Uganda’s Oil Discovery: Nature’s Blessing or a
Curse in the Making?
Understanding Domestic Stability Risks of the Newly Discovered Oil in Uganda
By Delphine Mukeshimana 1806483 Oranjerivierdreef 12 c 3564 BE Utrecht 0648262768 University of Groningen Faculty of Arts
Master thesis International Relations and International Organization Specialization: International Security
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Acknowledgement
I would like to take this opportunity to thank everyone who has supported me throughout the process of writing this thesis. I am grateful to my thesis supervisor Professor Faltas for his guidance. My heartfelt gratitude also goes to my husband Peter van der Zee for his tireless support and encouragement throughout my studies and for putting up with me in stressful moments. Without his support I would not be where I am today.
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Declaration by candidate
I hereby declare that this thesis is my own work and my own effort and that it has not been accepted anywhere else for the award of any other degree or diploma. Where sources of information have been used, they have been acknowledged.
Name: Delphine Mukeshimana
Signature:
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Abstract
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1 Table of Contents
ACKNOWLEDGEMENT ... I DECLARATION BY CANDIDATE ... II ABSTRACT ... III 2 INTRODUCTION ... 1 2.1 Motivation ... 22.2 Research questions and outline of the thesis ... 3
2.3 Research method ... 4
3 CONTEXTUAL BACKGROUND ... 5
3.1 Uganda’s oil exploitation ... 5
3.2 Geographical location of Uganda’s oil reserves ... 6
3.3 Exploitation plans and the current state of affairs ... 6
3.4 Uganda’s oil sector regulatory framework ... 8
4 THEORETICAL LITERATURE. EXPLORING THE LINK BETWEEN NATURAL RESOURCES AND VIOLENT CONFLICT ... 10
4.1 The resource curse thesis ... 10
4.1.1 Natural resources, the economy and violent conflict... 13
4.1.2 Natural resources, governance and violent conflict ... 18
4.1.3 Natural resources, exploitation communities and violent conflict ... 21
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5 UGANDA AT RISK? ... 25
5.1 Effects on economic performance ... 25
5.2 Effects on governance ... 32
5.2.1 Authoritarianism and personalized presidential power ... 33
Uganda’s ingrained culture of corruption ... 35
5.2.3 Oil sector regulatory framework and transparency ... 38
5.3 The effects of oil on local communities ... 40
5.3.1 Oil exploitation and the sources of local communities’ livelihoods ... 40
5.3.2 Oil exploitation and land conflicts ... 42
5.3.3 Lack of transparency and consultation with local communities ... 43
5.3.4 Ethnic/tribal identification ... 43
5.4 Oil and potential rebel activities ... 46
6 CONCLUSION ... 48
7 BIBLIOGRAPHY ... 50
APPENDICES ... 58
Appendix 1: The Albertine Graben ... 59
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2 Introduction
The 2014 Energy Information Agency’s International Energy Outlook report projects that the global consumption of oil and other liquid fuels will rise from 87 million barrels per day in 2010, to 119 million barrels per day in 2040.1 The price of crude oil is expected to rise from 113 United States dollars (hereinafter $) per barrel in 2011, to $141 per barrel in 2040.2 With the world’s oil consumption and the crude oil price rising in this pace, discovery of oil reserves are usually treated as godsend, especially in developing countries. They are seen as means for economic transformation, and perhaps the only way to lift countries out of the poverty trap. However, experiences from natural resource-rich developing countries such as Nigeria and Angola demonstrate how the exploitation of natural resources could have far-reaching negative implications for stability in respective countries.
Uganda is one of the developing countries to recently discover oil reserves on its territory. In 2006, following years of exploration activities, tests drillings by an oil company confirmed the existence of commercially viable oil deposits in the Lake Albert Rift Basin, also known as the Albertine Graben (hereinafter Albertine Graben), in the western part of the country. The Ugandan Petroleum Exploration and Production Department estimates that the Albertine Graben oil reserves contain over 3.5 billion barrels of crude oil.3 If accurate, this amount of oil reserves will allow Uganda to become one of the top five oil-rich countries in Africa.4 It is believed that, if all goes as planned, the discovery of oil in Uganda will yield billions of Ugandan Shillings in annual revenues.
Much has been written about the impact of oil, gas and other natural resources on the countries that produce them. It does not make for happy reading. There is a long list of counties that have not managed to profit from their natural resources riches, from Nigeria, Equatorial Guinea, Angola, Gabon and Sudan, to Turkmenistan and Venezuela. Scholars have developed
1
U.S. Energy Information Administration, International Energy Outlook 2014 (Washington D.C., 2013), 4.
2 Ibid, 3.
3 Annette Kuteesa, “Local Communities and Oil Discoveries: A Study in Uganda’s Albertine Graben Region,”
Brookings, February 25, 2014, accessed March 9, 2014, http://www.brookings.edu/blogs/africa-in-focus/posts/2014/02/25-oil-discoveries-uganda-kuteesa.
4U.S. Energy Information Administration, “World Proved Reserves,” accessed March 9, 2014,
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theories in their attempts to establish and explore the relationship between a country’s natural resource endowment and its predisposition to civil wars and other violent conflicts. Some of these scholars argue that countries with abundance of natural resources are more likely to endure instability arising from a number of socio-economic, political, governance and security aspects associated with natural resources endowment.5 In the field of political studies, the proponents of this so called “resource curse” thesis seek to uncover, among other things, the relationship between the abundance of natural resources and violent conflicts.6 This study aims at assessing the potential consequences of Uganda’s oil exploitation on its domestic stability. More specifically, it aims at assessing the potential security risks of oil exploitation in Uganda, making note of the likelihood of the resource curse related to oil exploitation.
2.1 Motivation
Ever since the confirmation of the existence of commercially viable oil reserves on the Ugandan territory, a vast number of academic studies have sought to analyze the potential impact of Uganda’s oil endowment.7
However, most of these studies, and hence advice, have been devoted to potential economic and the environmental effects of oil exploitation. Few of these studies have been directed to understanding the potential political and internal security risks of oil exploitation. This study seeks to bridge the gap by undertaking a comprehensive analysis of several factors that are likely to lead to national instability as a result of oil exploitation in Uganda.
5 Terry Lynn Karl, The Paradox of Plenty (Berkeley and Los Angeles: University of California Press, 1997) 4. See
also Jeffrey D. Sachs and Andrew D. Warner, “Natural Resources and Economic Development. The Curse of Natural Resources,” European Economic Review 45, no. 4-6 (May 2001), 837; and Philippe Le Billon, Fuelling War; Natural Resources and Armed Conflicts (London: Routledge, 2005)11-27.
