Syndicate content

oil

Smart Lesson: Combatting the Resource Curse in Fragile and Conflict-Affected Countries


  

Control over natural resources often plays an important role in armed conflicts, either because warring factions fight over access to natural resources or because natural resources help finance one or several of the factions. Recent examples include the several wars fought, in part, over access to oil in the Middle East and wars fueled by “blood diamonds” in West Africa. The Extractive Industries Transparency Initiative (EITI) facilitates public control over the wealth generated by these natural resources and limits corruption.

The EITI, launched in 2002 and endorsed by the World Bank in 2003, has provided tangible governance improvements in resource-rich conflict-affected countries. It works with multiple stakeholders—a coalition of governments, companies, investors, international organizations, and civil society organizations — to manage a process of publication and verification of company payments and government revenues from oil, gas, and mining.

The curse of treasure in fragile states

Nicholas van Praag's picture
 
    Bless them.   Photo source Wikipedia.

As people return from the holiday break in early January, the citizens of south Sudan will be voting in a long-awaited referendum.  Polls suggest there will be a big majority in favor of southern independence. Boosting people’s hopes for the new state are its oil reserves worth some $2 billion a year.

Sorting out how the North and South will divvy up the benefits of oil is not clear.  While most of the oil is in the South, the export and refining infrastructure is in the North. Revenues are currently shared roughly 50-50 but there is no agreement yet over the fate of Abyei, a significant oil producing region on the North/South border.

Still, the prospect of oil revenues is central to southern thinking about financing its way to a better future. Assuming the problems with the north are sorted out, are they right to see their natural resource endowment as the basis for future prosperity?