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Renaissance of extractive industries
It could augur well for the future if Uganda's Vice President Gilbert Bukenya means what he says. The revenue accruing from the newly discovered oil deposits in the west of the country, he claims, will be transferred to an account abroad, to be invested in Uganda’s long-term social and economic development. In utilising oil revenues this way – Bukenya said in September – his country would follow the example of Norway.
According to the UN trade organisation UNCTAD, it crucially depends on government action whether mineral resources are a boon for a country or whether they prove a curse, as has been the case in many African countries. Obviously, the business practices of transnational mining and oil companies play a role too, but it matters most that resource-rich countries themselves set clear conditions and create effective monitoring institutions. The renaissance of the mineral resource sector is the special focus of UNCTAD’s World Investment Report 2007. It shows that mining and power accounted for a steadily diminishing percentage of total foreign direct investment (FDI) from the 1970s onwards, but that trend has been reversed since the year 2000 (see chart).
UNCTAD reports that total FDI increased sharply last year, jumping by 38 % to $ 1.3 trillion and getting close to the record $ 1.4 trillion registered in 2000. Inflows into developing countries, at $ 379 billion, have never been higher. In Africa, investment rose by 20 % to twice its 2004 volume – an increase, which the UN experts see as a sign of resurgent interest in mineral resources. However, 90 % of inflows were shared by only 10 countries. Investment in South, East and Southeast Asia also rose by 20 %, with China and Hong Kong leading the field. But according to UNCTAD, India is catching up. In 2006, the country registered as much investment capital as in all three previous years put together. In Latin America, investment inflows stagnated; only Caribbean tax havens registered upturns.
By and large, UNCTAD explains the recent rise in investment in the mineral resources sector as a reaction to the increased price of mining products and energy resources. Since 2002, it says, the return on sales for extractive industries has been climbing, it now stands at 27%. In 1990, it was at just 5 %. For resource-rich countries, the boom opens up new sources of revenue – provided they have the mechanisms in place to share in the production companies’ profits. In many poor countries, however, that is not the case. In Mali, for example, UNCTAD reports that the operator of the world’s biggest gold mine, AngloGold Ashanti, handed over the equivalent of 10 % of its net profit in taxes from 2000 to 2003. Zambia’s revenue from copper mining amounted to a mere five percent of total value of copper and cobalt exports in 2005.
In the meantime, a commentator in Uganda’s The Daily Monitor has expressed skepticism about the Vice President’s announcements. The proposal to deposit oil revenues in an account outside the country does not exactly inspire confidence, the writer argues; on the contrary, it shows that the government has no idea how to protect money from thieves. (ell)