006 period. Using the national oil company’s (the Société Nationale des Hydrocarbures’s, or the SNH’s) own production data2 as a threshold, the difference between Cameroon’s estimated oil revenue and reported oil revenue during the period is even higher—an impressive US$7 billion, or 35.2 percent, of the estimated total oil revenue that should have accrued to the government has not been accounted for.3

This chapter contrasts Cameroon’s development experience with that of Malaysia, a country with strong commonalities with Cameroon but that has managed to escape the “Dutch disease,” and argues that the lack of transparency and accountability in oil revenue management, including diversion of revenue away from the state budget, has significantly slowed the pace of development in Cameroon over the long run. Although transparency and accountability in the oil sector have improved somewhat during the past 30 years, evidence suggests that much remains to be done. Reforms along the lines of the Natural Resources Charter,4 especially reforms aiming at empowering civil society to hold governments, firms, and capital markets accountable, would be most useful. Specifically, the creation and operation of a truly independent energy regulatory agency, audit court, and anticorruption commission would help improve transparency in the oil sector in Cameroon.

The next section discusses Cameroon’s lackluster development outcomes, contrasting these with the Malaysian experience. The subsequent sections link transparency and development outcomes, contrasting experiences from Malaysia and Cameroon, describe the oil sector in Cameroon and institutional arrangements governing the sector, and review the efforts to improve transparency in collaboration with the international community.

Oil and Development Outcomes in Cameroon and Malaysia: A Comparative Perspective

Cameroon has experienced a stark deterioration in development outcomes despite growing oil exports. To put this situation in perspective, this analysis contrasts Cameroon’s experience with Malaysia, which shares many characteristics with Cameroon but has managed to escape Dutch disease. As highlighted by Collier (2010, p. 93), “Nowadays Malaysia is a highly successful middle-income country; at the time it established the state-owned oil company it was poor and struggling.”

Cameroon and Malaysia are both small, tropical countries, with populations of 19 million and 27 million, respectively. Both countries have multi-ethnic populations and are former colonies, Malaysia gaining independence from the British in 1957, just three years before Cameroon.5 Both countries are rich in natural resources, were agrarian economies in the 1960s, and still export commodities such as palm oil, rubber, and oil.

However, as shown in Figure 9.1, in contrast to Malaysia, Cameroon did not harness its natural resources for sustained growth and development. Although the two countries were very similar at independence, Malaysia’s gross national income (GNI) per capita in constant US$ prices was twice Cameroon’s by 1970 and close to nine times greater in 2010.

Figure 9.1Real GNI per Capita, Cameroon and Malaysia, 1970–2010

Source: World Bank, World Development Indicators.

Note: GNI = gross national income.

Cameroon’s annual GDP growth averaged 5.7 percent between 1972 and 1979, driven by the cocoa and coffee booms. Oil discovery and production began in 1977 (just before the second oil shock, in 1979), leading to a shift in the growth trajectory, with the country growing about 9.4 percent annually between 1977 and 1986. However, this high growth episode was short lived. A drop in the prices of commodities and oil coupled with inadequate policy responses plunged the country into a severe economic crisis. Between 1986 and 1993, GDP contracted by 5 percent per year on average, dropping per capita income in 1993 to half its 1986 level.

The spell of negative growth culminated with the 50 percent devaluation of the Coopération Financière en Afrique Centrale franc in 1994. A set of accompanying measures were implemented, aimed at reforming public finances and the macroeconomic environment, including tax and commercial policies. The country’s positive growth rates resumed in 1995, but have not yet topped 5 percent. The slight rebound observed after the devaluation, mostly driven by a surge in timber exports—and forestry depletion—did not live up to expectations. Growth between 2001 and 2007 was 1 percentage point lower than the 4.5 percent achieved between 1995 and 2000, and Cameroon was poorer in 2007 than it was in 1985 as measured by GNI per capita.

