Over $10 Billion “Missing”

Over $10 Billion “Missing”

Donna Cline June 27, 2013
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“Over $10 Billion Missing” in Equatorial Guinea: Lack of Transparency Means Illicit Outflows Will Continue.

Equatorial Guinea has a missing money problem.

More specifically, the country has an illicit financial flow (IFF) problem.  Global Financial Integrity(GFI), an organization that promotes policies aimed at curtailing the cross-border flow of illegal money, defines IFFs as funds or money that is illegally earned, transferred, or utilized.  In estimating IFFs, GFI follows the World Bank Residual method, which measures the gap between the recorded source of funds and government use of those funds.  The formula is simple:  if a country’s source of funds is greater than its recorded use of those funds, that difference – or gap – represents capital that has “leaked out” of the balance of payments.  GFI assumes that unrecorded cash flows must be illicit, because in their view, “there is no logical reason why legitimate capital transactions should go unrecorded.”

This is the case in Equatorial Guinea, Africa’s third-largest oil producing country.  GFI estimates that the country’s IFFs between 2001 and 2010 total $10.03 billion USD.  This number places Equatorial Guinea 51st on the list of countries with the largest IFFsfrom the same time period.  Put another way, this means $1 billion simply disappears in Equatorial Guinea every year.

$10 billion could significantly improve the Growth National Happiness (GNH) in a country where 75% of its citizens live on less than $2 per day

So, where has the money gone?  President Obiang, Equatorial Guinea’s ruler since 1979, who has claimed there can be no corruption in Equatorial Guinea because he personally controls the nations expenditures, has used his position to amass a large personal fortune, estimated to be worth around $600 million.  High-ranking government officials – most are related to President Obiang – also benefited from the country’s oil revenues as they own companies that “won” contracts to extract oil or other natural resources without true competition.  A culture of unbridled government corruption shares the blame.  Teodoro Nguema Obiang Mangue, the eldest son of President Obiang and currently the Second Vice President in Charge of Defense, famously abused his previous position as Minister of Forestry to force timber export companies to pay a fee in return for permission to harvest Equatorial Guinea’s timber.  This rampant corruptioncombined with the lack of rule of law accounts for the missing $10 billion.    

Opacity and the lack of rule of law or mechanisms by which the country’s citizens may hold the government accountable internally means the Obiangs and other government officials will continue to get away with stealing while widening the inequality gap in the country.  Equatorial Guinea has no meaningful freedom of information legislation, and in 2010, Equatorial Guinea was expelled from the Extractive Industries Transparency Initiative(EITI) for failing to meet transparency requirements. 

Since being expelled from the EITI, the government’s actions have not reflected those of a candidate country interested in joining a transparency initiative.  Equatorial Guinea’s government blocked the International Monetary Fund (IMF) from publishing its 2011 Article IV Report(Article IV Reports summarize the economic conditions in IMF member countries).  Although IMF rules permit member states to veto the public release of their Article IV Report, only 10% of IMF member states have used the veto power to block publication of this information.  Equatorial Guinea was also ranked 56th out of 58countries measured in the 2013 Revenue Watch Institute Resource Governance Index.  This ranking indicates that the citizens of Equatorial Guinea lack even the most fundamental information about government revenues from Equatorial Guinea’s natural resources.  Equatorial Guinea also scored poorly in the 2013 Open Budget Index, which measures governmental budget transparency and accountability.  Equatorial Guinea’s 2013 score reflects its third consecutive zero.

Overtures by the government of Equatorial Guinea to join the EITIare just another ploy to distract the international community away from the reality on the ground; unless their proposal follows from significant and verifiable improvements, such as the adoption of and adherence to an access to information law, removal of restrictions of freedom of expression, association and assembly, full disclosure of resource revenue, and project-specific payments by oil companies in the country.  Until some of these reforms take hold in Equatorial Guinea, money will continue to simply disappear at an alarming rate.

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