Tuesday, June 05, 2007

EITI and the Resource Curse

Word is out on the “Resource Curse.” Countries that depend upon minerals like oil tend to be harmed by them, especially if they are poor and badly governed in the first place. For example, latest World Bank data shows that Nigeria’s Gross National Income (GNI) per capita is lower than the average for all countries in sub-Saharan Africa, despite nearly $400 billion in oil revenues since 1960. It is hard for many people to accept that great wealth can produce great poverty, but academic research, particularly over the past decade, has confirmed this relationship to be robust. Tax is a central reason for this paradox: in “normal countries” like France or Sweden, citizens pay tax and demand accountability from their rulers in return. It works well enough. In mineral-dependent countries like Angola, however, rulers tax oil companies, and their citizens are left out of the loop. Accountability evaporates, and rulers can behave as badly as they like, for their revenues are guaranteed anyway by the taxes flowing from the mineral industries. Since the late 1990s – notably with the publication in 1999 of A Crude Awakening by the London-based NGO Global Witness -- people have been getting more interested in transparency as a potential tool in the fight against the “Resource Curse” in places like Africa. The big push these days is the Extractive Industries Transparency Initiative (EITI), which seeks to get producer governments to work with mineral-producing companies to publish data about financial flows from their resource industries, voluntarily. Richard Murphy, a senior advisor to TJN, and Nicholas Shaxson, who has been providing TJN with consultancy services, have written a comment article in the Financial Times about EITI, using TJN's unusual perspective to expose grave weaknesses in this initiative, which is backed by the World Bank, the IMF, numerous governments, and a number of companies extracting oil or other minerals around the world. In conclusion: EITI is still a good thing, and it should continue, but the time has now come to start looking beyond this limited scheme.


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