6 See for instance Ian Bannon and Paul Collier, Natural Resource and Violent Conflict: Option and Actions
(Washington DC: The World Bank, 2003).
7 Alan Gelb and Stephanie Majerowitz, “Oil for Uganda – or Ugandans? Can Cash Transfers Prevent the Resource
Curse?” Center for Global Development Working Paper 261 (2011) accessed March 12, 2014,
http://www.cgdev.org/files/1425327_file_Oil_Uganda_Transfers_Gelb.pdf. See also Louise E. Roos, Philip D. Adams and Jan H. van Heerden, “ The economic impacts of a newly discovered oil in Uganda, using a recursive dynamic CGE model," (paper presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China, June 12-14, 2013), 29, accessed April 18, 2014,
https://www.gtap.agecon.purdue.edu/resources/download/6277.pdf.
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2.2 Research questions and outline of the thesis
The purpose of this study is to analyze potential impacts of newly discovered oil on Uganda’s domestic stability. Put differently, this study aims at assessing the potential security risks of oil exploitation in Uganda, making note of the likelihood of a resource curse related to oil exploitation. The main research question guiding this study is: Is the recently discovered oil in Uganda likely to lead to violent conflict in the country?
In order to answer this question, the study is divided into three chapters. The first chapter will provide a brief introduction into the Ugandan oil sector. It will set out the expected amount of oil reserves, the geographic location of oil reserves, the state of the exploration and production activities and the Ugandan oil sector legislation. The aim of this chapter is to establish a contextual background for this study.
The second chapter will form the theoretical background of the study. It will set out the academic literature on natural resources and stability. In the academic literature, there is a prevalent assumption that natural resources exploitation tends not to bring with it the expected blessings, but that it is associated with a curse with regard to a number of aspects.8 The aim of this chapter is to analyze the peace and security aspects of the resource course and to establish the ways through which natural resources exploitation can lead to national instability. The chapter will set stage for the rest of the research by establishing the tenants of Michal Ross’s account on the resource curse.9 This account will form the structural cornerstone for this study. The sub-question guiding this chapter is: What is the relationship between natural resource endowment and conflicts?
The third chapter will look at the structures which are likely to govern the Ugandan oil sector. This chapter will provide an in-depth study of the Ugandan oil sector in relation to Ross’s four pathways through which natural resources exploitation lead to violent conflicts. More specific, it will analyze the potential impact of oil exploitation on other sectors of the Ugandan economy, on Uganda’s governance, on local communities in the oil-rich region and on rebels’ activities. The
8 Matthias Basedau, “Context Matters; Rethinking the Resource Curse in Sub-Saharan Africa,” German Oversee
Institute for Global and Area Studies working Papers No. 1 2005, 17, accessed March 9, 2014), http://www.giga-hamburg.de/en/system/files/publications/wp01_basedau.pdf.
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aim of the chapter is to analyze whether Uganda will be able to avoid the dangers associated with Ross’s four pathways and therefore avoid conflicts arising from its oil endowment. The sub-question guiding this chapter is: What are potential sources of domestic instability arising from Uganda’s oil endowment?
2.3 Research method
This study is based on literature review and secondary sources from the fields of economic, environmental, political and security studies. The theoretical background is based on academic literature on the “resource curse” thesis. While Ross recognizes that natural resources are never the only cause of conflicts and that natural resources exploitation does not make conflicts inevitable, he presents an overview of pathways through which, according to the academic debate on the resource curse, natural resources could lead to violent conflicts. These factors are according to Ross, the effects of natural resources on the economy, on governance, on local communities living in the resource rich regions and on rebel movements.10 Ross’s synthesis of the resource curse will form the theoretical and structural background of this study. In addition, the study will rely on a number of reports from international organizations such as the World Bank and NGO’s such as Human Rights Watch, Global Witness and International Alert for the analysis of the economic, governance and other issues in Uganda. Moreover, secondary academic research from the above-mentioned fields will be used.
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3 Contextual background
This chapter provides a brief background on the recently discovered oil reserves in Uganda, placing it in the context in which oil exploitation is bound to take place. The aim of the chapter is to establish a contextual background for this study.
3.1 Uganda’s oil exploitation
Crude oil reserves in Uganda were first hinted on in the 1920s. In the decades that followed, the British colonial rulers, in cooperation with oil companies, undertook oil exploration activities in the entire country, and especially in and around Lake Albert on the western boarder of the country. Following failed drillings and testing around the town of Buliisa in the Albertine Graben, the British decided to abandon their search for oil and instead focused on the then highly profitable colonial agricultural goods such as coffee and thee.11 Oil exploration activities were further hampered by the events of the Second World War as well as the long period of political instability and civil wars that followed Uganda’s independence.
It was not until after Yoweri Kaguta Museveni (who has been Uganda’s president since then) and his National Resistance Army took over power in the late 1980s that serious steps were taken to explore the possibilities for the development of Uganda’s oil sector.12The initial efforts were directed to attracting foreign oil companies to undertake exploration activities, and to acquiring national human capital needed for the exploration of viable oil reserves. As a result of the relative political stability brought on by the Museveni administration, foreign oil companies renewed their interests in oil production in Uganda.13 Following the enactment of the Petroleum Exploration and Production Act in 1985, the Ugandan Government licensed the entire Albertine Graben to international oil companies for exploration activities.14The existence of commercially
11 Lawrence Bategeka and John Mary Mutovu, “Oil Wealth and Potential Dutch Disease Effects in Uganda,”
Economic Policy Research Center, 2011, accessed April 12, 2014, http://www.eprc.or.ug/pdf_files/oilwealth.pdf.
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A survey commissioned by Museveni’s government revealed indications of the presence of oil reserves in several regions of the country. Joseph Mawejje and Lawrence Bategeka, “Accelerating Growth and Maintaining Intergenerational Equity Using Oil Resources in Uganda,” Economic Policy Research Center’s Research Series no.
111, 2013, accessed April 12, 2014,
http://www.eprc.or.ug/pdf_files/Accelerating_Growth_Intergenerational%20Equity_Using%20Oil%20Resources_U ganda%20RS%20111.pdf.
13
Ibid.
