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The Observer

By Deus Mukalazi

October 23, 2011 23:01

The last few weeks have been characterised by running battles between the Executive and the Legislature over confidentiality of the oil contracts signed between the Government of Uganda and the oil companies.

This climaxed in the two-day heated oil debate where Parliament resolved that government desists from signing agreements with confidentiality clauses. Attempts were made by the executive to argue the case for confidentiality, citing commercial sensitivity of certain information in the contracts and confidentiality being the norm all over the world, as well as security reasons.

The MP for Ruhaama Janet Museveni even reasoned that Uganda could have her oil fields bombed if there was no confidentiality! The one million dollar question is: are oil contracts really that sacred that they can’t be shared?

While treaties, laws, regulations, and other legal documents defining the relationship between governments and private companies are public documents, oil, gas and mining contracts between governments and the extractive industries are usually shrouded in secrecy. In Uganda, these have been unavailable to citizens and it took frantic efforts for the signed production sharing agreements to be availed to Parliament and even then the content of these contracts was not to be shared outside Parliament.

There is a growing international call to make the terms of extractive industry contracts available to the public, and to establish new norms for what information is and is not disclosed in deals between government and industry. Proponents of transparency argue that the secrecy surrounding oil transactions in Uganda and government’s reluctance to share the oil contracts might be a precursor to the ‘oil curse.’

The oil curse is a popular reference to a situation of poverty, low economic growth, corruption and civil strife that has come to characterize natural resource rich countries in Africa like Liberia, Nigeria, DRC, Angola, etc.  Contract transparency is essential for the responsible management of natural resources and the potential for growth and economic development that those resources can provide.

The government, citizens and investors, all have to gain from contract transparency. Citizens’ suspicions of the hidden clauses will decrease, creating a more stable contract that is less likely to be subject to calls for renegotiation and better relationships with communities. It also allows citizens to monitor contracts in areas where they may be better placed than the government to do so, such as environmental compliance and the fulfillment of social commitments.

Contract transparency provides incentives to improve on the quality of contracting because government officials will be deterred from seeking their own interests above the population’s, and with time, government’s bargaining power would increase. There are already claims that the contract terms between the government and the oil companies were not consistent with international norms.

Secrecy only helps to fuel such speculation and hides incompetence, mismanagement and corruption. Ugandans have a right to know how their government is selling their resources. In Uganda, sub-soil resources such as minerals, oil, and gas are the property of the nation, not the individual owner of the surface rights.

Accordingly, contracts involving oil, gas and other mineral resources may cover a range of information to which citizens should rightly have access to, as owners of such resources. Contracts typically contain information about fiscal terms and the allocation of risk that are essential to understanding the benefits and risks – the real value of the deal.

Public contracts are essentially the law of a public resource, and the basic tenet of the rule of law requires that laws are publicly available. The size and scope of many extractive projects is so large that they directly affect the livelihoods of large populations for decades.

Where contracts create their own laws – because they modify existing laws, freeze their application or elaborate on outdated or incomplete laws – it’s all the more important to disclose their contents for democratic accountability.

Following several high-profile reports on contracts, national debates in a number of countries and campaigns by international organizations, Ugandans are increasingly aware of the critical role of contracts and some of their worst excesses.

Ugandans are also aware of the infrastructural development and benefits that transparency in managing diamonds has brought in Botswana.
So, in the face of mounting calls for transparency, those who fail to disclose, or to provide a plausible explanation for non-disclosure, are seen to have something to hide.

The author is coordinator, Publish What You Pay Uganda.
deusmukalazi@gmail.com