Aligning Incentives for Development: The World Bank and the Chad-Cameroon Oil Pipeline

Abstract

The precise causes of the "resource curse"-the relationship between natural resource extraction and an increase in poverty, violence, and political instability-remain unknown. Yet the relationship between natural resource extraction and low economic growth rates in underdeveloped countries is well documented.' It is therefore surprising that the World Bank approved funding for the Chad-Cameroon Oil Pipeline on the premise that resource extraction would reduce poverty in Chad. Critics argued that the Chadian government, with its questionable record on corruption, would surely squander Chad's oil revenue, thereby following the usual trajectory of the resource curse. In response, the World Bank required Chad to institute certain measures to ensure that oil revenue would be used for development purposes. This novel scheme-considered the World Bank's great "experiment" in combating corruption in oil-led development-included a revenue management law and a local and international monitoring component. Some believed that in these measures the World Bank had found a viable solution to the resource curse.