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viable oil reserves in the region was confirmed in 2006 in an area licensed to Heritage Oil and Tullow Oil.15
It is estimated that Uganda’s oil fields hold approximately more than 3.5 billion barrels of crude oil, of which 1.2 to 1.7 billion is ready for commercial exploitation.16 Only 40 percent of the entire Albertine Graben has been explored. The estimated numbers could therefore increase as exploration activities continue. Putting Uganda’s oil endowment in the wider international context, the world’s biggest oil producing countries Saudi Arabia, Libya, Nigeria and Angola respectively have 263, 46, 37 and 9.5 billion barrels of oil reserves. With over three billion barrels, Uganda oil reserves could earn the country a place on list of top fifty oil producing countries, and into a peer group of six eminent oil-rich Sub-Saharan Africa countries.17
3.2 Geographical location of Uganda’s oil reserves
Uganda’s oil reserves are located in the Albertine Graben, along the border with the Democratic Republic of Congo (hereinafter DRC). The Albertine Graben stretches from the southwestern border with DRC up to the border with South-Sudan, covering an area of 23,000 square kilometers.18 Although oil prospecting activities have been carried out in and along the entire rift, exploitation activities are currently taking place in the districts of Amuru, Buliisa and Hoima, which fall under the Acholi and the Bunyoro-Kitara (hereinafter Bunyoro) traditional kingdoms. The exploitation activities are currently taking place on what is largely the Bunyoro kingdom’s territory.
3.3 Exploitation plans and the current state of affairs
Following the confirmation of commercially viable oil reserves in the Albertine Graben, the Government of Uganda granted several international oil companies the right to undertake preliminary exploration activities and tests. Over the last two decades, some of these companies transferred their exploitation rights to bigger players. At the moment of this writing, the Albertine
15 Tullow oil, “A brief timeline,” accessed April 13, 2014, http://www.tullowoil.com/index.asp?pageid=63.
16 ActionAid Uganda, “How much oil (and gas) does Uganda have, and where is it?”Accessed March 24, 2014,
http://www.oilinuganda.org/categories/facts-faqs/uganda-oil-facts-faqs.
17 The World Bank, “Uganda Country Assistance Strategy for the Period FY2011-2015,” accessed March 24, 2014,
http://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/05/04/000334955_2010050403 3727/Rendered/PDF/541870CAS0P11610only10IDAR201010116.pdf.
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Graben oil reserves are divided into five discovery areas which are licensed to three oil companies, namely Tullow Oil, TOTAL and the Chinese oil company CNOOC (see Appendix 2).19Although no actual oil has been pumped yet, production is expected to take off before 2016. The World Bank estimates a daily production of 150,000 barrels over a period of ten to twenty years.20
Oil exploitation in Uganda has been rather slow due to a number of factors. One of the factors is the disagreement between the government and oil companies over the government’s wish to construct an oil refinery. Oil companies preferred to build a pipeline for the transportation of crude oil to the Kenyan coast. However, the Ugandan government has always insisted on constructing a refinery in the Albertine Graben. The refinery is expected to “reduce [Uganda’s] overreliance on foreign importation of petroleum products, help alleviate fuel shortages and facilitate regional economic growth, earn revenues to support the development of other sectors and create investment opportunities in the country.”21 Moreover, Uganda plans to become the main supplier of oil and petroleum products to Rwanda, Burundi, South Sudan, DRC, Kenya and Tanzania.22
As of early this year (2014), the Ugandan government has signed a memorandum of understanding (MOU) with the abovementioned three international oil companies to construct a refinery which will initially have the capacity of refining 30,000 barrels oil a day. This capacity is expected to be pushed up to 60,000 barrels in 2020.23 Four potential investors have already submitted their proposals for the construction of the refinery and the government plans to select the lead investor in September this year.24
19 Ugandan Ministry of Energy and Mineral Development, “Status of Licensing in the Albertine Graben of Uganda
2014,” accessed June 11, 2014,
http://www.petroleum.go.ug/uploads/Statuspercent20ofpercent20Licensingpercent20Mappercent202014.pdf.
20 The World Bank, “Uganda Country Assistance,” 8. 21
Ugandan Ministry of Energy and Mineral Development, “Government embarks on a Resettlement Action Plan for the oil refinery area in Hoima district,” accessed June 11, 2014, http://www.petroleum.go.ug/page.php?k=curnews&id=31.
22 Ibid.
23 Obafemi Oredein, “Uganda Expects Commercial Oil Production In 2018,” Exploration and Production Magazine,
May 15, 2014, accessed June 12, 2014, http://www.epmag.com/Production/Uganda-Expects-Commercial-Oil-Production-2018_133585.
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3.4 Uganda’s oil sector regulatory framework
According to the Ugandan Constitution, it is the responsibility of the government to “protect important natural resources, including land, water, wetlands, minerals, oil, fauna, and flora on behalf of the people of Uganda.”25
Moreover, the government is responsible for ensuring that “the natural resources of Uganda shall be managed in such a way as to meet the development and environmental needs of present and future generations of Ugandans.”26 To this end, the Ugandan Parliament is charged with enacting laws and regulations to guide natural resources exploration and production, and to manage natural resources revenues.
Following the renewed interest in Uganda’s oil sector in the 1980s, the Ugandan parliament adopted the Petroleum (Exploration and Production) Act in 1985. The 1985 Act aimed at regulating exploitation activities as well as at providing guidelines for granting exploration licenses.27 With the confirmation of a significant amount of commercially viable oil reserves in the Albertine Graben, the government realized that the oil sector required a comprehensive regulatory framework for efficient management. In 2008, the government approved the National Oil and Gas Policy (NOGP), which called for the establishment of an appropriate regulatory framework for “guiding the use of the county’s oil and gas resources in such a way that they contribute to early achievement of poverty eradication and create lasting value to society.”28 In line with Uganda’s legislative practice, the NOGP was operationalized by the enactment of the Petroleum (Exploration, Development and Production) Act 2013 (also known as the Upstream Act) and Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013 (the Midstream Act).29
The Upstream Act focusses on the regulation of all aspects surrounding oil exploration, development and production. The Act also establishes the Petroleum Authority of Uganda and the National Oil Company, two governmental institutions which will be responsible for the
25 The Republic of Uganda, “The Constitution of the Republic of Uganda, section xiii,” accessed June 15, 2014,
http://www.statehouse.go.ug/sites/default/files/attachments/Constitution_1995.pdf.
25 Ugandan Ministry of Energy and Mineral Development, “Acts and Bills,” accessed June 12, 2014,
http://www.petroleum.go.ug/cgi-sys/suspendedpage.cgi?k=curnews&id=30.
26 The Republic of Uganda, “The Constitution of the Republic of Uganda, section xiii.” 27 The Petroleum (Exploration and Production) Act 1985.
