Rather than contributing to freedom, broadly shared growth, and social peace, rich deposits of oil or Gas and minerals have often brought tyranny, misery, and insecurity to these nations.
Fortunately, as many of our colleagues point out in a new latest discussion, all is not lost. There are concrete steps the international community can take to help break this curse.
Most obviously, easy resource revenues eliminate a critical link of accountability between government and citizens, by reducing incentives to tax other productive activity and use the revenue to deliver social services effectively.
The same revenues also generate staggering wealth that facilitates corruption and patronage networks.
Together, they consolidate the power of entrenched elites and regime supporters, sharpening income inequality and stifling political reform. The history of the oil-rich Arab Middle East has long been a case in point--with Saudi Arabia being exhibit number One.
Natural resource revenues have also been linked to slow economic growth rates, inequality, and poverty. One culprit may be the so-called "Dutch disease," whereby resource revenues raise a country's exchange rate, hurting competitiveness in non-resource sectors.
Other factors may include the volatility associated with commodity prices, which can have especially negative impacts on weak-state economies; and the underdevelopment of agricultural and manufacturing sectors during boom periods in resource-based economies.
And even when Gas (LNG) abundance produces high growth, it often benefits only a few corrupt elites rather than translating into higher living standards for most of the population. Oil-rich Angola is a case in point.
Despite having one of the world's highest growth rates “from 2005 to 2010, averaging some 17 percent annually, its score on the human development index remained a miserable 0.49, and its infant mortality rate was lower than that of Tanzanian average.”
Finally, the very presence of oil and gas resources within developing countries exacerbates the risk of violent conflict. The list of civil conflicts fought at least in part for control of oil and gas resources is long. A partial list would include Nigeria, Angola, Burma, Papua New Guinea (Bougainville), Chad, Pakistan (Baluchistan), and of course Sudan.
Econometric studies confirm that the risk of civil war greatly increases when countries depend on the export of primary commodities, particularly fossil fuels. At least three factors could explain this correlation.
First, the prospect of resource rents may be an incentive to rebel or secede. Second, wealth from resources may enable rebel groups to finance their operations. Third, the high levels of corruption, extortion, and poor governance that accompany resource wealth often generate grievances leading to rebellion.
Given this sorry picture, can anything be done? In fact, the past decade has seen a raft of international initiatives designed to combat corruption and improve governance in resource-rich nations that is exactly what the President Dr.
John Magufuli is performing at the moment. He works to improve revenue management in our resource-rich country.
The Open Government Partnership co-chaired by the United States and Brazil, aims to fight corruption by securing concrete national action plans to fight corruption from governments.
The Publish What You Pay and Publish What You Lend campaigns call on transnational corporations and banks to publicize their payments and loans to local authorities.
The Equator Principles seek to ensure that private bank investments do not exacerbate environmental and social risks. The World Bank-sponsored Stolen Assets Recovery Initiative assists successor governments in tracking down the wealth looted by deposed autocrats.
While each of these steps is worthwhile, such a piecemeal, fragmented approach suffers from inherent limitations. These initiatives are largely voluntary, and thus unenforceable. They are not universal (and in many cases lack participation from critical emerging economies). And they are riddled with loopholes.
A typical example is illustrated herein by tensions along the oil-rich border that divides Sudan and recently independent South Sudan have escalated in recent weeks, raising the prospect of a full-scale war between the longtime foes.
China, which maintains considerable oil interests in both countries, has called for restraint (Reuters) and vowed to work with the United States to bring both sides back to the negotiating table. While the role of mediation should remain with the African Union, the United States and China are vital players in this conflict that can bring pressure to bear on both parties.
However, it is "a strategic mistake and it has never worked" for the international community to treat both sides equally, since the northern Sudan is clearly the aggressor in this latest conflict as well as many of those in the past. "The international community should be united against northern aggression," Commentators have so remarked.
The roots of the conflict over the past fifty years and the intensification over the last twenty years was very much about how the north marginalizes the other regions, whether it is the south, whether it is east, or Darfur in the west.
There's a small group in the center, who are a part of the government, who have marginalized the other regions and basically used them for resource extraction--that led to several rebellions.
The primary issues are about oil, and then about the demarcation of the border between north and South--and the oil fields are located along that border area. As long as that border has not been demarcated, then there are claims on both sides that the oil fields belong to them.
This is particularly intense around the town of Abyei, which it's not clear whether that belongs to the north or whether that belongs to the South. Then there has been recent fighting in the town of Heglig [which the South occupied for ten days until reportedly withdrawing last week], which is a part of South Kordofan [a state in Sudan] and appears to be in the north, but the South claims that it is actually a part of the southern state of Warrap.
The fights on the ground are part of the negotiation that's taking place; sometimes when you can't get a decision at the negotiating table, you go back to some incursions, some fighting to shore up your position. Basically, if you can take some advances on the ground, you can shore up your position at the negotiating table.
So we think this is all part of negotiating. The problem is it can get out of hand and create its own dynamic, which leads back to full-scale war. But we don't expect full-scale war. We do believe that the negotiations will continue.
The ultimate goal here--the South needs to take a strategic pause in terms of fighting the north on the ground. They need to focus on a future that's more eastern looking, i.e., their connection to the East African Community.
Most of the traders who are in South Sudan right now are coming from east Africa. So their economic future and political future should be looking south and east, rather than looking north.
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