The ‘resource curse’ and the
Extractive Industries
Transparency Initiative (EITI)
SHADY ANAYATI
Year of submission: 2012
This dissertation is submitted as part of a MA/MSc degree in
Geopolitics, Territory & Security at King’s College London
i
List of Contents:
List of Tables…………………………………………………………………………………………………………………………………..ii
List of Figures…………………………………………………………………………………………………………………………………iii
Chapter 1 – Introduction and literature review
1.1 Introduction………………………………………………………….……………………………………………………………1
1.2 Changing perspectives about natural resources….…………………………………………………..............2
1.3 The resource-curse theory in details……………………….………………………………………………………….3
- Poor economic performance and exposure to shocks
- Social and economic inequalities and low standards of living
- Rent-looting and corruption
- Tendency to authoritarian regimes
1.4 Challenging the resource curse…………………………………………………………………………………………..5
Chapter 2 – Third factors and policy suggestions
2.1 New trends in economic growth, a turnabout?......................................................................7
2.2 Mediation of social and political factors in the relationship
between natural resources, poverty and inequality…………………………………………………………10
2.3 The role of taxation and state formation to achieve democracy and transparency……….....12
Chapter 3 – Transparency initiatives for the extractive industries – the EITI
3.1 Transparency Initiatives for the Extractive Industries……………………………………………16
3.2 Case Study – the EITI……………………………………………………………………………..……………..17
- EITI and transparency
- EITI and accountability
- EITI and economic growth
- EITI, poverty and inequality
- The EITI’s new strategy
3.3 Conclusion……………………………………………………………………………………………………………………..25
Appendices
Reference List
ii
List of Tables
Table 1: Chinese influence on world demand for refined metals demand, 2000-2007……………………9
Table 2: Policies suggested in chapter 2 to promote transparency………………………………………………18
Table 3: Policies suggested in chapter 2 to promote accountability………………………………………………21
List of figures
Figure 1: Resource-Intensive Sub-Saharan African countries: Real Resource GDP Growth……………8
Figure 2: Real International Commodity Price 1996-2011……………………………….…………………………..8
Figure 3: FDI inflows to Africa, 1990-2007 (billions of dollars)………………………………………………………9
Figure 4: Human Development Index: trends 1980-present…………………………………………………………11
Figure 5: Suggested Action 11 vs. Requirement 11………………………………………………………………………24
iii
Chapter 1 – Introduction and literature review
1.1 Introduction
Since the beginning of the century, certification schemes, international standards and
transparency initiatives for extractive industries have become a widely discussed topic. These
initiatives try to resolve the apparent contradiction that was highlighted by the resource curse
theory: resource-rich developing countries are among the poorest, less democratic and most
conflict-ridden countries in the world, despite their endowments of natural wealth. Such issues
were put under the spotlight in the late 1990s when the phenomena of conflict minerals,
particularly blood diamonds, and that of resource-rent looting were disclosed, thanks to the work
of a number of NGOs, primarily Global Witness International, and scholars, such as Collier &
Hoeffler, Le Billon, Ross et al. The media gave great emphasis to these issues, arguably because
important multinational mining corporations were involved. Therefore, at the beginning of the
2000s a plethora of academic literature, articles and reports by NGOs addressed the relationship
between resources, conflict and bad governance, laying the foundation upon which international
initiatives were built. Among these initiatives, international transparency standards have received
a lot of attention, because they have been advertised by civil society, governments and
international institutions like the World Bank as a solution to the negative outcomes predicted by
the resource curse. This paper therefore assesses the validity of such initiatives, particularly of the
Extractive Industries Transparency Initiative (EITI). To do so, it will first analyze the factors that
have caused resource-rich countries to perform poorly in terms of economic growth and
governance; second, it will suggest a framework of policies that need to be addressed by policy
makers; and finally, it will use the suggested policies as a guideline for evaluating the EITI. The
present work does not claim to be exhaustive, mostly for reasons of space constraint and because
of the vastness of the topic addressed. Nevertheless, it is quite unique in as much as it spans from
thoughtful insights about the limits of the resource-curse theory, via concrete policy suggestions,
to an evaluation of an internationally supported solution, namely the EITI. To be more precise, it
will try to answer the following question: can transparency initiatives for the extractive industries
and particularly the EITI tackle the negative outcomes presented by the resource-curse theory?