28 Acode, “The National Oil and Gas Policy for Uganda, viii,” accessed June 15, 2014,
http://www.acode-u.org/documents/oildocs/oil&gas_policy.pdf.
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4 Theoretical literature. Exploring the link between natural
resources and violent conflict
This chapter looks at the theoretical relationship between natural resources and violent conflicts. The first part of the chapter looks at the debate behind the assumption that natural resources exploitation could be a curse instead of a blessing for resource-rich countries. The second part of the chapter presents Ross’s four pathways through which natural resources exploitation could lead to violent conflicts.
4.1 The resource curse thesis
The idea that natural resources exploitation has detrimental effects has a long history of academic debate. The debate was mostly motivated by a series of international as well as internal devastating conflicts in natural resource-rich countries such as Nigeria, Angola, Colombia and the Democratic Republic of Congo. Initially, discoveries of natural resources gave rise to hope and ambitions for fortune, national progress, socio-economic independence, and stability. Natural resource-rich developing countries hoped that revenues arising from the exploitation of their resources would provide them with the ability to catch up with more developed economies, and at the same time bring internal political stability and prosperous future for their population. However, it did not take long to realize that these aspirations would be hard to achieve.
While the endowment of natural resources had long been perceived as a blessing for the countries possessing them, the growing number of civil wars in those countries demonstrated that natural resources could also have destructive effects on internal stability. The experience in many, mostly sub-Saharan Africa, resource-rich countries led many scholars to study the relationship between resource endowment and violent conflicts. One of the conclusions of these studies was the “resource curse” thesis.
The “resource curse” or the “paradox of plenty” thesis is the idea that abundance of natural resources does not bring the expected blessings but instead turns out to be a curse with regard to a number of aspects.30 The academic literature on the resource curse mainly refers to the economic effects of natural resource endowment, arguing that “natural resources damage other tradable sectors and other sources of economic growth, stimulate unwise economic policies and
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render the economy vulnerable to external shocks.”31 However, the resource curse thesis is not limited to socio-economic effects. A large number of academic literature has been dedicated to uncovering the relationship between natural resources and violent conflicts.
Paul Collier’s work (mostly in cooperation with Anke Hoeffler) on the causes of civil wars, in particular, has been the most influential.In their study of civil wars between 1960 and 1999, Collier and Hoeffler concluded that the dependence of state on natural resources, among other things, significantly increases the likelihood of violent conflicts.32 Their finding sparked an extensive debate within the academic community as well as within organizations in the field of international security. As a result, a considerable amount of literature has been devoted to testing Collier and Hoeffler’s findings and to further uncover the relationship between natural resources and violent conflicts. Some scholars rapidly observed similar relationship while other questioned the validity of Collier and Hoeffler’s findings.33Others attempted to discover the mechanisms which transmit natural resources exploitation into violent conflicts.34
In their explanation of the link between natural resources and conflicts, Collier and Hoeffler argued that conflicts are a result of either “greed” or “grievance”. The debate on the mechanisms that link natural resources abundance to civil conflicts has followed these two lines of arguments, albeit with some variations.35 On one side of the debate are scholars who argued that natural resources abundance increases the likelihood of armed conflicts because of the economic profitability of the resources.36 They stress the idea that resource conflicts are the result of rebel groups’ attempt to benefit from natural resources outside of the state realm. In this case, they will challenge the state’s control over resource-rich regions. They argue that in order to
31 Ibid, 10.
32 Paul Collier and Anke Hoeffler, “On Economic Causes of Civil War,” Oxford Economic Papers 50, no. 4 (October
1998), 568.
33 See for instance Håvard Hegre and Nicolas Sembanis, “Sensitivity Analysis of Empirical Result on Civil War
Onset,” Journal of Conflict Resolution 50, no. 4(August 2006), 509.
34 Macartan Humphreys, “Natural Resources, Conflict and Conflict Resolution: Uncovering the Mechanisms,”
Journal of Conflict Resolution 49, no.4 ( August 2005), 510.
35 Humphreys divides greed mechanisms in the greed rebel, the greed outsider and the feasibility mechanisms.
Humphreys, 511.
36 Collier and Hoeffler are the biggest proponent of the greed side. Others are Fearon and Laitin who argue that
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comprehend contemporary natural resources driven armed conflicts, we are required to first understand rebels groups’ greed rather than their grievances. In their words:
“We test a “greed” theory focusing on the ability to finance rebellion, against a “grievance” theory focusing on ethnic and religious divisions, political repression and inequality. We find that greed considerably outperforms grievance.”37
In their later revisions of the theory, Collier and Hoeffler still hold that:
“The extortion of primary commodity exports will occur where it is profitable and the organizations which perpetrate this extortion will need to take the form of a rebellion”38
Other scholars have emphasized the importance of obtaining control over the state, and consequently, gaining access to resources exploitation. Fearon and Laitin for example argue that natural resources increase the “prize” value of capturing the state.39
In short, their “greed” line of argument is grounded in the belief that natural resources generate valuable rents which could serve as an incentive for armed struggles against the government in a resource-rich country.
On the other side of the debate are scholars who maintain that natural resources exploitation generates effects which deprive parts of the population of the benefits of resources revenues, while they may endure the negative socio-economic, political and environmental impacts of natural resources exploitation.40 In this case, natural resources could lead to violent conflicts by spawning feelings of resentment and frustration which could spur groups’ grievances and consequently enhance their proneness to armed struggles.41Others argue that natural
37 Collier and Hoeffler, “Greed and Grievance in Civil War,” World Bank Policy Research Paper no. 28126 (2001),
1.
38 Collier and Hoeffler, “Greed and Grievance in Civil War,” The World Bank Policy Research Working Paper
WPS/2002-01, (2002), 6.
39 James D. Fearon, “Primary Commodity Exports and Civil War,” The Journal of Conflict Resolution 49, no. 4
(August 2005), 488.
40 Patrick M. Regan and Daniel Norton, “Greed, Grievance, and Mobilization: The Onset of Protest, Rebellion, and
Civil War,” Journal of Conflict Resolution, 49 no. 3 (June 2005),1.
