Towards Oil, a Curse or Blessing? (video)

 (TURAN’s interview with former World Bank president on dictatorships and the “resource curse”)

Every nation wants to have oil, but discovering a hole in the ground that spouts tremendous amounts of money can sometimes be the worst thing that can happen to a country…

Many studies have found that resource-rich countries often end up being ruled by dictators, their clans and autocrats; they are less likely to transition to democracy by spending their vast public resources to buy out or repress their political opponents and quickly become disconnected from their people and are prone to tremendous corruption with less economic stability and more frequent civil wars than countries without oil.

Pretty soon the national money, which should be spent on the country’s citizens, is instead spent on bribing the right people for the right favors in order to ensure that leaders stay in power, they no longer see a need in investing in health, education; after all, it isn’t the people who bring money to the country, it’s the oil…  It's a curse that is not easy to manage to avoid.

Statistically, oil-rich governments spend more on their militaries than countries without oil and are more prone to go to war, according to many observers.

Does this mean that every natural resource is a curse? 

“Of course not”, -- say many economists and development specialists, like former World Bank President, Robert Zoellick.

In fact, the analysts argue, there are many oil rich countries without totalitarian regimes and rules. But the question is how developing nations are shaped by their mineral wealth and how they can turn oil from a curse into a blessing.

As Mr. Zoellick puts it, not only political leaders, but also the society has to have a free will, and that they can choose to use their resource bonanzas for the long-term economic advancement of their own.

“The countries like Azerbaijan… should look to others on how to use oil so it becomes a blessing, not a curse,” Mr. Zoellick, who last week showed up at the 20th Anniversary Gala of the Eurasia Foundation, a US-based international development organization, promoting civic and economic participation, told, in an interview with TURAN’s Washington DC correspondent.

Over the years, Robert Zoellick served on the U.S. cabinet, in several senior positions, including deputy secretary of state, and as the 13th US Trade Representative, under President George W. Bush, where he forged an activist approach to free trade at the global, regional, and bilateral levels.

He recently stepped down as the president of the World Bank after serving in that office for the past five years.

TURAN asked Dr. Zoellick whether oil-rich dictatorships have a way out of the resource curse? He believes they might.

“The world has learned a tremendous amount on the challenges of resource-based development, in particular, oil-based development,” he said in this exclusive interview.

On the one hand, he argued, “while it can provide valuable source of money and income, and wealth of the country, one has to handle it in way that tries to support inclusive growth…

In particular, to proceed with development in a way that it is transparent and accomplished.  Because the danger of natural resource development is that in many countries it has been used to feed corruption, and buying pockets, go to benefit a rather small segment of society…”

There is an aspect to inclusive growth, that is “it’s important on how resources are reused.  Other aspects are on how they invest in the human capital of the country, and create alternative sources to the enterprise over time.  In addition, how one can try to use program links to basic energy industries, so you can help small and medium enterprises.  While some of these sounds like common sense, it is not so easy to implement…” he added.

For Zoellick, the demands from the energy sector are large, and powerful, and people need the resources. “But one of the things we try to do at the World Bank... is try to learn lessons from other countries about the challenges.”

From Azerbaijan’s perspective, he said, being a country, which lives “in a tough corner of the world,” it also has security issues to deal with. As it has oil and gas reserves, it also tries to position itself for future growth.  Some of the challenges are how it fits with broader regional economies, how it deals with the security question, and how to use the oil, so that it becomes a blessing and not a curse.

“Now”, he added, “it will be a challenge not only for the government, but for society to be brought into the overall issues of development. Because… ultimately development depends on the leadership, outsiders can’t do it for you.”

Alakbar Raufoglu

Washington, DC

05/14/2013