The first chapter will therefore review the main hypothesis clustered under the resource-curse
theory, using it as a theoretical starting point. The second chapter will distance itself from the
resource curse theory, arguing that it fails to highlight the most important political, social and
case-specific factors that are the real causes behind the negative outcomes which traditional
theory attributes to the presence of natural resources. Finally, the third chapter uses these
suggestions as a blueprint against which to judge the validity of transparency initiatives,
specifically of the EITI. The concluding remarks will highlight the main findings of this paper, and its
contribution to the current literature.
1
The methodology used in this work relies on secondary sources, academic articles, research
institutes’ and NGO’s reports, as well as documents from the World Bank, the International
Monetary Fund, documents from international standards and certification schemes, data recorded
by EITI reports and by statistical offices in English and French, EITI publications and meeting
minutes. Despite the initial intention to carry out primary research, the author was faced with
significant resistance. The mining sector is indeed well-known for its secrecy, and to obtain
interviews with key figures is a hard task for expert journalists, let alone a research student. In
addition to that, the timing of this research was very unlucky, as NGOs and institutes’ personnel
contacted were often out on mission or not available for interviews. Nonetheless, the author
would like to thank Fred Cawood from the University of Witswatersrand South Africa, Varsha
Venugopal from Revenue Watch Institute, Antonio Pedro and Merit Kitaw from UNECA, Neema
Patel from Natural Resource Charter and Nick Donovan from Global Witness, who directed me
towards the right documentation via private correspondence. Many thanks go also to Luke
Danielson from Sustainable Development Strategies Group, Olle Ostenssen and Magnuss Ericsson
from Raw Materials Group, who inspired and encouraged me during the CEMPLM annual meeting
in London. Finally, I would like to thank Verity Outram from Natural Resource Charter for her
support, encouragement and patience, and Dr. Deborah Potts for directing me in this task.
1.2 Changing perspectives about natural resources
The impact of natural resources on development has been a controversial issue for decades. From
the late 1950s through to the 1980s, when resource-rich countries in Africa gained independence,
natural resources were considered an opportunity for developing countries to boost economic
growth, in the manner of the United States or Australia. Primarily, scholars focused their attention
on the possible economic impact of natural resources. American geographer Norton Ginsburg
(1957) stated that “The possession of a sizable and diversified natural resource endowment is a
major advantage to any country embarking upon a period of rapid economic growth” (p.211).
W.W. Rostow, influential economist and political theorist in the US during the 1960s and 1970s,
affirmed that natural resources could be a “precondition for the take-off” of a developing country
(1960,p.31): natural resources exports would provide a flow of foreign exchange that
counterbalanced the increase of imports, which is a recurrent characteristic of industrializing
economies. To be sure, not all scholars shared this view: radical economists in particular argued
that resource-dependent countries were in a position of disadvantage when trading with
developed countries because of the structure of the global economy and the characteristics of
international commodity markets (Singer 1950, Prebisch1950 in Rosser 2006). Despite these
contrasting opinions, however, mainstream economists believed natural resources to be a blessing
that could foster sustained economic growth.
However, after the end of the Cold War, the discourse on natural resources changed radically, as
economists and political theorists observed the development, or lack thereof, among resourcerich countries. The complex situation of mineral-exporting Sub Saharan African countries, faced
2
with a decrease of mineral commodity price, high price volatility and political instability caused by
the end of the Cold War, became the focus of many studies. Scholars started to relate the poor
economic performance of resource-rich countries and the numerous conflicts that had intensified
in the 1990s, to their endowment of natural resources (Collier &Hoeffler 1998, Gelb 1988, Le
Billon 2001, Nankani 1979, De Soysa 2000, Auty 1993, Karl 1997, Ross 2001, 2003 et al.). Of
particular relevance was Auty’s formulation of the “resource curse” theory in 1993, which
recognized that “not only may resource-rich countries fail to benefit from a favourable
endowment, they may actually perform worse than less well-endowed countries” (p.1). Auty
based his reasoning on Nankani (1979)’s finding that mineral-economies (developing countries
where the mineral sector accounts for more than 8% of GDP and 40% of export earnings) grew
slower and struggled to achieve the social welfare conditions of other developing countries. Auty
argued that this was a counter-intuitive but actual finding whose reasons are to be found in the
enclave nature of the mining: first, mining is capital intensive and therefore doesn’t employ a
considerable fraction of domestic labour, second its capital usually comes from foreign companies,
third it is a sector with very few local linkages, and finally, in contrast to other primary product
exports, mining contributes to the national economy mainly through the tax revenues it
generates. For all these reasons, an endowment of mineral resources was more of a curse than a
blessing. This phenomenon has also been called the “paradox of the plenty” (Karl 1997), because
it is paradoxical that countries endowed with such riches are often among the poorest and most
conflict-torn of the Earth. As more studies were done on the empirical relationship between
natural resources abundance and poor economic growth, more factors were added to the
resource curse theory, which can now be said to comprise five main elements: poor economic
performance, social and economic inequalities and poor standards of living, rent looting and
corruption, a tendency to authoritarian regimes and increased likelihood of conflict (Le Billon
2004). This paper will only deal with the first four, as the EITI has been claimed to be one possible
solutions to such issues.