41The RUF insurgent in Sierra Leon for example claimed to fight against the unequal distribution of the country’s
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resources and oil in particular, fuel violent conflicts by destabilizing political institutions and by weakening the economy of the countries concerned.42
Despite extensive research on the relationship between natural resources and violent conflicts, there seems to be no consensus with regard to the ways through which this relationship transpires. Michael Ross is one of the prominent scholars who have attempted to elaborate on the relationship between natural resources exploitation and violent conflicts. In his contribution to the debate, he has sought to recapitulate the principal findings of both sides of the academic debate. His explanation integrates both the greed and the grievance sides of the debate and provides a clear overview of the transmission channels that link natural resources exploitation to conflicts. Because of this clarity, his take on the debate will form the theoretical and structural background of this study.
According to Ross, there are four main pathways through which natural resources could lead to violent conflicts: their effects on the economy, on governance, on communities living in resource-rich regions and on rebel movements.43 Clearly, Ross employs both greed and grievance to understand the relationship between resources and conflicts.
Before moving on to discussing these pathways, it is important to mention that Ross does not consider natural resources to be the sole cause of violent conflicts or that natural resources exploitation inevitably leads to instability. According to the author, conflicts are caused by interplay of multifaceted factors. Moreover, there are many cases where natural resources exploitation has not led to national instability or conflicts. Ross’s four pathways are discussed separately in the rest of this chapter.
4.1.1 Natural resources, the economy and violent conflict
According to Ross, natural resources lead to violent conflicts through their effects on the economy.44 Natural resources exploitation could generate capital needed for the economy to
bloom. The exploitation could generate employment opportunities, better infrastructure and therefore be what a country needs to climb out of the poverty trap. Yet, research shows that there is a correlation between natural resource exploitation and poor economic performance in natural
42 James D. Fearon and David Laitin, “Ethnicity, Insurgency and Civil War,” American Political Science Review 97,
no.1 (February 2003)81.
43
Ross, “The Natural Resource Curse,” 19.
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resource-rich countries. Based on an empirical study, Sachs and Warner found that, on average, natural resources exporting countries experience a lower level of economic growth than non-resources exporting countries.45 The relationship between natural resources abundance and poor economic performance is believed to lie in a number of factors.
The first often mentioned factor is the so called “Dutch Disease”.46 The basic assumption behind the Dutch Disease is that a country’s exploitation of natural resources could lead to de-industrialization and therefore negatively influence that country’s economic growth. The initial explanation of the Dutch Disease goes as follows: a boom in the natural resources sector leads to an increase in the demand for the currency of the resource-rich country. This rise in turn leads to the appreciation of that country’s currency, which renders imports from that country more expensive. As a result, that country’s non-resource goods become more expensive, and accordingly, less competitive on the world market. This loss of competitiveness in the end leads to a decline of the non-resources sector, which could in the end lead to de-industrialization.47
Sachs and Warner have addressed this problem from a different angle, but they have nonetheless arrived at a similar conclusion. In their model, an economy has three types of sectors: a tradable natural resources sector, a tradable (resource) manufacturing sector, and a non-tradable sector. According to the authors, a boom in natural resources sector will create an inflow of additional revenues. These revenues in turn will raise the demand and subsequently the prices of non-tradable goods. These good are usually employed as input for the tradable (non-resource) manufacturing sector. In that case, since the price of manufactured goods are fixed at the global market, high input prices will “squeeze” out profits in the tradable (non-resource) manufacturing sector. This sector will become more and more unable to compete on the world market and will inevitably shrink, which will negatively influence economic growth in the long run.48
The second often mentioned factor is price volatility. The prices of natural resources and of crude oil in particular have the tendency to be volatile. By way of example, between December
45 Sachs and Warner, “The Curse of Natural Resources,” 837.
46 Coined after the decline of the Dutch manufacturing sector following the discovery of natural gas in the 1950s. 47 Max W. Corden and Peter J. Neary, “Booming Sector and de-industrialization in a Small Open Economy,” The
Economic Journal 92, no. 368 (December 1982), 827.
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2004 and July 2008 the Brent crude oil price rose from 39.6 to 132.72 dollars per barrel.49 At the end of 2008, the price dropped to the December 2004 level, to subsequently rise to 125.45 dollars per barrel in March 2012.50 Various studies have demonstrated that resource-rich countries tend to experience lower growth than countries exporting products with more stable prices. In many resource-rich countries, resources rents form a substantial part of the government’s budget. Price volatility could therefore render long-term government’s budgetary planning a major challenge. These challenges could have dire consequences for a country’s economic performance. According to Karl, the economic performance of a natural resource rich country could deviate from initial plans by as much as 30 percent due to natural resources price volatility.51 For Auty, the volatility of natural resource prices, in particular in the case of oil, is possibly the most devastating factor for the economy.52
The third factor is the argument that natural resources exploitation has negative effects on long-term economic growth through its effect on human capital accumulation in resource-rich countries. Numerous studies show that human capital accumulation has considerable impacts on a country’s economic growth, because it embodies skills and knowledge of the working population, which is believed to raise productivity of labor.53 As human capital is attained through education and other types of training, investment in education is crucial for economic growth. In his research, Gylfason found that, on overage, natural resource-rich countries invest less in education compared to non-resource countries. His explanation for this phenomenon is the assumption that resource-rich countries are “blinded” by their resource wealth, to the extent that they do not see the importance of investing in education.54 Natural resources generate a high amount of revenues which does not necessarily depend on the education level of a nation’s working population. Natural resources are viewed as the main asset for the country’s economy, and the importance of
49US Energy Information Administration, “Spot Prices,” (website), accessed July 30, 2014,
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rbrte&f=m.
50 Ibid.
51 Terry Lynn Karl, “Oil-Led Development: Social, Political, and Economic Consequences,” Center on Democracy,
Development, and The Rule of Law Working Paper, accessed March 21, 2014,
https://politicalscience.stanford.edu/sites/default/files/documents/KarlEoE.pdf.
52 Richard M. Auty, Resource Abundance and Economic Development: Improving the Performance of
Resource-Rich Countries (Helsinki: UNU World Institute for Development Economic Research, 1998), 7.
53Robert J. Barro, “Human Capital and Growth in Cross Country Regressions,” Swedish Economic Policy Review 6,
no. 2 (Autumn 1999) 239.
54Thorvaldur Gylfason, “Natural Resources, Education and Economic Development,” European Economic Review
16
education in the long run is neglected. This could have detrimental effects on the country’s economic growth.