Malaysia, in contrast, posted an impressive growth performance in the 1970s right through the 1990s, raising GNI per capita to upper-middle-income status and reducing the poverty rate to less than 5 percent in 2007 from 50 percent in 1957. This performance was brought about by committed and far-sighted leaders, macroeconomic stability, high rates of saving and investment, market-friendly policies, and openness to the world economy resulting in large inflows of foreign direct investment and economic diversification. In 2008, Malaysia was identified as 1 of only 13 countries in the world to have sustained growth of greater than 7 percent for more than 25 years since World War II (Growth Commission, 2008).6 Although the growth momentum has decelerated since the 1997 Asian financial crisis, and the 2001 bursting of the U.S. dot.com bubble, Malaysia’s real GDP growth still averaged 6 percent during 2003–07, against 9 percent in the 1987–97 period. By 2010, Malaysia had become the third most open economy in the world, with trade at 200 percent of its GDP (Azrai and Zeufack, 2011).

Malaysia diversified its economy and exports. Exports of manufactures in particular increased significantly. In 2009, exports of manufactured goods represented 70 percent of the total value of Malaysian exports compared with only 3 percent in Cameroon. Oil accounted for only about 10 percent of Malaysian exports compared with about 41 percent in Cameroon. Strikingly, by 2009, 45 percent of Malaysia’s total exports were electrical and electronics components and products targeting the U.S. and European markets. About 90 percent of Dell laptops sold in the United States, for instance, were assembled in Penang, an island northwest of peninsular Malaysia.

Infrastructure and other social outcomes also diverge dramatically between Cameroon and Malaysia. By 2009, Malaysia’s road network was about twice the length of Cameroon’s. Most important, 83 percent of roads in Malaysia are paved, but only 8 percent are in Cameroon. Malaysia has an extensive network of highways, including the 1,300-kilometer North-South highway that runs from South Thailand through Malaysia to Singapore. With regard to telecommunications infrastructure, while close to 56 percent of Malaysians have home access to the Internet, this proportion is only 4 percent in Cameroon.

Social and human capital indicators have also deteriorated dramatically in Cameroon since the mid-1980s. Life expectancy dropped to 51 years from 53 between 1991 and 2009. The infant mortality rate steadily increased from 65 per 1,000 live births in 1991 to 84 in 2009, and the chronic child malnutrition rate remained at about 36 percent. During the same period in Malaysia, the infant mortality rate decreased from 16 per 1,000 live births to 6 and life expectancy increased to 74 years from 70.

In 2008, while 100 percent of the Malaysian population had access to a clean water source, more than a quarter of the population of Cameroon was still without access to clean drinking water. Some 96 percent of Malaysians had access to sanitation facilities, whereas less than half of Cameroonians did. In 2007, the poverty headcount ratio was about 40 percent in Cameroon. Malaysia, however, has eliminated hardcore poverty in 50 years of independence. Only 3.6 percent of the Malaysian population was below the poverty line in 2008.

The relatively high maternal mortality rate in Cameroon (600 per 100,000 live births) also carries a rural-poor bias. In 1998, fewer than one-third of women from the poorest quintile (29 percent) had deliveries attended by a medically trained person compared with 90 percent of women from the richest quintile. Also, roughly 60 percent of women from the poorest 20 percent of the population received antenatal care from a trained person compared with close to 100 percent of women from the richest 20 percent.

These economic and social outcomes are not independent of oil revenue management policies implemented in each of the two countries, nor of political institutions.

Political Institutions, Transparency in the Oil Sector, and Development Outcomes

In The Plundered Planet, Paul Collier asks, “Why did Norway and Malaysia succeed where most countries have failed?” His answer: “Both had honest leaders, and both had a cadre of public officials with a sense of national purpose” (Collier, 2010, pp. 93–94). Indeed, political leadership is fundamental to ensuring any successful development outcome. Most important, the relationship between oil and the economy cannot be understood outside the political economy realm.

Malaysia’s successful diversification, for instance, was helped tremendously by political institutions, especially federalism,7 and a robust democratic system in the 1960s and 1970s that forced the multiple political parties to compete for solutions to voters’ main problem: unemployment. The electronics industry was introduced in Malaysia by the visionary Chief Minister of Penang State, the late Tun Dr. Lim Chong Eu, to tackle rising unemployment following Penang’s loss of free-port status. He created Malaysia’s first free trade zone in 1971 and aggressively recruited American and Japanese electronics firms to Penang. This example was subsequently replicated in other parts of Malaysia, especially in Greater Kuala Lumpur (Klang Valley) and in the southern state of Johor, bordering Singapore.8 This institutional setting contrasts starkly with Cameroon, where most political powers are centralized at the national level.

