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Statement at South Sudan International Partner Forum

Statement at South Sudan International Partner Forum given by Minister of International Development Heikki Eidsvoll Holmås

Minsters, ladies and gentlemen,

This International Partner Forum comes at the right time. Oil has started to flow again. Still in small quantities, but it will increase. They must be busy in the Ministry of Petroleum and Mining, in the new building I was very happy to open in July last year.

It is also appropriate in this forum to mention the historic summit that took place in Juba last Friday. This marked the end of a difficult period and a new beginning – there is no going back.

We commend both Governments for the political will to fully cooperate, building on the achievement of the CPA and finding lasting political solutions to all issues, including debt.

As we have said so many times, it is not about coming up with something new – it is about implementing what has been agreed. Now we have a conducive environment to decide the policies that will shape the economic development of the South Sudan.

The last time we met in Washington in this format, in December 2011, we spoke of the need for getting the policy right from the start. Since then a lot of good work has been done.

The Government of South Sudan should be commended for its efforts to establish a petroleum revenue management framework with the Petroleum Bill and the petroleum policy.

As oil production resumes, there are financial needs and expectations to be met everywhere. What is critical now is to adhere to and implement the legislation. This includes the Petroleum Act, the Petroleum Revenue Management Billow before the National Assembly and the soon to be proposed Environment Bill.

Soon South Sudan will be ready to award new petroleum agreements. Investors can be brought in through the transparent tendering procedure and qualification requirements of the Petroleum Act and a carefully considered licensing policy. This way you will attract serious partners with a long term perspective, safeguarding the interests of the people of South Sudan.

The way I see it, good governance is a unifying theme in the proposed legislation. Transparency and accountability are the key principles. The stage is being set for Parliament, opposition, civil society, local communities, media and the general public to follow and to discuss how oil resources and revenues are managed.

Transparency is required along the entire petroleum decision chain – how much is produced by whom, and at what price. This will help to identify and track financial flows, combating mismanagement and corruption. Contracts should be published and publically available as an integral part of this process.

South Sudan is in a unique situation, building a complete new state. You have access to a natural resource to do this, with the potential for long term development and wealth for the nation and for its people. To achieve this, fair and equitable distribution of the wealth created is required, together with a prudent fiscal policy.

This raises the question of striking the balance between long term investments, savings and consumption. Oil reserves will be depleted one day, and then it is critical to have laid the basis for a diversified economy. That would require adequate investments in health, education, infrastructure, agriculture, private sector development etc. These are long term investments benefitting the country and its people, and concrete expressions of wealth being distributed.

When revenue from oil production start coming into the state coffers again it is also vital to have a perspective that ensures macroeconomic stability. Oil prices are high at the moment, but we know that they will fluctuate over years. Production from existing fields may have peaked.

It is therefore important to build buffers when prices and production are high, and to separate earnings from spending. Best international practice underlines this.

The government’s financial reserves that were depleted during the shutdown must be replaced, and all petroleum revenues collected should be allocated through the budget.

Allow me to use one slide here to illustrate this last point. The graph shows how Norway has managed to separate the earning and spending of oil revenues. This has helped my country to have a stable macro-economic development even in a world of sharply fluctuating oil prices.

There are a number of oil producing countries that have not managed to make this separation; almost all with negative effects.

To sum up:

  1. Petroleum resources are public assets. They belong to the people and should benefit the people. Today, tomorrow and for coming generations. That requires sound management, transparency and accountability at all levels.
  2. While commending South Sudan on the development of the legal framework, let me emphasise the importance of fully implementing this legislation. Acts and regulations properly implemented and adhered to are your main tools to manage the petroleum sector in a sustainable way.
  3. Getting the policies right and implementing them to attract serious long-term oil companies willing to make the required long-term investments. Cooperate with the companies, but be in control.
  4. Focus should remain on long-term challenges – capacity building, rules and regulations, equitable distribution of wealth, social justice, health and safety, and protection of the environment.

We will support you in this work. Bilaterally through our cooperation on capacity building and state building, through the Oil for Development program, and together with other partners working within the framework of a Partner Fund as discussed earlier today.

I thank you for your attention, and I look forward to listening to H.E. Minister Stephen Dhieu Dau’s intervention and the discussion to follow.

 

Minister of International Development Heikki Eidsvoll Holmås

 

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