Lost in the euphoria sweeping through the Middle East and north Africa is the fact that in many of these countries, including Libya, oil revenues have propped up corrupt regimes but not benefited their people. It is a sad fact of economic life that democratic moments in oil states will probably fail to deliver a higher quality of life if their energy revenues do not promote broad economic growth. Yet there are signs elsewhere that this “resource curse” can be defeated.
The natural resources sector has the potential to generate billions of dollars in revenues that can be used for poverty reduction and sound investment. For decades, however, management secrecy has allowed corruption to thrive in countries such as Angola, Cambodia, and Guinea. According to Nigeria’s own corruption agency, up to $400bn of oil money has been stolen or wasted over the past 50 years. And in Libya, in particular, we now see a population rising against rulers whose control has been financed by the immense revenues they manage, and mismanage, in secret.
Ending this problem and letting new democracies flourish will, of course, not be easy. The resource curse undermines the investment climate, raises costs for companies, threatens energy and mineral security, and consigns millions of citizens in resource-rich countries to poverty. But evidence suggests that transparency in extractive industries can play an important role.