US embassy cable - 05NDJAMENA867

UNCLAS  NDJAMENA 000867 
 
SIPDIS 
 
 
SENSITIVE 
 
LONDON AND PARIS FOR AFRICA WATCHERS, TREASURY FOR OTA, 
ENERGY FOR GPERSON AND CGAY 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ENRG, EPET, PGOV, CD, Oil Revenue Management 
SUBJECT: CHAD'S OIL REVENUE MANAGEMENT COLLEGE UPDATE 
 
REF: A. NDJAMENA 72 
 
     B. NDJAMENA 04 2157 
 
 1.  (SBU)  Summary:  Based on the assessment of visiting 
Treasury advisors, Chad's Oil Revenue Management College (the 
College) is working as intended and even in some cases has 
succeeded in exercising a stronger role than mandated. 
During their visit to N'Djamena May 15-26, Ken Torp and 
Eileen Brown of Treasury's Office of Technical Assistance 
discussed the selection of a new resident Treasury and worked 
with the College's technical staff on the management of its 
internal workload and its budget development and execution. 
Additional technical assistance through a new resident 
advisor and targeted training will help strengthen the 
College's capacity in budget development and execution.  End 
Summary. 
 
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COLLEGE MEETING ITS MANDATE... 
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2.  (SBU)  In a debrief May 26, the Treasury team told the 
Ambassador that the College is largely meeting its mandate. 
In 2004, the Government's gross earnings from oil revenues 
was 169 million USD.  This figure is prior to deductions for 
debt payments, funds for stabilization, future generations, 
and the producing areas.  (Ref A.) The College approved 
commitments of all revenues received with the exception of 
close to USD 14 million, which the Chadian Treasury, in 
conjunction with the Central Bank, rolled over for use this 
year.  The College has approved close to USD 200 million to 
date.  The projected gross earnings from oil revenues in 2005 
is USD 242 million. 
 
3.  (SBU)  Nine ministries have benefited from oil revenue 
projects.  They include public works, agriculture, education, 
health, environment, mines and energy, and 
telecommunications.  The bulk of the projects approved are 
for public works and roads, education, and health.  Other 
expenditures include a small subsidy of 250 million FCFA 
(almost USD 500,000) to the Ministry of Petroleum and to 
inter-ministerial development, a project designed to link the 
Government ministries together with electrical and 
communications lines.  Another interesting development is the 
use of oil revenues to pay salaries in the priority sectors, 
such as education and health. 
 
4.  (SBU)  The College is playing an increasing influential 
role earlier in the budgetary process, one which goes beyond 
the mandate defined in Chad's petroleum law, according to the 
Treasury advisors.  With the budget cycle for 2006 just 
beginning, the Ministry of Finance will soon issue a letter 
to all ministries outlining the Government's budget 
priorities and delineating a series of percentages for 
expenditures in each sector.  The ministries will be 
requested to send their "wish list" to the Ministry of 
Finance.  After reviewing the budget proposals, the Ministry 
of Finance will send back a list of how much each ministry 
can spend.  A budget conference will be scheduled at which 
the College will be able to question some of the projects. 
 
5.  (SBU)  Last year a technical staff member from the 
College participated as an observer in this process.  This is 
the first year that the College will be involved from the 
beginning.  The College is expected to receive each 
ministry's "wish list" in advance.  The College's comments 
will be sent to the Council of Ministers along with the 
Ministry of Finance's recommendations.  The Treasury advisors 
advocated that a College member attend the budget review 
conference along with a technical staff member.  A College 
member would have a higher status and more likely be able to 
ask difficult questions. 
 
6.  (SBU)  In the past, the College has rejected projects, 
and its rejections have been respected, according to the 
Treasury advisors.  Although the petroleum law stipulates 
that the College is authorized to reject projects at the time 
of payment, it is now doing so at an earlier stage   In 
practice, the professional technical staff is intervening to 
stop project proposals at the time they review the 
 
procurement notices.  This, according to the Treasury team, 
saves valuable time so that projects that do not meet the 
criteria for funding are stopped well before the obligation 
stage.  The technical staff confirmed that they turn back 
many projects for clarification. 
 
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... BUT NEEDS TO THINK STRATEGICALLY 
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7.  (SBU)  College board members meet regularly to consider 
the project proposals vetted by the professional staff.  The 
Treasury team is concerned, however, that meetings of the 
College board members are held to merely rubber stamp the 
work of the technical staff instead of setting direction, 
trouble-shooting, resolving bureaucratic issues, or 
determining if the projects are contributing to overall 
poverty alleviation.  Another issue that requires leadership 
from the members is improvement in the relationship with the 
Ministry of Finance, which currently views the College in 
almost adversarial terms.  A possible positive outcome of 
improved relations between the College and MOF, according to 
Torp and Brown, would be the adoption of successful College 
practices by the MOF to improve their own budgetary process. 
 
8.  (SBU)  The Treasury team also noted that the College's 
monitoring of projects has no enforcement mechanism.  It is 
extremely important for the College to follow through with 
the various ministries in cases where the College attempts to 
verify a project and discovers that projects are inadequately 
executed (i.e. no wells or a poorly constructed building). 
Due to the lack of enforcement, the College is unable to 
focus on the results of specific projects.  Finally, the 
College members, according to the Treasury team, need to have 
in place a management system within the College, build a 
sense of teamwork, and develop their own budget priorities. 
The Treasury team noted that a Resident advisor would aid 
these activities not only through providing expertise, but 
also through identifying needs for training programs in 
specific areas, such as budgetary analysis or IT management. 
 
 
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SITE VISIT 
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9. (U) On May 25, the Treasury team, political assistant, and 
member of the College's technical team visited a school in 
N'Djamena which is the beneficiary of a project funded with 
the petroleum revenues.   Prior to the project, some five 
thousand students attended class in mud structures with 
corrugated tin roofs which had no furniture.  The project of 
12 billion FCFA (24 million USD) paid for the construction of 
concrete school blocks, a wall, a sports facility, 
guardhouse, and furniture for the classrooms.  The project is 
still being completed. 
 
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COMMENT 
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10. (SBU)  So far Chad's oil revenue management College 
appears to be working as intended.  It is still in its early 
days, however.  Much work remains in terms of determining how 
revenues from new fields will be managed, how project 
execution will be verified, and how the College will fit into 
the overall budget process.  A resident Treasury advisor will 
have a pivotal role in influencing those decisions. 
 
11.  (U)  Torp and Brown did not have the opportunity to 
review this message before their departure. 
WALL 
 
 
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