Natural Resources Should Benefit All, Not Just a Wealthy Elite

Forced transparency to address paradox of plenty

This article is being distributed by Transparency International, a leading anti-corruption organization. It originally appeared in the "World Bank Press Review" of December 16, 2002.

In poor countries blessed with oil, revenue from oil has a way of making most people poorer, reported the New York Times on December 15. The pattern is so pervasive and has been going on for so long that it has a catchy slogan: the paradox of plenty.

No place has been more paradoxical for more years than Angola.

[The Progress Report says -- actually, Nigeria is as good an example. Blessed with enormous oil reserves, the population is desperately poor due to injustice. To remedy that situation, the Niger Delta Fund Initiative seeks to give all Nigerians a share of the benefits.]

Angola is potentially the richest country in Africa, with huge reserves of offshore oil and a population of just 12 million. Oil money, though, has bought decades of war, while giving Angolans a terrible standard of living. Although the war ended this spring, it's still not clear where the money is going (or even how much there is). In the past five years, $4 billion has vanished; meanwhile, the world spends about $200 million a year to feed poor Angolans.

To break this cycle, in Angola and elsewhere, a simple idea has emerged this year. It also has a catchy slogan: Publish What You Pay. The World Bank backs the idea, as does George Soros, the financier and human rights crusader, as do 70 private aid agencies around the world. The Publish What You Pay coalition prods major companies to declare how much money they give governments in order to extract oil and minerals. If citizens know how much money comes in, they can, at the very least, figure out how much is stolen. Forcing transparency on corrupt governments would increase pressure on leaders to spend more on schools, hospitals and roads - and might motivate citizens to toss out known thieves.

British Prime Minister Tony Blair gave the idea a boost this autumn by calling on all companies involved in oil and mineral extraction to voluntarily announce how much they pay. But the Publish What You Pay coalition wants more. They want regulators of the world's richest stock markets, like the Securities and Exchange Commission, to compel oil companies to declare net annual payments to countries like Angola. None currently do.

Most governments of oil-producing regions hate this idea. And oil companies fear losing billion-dollar concessions to competitors that will keep their mouths shut. This is not an irrational fear. When BP announced last year that it would publish its payments to Angola, the government threatened to cut the company off unless it ''scrupulously respects'' confidentiality laws.

In all this, says the story, the administration of US President George W. Bush has been noticeable for not taking a leadership role. Forty percent of Angola's oil is exported to the US.

In a separate report, the NYT also notes that this year brought several peace initiatives based on an important new idea: the quickest way to stop a civil war is to cut off the funds of those doing the fighting. Throughout Africa and in parts of Asia and Latin America, guerrillas finance their armies through the illegal export of commodities: timber, diamonds, oil and coca. Policy makers are now trying to encourage guerrillas to give up their fight by cutting off the money spigot. An embargo, they believe, can put rebels out of business or drive them to the negotiating table.

[The Progress Report says -- another, more important way to put rebels out of business is to establish justice. In a system where claims and complaints are settled justly, there will be no violent rebel movement.]

Paul Collier, research director of the World Bank, and his student Anke Hoeffler happened on the connection while studying civil wars and economic growth. They were shocked to discover that the single best predictor of conflict was a nation's dependence on the export of commodities. Political grudges are common, Collier found, but in most developing nations they turn into armed conflicts only when the dissenters have the money to buy guns and hire soldiers. The easiest way to get the money to do that is by looting natural resources.

[The Progress Report says -- "looting natural resources" is not only the way that rebels get funding. Corrupt governments and corrupt corporations are by far the leading looters of natural resources. In all cases, it is unjust to seize exclusive control of benefits from natural resources which are, after all, properly the common heritage of all humanity.]

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