Others have argued that the exploitation of natural resources disrupts national and local labor markets. This is in particular the case in a situation where it concerns labor intensive exploitation activities. In this case, resources exploitation requires more labor which leads to a rise of the wages. The high wages in the resource sector put pressure on the demand for labor in the other sectors of the economy such as agriculture. As a result, small businesses are unable to compete and will most likely close. Not only do higher wages as a result of the risen demand for labor in the natural resource sector crowd out other economic activities, they could also drain out the entrepreneurial mindset of the population.55
Experience from oil exploiting countries show that oil exploitation is often associated with high poverty rates, child malnutrition, poor healthcare, low levels of school enrolment and illiteracy. Writing on the social welfare consequences of oil abundance, Karl holds that people in oil exporting countries remain poor or suffer a severe decline in their living standards.56 Most Sub-Saharan resource-rich countries rely heavily on agriculture prior to natural resources exploitation. In the case of Uganda, agriculture forms over 80 percent of national economic activities.57 If the abovementioned effects of oil exploitation on non-resource sectors of the economy were to occur, oil exploitation could have devastating effects on the population currently depending on the agricultural sector.
According to Ross, these economic consequences of natural resources exploitation have implications for the susceptibility of the resource-rich counties to civil wars.58 The ensuing economic hardship and frustrations of citizens will spur grievances and create a conductive environment for challenging the government. This will be more the case where the effected citizens also endure other negative effects of natural resources exploitation.
55 Center for Rural Entrepreneurship “Redefining the “Crowding Out” Effect: Economic Development Capacity and
Long-Term Resilience in the Face of an Energy Boom,” February 26, 2012, accessed March 12, 2014,
file:///C:/Users/HP/Downloads/Crowding%20Out%20whitepaper%20Final%20(6).pdf.
56Karl, “The Paradox of Plenty,” 664.
57 Ugandan National Planning Authority “National Development Plan 2010/11-2014/15,” accessed May 6, 2014,
http://npa.ug/wp-content/themes/npatheme/documents/NDP2.pdf.
17
For Ross, there are important measures that need to be taken in order to overcome the low economic growth associated with natural resources exploitation. First, a country needs to diversify its economy in order to mitigate the economic effects generated by the Dutch Disease and price fluctuation. For oil exporting countries in particular, downstream industry should be established in order to add value to crude oil and to create employment opportunities for the low skilled part of the population. Furthermore, resource-rich countries should reduce the effects of rents volatility by setting up stabilizations fund, for example, through savings.59
In sum, when resource-rich countries are unable to adopt and implement measures that are needed to mitigate adverse economic effects of natural resources exploitation, they are likely to experience low economic growth. In this case, conflicts are likely to occur as a result of grievances over poverty, inequality and other negatives externalities stemming from a country’s resources-driven poor economic performance. The next chapter looks at the governance pathway through which natural resources exploitation leads to violent conflicts.
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4.1.2 Natural resources, governance and violent conflict
The negative effects of natural resources exploitation are not limited to the macro-economy of resource-rich countries. The exploitation of natural resources could also have consequences for political institutions and the quality of governance. Natural resources tend to render countries more prone to conflict by promoting corruption, state weakness and reduced government’s accountability.60
According to Ross, resource abundance is mostly associated with corruption, especially within government institutions. Because of the big volume of revenues generated by resources and the abovementioned natural resource price volatility, governments are often overwhelmed and therefore unable to keep track of the manner in which these revenues are spent. This also implies that citizens have even more difficulties in tracing how resource rents are collected and spent by their governments. This offers the ruling elite room for rent-seeking behavior and corruption.61 Corruption and rent seeking among different levels of government are often associated with low degrees of public welfare and high levels of inequality. Excessive unequal distribution of wealth is believed to generate a discrepancy between what people believe they are entitled to and what they actually get.62 Unequal distribution of wealth will generate feelings of dissatisfaction among those who are disadvantaged and will act as a motive for participating in political protest and even violent conflicts. In the words of Alesina and Parotti:
“A large group of impoverished citizens, facing a small and very rich group of well-off individuals is likely to become dissatisfied with the existing socio-economic status quo and demand radical changes, so that mass violence and illegal seizure of power are more likely than, when income distribution is more equitable.”63
Ross also associates natural resource exploitation with weak governments. According to the author, natural resource wealth weakens government’s control of the mining territory. This is more the case when it concerns high value minerals such as diamonds which could be mined with
60 Ross, “The Natural,”25. 61 Ibid.
62According to Gurr’s theory of Relative Deprivation, people may result to aggression when there is discrepancy
between their actual state and what they believe they should be able to achieve. Ted R. Gurr, Why Men Rebel (Princeton: Princeton University Press, 1970), and 37.
63Alberto Alesina and Roberto Parotti, “Income Distribution, Political Instability, and Investment,” European
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little to no investments in the extractive infrastructure. In this case, governments may face instabilities emerging from warlords, gangs and other armed groups fighting over control of the resource-rich territory. Furthermore, resources exploitation could weaken state’s bureaucracy. Like many other scholars, Ross argues that in the case where the government obtains a large share of its income from minerals such as oil instead of its taxation system, it loses the strength that comes with the ability to raise taxes, part of this strength being a well-functioning bureaucracy. And where a government fails to develop this ability, it also fails to set up structures that are necessary to deliver valuable public goods, which if lacking, could increase dissatisfaction and the danger of violent conflicts.64
Ross also argues that governments that receive large amounts of resource rents become unaccountable to their citizens, which might increase the likelihood of armed struggle for redress. This happens through what Ross calls the “rentier state effect”, a situation whereby a substantial amount of regular revenues relieves the governing elite from citizens’ demand for political participation and accountability.65 In normal circumstances, the taxation system provides the population with the ability to check and balance their government’s policy. Revenues generated from the natural resources sector (e.g. oil sector) on the other hand, substitute for the governments’ need to extract taxes from their people. In this case, people are less capable of demanding political participation and accountability from the governing elite and the government becomes less depend on the citizens for their hold on power. Lack of government accountability and the increased government autonomy will in turn lead to predatory behavior by the ruling elite. The elite will become inclined to spend the rents on their shortsighted privileges such as the consolidation of their power position and access to the resource rents, disregarding long-term beneficial public goods. This will create a context in which violence will be employed to deal with grievances, rivalry and struggle over access to natural resources. According to Ross, governments with abundance of resource revenues will employ them to suppress opposition and to build up excessive security forces.66