Malaysia and Cameroon also have divergent institutional settings and strategies for oil revenue management. Both countries created national oil companies (Petronas in Malaysia in 1974 and the SNH in Cameroon in 1980), but their mandates were very different, and it is not surprising that they evolved in completely opposite directions. While Petronas was given a central role in production and in negotiation of technology transfer from multinationals, the SNH was created to manage the country’s interests in the oil sector and has therefore remained distant from direct production. As a consequence, in less than four decades, Petronas has built enough know-how to venture abroad and become a large, multinational, Fortune 500 company, successfully competing against all the other giants around the world and especially in Africa.

One of the striking differences between these two countries is transparency in the oil sector. In contrast to Cameroon, information on the breakdown and time series of Malaysian federal government revenue from the oil sector is publicly available. Oil and gas revenue collected by the Malaysian federal government increased from US$154 million (7.8 percent of GDP) in 1975 to about US$16.1 billion (37.8 percent of GDP) in 2007 (Yusof, 2011). Data on direct taxes on oil and gas companies, indirect taxes (export duties on petroleum-related products), dividends from Petronas to the federal government, and royalties are published. Petronas’ profits are also published, even though it is not a publicly listed company. Access to information empowers civil society and enforces accountability. Petronas’ yearly contributions to the Malaysian federal budget are discussed at length in parliament and published.

Transparency in oil revenue management has allowed the oil sector to become a central piece of Malaysia’s economic policy and development. Petronas’ rising profits were tracked and guided the design of the dividends policy. Dividends paid to the federal government by Petronas rose from US$374.5 million in 1985 to US$7 billion in 2007 (51.7 percent of the company’s 2007 profits). These transfers were used to finance Malaysia’s impressive social and physical infrastructure while keeping the budget deficit and debt in check. In stark contrast, because of the lack of transparency in Cameroon, the oil sector has remained an enclave and has not been engaged systematically in the medium- to long-term development planning for the country.

Transparency is also critical in defining the rights of states and regions that produce oil. In Malaysia, the allocation rule between the oil-producing states and the federal government is publicly discussed and the states have the right to sue the federal government in case of wrongdoing. In Cameroon, this question is not publicly discussed. Transparency provides legal ways to voice concerns, an alternative to rebellion.

The next section argues that the institutional arrangements governing the oil sector in Cameroon are confusing and complex, thus leading to nontransparency and a lack of accountability.

Institutional Arrangements in the Oil Sector in Cameroon

Cameroon is a small oil producer on the world scene. It is also the smallest producer in Africa, far behind Nigeria, Africa’s largest oil producer, with about 4 percent of its northern neighbor’s oil output. Cameroon’s proven oil reserves are also relatively small, estimated at about 540 million barrels, with an additional 960 million barrels of probable oil reserves (IMF, 2007).9

Despite being small by world standards, the oil sector plays a major role in production, exports, and government revenue in Cameroon. In 2009, the share of oil in total GDP was 4.8 percent, down from close to 30 percent at the peak of the oil boom in 1985. Crude oil products are the country’s main export, representing more than 41 percent of export revenue in 2009 (down from close to 80 percent in 1985), and far outweighing timber and wood products. The government’s revenue base is dominated by oil, which accounted for 26 percent of government revenue in 2009, down from almost 48 percent in 1985.10

Main Actors

Oil exploration and production in Cameroon are carried out by international oil companies (IOCs), in a joint venture agreement (accord d’association) with the state, represented by the SNH. The SNH was created in 1980 as an autonomous public corporation, with a mandate to act as the government’s holding company for participation in joint ventures in the oil sector. It has overall responsibility for management of the sector, in behalf of the government. Its mandate includes (i) management of state interests in the oil sector; (ii) promotion, development, and monitoring of oil activities throughout the national territory; and (iii) commercialization of Cameroon’s share of crude oil production (SNH, 2008).

While the SNH plays a vital role in the oil sector as regulator and joint-venture associate in all oil activities, two line ministries share some responsibilities over the sector: the Ministry of Energy and Water and the Ministry of Industry, Mines, and Technological Development, which is responsible for the issuance of mining titles for the extraction of oil. Responsibilities overlap between the two line ministries and other public agencies in the oil sector11 (World Bank, 2006). Notably, the delimitation between the SNH as a regulatory agency and as the party to an oil contract is insignificant. This lack of clarity leads to a very complex and quasi-opaque web of financial flows as shown in Figure 9.2.

