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That’s the question in Alain Vicky’s piece this morning in Le Monde Diplomatique (gated). Vicky warns that oil discoveries in Uganda’s Bunyoro region threaten to heighten simmering tensions between the local communities whose ground is being drilled and the central government which is pocketing the cash. Unmet expectations and popular frustration with politicians could unleash violence and do raise concerns that Uganda might be heading for a rough patch. Given the technical characteristics of Uganda’s crude and that the country is landlocked widespread "bunkering" and criminality as seen in the Niger Delta are probably unlikely.  But the risk of local grievance-driven violence and sabotage is all too real.

Just as worrying—and likely a much greater risk—is Uganda’s worsening corruption. A country’s ability to reap the benefits of new income seems to largely depend on the strength of current institutions. A wall of new oil money—coupled with new projections that Uganda’s oil reserves might actually be double previous estimates— could very well accelerate the country’s disappointing decline in governance. Oil revenues that could in theory build up the sorely needed infrastructure and social services could instead end up fueling conflict, wasted on white elephant projects, or used to further consolidate President Museveni’s grip on power.

As part of CGD’s Oil-to-Cash Initiative, our latest working paper by Alan Gelb and Stephanie Majerowicz explores the potential for direct distribution of Uganda’s oil rents to diffuse the risk of centralized, unaccountable spending. They conclude:

If investments were well chosen and well implemented and the assets well managed, the benefits could be large given the extreme constraints that poor infrastructure services now pose for the economy… But the investment path also represents a riskier strategy in terms of the indirect governance effects; in a government without strong internal checks and accountability, there are few guarantees that the government will use the funds appropriately...

Ultimately, distribution of the oil rents… can be considered a way to mitigate the risk that Uganda will succumb to the resource curse… coupled with the benefits of the cash itself in reducing poverty, and the possibilities of building up a tax system that can produce a more accountable delivery of public services (including the much needed infrastructure) suggests that cash transfers are an option worth considering in the Ugandan context.

Unfortunately, Ugandan politicians don’t yet seem particularly open to this idea. Like many other politicians, they seem to believe that their country is immune to the effects of the oil curse. We shall see.

We’ll continue to watch Uganda, as well as a number of other new (and old) oil producers that face similar challenges. Watch this space for forthcoming studies on Iraq, Equatorial Guinea, Papua New Guinea, and more.