Managing the 'curse' of natural resources: charter offers guide for politicians

A how-to guide for the political leaders of poor countries on how to manage natural resources was launched this week, aimed at ending the so-called "resource curse" plaguing the economic development of poor nations rich in oil, gas and other natural assets.

Some of the world's poorest countries are also some of the richest in natural resources, among them Nigeria, Angola or the Democratic Republic of Congo, as they suffer from the "resource curse". Instead of being an opportunity for economic development, natural assets tend to foster political instability and corruption as greedy individuals try to get their hands on them. Natural assets are also so valuable that they remove the incentive to develop non-extractive industries.

But the potential for development is huge, as the value of these assets dwarfs any international aid they might receive. Angola, ranked 162nd out of 177 countries in the UN's human development index in 2007-08, had oil revenues in 2008 that were twice as large as the total amount of international aid given to the world's 60 poorest countries that same year.



A draft of the Resource Charter was presented on Wednesday at an international conference in Kuwait. It will be open for comments until its official launch in Oslo in May, when it will be available online at

The Resource Charter is backed by the International Monetary Fund, the World Bank and the African Development Bank, but receives no money from these bodies. The document was conceived on a shoestring, during the academics' spare time, in an attempt to provide easily accessible information to decision-makers and citizens of nations hit by the resource curse.

"There is huge frustration in these countries as to why they are poor when they have such valuable assets," says Collier. "We want citizens to find the material easily, free of the technocratic gobbledegook, so they understand these issues and push their governments for change … Reform can only happen from the inside."

One of the key steps recommended by the Resource Charter is to use the revenues of natural assets to boost domestic investment. "Saving the money into a sovereign wealth fund is wrong for these countries, as their big problem is lack of domestic capital," says Collier. "Neither should the revenues be used in the ordinary state budget because they come from a depleting natural resource. Instead, nations should invest in investing, by increasing the mass of domestic capital available."

When it comes to fighting corruption, countries should auction extraction rights, rather than engage in one-on-one negotiations. "Auctions force companies to inadvertently reveal the real value of extraction rights, something that the government may not know," explains Collier.

"In a straight negotiation, there is also a strong incentive on the side of the company to bribe the government officials taking the decisions," he says. "In an auction, the bid's winner is usually the closest to the true value of the natural assets."

Auctions can also limit corruption when public contracts are concluded. "In 2004 the Nigerian minister for solid minerals, Obi Ezekwesili, introduced competition to award public procurement projects. Overnight the costs of these projects to the government went down 40% [as opportunities for corruption were removed]," says Collier.

The economic crisis is hitting resource-rich poor countries hard as demand for them falls. "We have just seen the end of one of the biggest commodities booms and you can be sure that the governments of these countries are kicking themselves for not taking advantage of it to boost economic development. The spirit now is 'never again'," says Collier, which believes the current crisis could be an opportunity for change. "They want to get it right so that they can harness the value of natural assets better in future."