Figure 9.2Cameroon’s Oil Sector Financial Flows

Institutional Arrangements

Until the adoption of the oil code in 1999, activities in the sector were governed by the 1964 Mining Law (Loi 64-LF-3) supplemented by the 1978 Law (Loi 78-14). Under that regime, oil taxation in Cameroon was based on a complex hybrid system combining production sharing and taxation as well as a guaranteed mining rent. State involvement in the oil sector took the form of a compulsory 20 percent SNH equity participation in the operating IOCs and a 50 percent share in joint venture arrangements with the same operators. This resulted in a 60 percent SNH equity share in all oil activities. In addition to the obligation to conclude production-sharing arrangements in accordance with the 1978 law, each IOC had to conclude a Convention of Establishment (convention d’établissement), part of the Investment Code that defined fiscal provisions.

The Oil Code (Loi 99/013) adopted in 1999 sought to simplify the legislative and fiscal environment for IOCs, improve the incentive environment for exploration and extraction, and attract new investments in the sector (Extractive Industries Transparency Initiative [EITI] Cameroon, 2007). The code defines two types of contracts between which firms are free to choose: the concession contract and the production-sharing contract (Cameroon National Assembly, 1999). Despite the fact that several contracts have been signed under the new Oil Code, the two systems still coexist. In addition to a share of physical production, IOCs transfer to the SNH dividends as well as a series of taxes.12 In turn, the SNH is expected to remit to the treasury these payments as well as its benefits from oil sales and its own required fiscal contributions.

The level of government revenue from oil production depends on the specific conditions agreed on between the SNH and the private IOCs, as defined in the production-sharing arrangements. The oil take also depends on production and transport costs. In Cameroon, a large share of the fixed costs is now amortized and transportation costs from off-shore platforms are low. The oil revenue accruing to the government is thus quite high relative to other oil-producing countries and amounts roughly to 67–70 percent of the value of oil exports (EITI Cameroon, 2007; and World Bank, 2006).

Oil Revenue Transparency and the Role of Donors

This section reviews the evolution of transparency in the management of oil revenue in Cameroon and the role played by the international community in promoting better governance in the sector. Secrecy has been the norm in the oil sector in Cameroon. Although the government has gradually provided more transparency over time in collaboration with donors, the situation is still far from full transparency and accountability.

To analyze the evolution of transparency in the oil sector, the last three decades are segmented into five main periods.

First Period: 1977–79, Opaqueness of Oil Revenue Management

When oil was discovered off the west coast of Cameroon and commercial production began in 1977, no specific state structure existed to regulate the sector or the relationship with IOCs. Responsibility for management of the sector, relationships with oil companies, and the use of oil revenue were directly assumed by the presidency. Full secrecy surrounded contractual arrangements with IOCs, and public oil revenue was deposited in accounts that were not transparently reported in the budget.13 Various authors have speculated about the destination of the oil revenue. Benjamin and Devarajan (1986) support the view that they were deposited outside the Cameroonian banking system, probably in U.S. banks. How much revenue accrued to these secret foreign accounts, and the uses to which they were put, have never been established.

Second Period: 1980–86, Creation of the National Oil Company and Continued Opaqueness of Revenue Management

In 1980, the SNH was created to assume responsibility for the oil sector, in particular to oversee the relationships with IOCs and manage oil revenue. Despite the creation of this public corporation, the presidency did not abandon control over the sector. The SNH was placed under its direct authority with the SNH administrative board headed by the General Secretary of the Presidency and the SNH president appointed by the country’s president. Furthermore, the creation of the SNH did not diminish the opaqueness surrounding oil revenue. As during the first period, oil revenue transferred by IOCs or derived from SNH direct oil sales was deposited in bank accounts that were still not reported transparently in the budget (DeLancey, 1989).

Citizens had virtually no information on the level or use of oil revenue. Indeed, during the economic upturn that accompanied the oil boom, very little information openly circulated in the country about oil sector activities.

The population was also repeatedly told that the country’s oil reserves were very limited and would, at best, last a decade. These beliefs helped contain public spending pressures and reduce expectations about the importance of the oil bonanza, along with the need for public scrutiny. World Bank reports during the period conveyed the same message about oil revenue’s limited and transitory nature: “Proven oil reserves are expected to be exhausted within the next ten years, if not sooner …” (World Bank, 1987, p. i).

