The Role of a Global Organization for the State
Global organization refers to any international alliance that involves many different nations or countries that are united by a common agenda. Global organizations are defined by the countries or regions they represent, and their main objective is to study, gather and disseminate information, establishing laws and policies that are universally accepted (Campbell et al., 2004). More importantly, these organizations do play several significant roles and activities to their member states. For instance, the organizations assist in cooperation and unity between different nations, by setting negotiation deals between them.
It is also the responsibility of international organizations to set up bilateral or multilateral treaties between nations. Apart from these roles, some organizations would also conduct certain supervisory functions. Other common functions of global organizations, which have assumed great significance in recent times are the negotiation of multilateral agreements between nations and the formation of consortium institutions that would establish a foundation for important international projects (Cullen and Parboteeah, 2005). This paper features the Chad-Cameroon Oil Pipeline Project as an example of projects that have been funded by a consortium of private and public financial institutions.
The Chad-Cameroon Oil Pipeline Project
The Chad-Cameroon Oil Pipeline Project is a project whose development can be defined in a mixture of aids and debts. Officially inaugurated in the year 2003, this was arguably one of the largest private/public development projects in Africa. As it would be observed, Chad and Cameroon are both categorized as low-income nations, by the World Bank and they only depend on exports of primary products for their foreign earnings. For instance, Chad’s limited natural resources, coupled with the incessant political conflicts have resulted in less private investment. In that case, Chad would have to depend largely on their neighbor Cameroon which serves as an entry as well as an exit for the country’s imports and exports. Also, Chad’s foreign income is very much limited owing to its limited accessibility as a landlocked country. This continues to pose serious challenges to the country’s economic development…
Economic Situation in Chad
To sum it all, the economical situation in Chad is not so impressive as a result of long years of political instability and civil wars. The country was recently ranked in the fifth position among the poorest countries globally, by the World Bank and this indicates its poor economy. More importantly, Chad is constituted of a bulging informal sector and a very small formal sector. Things are not very much different with Cameroon, which has been ranked among the countries with the lowest incomes. In that scope, it would be understandable for one to see the benefits brought by oil in ameliorating the living standards of citizens in the two countries. However, both Chad and Cameroon cannot process oil by themselves, owing to their poor economical standings. This has over the years called for the intervention of consortiums that play an important role in the development of the two countries, by funding important projects in the region, such as the one highlighted in this report.
Chad-Cameroon oil pipeline project was an ExxonMobil-led Oil Consortium involving Petronas and Chevron as the key private financiers, and the World Bank and other public financiers. The entire project involved the construction of a pipeline extending about 1,070-kilometers from the oil fields in Chad, to the Atlantic coast in Cameroon. Additionally, there was also a plan of infrastructure improvements, ancillary facilities, and installation of an 11-km offloading vessel and an offshore Floating Storage. The governments of the two countries, together with the consortium would make all the necessary preparations for the project, with the assistant of IFC, the World Bank, and other private and public lenders, between the years 1993 and 1999. The government of Chad and the consortium would establish Tchad Oil Transportation Company SA (TOTCO) while the governments of the two countries and the consortium established the Cameroon Oil Transportation Company S.A (COTCO). The total cost of the project at the initial stage of development was estimated to be $3.5 billion, but later on, in a different presentation, ExxonMobil the consortium leader would place the project at a total cost of $4.2 billion (Pegg, 2006). However, if there was anything that would necessitate the participation of the World Bank in the project, it was the possibility that the project would be very useful to the generation of economic growth, thus enhancing new developments for the people of Chad and Cameroon.
As it would be observed, the consortium would source the biggest funding for the project, leveraged by the full participation of the World Bank. Taking the independent value for each member of the consortium, the United States’ ExxonMobile contributed the largest funding share, with 40% of the total private equity. Following in the line was Malaysian Petronas which accounted for a total of about 35% of the project’s private funding. Chevron, also from the U.S., was third in the line, with 25% of the total contribution by private institutions. Public financial supporters accounted for only 4% of the total funds towards the inception of the project which was also important, considering the minimal credit rating of the two countries benefitting from the project (Keenan, 2005).
In this regard, each member of the consortium had played a significant part to play in the development of this project that would be perceived as the largest single private investment project in Africa and a perfect example of public-private partnership initiatives. Public financing institutions aligned to the project included organizations such as the EIB, the IDA, the IBRD, the African Development Bank, and the export credit agencies, the IFC. The total amount of loans made by the EIB was $ 41.5 million, while IFC and the IBRD contribution to the project would be $200 million and $92.9 million respectively. Export Credit Agencies such as COFACE of France, EXIM Bank of USA, and the Ex-Im Bank of Africa had also made significant contributions towards the inception of the Chad-Cameroon Oil Pipeline Project. Finally, the total financial commitment made by the World Bank to Chad and Cameroon was $259 million.
The Oil Consortium in the Chad-Cameroon Oil Pipeline Project
The overall involvement of the oil consortium in the Chad-Cameroon Oil Pipeline Project had had a great impact on the success of the project. The consortium had independently contributed over 80% of the total funding that had been directed towards the development of the massive project and this proved to be a big boost to the efforts required to launch the project (Utzinger and Wyss, 2005). Even though there would be some clashes between the financial institutions and the indigenous people later on, whereby it was allegedly observed that some organizations had violated the rights of the indigenous citizens, the consortium had nothing to do with this at all, since all the blame was directed towards the public, notably the World Bank. In this regard, the mission of the oil consortium in the program was a focused initiative that would generate positive results in the success of the project.
References
Campbell, D., Hamill, J., Purdie, T., & Stonehouse, G. (2004). Global operations and transnational business: Strategy and management (2nd ed.). West Sussex, England: Wiley.
Cullen, J. B., & Parboteeah, P. (2005). Multinational management: A strategic approach (3rd ed.). Mason, OH: Thompson.
Keenan, J. (2005). Chad-Cameroon Oil Pipeline: World Bank & ExxonMobil in Last Chance Saloon. Review of African Political Economy, 16(9), 395-405.
Pegg, S. (2006). Can policy intervention beat the resource curse? Evidence from the Chad-Cameroon pipeline project. African Affairs, 105(418), 1-25.
Utzinger, J. & Wyss, K. (2005). Assessing health impacts of the Chad-Cameroon petroleum development and pipeline project: challenges and a way forward. Environmental Impact Assessment Review, 25(1), 63-93.