12 February 2013

Uganda: Oil Debate Must Move Beyond Politics - Report

Uganda has built up considerable technical knowledge in the preliminary phases of oil development, a new oil report has noted.

This underscores the long-term efforts of President Yoweri Museveni to building strong individual and institutional capacity to manage Uganda's nascent oil and gas sector.

The report, "Oil in Uganda: International lessons for success," authored by the Royal Institute of International Affairs, however, noted that the management of the oil sector is set to change with oil-related legislation currently before Parliament or just passed.

"These changes bring risks that the role of Uganda's technocrat will be confused, overshadowed by the involvement of political actors or subverted," the report predicts.

"In Norway responsibility for management of the oil sector is split between a national oil company, a petroleum authority and the government. It is the model that Uganda seems set to follow."

The report warns that while the checks and balances built into such a system are positive, the complexity of setting up such an institutionally heavy system risks confusion over roles and expense.

It recommends that it will be important for Uganda to monitor the effectiveness of its systems carefully, to ensure that expert voices are not drawn out.

The report notes that the process of rebuilding Uganda's politics and society after years of war and misgovernment was driven by the National Resistance Movement, and the Government has achieved a transformation of the country, including economic and social stability.

However, challenges remain, especially the need for confident and well-respected social voices to emerge that are able to rise above the short-term political imperatives that are normal in any democracy and instead offer a longer-term, nuanced view, the report says.

"Though there are long-established social actors in Uganda, from churches to traditional kingdoms and NGOs, they are sometimes controversial and potentially divisive. Uganda's private sector, though growing, remains nascent."

The report adds that one of the biggest challenges in coming years will be ensuring that strong social actors emerge.

"They should not be considered as acting in opposition to government, which will remain the task of political parties, but instead be able to articulate alternative views and perspectives on the overall direction of the country."

Notably, according to the report, this is likely to demand the emergence of a commercial class.

Given Uganda's natural advantages such as fertile land and a large rural population, it is likely that agriculture will play a central role.

"But agriculture, along with all export-led business, is sensitive to currency appreciation, one of the possible results of large-scale oil-related spending," the report notes. It is for that reason that some form of mechanism to regulate spending is important.

"Such mechanisms take many forms around the world, from sovereign wealth funds of the type instituted in Norway to fiscal rules limiting the percentage of revenues governments are able to spend."

The report asserts that Uganda is in the advantageous position of being an established democracy with enshrined legal media freedoms.

"But the fact that much decision-making remains relatively centralised and the population is spread across remote rural communities' means that many may feel disconnected from a collective development goal," the report states.

The report cautions that Uganda has time on its side, but must not waste it.

"The debate on oil must move beyond the politics of the present and look to the long-term. Oil will be central to Uganda for decades to come."

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