1.3 The resource –curse theory in details
This section will review the main elements of the resource-curse theory bydrawing on the existing
literature.
Poor economic performance and exposure to shocks
Several scholars (Nankani 1979, Auty 1993) have produced quantitative evidence that natural
resource endowment reduces economic growth, as resource-rich countries are empirically more
likely to perform poorly in economic terms than other countries. Of particular relevance is Sachs &
Warner’s study (1995), which “documented a statistically significant, inverse, and robust
association between natural resource intensity and growth” (p.21). A 2002 World Bank report
found that during the 1990s, countries where mining products accounted for 15-50% of total
exports experienced a decrease of per capita GDP of 1.1 percent a year, and countries whose
mining exports were more than 50% of their total exports saw an annual reduction of 2.3 percent
3
(Ross 2003). Out of the twenty-five most resource-dependent countries in 1995, twelve were
considered by the World Bank as “highly indebted poor countries”, despite their important
resource exports (Ross 2001). One of the reasons for the decrease of per capita GDP is the so
called “Dutch disease”, coined by The Economist in 1977 when this phenomenon followed the
discovery of gas resources in the Netherlands. Dutch disease occurs during a boom of a resourcerich country’s mining sector: higher levels of consumption and investment, allowed by the
increase in resource revenues lead to a greater demand for non-tradeable goods and services; this
in turn brings about an appreciation of the exchange rate and wage effects that cause a slowdown
of the non-mineral sectors, usually agriculture or manufacturing, as they become less
internationally competitive. Moreover, the booming sector tends to attract capital and labour,
detracting from other sectors. Therefore the economic structure becomes dominated by an
enclave industry, the booming mining sector, while other industries shrink (Bebbington et al. 2008,
Ross 2001). In addition to that, Auty (1993) showed that dependence on mineral exports exposes
the country to shocks caused by price volatility and to a series of booms and downswings in
economic growth, because of the rigidity and slow adaptability of the mineral sector to the
frequent changes in the market. This is even more pronounced among developing countries which
had amassed debt during an economic boom because of deficit-spending, and relied on
international loans when prices fell, thereby aggravating the boom-bust cyclical nature of
resource-exporting economies.
Social and economic inequalities and low standards of living
As mentioned before, the richest countries in terms of natural resources endowment are often
among the poorest of the world. Ross (2001) finds that mineral export-dependent countries have
low Human Development Index (HDI) ranking: “the more the states rely on exporting minerals, the
worse their standard of living is likely to be” (p.8). Le Billon (2004) argues that diamond-exporter
Botswana is a good example of the lack of correlation between GDP growth and real standards of
living in resource-dependent countries. Botswana is often considered a “success story”, because of
its sustained economic growth, relatively good governance, mining policies and a GDP per capita
of $6,872 (Le Billon 2004). However, as Ross (2001) points out, it is ranked 122nd1 in the HDI
because of enduring socio-economic inequality: about 60% of its population lives on less than $2 a
day (Le Billon 2004). Bond (2008) argues that such inequality is caused by the integration of
developing countries into the world capitalist system, as the main beneficiaries of mineral exports
are primarily “import/export firms, transport/shipping companies, plantations and large-scale
commercial farmers, the mining sector, financiers ... consumers of imported goods, and politicians
and bureaucrats who are tapped into the commercial/financial circuits” (p.91).
