Business News of 2014-06-27

‘Oil to cash’ module can reduce corruption

A Senior Fellow at the Hoover Institution, Stanford University, USA, Prof Larry Diamond, has said the adoption of the “Oil to cash” module in Ghana in oil revenue mobilisation is a promising innovation that can help reduce the scope for corruption and increase citizen engagement with the state.

He explained that the “oil to cash” module in oil revenue mobilisation was where a portion of the state’s oil revenue was distributed directly to all citizens as annual dividends.

Prof Diamond was speaking at a lecture in Accra on the theme, “Managing windfall: How oil resources can generate development rather than decay”. The lecture was aimed at analysing the opportunities and challenges presented to developing countries with the discovery and exploration of oil.

It was organised by the Ghana Centre for Democratic Development (CDD-Ghana), in collaboration with the Africa Centre for Energy Policy (ACEP).

Examples from other countries

Citing the Alaska module practised in the USA as an example of the “oil to cash” module, he said citizens annually received some of the proceeds from the oil exploration, adding that it was possible for the module to be implemented in developing countries such as Ghana.

He said the system would reduce inequality in most of the developing countries. Prof. Diamond, who is also the co-editor of the Journal of Democracy, indicated that the equitable distribution of oil revenue to the citizens would increase domestic tax by deducting tax from source before it reached every individual, but with their understanding.

Mismanagement of oil revenue

Prof. Diamond said very often, the leaders mismanaged the revenue accrued from oil exploration. “Data from the Mo Ibrahim Index of African Governance show that the major African oil producers have the worst governance and the worst human development performance of any set of African countries,” he stated.

In contrast, he indicated that some of the countries in Africa with sustained democracies, none of which was a significant oil exporter, had the best governance scores, as well as the best performance in human development. The situation, he added, could be worrying, leading to discontentment among the citizenry.

Efficient use of oil revenue

The Executive Director of ACEP, Dr Mohammed Amin Adam, said it was unfortunate that such an issue had not been properly addressed.

Even though he admitted that the oil revenue so far had been evenly spread to reach many governmental agencies, he added that there was the need for its efficient use. Dr Adam, who was also a discussant at the lecture, indicated that there was the need to consider other modules which would also be feasible for Ghana.

Source: graphic.com
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