Essay on Report One

Submitted By Yuexi-Zheng
Words: 1144
Pages: 5

Report One: Angola’s Mislaid Billions
Problem Identification:
In the case, the mislaid billions directly drive my attention to the severe corruption issue in the Angolan government. And this issue, according to the author, greatly polarizes the living standards of people in Angola. A very small group of elite grabs national wealth by using government positions, while most people are facing longstanding poverty. Such wretched poverty could have never happened because of Angola’s rich natural resources of petroleum and diamonds. So to save those poor people, we have to find the main problem source of corruption and do something. From my perspective, the main problem source is the nontransparent information system supported by the government of Angola. That is to say, the data of the government revenues and expenditures is scarcely disclosed so that officials can grab interests under no regulation and refutation. Situation Analysis:
In this part, the method of PEST analysis will be used to analyze the situation and the results of nontransparent information system in Angola.
1.Political Analysis
Such nontransparent information system may cause domestic political instability.
After the civil war, the Angolan government actually won the arbitrary control on its natural resources. And then nontransparent information system was set up to grab interests from those resources mainly for the small group of elite rather the poor public. That is to say, the control of the country means the control of natural resource “ monopoly” profits. So greedy groups may try to challenge the current authority and take its place. Probably, the whole nation will suffer from wars between different interests groups.
2.Economic Analysis
Such information system may hamper the development of oil industry and Angola’s economy for two reasons. On the one hand, new potential foreign investors may decrease owing to the nontransparent information system. Because the data provided by the government are not so realistic, so foreign oil companies can hardly evaluate the risk on their investments. On the other, for the existing oil companies, because they don’t know the offered signature bonus of their competitors, they may try to offer as much as possible within ability to get the project. Thus, less recorded expenditure of the government contributes to lower GDP to some extent. The mentioned two reasons are both against the sustainable development of oil industry and economy.
3.Social/ Cultural Analysis
Angola’s nontransparent information system also causes the problem of labor shortage and social instability. Vast unrecorded expenditure leads to underinvestment in social sectors. Under the low expenditure of health care system, about half of the newborn babies died and most people can only live to 40 years old. This leads to a large shortage of labor market. Lots of factories may not able to hire enough workers to produce goods and service. Also, under the low expenditure of education system, more than half of people above 15 are illiterate, let alone knowing about laws. It easy to figure that crime rate in Angola may be very high because of the lack of education. People may not know what is the right thing to do and what is not.
4.Technological Analysis
Under the nontransparent information system, the amounts of signature bonus decide who will get the project. So oil companies may never waste their time on improving drilling technology, refining technology and so forth.
Alternative Solutions:
1. Oil companies should disclose their oil payments conscientiously.
Advantages: (1) Potential foreign investors now have data to evaluate their investment risk, so without risk uncertainties the amount of foreign investments may increase to promote economic development. (2) Because every bidding will only have one winner. By reviewing past data on signature bonus, every oil company may come up with a reasonable expected price. So the unreasonable money can be saved and