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Natural Resources Don’t Always Spell Prosperity

Editor’s note: VOA Khmer recently spoke with specialists in the field of natural resource management in developing countries and learned that Cambodia is not alone in struggling to use natural resources to benefit its citizens. The resource curse, where natural riches fail to help the poor, is a worldwide scourge, the global experts told VOA Khmer in numerous interviews. Below is Part Four of the original VOA Khmer weekly series, airing Sundays in Cambodia.

Whether a country is at war or peace, natural resources can reduce economic growth, because when a lucrative resource is exploited, other means of production are forgotten, experts say. Meanwhile, without transparent management, revenues from natural resources can widen income disparities and engender corruption.

And while it’s true that natural resources can transform an economy, an adequate state apparatus is needed to implement effective and efficient management strategies, experts say.

Countries rich in resources like timber, minerals or oil, and with adequate management structures, can access the international community for assistance.

The World Bank, for example, can provide facilities for low-income countries. In 2002, the Bank helped to launch “Extractive Industries Transparency Initiative,” or EITI, to help such countries maximize development and guard against corruption.

William Ascher, a professor of government and economics at Claremont Mckenna College, in California, and author of “Why Governments Waste Natural Resources: Policy Failures in Developing Countries,” says it is imperative to ensure that private and state enterprises be required to hand over the value of the resources to the government at the very beginning of the process.

This becomes a matter of contracting, and Ascher recommended countries without the skills to undertake look to the international community for help.

“The fortunate thing for low-income countries is that both the United Nations and the World Bank, and other organizations, have good facilities to advise governments on how to write contracts with the private sector, usually international companies, in order to ensure that the contracts are fair from both sides,” Ascher said.

Paul Collier, an Oxford University economist and author of “The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It,” told VOA Khmer by phone that a group of economists have build a helpful Web

There, people can seek out non-partisan academic advice on key decisions in harnessing natural resources.

The Natural Resource Charter is a set of principles for governments and citizens describing how to effectively use the opportunities created by natural resources. It provides guidelines and standards to inform and improve natural resource management.

“You need to focus on the really important steps,” Collier said. “The Natural Resource Charter tries to do that. And it tries to help governments that don’t have a lot of capacity to see what is really important.”

Ascher emphasized three important steps to begin the proper management of natural resources: fiscal policy, contracts and transparency.

“The place to start is in the fiscal policy, that is the fiscal arrangement between the government and whatever state agencies are involved,” Ascher said. “The second thing to be very, very concerned about is the nature of the contract between the government and any private enterprises involved. The third would be to ensure much greater transparency both in the contracting process and in all the processes that follow.”

The mandates of government agencies must be simple and consistent, he said. Inter-ministerial task forces can be good only with proper communication and cooperation.

“Whenever you give an agency multiple tasks that conflict with one another, you put it in a very difficult situation, and any agency has to decide to what degree each one of these goals should be pursued,” Ascher said. “And the agency typically will pick whatever is in the interest of that agency, rather than to come up with the best balance on behalf of the country.”

Somit Varma, director of the oil, gas, mining and chemicals department of World Bank/IFC, told VOA Khmer at his office in Washington that natural resource management has to be structured to fairly benefit all stakeholders. A robust system has to be in place to ensure benefits during the boom and feasible investing during a bust.

“It’s community surrounding the project, it’s the government; it’s the municipality from which the resources are coming,” he said. “It’s not just a central government, it’s civil society, it’s private sector, which is involved, it’s suppliers who provide supplies to the project.”

“So, there’re numerous stakeholders in an extractive industry project. And each one needs to get a fair share of benefit.”

Genuine auctions made in a transparent manner are another good process to ensure that natural resource revenues go to the government and serve the public good, Collier said.

“With the auction, the government doesn’t really need to know a lot,” he said. “The value of the resources is revealed by the bidding process, one company bids against another.”

Meanwhile, a strong corps of knowledgeable advocates is needed to hold the government accountable.

“Ordinary citizens have the responsibility to the society that children inherit,” Collier said. “So, there’s no substitute for critical masses of many thousands of informed citizens.”

This also requires good information, through newspapers, magazines, radio programs.

“And it doesn’t require everybody in the society to be well informed,” he said. “We need of course a critical mass, which is several thousand people who really understand the issue and hold the government to account.”

Civic groups can build that critical mass and share information with others. “So if we start with a few hundred, it will quite rapidly get up to a few thousand to the hold the government responsible.”

According, resource-rich countries that have successfully managed revenues include Botswana, Chile, Oman and Malaysia. The roles of governments contributed a great deal to that success.

It’s clear that natural resources represent a big opportunity for countries that have them. They can take a country from poverty to prosperity, but only if government elites are committed to building a prosperous future, not in short-term plundering that leads to a dim future where everyone’s children grow up.