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VIEW: Curing the resource curse —Saleem H Ali

Most of the world’s major economic and educational powers have depended at some point in their development path on the exploitation of their natural resources — the United States, Canada and Australia being foremost among them. In many cases extractive industries have been necessary for the development trajectory

Countries that produce oil, metals and precious gems have recently come under scornful scrutiny by numerous public intellectuals. Phrases such as “resource curse”, “petro-politics”, and “conflict diamonds” are now common parlance. The war in the Middle East and the empowerment of Iran through petrodollars has brought this matter in the limelight again. The conflict in Balochistan is also claimed by many to be a manifestation of the “resource curse”. In a recent column Thomas Friedman of the New York Times claimed that “countries that get addicted to selling their natural resources rarely develop their human resources and educational institutions”. Such statements are neither well supported by facts nor offer much prescriptive guidance for resource-rich economies with no other significant endowments upon which to base development.

Most of the world’s major economic and educational powers have depended at some point in their development path on the exploitation of their natural resources — the United States, Canada and Australia being foremost among them. In many cases extractive industries have been necessary for the development trajectory.

The Democratic Republic of Congo, which had a landmark election last week, is a common example used by the resource pessimists. During my visit to Kinshasa five years ago, I was repeatedly told by development agencies that diamonds and coltan were to blame for much of the country’s woes. While the revenues from mining may indeed have contributed to rebel movements in the east of the country, let us not forget that neighbouring Rwanda had been scourged by civil strife a few years earlier without a scramble for minerals. Underlying ethnic tensions coupled with massive deprivation and perceived social injustice, are the root causes of conflict. What the people of Congo need now is not more doom and gloom from the resource curse theorists but rather an effective means of managing and monitoring the flow of their mineral revenues.

Such paths to development must, of course, be tempered with environmental performance, economic diversification, and a respect for the safety of those who toil so tirelessly to retrieve these resources for us. There has been considerable research on the economic performance of resource-rich countries by academics as well as by international financial institutions. Unfortunately, such studies do not consider the full spectre of alternative development paths and cannot account for the myriad intervening variables that may lead to poor economic performance or conflict. Some of the most remarkable success stories of development in recent years such as Botswana, Malaysia and Chile have been mineral producers, and must not be dismissed as outliers. In fact the causal connection in their turn of fortunes as a result of minerals being discovered is far more robust than the resource curse studies.

Other countries such as Chad or Equatorial Guinea were economically stressed and examples of poor governance and armed conflict long before oil was discovered there. If anything, minerals might bring the behaviour of these governments in the international limelight and force rogue regimes to improve their performance. The World Bank briefly cut off financial payments to Chad earlier this year because of its misuse of oil revenues. While the terms of the resumption agreement are being challenged by activists, the Chadian government agreed to pass a law requiring 70 percent of oil revenues to go towards “priority poverty programmes”.

As international norms for accountability evolve, the fear that resource endowments will be misused is abating. On July 6, 41 financial institutions agreed to a revised version of “The Equator Principles” for ensuring social and environmental consciousness in their investment decisions. The British government has been leading the Extractive Industries Transparency Initiative, which aims to recruit governments in having constructive action plans for resource revenues. The Kimberley Process for diamond certification and the recent partnership between jewellery manufacturers and groups such as Earthworks and Oxfam on ‘clean gold usage’ are promising signs of constructive engagement. Such efforts are far too easily labelled as “greenwash” and deserve more credit and time to mature.

Natural resource extraction is far too consequential to ignore or tackle on an ad hoc basis. Making choices in environmental conflicts involves a confluence of fearless science and clear policy formulation. We need an integrated natural resource management strategy that considers energy and material sources for our modern lifestyles across the supply chain. While society must be better prepared for depletion of non-renewable resources such as oil, we should not be constrained from harnessing resources to benefit communities that have limited alternatives. It is true that many of these extractive economies have failed to equitably distribute their wealth — the Niger delta region in Nigeria being a prime example of such a case. However, this situation reflects failed policy more than a failure of resource extraction itself. Norway, one of the world’s oldest democracies, has succeeded to manage its resources quite equitably and enjoy relatively high environmental performance as well.

Selective statistical analyses that disparage mineral economies or polemical statements about resource curse are unlikely to address any of the major development challenges that confront us.

Saleem H Ali is associate professor of environmental planning and conflict resolution at the University of Vermont and a visiting scholar at Griffith University in Brisbane, Australia

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