Rent-looting and corruption
As Rosser (2006) highlights, abundance of resource rents provides rational political actors with the
opportunity to “line their own pockets by engaging in rent-seeking” (p.15). Ross (2001b) argues
that during periods of economic booms, governments receive windfalls of resource rents and are
1
th
This data refers to 1995. In 2011 it ranked 118 (HDR 2011)
4
therefore more prone to seize rents directly or to control their distribution, a process he calls
“rent-seizing”. Robinson et al. (2002) have stressed the temporal dimension of rent-seeking, while
authors like Moore (2000, 2004) and Luciani (1987) have argued that rent-seeking has a negative
impact on the institutional capacity of the state, and ultimately enhances bad governance. T.
Dunning (2005) investigates the political reasons behind the choice to loot resource rents rather
than investing them in the economy, and finds that resource dependence is sometimes purposely
pursued by political elites in order to maintain their control over the resource rents, like in the
case of Mobutu’s Zaire. Ross (2011) has focused his attention on oil exporters, which he calls
“rentier-states” because of their high dependence on the huge amounts of rents provided by oil
exports, but often draws parallels with non-fuel mineral commodities. In his work he stresses four
factors that cause revenue rents to trigger the ‘resource curse’: first, the exceptionally huge scale
of oil rents, which can induce similarly large government expenditures; second, the source of
revenues, which do not come from taxes but from foreign companies; third, the instability or
revenues caused by commodity price volatility; and finally the secrecy of mining revenues, which
breeds corruption. He concludes (2001) affirming that “rentier-states” are generally more inclined
to rent-looting and corruption.
Tendency to authoritarian regimes
Ross (2001) argues that rentier-states are more likely to have authoritarian regimes because
“authoritarian governments are more inclined to respond to the needs of the few and the
wealthy, rather than the many and the poor” (p.14). For these states “it is more efficient to use
some revenue to buy off those citizens likely to cause trouble, and more of it to support a
powerful army and intelligence apparatus that will keep the others in line” (ib. p404). He also
finds that resource-rich governments tend to spend a relatively greater part of their budget on
strengthening internal security. In addition, Mick Moore (2000) affirms that natural resources
seem to hinder democracy as they prevent the social and cultural changes that stimulate the
emergence of democratization such as occupational specialization and better education levels. A
very interesting consideration is also done by Reno (1997), who suggests that foreign partners,
diplomacies and firms alike, who often have interests in the resource wealth of developing
countries, ultimately prefer authoritarian regimes to liberal democracy in politically divided states,
because these would otherwise risk becoming “failed states” if rebel movements tore apart
political order. Finally, Wantchekon (1999), examining data from 141 countries from 1950 to 1990,
found that a 1% increase in natural resources dependence, increased the likelihood of
authoritarianism by almost 8%, therefore highlighting a great correlation between this two
phenomena.
1.3 Challenging the resource curse
Not all scholars have embraced the resource curse. For instance, Davis (1995), a strong supporter
of the positive potential of mining for economic growth, has shown that measuring performance
against certain economic and social measures, mineral economies performed better than non5
mineral economies between 1970 and 1992. Indeed, there isn’t consensus around the measures
and datasets on which different studies are based. Snyder & Bahvani (2005) argue that it is
possible to identify different “generations” of resource-curse theorists: scholars from the first
generation (Auty 1993, Collier & Hoeffler 1998, De Soysa 2000) focused on quantitative research,
to disclose the link between natural resources and negative outcomes; while the second
generation of scholars was more interested in analyzing the circumstances that make this
relationship possible (Dunning 2005, Humphreys 2005, Le Billon 2001, 2004, et al). In the last
decade or so, the resource-curse theory has often been criticized because it has focused scholars’
attention on the question of whether resources have impeded or enhanced economic growth and
less on the factors that intervene in this relationship (Davis & Tilton 2005). As Rosser (2006)
affirms, the existence of a correlation between mining and various negative development
outcomes does not necessarily have a causal nature. Similarly, Davis (2005) confirms that the
current debate will continue over the possible causal routes by which mining may impede
development (p.237). Interestingly, even classic resource-curse theorists seem to realize the limits
of this approach: Auty admits that the resource curse “is not an iron law” (Le Billon 2001) and
Collier & Hoeffler (2005) state that resource rents are not intrinsically a curse, as they hold the
possibility for development, which will take place according to “conditioning circumstances”.