Third Period: 1987–90, Reporting of Oil Revenue in “Off-Budget Accounts”

With activation of the first IMF stand-by agreement in 1988 and the first World Bank structural adjustment loan in 1989, oil revenue appeared for the first time in the state’s finance law. Oil revenue transfers under the heading Redevance pétrolières were reported as an off-budget account in the budget for the first time in 1987. This also led to more external scrutiny and estimates of Cameroonian oil revenue.

Fourth Period: 1991–99, More Transparency through “Partial SNH Audits”

Another milestone in oil revenue transparency was reached in 1991, the year of Cameroon’s second stand-by agreement with the IMF. For the first time, some components of SNH activities were partially audited. That same year, the World Bank advised the authorities to (i) elaborate oil sector regulation and fiscal code distinct from the mining law, (ii) simplify contractual and legal arrangements in the sector, and (iii) redefine the role of the SNH.

A decade after the first adjustment program was launched, a new generation of reforms was put forward. The IMF- and World Bank–supported reform program included measures dealing with governance and corruption issues, in particular (i) improvement of public finances and expenditure management, (ii) greater transparency in the management of public affairs, and (iii) anticorruption efforts.

Despite progress in transparency, challenges remained. As a reminder, Transparency International’s Corruption Perceptions Index ranked Cameroon as the most corrupt country two years in a row.

Fifth Period: 2000–Present, Improved Transparency through the Heavily Indebted Poor Countries and Extractive Industry Transparency Initiatives

The beginning of a new stage of oil revenue transparency can be pegged to 2000. The satisfactory completion of the 1997–2000 IMF lending program made Cameroon eligible for the Heavily Indebted Poor Countries (HIPC) facility, which would ultimately erase most of Cameroon’s external public debt.

In exchange for debt alleviation, the government launched a new round of reforms to fight corruption and poor governance, and improve accountability and transparency, particularly in the oil sector (IMF, 2000). Specifically, the government adopted a five-year National Governance Program (Programme National de Gouvernance), which was among the conditions for reaching the HIPC completion point. The program aimed at fighting corruption; strengthening public financial management, transparency, accountability, and civil participation in public affairs; and improving justice and human rights.

Despite the implementation challenges that caused it to fall behind the initial timeline for HIPC completion, the government of Cameroon adopted a second National Governance Program in 2005 to prove its sustained commitment to good governance. Furthermore, in March 2005, in collaboration with donors, it announced its intention to join the EITI to signal its determination to improve governance in the oil sector. Finally, in 2006, the Bretton Woods institutions concluded that Cameroon had made sufficient progress in its reforms to reach the HIPC completion point.

Cameroon’s Commitments versus Actual Governance Reforms

The government has made enthusiastic commitments to carry out governance reforms during the past 20 years, but with relatively modest results. For instance, in 2011 Cameroon still ranked 134 out of 182 countries on Transparency International’s Corruption Perceptions Index with a score of 2.5 on a scale of 0 to 10.14 In its September 2011 Article IV Consultation Report on Cameroon, the IMF states “Cameroon’s competitiveness remains clearly hampered by structural obstacles, mostly related to a weak business environment, corruption [emphasis added], and high costs of services” (IMF, 2011, p. 43).

The overall state of governance in Cameroon is still considered poor according to most indexes of governance quality. For instance, in 2010, according to the World Bank’s World Governance Indicators, Cameroon ranked in the bottom quintile of countries for all six dimensions of governance, except political stability and regulatory quality, where it was in the bottom fourth (World Bank, 2011). It ranks below other middle-income and other African countries on all dimensions. Indexes of budget transparency also indicate opacity and poor governance in the country. The Open Budget Index of the International Budget Partnership, which evaluates clarity, scope, and availability of documents on public spending, found that Cameroon, with a score of 2 percent, is among the worst performers for meeting basic standards of transparency and accountability, ranking among the bottom 5 percent of the 94 countries surveyed in 2010 (IBP, 2010).15

When institutional reforms have taken place, they have been slowly enacted, and when put in practice, were often relatively inefficient at promoting better governance. For instance, in January 1996 the government announced the creation of an audit chamber (Cour des Comptes) to oversee external audits of government financial operations. The law creating the chamber, however, was not adopted until seven years later (World Bank, 2006), and the chamber became partly operational only in 2006. In 2010, only 19 magistrates were involved in reviewing government accounts, without the help of assistants and having access to a very limited share of government documents (IMF, 2010).

