"Building" Growth?

"Building" Growth?

June 16, 2011
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The government of Equatorial Guinea is spending billions on showcase infrastructure projects. Will that lead to sustainable development in Equatorial Guinea?

In early June, the government of Equatorial Guinea unveiled Sipopo, an ultra-luxurious resort located on the outskirts of Malabo. The government spent in excess of 580 million Euros (US$830 million) to construct Sipopo, as recently documented in a joint press statement by EG Justice and Human Rights Watch.

In an effort to diversify its economy and end its dependence on oil, the government is taking a gamble that Sipopo will be “used in the future as one of the most important locations for tourism and holding of events in Africa.” In a country that currently attracts very few tourists, it is unclear if a beachside resort will be enough to attract tourists to a country where electrification and potable water is not readily available to most citizens, or how many new tourists the new resort will need to attract in the coming years to justify its high cost.

The societal benefit of other infrastructure spending is unclear as well. A new presidential palace covers an area equivalent to 12 city blocks in downtown Malabo. In recent years, presidential palaces have been constructed in a number of cities, including Bata, Luba, Malabo, Malabo "Dos", Mbini, Moka, Evinayong, Micomiseng, and Mongomo. The recently completed presidential palace in Moka was built alongside a new mansion reserved for the first lady. According to government documents obtained by EG Justice, the government also has spent considerable amounts of money remodeling and/or maintaining palaces, including the Friendship Palace in Malabo, the Casa Blanca Palace in Malabo, the 3 de Agosto Palace in Malabo, the Africa Palace in Bata, the Presidential Palace in Mbini, and a presidential residence in Akurenam. A “Palace of Conferences” was recently completed in the Baney district.

A new city, “Malabo Dos”, is currently being constructed just west of Malabo. It features a six-lane highway, modern offices, and apartment buildings. Many of the buildings remain empty, and according to research conducted in 2010, a number of apartment buildings were not offered for rent on the open market, but rather, were given to senior government officials who sublet them out at a significantly marked-up price.

The government’s development plan clearly prioritizes spending on infrastructure projects over other sectors. The government spent, on average, $880 million annually on infrastructure between 2004 and 2009 (the latest year for which data is available), an amount equivalent to nearly 44% of total capital expenditures. During the same period, less than 15% of total capital expenditures were allocated to the social sector.

The International Monetary Fund (IMF), which works closely with the government in a technical advisory role, has repeatedly expressed concern over the imbalance between infrastructure and social spending, emphasizing in 2010 that “priority should be given to public investment projects aimed at improving living standards and productivity.” In 2010, driven by rapidly increasing spending on infrastructure projects, the IMF noted that “unprecedented spending under the public investment program surpassed the original budget by some 25 percent.” 

While the IMF acknowledges the need for economic diversification, it concludes that the government's focus on infrastructure projects may not lead to long-term growth. It cautions that economic diversification “may stall under slow progress on key structural reforms to improve the business climate.” Equatorial Guinea ranks 164 out of 183 countries in the World Bank’s Doing Business. The government needs to improve transparency, strengthen budgetary control, and generate a skilled workforce through greater investments in education and health.

The fact that the government was able to coordinate the design and construction of the Sipopo complex—which involved the construction of 21 infrastructures by ten different companies in less than two years—demonstrates that, given sufficient political will, the government is capable of achieving significant progress in a short period of time.

Similar effort should be paid to improving the lives of ordinary Equatoguineans.

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