This literature review shows that scholars are still debating the possible existence of a ‘curse’, a
mathematical equation, a causal relation between natural-resource endowment and negative
outcomes. This paper argues that the resource curse, taken in its orthodox form, is a misleading
theoretical framework: it led scholars to consider all the variables that play a role in the
relationship between resource abundance and negative outcomes, as determined by the mere
presence of natural resources. This faulty approach is likely to derive from reliance upon statistical
data. Quantitative research and the deduction of ‘iron laws’ from statistical data, can provide a
biased interpretation of the correlation between such data: even if two elements are linked by a
correlation, this is not necessarily a causal relationship, nor does it exclude the existence of third
factors being the real influencing variables. The narrowness of statistical evidence is poignantly
expressed by the ‘ice-cream metaphor’: the simultaneous statistical increase of ice cream
consumption and the number of sunburns does not mean that they are one the cause of the
other, rather, they are both caused by changes in the seasons and in temperature (Rosser 2006).
The next chapter will therefore stress the ambiguity of the resource curse and analyze a number of
historical, political, sociological and human factors, which are arguably the variables upon which
depend the negative outcomes of endowment of resources. The purpose of the analysis is to
suggest policies attaining to the four relevant dimensions of the resource curse highlighted before.
Such policies will be used in chapter three as a blueprint to judge the validity of the EITI.
6
Chapter 2 – Third factors and policy suggestions
As argued at the end of the previous chapter, the negative outcomes of the resource curse are
likely brought about by a variety of third factors and mediating circumstances. This is a poignant
observation for policy makers, as it allows them to shift their attention from addressing the
presence of natural resources as a problem, to focusing on the factors that, if positively
influenced, can ‘break the curse’. The present chapter will suggest and analyze some mediating
circumstances and factors that can be argued to be the real causes of the negative outcomes
recorded by the resource-curse theorists. This analysis will be carried out for each of the elements
comprised by the resource-curse theory and discussed in chapter 1. It will be based on the existing
literature that, to varying degrees, criticizes the limits of the resource curse, and it will build upon
it, using data from the IMF, the WB, the UNDP and African Union that regard fuel and non-fuel
mineral commodities in Sub-Saharan Africa primarily. The policy suggestions that will emerge will
then be used in the third chapter to test the validity of current certification schemes and
international standards for the extractive industries.
2.1 New trends in economic growth, a turnabout?
The beginning of the new century has brought about new trends that contest the existence of a
curse in the correlation between presence of natural resources and economic performance.
Probably the most interesting data is that GDP per-capita growth has been higher in resource
exporters than in other Sub-Saharan countries (International Monetary Fund 2012). Figure 1
shows that the highest levels of growth have been achieved by countries that are fiscally
dependent on resource rents (when resource rents are more than one-fifth of budgetary revenues
– IMF 2012), followed by significant exporters of natural resources (if such exports exceed onequarter of total exports –IMF 2012).
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This statistical evidence seems to support those scholars like Davis, who are convinced of the
positive impact that natural resources can have on economic growth. According to the
International Monetary Fund (2012), the two factors that have influenced such an outstanding
economic growth are the discovery of new resources in Sub-Saharan countries such as Angola,
Equatorial Guinea and Tanzania, and an increase in mineral commodity prices. Figure 2 (see
above) shows that mineral and petroleum commodity prices not only increased significantly
between 1996 and 2011 (they tripled and doubled respectively), but that their increase was
greater than any increase of other commodity prices. This trend peaked in the first half of 2008,
after which it dropped abruptly because of the effects of the international financial crisis. Prices
have though started to increase again and were even higher in 2008 than in 2008. The character
of continuity of this increase has apparantly persuaded market observers that metal prices are
currently at the beginning of a super-cycle: defined by Heap (2005: 1–2 in ECA 2012) as a
“prolonged (decades or more) trend rise in real commodity prices”, a super-cycle is demandrelated and it is driven by the “urbanization and industrialization of a major economy” (ib.). China
is evidently the lynchpin of the global economic growth of the last decade. Despite being the first
producer of Rare Earths concentrate, tungsten, mercury, tin, lead and manganese(ECA 2012), and
among the top five producers of coal (World Coal Association 2012), China’s need for raw materials
is not satisfied by its domestic production. Its contribution to world industrial production between
1995 and 2005 doubled from 6% to 12% (ECA 2012) and as a consequence its demand for metals
increased exponentially, as Table 1 shows. China doubled its global share of aluminium, copper
and zinc, tripled that for lead, quadrupled that for nickel, and tripled its imports of iron-ore.