64 Ross, “The Natural,”25.
65 Michael Ross,” Does Oil Hinder Democracy?” World Politics 53, no.3 (April 2001), 332. This is more the case
when government is strong centralized presidential system, with less influence from the legislator
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4.1.3 Natural resources, exploitation communities and violent conflict
The third pathway through which resource wealth affects stability is their tendency to promote secessionist movements. Natural resources are commonly geographically concentrated. This is also the case in Uganda where oil is mainly concentrated around Lake Albert in the western part of the country. According to Collier and Hoeffler, the concentrated nature of natural resources renders resource-rich countries more prone to secessionist movements.67 In Ross’ view, natural resources have the tendency to lead to armed conflicts by providing the communities around the exploration areas with incentives to demand independence and even separation from the state.68
Beside the above-mentioned economic and governance related consequences of natural resources exploitation, local communities also bear the costs of resource exploitation externalities such as land appropriation, pollution, influx of resource migrants, and loss of local livelihoods.69 These effects could promote grievances among local communities. In Ross’s view, these grievances could foster secessionist sentiments when a number of factors are at work.70
First of all, the identity and sentiments of the communities residing in areas where natural resources are extracted play an important role. Where there are distinct identities that distinguish the population from the rest of the country, natural resources exploitation is more likely to fuel local nationalism. Individuals or groups seeking to secede from the central government are more likely to succeed by appealing to a common sense of identity, whether real or imagined.71 Second, as the case of South Sudan illustrates, secessionist sentiments are particularly strong where communities in the regions in which resources are extracted have a history of marginalization by the central government. Moreover, local communities may be under the belief that the government is appropriating riches that belong to them. They may be under the impression that they would get a larger share of the wealth if they were a separate state. In some cases, secessionist movements are intensified by inequalities in the allocation of resource
67Collier and Hoeffler, “The Political Economy of Secession,” in Negotiating Self-Determination, eds. Hurst
Hannum, Eileen Babbitt (Lanham: Lexington Books, 2006), 31.
68 Ross, “The Natural,” 27.
69 Oil production in Nigeria for example has tremendous impact for the Ogoni people who bare the price for oil
spills, gas flaring etc.
70
Ross, “The Natural,” 27.
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revenues, especially when local communities believe to be disadvantaged.72 Lastly, in most cases, local communities suffer the most from negative effects of natural resources exploitation.
In Ross’s view, resource inspired secessionist sentiments could be avoided by preventive diplomacy between the government and communities in resource-rich regions. The government must engage the communities in a dialogue and must respond to their grievances and demands in a constructive manner. Ross also sees a role for private companies in preventing conflicts in resource rich countries. These companies should engage local communities in widespread consultations over the costs these communities are faced with, and to establish “community-based programs for the sensible distribution of the benefits.”73
Increasing transparency in resource revenues management is likewise another possible way to avert conflicts. Informing citizens on the extraction processes, the actual amount of resources to be extracted and the amount of rents expected to generate could prevent communities’ high expectations as well as claims about their resources being stolen by the central government.74
72 Insurgencies and civil war in the Niger Delta are believed have been caused by decades of marginalization and
neglect of the local communities by the Nigerian State and international oil companies. See for instance Abosede Babatunde, “Environmental Conflict and the Politics of Oil in the Oil-Bearing Areas of Nigeria’s Niger Delta,” Peace & Conflict Review 5, no.1 (Fall 2010), 43.
73
Ross, “The Natural,” 29.
23 4.1.4 Natural resources and rebel activities
The last pathway though which natural resources lead to violent conflicts is their effect on rebel movements. Rebels in resource-rich countries will fight to capture extraction sites in order to finance their activities.75 Because of the large amount of rents that they can generate, as well as their mostly region specific bound character, natural resources are susceptible to systematic looting and extortion. Through direct looting, extortion and kidnapping of resource workers, rebels are able to maintain and even worsen domestic instability.76
For the purpose of this study, it is important to emphasize that the extent to which natural resources are able to finance rebel groups depends on the nature of the resources at hand. Resources that are easy to loot transport and sell are more likely to attract rebel activities.77Oil exploitation, unlike diamonds and other gemstones, requires complex and capital intensive infrastructures which are difficult, and in some cases impossible, to attain by rebels. Moreover, the exploitation of oil requires a high degree of government involvement and does therefore not easily lend itself to rebel financing. That being said, oil exploitation infrastructure such as oil pipes and oil wells could be subject to sabotage by rebels. The Nigerian Delta case demonstrates how destabilizing these activities could be to national stability. This characteristic of oil will be kept in mind when analyzing the case of Uganda.
This chapter examined the theory behind the idea that natural resources exploitation could endanger the internal stability of a resource-rich country. Ross’s four pathways through which resources could lead to violent conflicts have been set out. It was suggested that resource wealth can lead to violent conflicts by causing economic grievances, by weakening the government, by providing communities in exploitation regions with the incentives to challenge the central government. Moreover, resources could provide financial means to rebel movements. The chapter also looked at measures that could be taken to mitigate these effects. The next chapter will provide an in-depth analysis of the potential conflict risks that Uganda faces as a result of its recently discovered oil reserves. Putting Ross’s four mechanisms in the Ugandan context and analyzing the current government oil policy, the next chapter will look at the
75 Collier and Hoeffler, “Greed and Grieavance,”1. 76
Ross, “The Natural,”29.
24
25
5
Uganda at risk?
In the previous chapter, the theoretical background of the linkage between natural resources and violent conflicts was examined. Ross’s four pathway through which natural resources can lead to violent conflicts were also set out. This chapter seeks to analyze whether, how and the extent to which Ugandan oil will affect Uganda’s internal stability. The goal of the chapter is to discover the implications of Uganda’s oil for the country’s economic growth, governance, local communities and rebel movements. The findings will allow us to determine whether Uganda’s oil is likely to become a catalyst for violent conflicts in the country.
5.1 Effects on economic performance
As already mentioned in the previous chapter, countries face challenges that come with the discovery of a substantial amount of commercially viable natural resources. The economic challenges are mainly associated with poor economic growth as a result of the Dutch Disease, natural resources’ price volatility and crowding out human capital. This section investigates whether the Ugandan economy is likely to suffer from these effects as a result of its newly discovered oil reserves.
According to the World Bank country information, Uganda’s GDP amounted to 20.03 billion dollars in 2012.78 With a population of 36.35 million in that year, this amounted to a GDP per capita of 551 dollars. Notwithstanding the observed economic decline in the years following the global financial crisis, Uganda has made a remarkable performance in managing its economy and in lowering the poverty rate. The World Bank recorded an average of 7 percent growth rate over the last twenty years. As a result of this growth rate, Uganda was able to lower the percentage of its population living under the poverty line from 56 percent in 1992, to 24 percent in 2014. The World Bank expects the Ugandan economic growth perspectives to remain positive in the medium term.79
78The World Bank “Uganda: country at a glance,” accessed May 02, 2014,
http://www.worldbank.org/en/country/uganda.
