Combating the Resource Curse in South Sudan
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2015 Cursed by Resources: Can Transparency Lift the Spell? Combating the Resource Curse in South Sudan SUZANNE SMEETS RADBOUD UNIVERSITY NIJMEGEN 30-10-2015 Cursed by Resources: Can Transparency Lift the Spell? Combating the Resource Curse in South Sudan To what extent can external actors help to compensate for weak domestic institutions in order to combat the resource curse? Suzanne Smeets S0820393 Master thesis Human Geography: Conflicts, Territories and Identities Radboud University Nijmegen Supervisor: Dr. H.J. (Haley) Swedlund Nijmegen, October 2015 ABSTRACT Globally there are many examples of countries that have deteriorated economically after the discovery of large amounts of natural resources. These countries show a backlog in economic growth, tend to be less democratic and prone to corruption and conflict. This phenomenon is widely known as the resource curse. Yet, the resource curse does not strike everywhere; multiple states like Norway and Botswana have managed to escape. The fact that they succeeded in turning their resources into a blessing is mainly due to the presence of strong institutions. Countries that have weak institutions are ultimately trapped and are often not capable of dealing with the complex problems related to resource abundance on their own. Therefore, this study focuses on finding out to what extent external actors can help to compensate for weak domestic institutions in order to combat the resource curse. It does so by examining if the Extractive Industries Transparency Initiative (EITI) can play a role in assisting resource-rich South Sudan. The EITI is an upcoming transparency and accountability initiative that promotes revenue transparency in resource-rich countries whereby it aims to increase accountability in extractive industries and reduce the room for corruption. This is desperately needed in South Sudan as the country is highly dependent on oil for its income and corruption is widespread. However, apart from initial signs of interest the current government lacks commitment to proceed with the EITI implementation process. If it would ever come to implementation, EITI’s possible impact is likely to be limited by the lack of capacity within the government and the low quality of civil society. The international community is ready to build capacity but this will take a long time and it is doubtful whether foreign efforts to build capacity will be very effective. The neo-patrimonial system of governance in South Sudan namely reduces most external efforts to treating symptoms while the broader corrupt political system is left untouched. EITI could improve the management of the oil sector by creating a more open climate but won’t be able to address political instability, poor commitment and weak rule of law. Moreover, the initiative might at best mitigate some of South Sudan’s resource curse related problems; most are far too big for the EITI to solve. In general, external help to avert the curse can only be effective in the right political environment. Potential impact is restricted in countries that lack strong institutions because corruption commonly serves the interests of the elites and is rather a part instead of a defect of the system. International initiatives can help to replace certain institutional components but they cannot change a corrupt system. Hence, this study concludes that external actors can only help to compensate for weak domestic institutions to a limited extent. ii PREFACE While South Sudan faced ongoing conflict the past 22 months, I encountered my own struggle. That is at least how it felt. Writing my thesis was a long and difficult process. Although it often felt like there was no end in sight, there was not a moment that I no longer believed in a favourable outcome. Of course I doubted the relevance of the subject matter, the quality of my research and my disciplinary skills at times but my passion for my topic kept me going. It was a great pleasure to delve into the issue of the resource curse, to conduct research and to write. This process has definitely increased my interest for development issues even further. Being an anthropologist I regret not doing fieldwork but I have done an extremely interesting internship instead. During my internship at the Dutch Ministry of Foreign Affairs I have met many inspiring people, have enlarged my knowledge of development cooperation and was able to peek into the world of diplomacy. In general, I have learned and have grown a lot in the past year and I hope to continue to do so in the future. I will certainly never stop broaden my horizons by exploring different places, meeting new people and taking on challenges. Although my education made me more pessimistic or perhaps more realistic about development cooperation, I will always remain somewhat idealistic and will continue to strive for a fairer world. Hopefully this paper can contribute to this by evaluating how natural resource abundance can be used to the benefit of the people. Writing this thesis would never have been possible without the help of others. There are many people to whom I owe my gratitude for their support, guidance and patience. First of all, I want to thank my informants who were willing to free up time and share their knowledge. I also want to express my appreciation to my thesis supervisor Haley Swedlund, whose constructive comments were essential for ensuring the quality of this study. Thank you for never losing faith, helping me back on track when I got stuck and reminding me to remain critical. My internship supervisor, Hans Teunissen, I like to thank for being a great mentor. Just as my colleagues for what you taught me and my fellow interns for the great company you were. Not in the least, I want to thank my parents Femmy and Loe for their assistance and unrestricted confidence and my sister Iris for being the best; your intelligence, believes and lifestyle are inspiring. Likewise, I won’t forget to thank my friends for always being there for me by offering good advice and much needed distraction. Avalon, Tarja, Thijs, Nick. Elwin en Jelle, I cherish the countless memorable moments we have experienced together. Suzanne, Adrianne, Moniek and Eva, thanks a lot of all the joy and sorrow we have shared over dinner and drinks. Last but not least, I like to thank my boyfriend Stephan. To you I’m by far the most indebted; so where to begin? I’m very grateful for your vast belief in my abilities, enormous support and unconditional love. I must have driven you mad a thousand times but you never got impatient, even when I turned our living room into my study area. Your ambition and positive attitude have been a great inspiration and you are probably even happier with the writing process coming to an end then I am. I want to end this preface by emphasizing that any remaining errors, deficiencies or inaccuracies in this thesis are my sole responsibility. You can contact me for any kind of questions or comments regarding my paper. I hope you will enjoy reading it. iii ABBREVIATIONS bpd barrels per day CNPC China National Petroleum Corporation CPA Comprehensive Peace Agreement CSO Civil Society Organisation DfID Department for International Development (UK) DPOC Dar Petroleum Operating Company EITI Extractive Industries Transparency Initiative EU European Union GNPOC Greater Nile Petroleum Operating Company GoSS Government of South Sudan HRW Human Rights Watch ICG International Crisis Group IGAD Intergovernmental Authority on Development (of East-African countries) IGO Intergovernmental organisation IMF International Monetary Fund MSG Multi-Stakeholder Group NCP National Congress Party (of Omar al-Bashir, president of Sudan). NEITI Nigeria Extractive Industries Transparency Initiative NPGC National Petroleum and Gas Commission NGO Non-governmental organisation ONGC Oil and Natural Gas Corporation (India) PWYP Publish What You Pay SPLA Sudan People's Liberation Army SPLM Sudan People's Liberation Movement SPOC Sudd Petroleum Operating Company TAIs Transparency and Accountability Initiatives UN United Nations UNMISS United Nations Mission in South Sudan iv LIST OF TABLES AND FIGURES Figure 1: Natural resources and conflict risk in low-income countries ...... 9 Figure 2: The EITI Standard ....................................................................... 16 Figure 3: EITI Validation deadlines ............................................................ 18 Figure 4: Map of border region Sudan and South Sudan ............................ 30 Figure 5: Sudan and South Sudan Oil Map ................................................. 35 Table 1: Main oil companies in South Sudan ............................................. 36 Chart 1: Revenue distribution as proposed in the Petroleum Revenue Management Bill ......................................................................................... 39 v TABLE OF CONTENT ABSTRACT ................................................................................................ ii PREFACE ................................................................................................... iii ABBREVIATIONS ..................................................................................... iv LIST OF TABLES AND FIGURES ........................................................... v TABLES OF CONTENT ............................................................................ vi Chapter 1: Introduction ........................................................................... 1 1.1 The problem: the resource curse ...............................................