8
Table 1: Chinese influence on world demand for refined metals demand, 2000-2007
Refined use,
2007
Share of China,
2007 (per cent)
Share of
China, 2000
(per cent)
Aluminium (kt)
12,267
32.5
13.0
Copper (kt)
4,800
26.2
11.8
Zinc (kt)
3,750
32.1
14.9
Lead (kt)
2,548
30.6
10.1
Nickel (kt)
345
24.9
6.0
Tin (kt)
150
39.9
18.6
Crude steel (Mt)
437
32.3
16.3
48.2
15.6
Iron-ore
379
seaborne
imports (Mt)
kt = thousand tons ; Mt = Million tons
Source: Ericsson (2009) citing Chinese statistics and metal forecasting, Macquarie Commodities
Research, Macquarie Capital Securities (2008) (in ECA 2012)
An important consequence of increased demand and commodity prices surge is the significant rise
of foreign direct investment in Africa, as figure 3 shows .This increase in FDI is particularly
important for governments of resource-rich countries, because it provides them with a
comparative advantage, which, if well managed, could arguably sustain such levels of growth.
Figure 3: FDI inflows to Africa, 1990-2007 (billions of dollars) (Source: AMV 2009)
The key factor that has induced a positive economic growth is then the demand of industrializing
countries and the subsequent surge of prices. What policies can governments implement to
harness the potential of this boom, averting the likelihood of price volatility and Dutch disease?
9
First, reserve funds can be created, that would provide a “cushion effect” (IMF 2012) in times of
price drops and counterbalance the boom-bust fiscal cycles caused by price volatility, such as have
been implemented in Kazakhstan and Botswana. Second, offshore “stabilization” or “future”
funds, where revenues are kept to be later invested in investment instruments, may help contrast
the appreciative effect on domestic currency of the Dutch disease and may provide a margin of
profit on revenues. These sort of funds are quite popular and have been implemented in Abu
Dhabi (UAE), Norway, Kuwait and Chile among other countries (Bauer 2011). Alternatively, Ross
(2011), criticizing the ease with which politicians plundered stabilization funds, suggests the use of
loans granted by the WB or IMF to encourage countercyclical borrowing: governments would have
to set aside the proceeding of a fixed amount of resource exports, so that the repayment of the
loan would be independent from political decisions. Arguably, another important policy for
fighting the effects of Dutch disease is investment in domestic infrastructure. Great care must be
taken by policy makers to avoid “white elephants”, that is, unfeasible and unsustainable projects.
In addition, domestic institutions should encourage legal trade and commercial relations with
industrializing economies, while at the same time provide training for governmental personnel and
local governments to increase their negotiating skills and achieve fairer contracts with mining
companies. Finally, in order to benefit from the competitiveness caused by the surge in demand,
mining rights should be awarded through open and competitive bidding, without giving priority to
one company or one foreign government over others, while the transparency of the bidding
should be monitored from an external body.
2.2 Mediation of social, historical and political factors in the relationship between natural
resources, poverty and inequality
Resource curse theorists claim that an endowment of natural resources brings about poverty and
greater inequalities. This section refuses this argument and suggests that the responsibility for
inequality and poverty should lies with an array of historical, sociological and structural factors
that go beyond the presence of natural resources. We will keep up the example of Botswana,
started in section 1.2. As mentioned before, Botswana is considered an example of how resourcerich countries are plagued with inequalities and poverty. It is true that Botswana’s ranking in the
Human Development Index has decreased drastically between 1991 and 2002 and is still very low
compared to its per capita GDP level (it ranked 118th in 2011); nevertheless, in this specific case,
HDI ranking and per capita income should be analyzed as separate elements. On one hand,
Botswana’s surprisingly high levels of per capita GDP are attributable to the direct effect of
diamond exploitation on economic growth; on the other hand, Botswana’s level of inequality and
standard of living don’t come as a surprise if they are compared to other countries in its region,
rather than countries with its per capita GDP level. Figure 4 shows clearly that Botswana’s HDI
trend has always been above that of Sub-Saharan Africa and even equal or above the medium
human development trend. This means that, compared to the countries of its own region
Botswana performs better in terms of human development. Affirming that it performs worse than
countries with its GDP per capita level, as for instance does Ross (2001), is an unfair comparison,
because it implies comparing a Sub-Saharan country like Botswana with countries such as Czech
10
Republic, Hungary, Romania, Argentina, Turkey etc. 2. Inequalities and poverty don’t come as a
result of exploitation of diamonds, which actually provides the country with an astonishing
economic performance when compared to its neighboring states, rather, they are the outcome of
a series of historical, political and sociological factors that make Botswana very different from, for
instance, Eastern European countries.