A government plan to fight corruption was put forward in 1999 with the creation of a National Observatory. It later became the National Anti-Corruption Commission (Commission Nationale Anti-Corruption, or CONAC) in 2006. However, the commission lacks independence, as argued by van Hulten (2008b). Another example of ineffective institutions is the 2006 law prescribing that all high-level government officials, from the president down to the director level, must declare their assets at the beginning and end of terms of office. However, the commission that was expected to enforce the law was never created.

The relative inefficiency of institutional reform in Cameroon is probably best exemplified by the SNH’s cash payment of off-budget expenditures. Donors’ documents frequently mention the problem of direct SNH payments, and calls for closing this tap became a recurring theme over the years. As early as 1991, this objective was put forward in World Bank– and IMF-supported programs as a required reform in the oil sector. Nearly 10 years later, the HIPC decision point document announced that these payments had stopped as a result of the efficiency of the reforms put in place. However, during the following years, some SNH direct payments of off-budget expenditures continued (Cossé, 2006; IMF, 2007; and Dynamique Citoyenne, 2008).

Because of the slow pace of anticorruption and governance reform, a group of six bilateral donors supported by the United Nations Development Programme decided to put together a special anticorruption program, Change Habits, Oppose Corruption, to investigate the situation,—including the inefficiency of CONAC—and to propose improvements. Its first main report, published in June 2008, Change Habits, Oppose Corruption, headed by Dr. van Hulten—a former United Nations Development Programme staff member, a former senator, and member of the house and State Secretary for Transport in the Netherlands—casts serious doubt on CONAC’s capacity to perform its mandate, given its lack of independence from the presidency, and concludes that neither the government nor many donors showed sufficient willingness to fight, let alone to eradicate, corruption (van Hulten, 2008, 2010). The report attributes a direct role to oil and forestry companies in exacerbating corruption and further mentions that “national and expatriate companies fuel the corruption to maintain their position in the world markets (petrol, wood)” (van Hulten, 2008a, p. 1).

Cameroon is currently a candidate country to EITI. To implement the disclosure process part of the initiative, an independent conciliator began in 2006 to collect and reconcile data on petroleum production, payments made by the oil companies to the government, and the corresponding receipts by the government for the period 2001–04, 2005, and 2006–08. In October 2010, the EITI board estimated that sufficient progress had been made by Cameroon in implementing IETI criteria (14 out of 18 criteria met), and the country was declared “close to conformity.” To achieve “compliant” status, the country has been asked by the EITI Board to meet various requirements, including producing reconciliation oil reports for 2009 and 2010. In February 2012, the EITI Board granted Cameroon a final 18-month extension to complete the validation process. If the country has not achieved the “compliant status” by August 15, 2013, it will be de-listed from EITI (EITI, 2012). Despite this progress in transparency in the oil sector, Cameroon still has a long way to go to reach the standards of other middle-income countries with regard to public management transparency and accountability.

Conclusion

Cameroon, potentially one of the richest countries in sub-Saharan Africa, has become another example of the natural resources curse. Building on Gauthier and Zeufack (2010, 2011), this chapter contrasts Cameroon’s development experience with that of Malaysia and argues that the lack of transparency and accountability in oil revenue management has significantly slowed the pace of development in Cameroon over the long run. The many efforts of the international community to help the authorities promote transparency in the oil sector in the country have yielded limited results. Clearly, these efforts have not been enough to fully integrate the oil sector with economic policymaking in the country. More needs to be done to engage the oil sector systematically in the medium- to long-term planning of Cameroon’s development, along the lines of the Natural Resources Charter developed under the direction of Paul Collier and Anthony Venables of Oxford University. Precept 11 of the charter, which deals with transparency, recommends that countries “develop benchmarks, checklists and metrics to empower civil society in holding governments, firms and capital markets accountable” (Natural Resource Charter, http://www.naturalresourcecharter.org/). This reform, combined with the creation and operation—beyond the symbolic level—of a truly independent energy regulatory agency, audit court, and anticorruption commission, is most needed to improve transparency in the oil sector in Cameroon.

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    YusofZ.A.The Developmental State: Malaysia,” in Plundered Nations? Successes and Failures in Natural Resource Extractioned. byPaulCollier and TonyVenables (London: Palgrave Macmillan).

