Exorcising the resource curse to resurrect economy

LAHORE: Resource curse is not limited to only natural wealth available in the country as nations that do not benefit from their natural resources also tend to play havoc with the material resources created by them through development.

Also known as the paradox of plenty, the resource curse is a paradoxical situation in which countries having abundant non-renewable natural resources suffer economic stagnation or even contraction.

Abundant natural resources have not translated into blessing for Pakistan; instead the country is plagued with resource curse so common in countries where planners know the solution but lack courage to implement it due to the absence of political will or consensus.

Destroying a resource has become a culture in our society. Ordinary citizens turn the roads and neighborhoods into a garbage dumps. The seats and upholsteries of public transport and railway coaches are vandalised by the passengers.

It is common to see people turning greenbelts into commercial markets. We have destroyed the purity of freshwaters by throwing solid domestic and discharging industrial waste in rivers and canals.

We tend to destroy anything that is good. Railways were once the major carrier of goods and passengers in the country. Today its share has dwindled to less than 5 percent. It was a great manmade resource but through negligence and irresponsible behaviours the entire infrastructure is in shambles.

Reports have it that one of Pakistan International Airline's (PIA) erstwhile slogans was “Great people to fly with” and it was given to the airline by Omar Qureishi, an early PIA executive, and was once endorsed by Jacqueline Kennedy, the former US first lady. Word has it that she took a PIA flight in 1962 and was so impressed by their services that she could not help giving the pilot a hug, saying ‘great people to fly with, as a token of acknowledgement of a great flying experience.

Similarly, Pakistan Steel Mill was a mammoth manmade asset created in the seventies. Today its real estate is the only worthwhile asset left and like PIA and Railways is bleeding the exchequer profusely.

Resource curse is a curious phenomenon that impacts countries with rich natural resources that perform worse than countries that lack or have fewer natural resources. Though there are countries with abundant natural resources that perform better than others, while some have done really well. Planners must probe as to why the spell of resource curse plagues Pakistan. There are several examples where two countries with similar resources have performed in contrasting ways.

About 50 years back oil-rich Nigeria and Indonesia had similar per capita income but today Indonesia is far ahead of its African counterpart. Similarly both Botswana and Sierra Leone are rich in diamonds but Botswana has exhibited robust growth in the past four decades, while Sierra Leon has lost all its wealth in internal strife.

The prospect of riches diverts official efforts to seizing a larger share of the pie, rather than creating a larger pie irrespective of the nature of resource. For instance, polluting water channels beyond repair with industrial waste may harm the entire community, but it saves some money for the industrialists, who use a part of it to coax the watchdogs to look the other way.

The public sector companies may be posting huge losses but honchos are always in profit owing to their enormous emoluments and their stupefying perks. They still make money from the company’s operations.

Stories of Furnace oil theft are common in Muzafargardh, where some public sector power generators are run on adulterated furnace oil. The loss is to the generator engine and its power generation capacity and the profit is shared by few that manage this practice.

Glaring examples of the admiration and the respect these thugs get creates a tug-of-war in the society where everyone blindly jumps on any opportunity to grab wealth, giving rise to a culture that leads to conflict.

Simple rent-seeking behavior of the officials with outside help is another outcome of this wealth-grab.

Firms yield to this temptation as bribing a government official to gain access to resources at lower rates is a better business proposition then to invest and develop an industry.

Natural resources, while a good source of wealth, do not create jobs by themselves, if raw resources are exported instead of being utilised indigenously for value-addition.

Exporting copper from Balochistan might bring some money but an industry based on this natural resource would create lot of jobs. Abundant natural wealth often creates rich countries with poor people.

Majority of the people in oil-rich Latin American and Middle Eastern countries are poor. Poverty in resource-rich Pakistan is over 30 percent, while resource-less Japan is among top global economies. The exports of Singapore, which doesn’t have any natural resources, are seven times more than Pakistan.

Looters park the wealth they have accumulated by plundering national resources in safe havens in the developed countries. The governments in developed countries can help with commonsense reforms. It is well established that secret bank accounts not only support terrorism, but also facilitate the corruption that undermines development. Similarly, transparency would be encouraged if only payments that are fully documented were tax deductible.

We need to exorcise the country's resource cruse once and for all; however it cannot happen in one fell swoop, but we can start with mustering the much-needed political will, taking one step at a time towards our ultimate goal.