Figure 4: Human Development Index: trends 1980-present (Source: HDR Statistics website)
What are the factors then that have had a direct influence on Botswana’s inequalities and relative
poverty and that should be addressed to understand its low HDI despite high per capita GDP?
First, let us consider an important social factor: the massive spread of HIV/AIDS in this country.
This disease exploded in Botswana to the extent that by 2002 almost 40% of the population had
been affected and life expectancy had dropped below 40 years (Good 2005). President Mogae had
publicly affirmed that “We saw the thing as an issue of survival. We had the fear of a nation simply
becoming extinct” (The Sunday Independent,July 20, 2003 in Good 2005). The impact that this
disease has had on poverty becomes clear in light of the fact that 60% of all children between 10
and 14 were expected to be orphaned by AIDS by 2015 (Good 2005). When a whole country is
faced with a terrible decimation of its work force, how could the remnant population not be
affected by poor standards of living? Second, historically Botswana has had terrible difficulties in
trying to integrate its ethnic minorities, which account for around 30% of the population:
discriminatory practices and even laws against the Basarwa/San, the Wayei and other tribes have
prevailed for decades (Good 2005). How could there not be inequalities when 30% of the
population is discriminated upon and poorly protected by law? Finally, a political factor: the
shrinking of the agricultural sector and the lack of development of the industrial sector (both of
which, being generally labour intensive, can provide concrete poverty relief), were not purely
effects of Dutch disease, rather, as Good (2005) shows, they were the outcome of planned
political decisions, taken by the political elite to maintain their power over diamond exports.
From the previous analysis, it is clear that inequalities and poverty in resource-rich countries are
caused by a number of social, historical and political factors that tend to be very country-specific.
2
Upper Middle Income Countries list, World Bank 2012
11
However, there is an array of policies that can try to tackle general social problems recorded in
Sub-Saharan resource-dependent countries. First, the population should be offered accessible
education and specific training to develop long-term skills related to the booming sector, for
instance through the creation of secondary-school diplomas and university degrees that can foster
specialization and therefore build human capital in the country. Second, a fundamental policy to
fight poverty and spread the benefits from mining to a greater share of the population, is the
creation of upstream, downstream and side-linkages. This can stimulate the industrialization of
the supplying and manufacturing sectors, and help fight unemployment. To achieve this, policy
makers should offer incentives to companies to build a network of local suppliers and sell a certain
percentage of their row production to local manufacturers (see for example Canadian regulations
that oblige BHP Billiton to sell 10% of Ekati mine’s diamond production to local cutters). In
addition, governmental policies should include diversification of the economy to gain a degree of
independence from the extractive sector. Particularly, support should be given to labor-intensive
sectors like agriculture, which can have a double positive impact, first by increasing food
production and second by tackling unemployment. Moreover, adequate policies should be
conceived to tackle country-specific social problems, usually related to the spread of diseases like
AIDS or to the aftermaths of conflict, with the support of international funding organizations.
Finally, the practice of “barter contracts” could help bring concrete ameliorations to the life of the
population. These contracts provide for companies to pay governments on the grounds of
investment in infrastructure projects, such as roads, railways and power plants. An attentive
scrutiny of the companies’ offers and of the feasibility of the project is essential for this policy to
bring real benefits to the population.
2.3 The role of taxation and state formation to achieve democracy and transparency
This section will discuss two elements of the resource curse, the tendency towards
authoritarianism and the propensity of rent-looting and corruption. It will argue that there is a
correlation between these negative outcomes and the presence of natural resources, but that
such correlation is not causal. The causal variables need to be looked for in the lack of adequate
fiscal regimes in resource-dependent countries and in the gap of accountability between state and
citizens. This preposition will be analyzed from an historical perspective, looking at the process of
state formation in tax-states and in resource-dependent states. This section draws from Ross and
Moore, but elaborates on their thoughts and adds to them.
