4
The Resource Curse
• Patriarchy and gender-based challenges: Natural resource wealth seems to
disproportionately impact women. Recent research indicates that oil-rich countries
tend to have fewer women in the workforce and a smaller representation of women
in government. One explanation for this is that industries that are usually easier
for women to enter, such as export-oriented manufacturing, are less likely to
succeed in resource-rich countries because of Dutch disease. In addition, studies
have shown that women in resource-rich regions often have higher rates of HIV/
AIDS and other life-threatening diseases. The large influx of men to communities
surrounding a mine has also been associated with an increase in rates of gender-
based violence. This trend is particularly concerning as study after study shows that
gender reforms are key to lasting poverty reduction. To address this, researchers
suggest countries take steps to protect manufacturing through avoiding Dutch
disease and that governments surrounding resource-rich areas include gender
perspectives in their development plans.
• Limited government capture of benefits: In some cases, only a small share of
the production value of the resource stays in the country. One explanation is that
many fiscal regimes, rules about how to split the profits between companies and
governments, fail to compensate the state and communities for depleting their
resources and related environmental damage or loss of livelihood. These bad deals
can happen when countries are so eager to encourage resource extraction that
they lower the rates for taxes and royalties without understanding the true value
of their resources. In Argentina, Canada, the United States and South Africa, the
average effective tax rate (AETR) on many oil projects is less than 50 percent, and
in Cameroon, DRC, Peru and the Philippines, the AETR on many mining project
is less than 40 percent. In comparison, the AETR on many oil projects in Angola,
Libya, Norway and Timor-Leste is more than 70 percent. Also, in capital-intensive
(rather than labor-intensive) extractive industries, few non-tax benefits, such as
jobs, accrue to locals. While expectations for local content, that is employment, local
business development and improved workforce skills, are often very high, the actual
number of opportunities may be few. The industry has a very low employment rate
relative to the size of investments and those jobs, and the machinery required to
implement them, mostly imported from abroad, tends to be extremely specialized.
• Weaker institutional development: Some researchers argue that institutions
are weaker in resource-rich countries because it is easy for elites to capture or take
large sums of cash. The theory suggests that large single-point sources of revenue,
such as an oil project, can be managed outside the normal budget process and are
relatively easily captured by powerful elites. Examples of tools used to capture
revenues include sovereign wealth funds, national oil companies and contractors
for extractive operations. As such, elites in natural resource-rich countries are
less likely to invest in productive enterprises, such as job-creating manufacturing
industries, and instead pursue rent-seeking, that is, fight for control of these
resources. In some cases, politicians or government officials have also purposefully
dismantled societal checks or created new regulations to get access to these
resources or to provide access to friends or family, a process nicknamed rent-seizing.
Some argue that elite focus on rent-seeking and rent-seizing promotes corruption
and is damaging to institutional development. In turn, the theory suggests that
countries with elite rent-seekers and rent-seizers tend to have weaker institutions
“Research indicates that
oil-rich countries tend
to have fewer women
in the workforce and a
smaller representation
of women in
government.”
“Elites in natural
resource-rich countries
are less likely to
invest in productive
enterprises, such
as job-creating
manufacturing
industries, and instead
pursue rent-seeking,
that is, fight for control
of resources.”