79The World Bank, “Uganda Economic Update 2013, 2nd edition,” accessed May 02, 2014,
26
The observed positive economic growth has been accredited to Museveni and his National Resistance Movement (NRM) government’s ability to successfully bring an end to decades of civil wars and rebel insurgencies as well as its ability to implement healthy macro-economic policy and market-friendly reforms.80 The question however is whether Uganda can sustain this positive development amidst the upcoming oil sector, or whether oil will endanger the progress made so far.
There is no doubt that Uganda’s oil reserves will generate substantial amount of revenues for the country’s economy. At the current oil price rates, it is believed that Uganda has the potential of earning up to 1.5 billion dollars from its oil reserves. The World Bank estimates that Uganda’s oil export has the potential of doubling and even tripling the country’s current export revenues.81 This income would be sufficient to finance the country’s current national budget for the next 42 years without any additional donor funds.82 However, whether these revenues will be utilized to sustain the above-mentioned positive economic developments depends on whether the government will be able to effectively deal with the effects of the Dutch Disease and other negative economic implications of natural resources exploitation.
Literature on the resource curse supported by empirical evidence from oil rich Sub-Saharan African countries show that oil revenues could generate economic malaise instead of creating opportunities for economic development. This is why several scholars and institutions, including the World Bank, remain cautious over the introduction of oil into the Ugandan economy.83
One of the reasons for this caution is the fear that oil revenues could have dire outcome for socio-economic wellbeing of the Ugandan population through its negative effects on the country’s agricultural sector. As mentioned in the theoretical part of the thesis, one of the potential effects of resource abundance is the stagnation of tradable (agriculture and manufacturing) sectors as a result of the Dutch Disease. In the case of Uganda, stagnation of
80
Ibid.
81 Ibid, 19.
82 Walter Wafula, “Uganda’s oil find surpasses 2bn barrels," The Citizen, September 7, 2010, accessed March 24,
2014, http://www.thecitizen.co.tz/business/14-international-business/4033-ugandas-oil-find-surpasses-2bn-barrels.html.%20.
83 The World Bank, “Uganda Economic Update 2013,” 21. See also Lawrence Bategeka, Julius Kiiza, and Sarah
27
resource sectors would bring forth devastating consequences, given the fact that the level of the country’s economic diversification is already narrow. Like in many Sub-Saharan African developing countries, agriculture, for the most part substance farming, remains the most important sector of the Ugandan economy. Agriculture is therefore the main source of livelihoods for a large part of the Ugandan population. Although its share in the country’s economy has been declining in the last twenty years, agriculture remains a vital source of growth for the Ugandan economy.84 Commodities such as coffee, tea and tobacco generate over half of the country’s export revenues. And not only are 80 percent of Ugandan households active in agriculture, the sector is also of the essence for the country’s industrial activities since these are mainly agro-based.85
Given the importance of the agriculture sector in Uganda, it is crucial that the oil sector does not obstruct agricultural activities. Crowding out of the agriculture sector would have devastating consequences for the country’s economy and the wellbeing of the population. The cases of Gabon, Equatorial Guinea serve as illustrations of the ways in which oil exploitation can crowd out the agricultural sector, and subsequently impair the economic wellbeing of the population. Despite the oil wealth that these countries enjoy, their agriculture sectors “have crumbled while inequality and poverty persist.”86
In Equatorial Guinea, the agricultural sector has entirely collapsed and the country now wholly depends on imports for its domestic food consumption. 77 percent of the population lives on less than a dollar per day while poverty and inequality persist.87 If no measures are taken to prevent the effects of oil revenues, Uganda might be heading down the same road.
Several economic studies have examined the potential Dutch Disease effects in Uganda as a consequence of the nation’s projected oil wealth. Some have argued that, with sound fiscal macroeconomic policies, the Dutch Disease effects could be mitigated by Uganda’s poor infrastructure, structural problems in the productive sector as well as the country’s current high unemployment rate.88 The rationale behind this argument is that Uganda will be able to keep up
84Ugandan National Planning Authority, “National Development Plan,”62. 85 Ibid, 105.
86 Brendan MCSherry, “The Political Economy of Oil in Equatorial Guinea,” African Studies Quarterly 8, no. 3
(spring 2006). 28.
87
Ibid, 23.
28
with the increased demand for non-tradable goods by drawing on its excess productive capacity. Bategeka and Mutovu on the other hand, in line with the Dutch Disease thesis, found that oil exploitation in Uganda could lead to the appreciation of the real exchange rate, which could notably hurt traditional exports.89 They urge the Ugandan Government to invest in improving the productivity of other tradable sectors in order to uphold the competitiveness of non-oil sectors of the economy on the international market.90 Findings in a similar study by Roos, Adams and van Heerden also support the Dutch Disease thesis. Like Bategeka and Mutovu these scholars urge the Ugandan government to spend oil revenues in a way that non-resource sectors are not endangered.91
The Ugandan government recognizes the potential macro-economic impact of oil. The country hopes to avoid the resource curse by learning from the African experience. Commenting on the potential Dutch Disease risks in his country, President Museveni stated that, “Nigeria had this problem…it caused their exchange rate to appreciate. Uganda will not allow this.”92
On the issues regarding crowding out of the agricultural sector by the oil industry, Allen Kagina, the Commissioner General of the Ugandan Revenue Authority commented that;
“It cannot happen here because we will develop the oil sector as well as strengthen other sectors. Our economy is based on agriculture which we intend to develop along oil. Such has happened in other countries which neglected other sectors and concentrated on oil revenue and we can learn from their experience.”93
Uganda is thus well aware of the economic effects of oil exploitation. The Ugandan government hopes to avoid this “African” experience by investing in infrastructure such as transport, energy and ICT. The objective is to boost the economic growth and diversify the country’s primary based economy in the direction of industrialization.94 Uganda also recognizes that crude oil
89 Bategeka and Matovu, 22. 90 Ibid.
91
Louise E. Roos, Philip D. Adams and Jan H. van Heerden, “The economic impacts of a newly discovered oil in Uganda, using a recursive dynamic CGE model,” (paper presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China, June 12-14, 2013), 29, accessed April 18, 2014,
https://www.gtap.agecon.purdue.edu/resources/download/6277.pdf.
92 Quoted in Habati Mubatsi Anjinja, “Oil Could Cause War,” The Independent, October 1, 2011. 93 Ibid.
94
The Ugandan Ministry of Finance, Planning and Economic Development, “Oil and Gas Revenue Management