This chapter draws heavily on a companion paper, “Governance and Oil Revenues in Cameroon,” in Collier and Venables, eds. (2011)Plundered Nations? Successes and Failures in Natural Resource Extraction, written as part of a project funded by the Revenue Watch Institute, which acknowledges the support of the Bill and Melinda Gates Foundation. The authors are particularly grateful to Paul Collier, Rick van der Ploeg, and Anthony Venables from Oxford University for valuable comments. They also thank Luc Désiré Omgba for research assistance and numerous staff from the World Bank for helpful discussions. The authors are indebted to the numerous people from civil society for sharing their invaluable insights during field visits in Cameroon.

To estimate the oil revenue accruing to the country since the beginning of oil production, Gauthier and Zeufack (2010, 2011) make use of production data released by the World Bank’s Adjusted Net Saving project. This project estimates natural resource rents for a large number of countries, including Cameroon. The data set includes production data, prices, and costs over time. The Adjusted Net Saving production data are obtained from different independent sources, in particular British Petroleum’s “Statistical Review of World Energy” (various years); the International Energy Agency; International Petroleum Encyclopedia, 2001; and the United Nations “Monthly Bulletin of Statistics.” This data set has been used in empirical studies of the effects of natural resources revenue (e.g., Collier and Hoeffler, 2005).

Oil production data was released by the SNH in 2008 as part of the Extractive Industries Transparency Initiative in Cameroon. These data comprise yearly physical production levels for the past three decades (Tamfu, 2008). The official data also comprise the country’s official budgetary data, part of the finance laws that present official oil revenue for most years during the period.

Using 2008 data, Gauthier and Zeufack found a gap of US$10.7 billion or 46 percent of total oil revenue.

The Natural Resource Charter is a set of principles for governments and societies on how best to harness the opportunities created by natural resources for development. (See http://www.naturalresourcecharter.org/.)

Cameroon, a German colony, was divided after World War I into West and East Cameroon, administered by the British and the French, respectively, with a mandate from the League of Nations. East Cameroon acceded to independence on January 1, 1960, and West Cameroon became independent on October 1, 1961. The two Cameroons reunited on May 20, 1972.

The 13 countries identified by the commission, chaired by Nobel Laureate in economics Michael Spence, included Botswana, Brazil, China, Hong Kong Special Administrative Region, Indonesia, Japan, the Republic of Korea, Malaysia, Malta, Oman, Singapore, Taiwan Province of China, and Thailand.

Malaysia is a federation, divided into 13 states and three federal territories. The 13 states are managed by elected chief ministers. Chief ministers enjoy considerable power, especially in economic policy. There is a clear delineation of powers between the federal, state, and local authorities.

By 2009, Penang was home to more than 200 multinational companies and remained one of the 10 most successful industrial clusters in the world (United Nations Industrial Development Organization, 2009).

However, with the retrocession to Cameroon of the potentially oil- and gas-rich Bakassi peninsula by Nigeria in August 2008, new explorations have been registered and discoveries are expected to boost the Cameroon’s reserves considerably (Economist Intelligence Unit, 2008).

In 2008, oil share of total GDP was 7.6 percent and oil accounted for 37 percent of government revenue (IMF, 2011).

Other public agencies include the Société Nationale de Raffinage (the national refinery) and the Société Camerounaise de Depots Petroliers (the national petroleum storage company).

These include taxes on profits, the proportional mining royalties, flat fees, land royalties, and royalties proportionate to production (EITI Cameroon, 2007).

DeLancey (1989) called these accounts “secret accounts.”

Cameroon was ranked the most corrupt country in the world twice in the last 20 years by Transparency International—85 out of 85 countries in 1998, and 98 out of 98 countries in 1999.

Civil liberties and political rights, two fundamental components of democratic life and good governance, are also perceived as severely deficient in the country. According to the Freedom House index, which has evaluated the state of civil liberties and political rights around the world since 1973, Cameroon ranks very near the bottom. The overall ranking of countries along this index classifies countries as “free,” “partly free,” and “non-free.” Whereas before 1977 Cameroon was classified as partly free, the first year of oil production was marked by a worsening of civil liberties and political rights. Since that year, the country has been classified as non-free, a non-enviable status it has kept for the last 30 years (Freedom House, 2011).

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