To begin with, let us consider Ross’ (2005) suggestion that privatization of the resource sector
might boost democracy because it would make it harder for governments to hide their revenues,
as they can easily do when there is a state monopoly on the management of resources (his
argument is on oil-exporters, but it can be applied to any heavily rent-dependent state). He argues
that changing the source of revenues, from a public company to a number of private companies,
could enhance transparency. Nevertheless he is well aware that, unless private companies are
publicly listed on stock exchanges and truly committed to transparency, there might not be much
12
change in terms of rent-looting and corruption. His reasoning holds water as far as it goes, but it
seems to us that Moore’s (2000) argument tackles this issue more convincingly. He argues that as
resource-dependent states rely upon massive amounts of “unearned income”, to the extent that
the state apparatus didn’t need to put in organizational and political effort to acquire a rent
(p.389), governments have less incentives to bargain with their citizens, and to engage in a
democratic discourse with them about the expenditure of revenues. Therefore, one first point that
this section would like to raise is that the real problem is not whether revenues derive from
private or public companies, but the fact that state income derives almost exclusively from miningrelated activities and not from the bulk of the population. This creates a gap between citizens and
the government not just in terms of accountability, but in terms of representation. Moore (2001)
stresses that governments have the luxury to “ignore” their citizens, as their administration can
exist notwithstanding the capacity of citizens to pay taxes. We like to think that the relationship
between the state and its supporter is akin to a show, acted between governmental officials and
private/national companies, whereas citizens are relegated to the role of powerless spectators. In
a country where citizens have no bargaining power with the government, and are only spectators
of its decisions, it becomes evident that democracy can be nothing but a pipe-dream. The
importance of tax regimes to induce a process of mutual exchange of benefits between state and
citizens, in terms of democratic representation and the creation of a framework that might
stimulate economic and social development is not a new argument. It was discussed probably for
the first time by the Cameralists. They were political and economic theorists that lived in 17thcentury German princedoms, and who realized that the state had all interests to promote the
economic and social wealth of its subjects, because the greater their wealth, the higher their
capacity to be taxed. Through taxes, argued the Cameralists, a state could raise a permanent army
and confirm its political and military power. Therefore, the sovereign should do all in its power to
promote a framework of individual freedoms that would enhance subjects’ capacity to create
economic wealth. A successful example of implementation of this theory was Fredrik Wilhelm I’s
Prussia, which he transformed “into the most formidable [18th-century] military power in Europe”
(Armour 2012 p.34). Prussia was an example of how society could prosper and state
administration modernise, when an enlightened sovereign would devout itself to the welfare of its
people, being rewarded by a constant and reliable flow of taxes. This scenario can still be
considered applicable today if we replace the “enlightened sovereign” with a democratic
government, held accountable to its citizens, and which provides them with services. Modern
democracy can be argued to be the result of historical processes that took place in modern Europe
and Northern America. British history above all shows us the deep correlation that runs between
taxation and democratic representation: tracing back to the Magna Charta baron’s efforts to have
a voice in the decisions of the king as a reward for their military and political support this
relationship spans over the centuries to the American colonists’ requests to be granted
representation in Parliament as a reward for their taxes, embodied in the popular slogan “no
taxation without representation”. This correlation has deep roots in European history. In the 19th
century, the importance of taxation was the subject of the political philosophy called fiscal
sociology. Schumpeter (1918), who was the main exponent of fiscal sociology, recognized the
importance of fiscal regimes and their interaction with the unwinding of European political history.
13
In his words: “…the budget is the skeleton of the state stripped of all misleading ideologies
[quoting Goldscheid]”, “the fiscal history of a people is above all an essential part of its general
history” and “..our people have become what they are under the fiscal pressure of the state.”
(Schumpeter, 1991 (1918) p.100-1 in Moore 2000). This last quote is of paramount importance for
our present discussion because it implies that Western democracies are the outcome of their
unique fiscal history, among other factors. Another factor needs to be considered. Both Moore
and Karl (1997) highlight that the need to rely upon taxes for income has induced European states
first, to form an efficient, honest and reliable bureaucratic apparatus, as in the case of Prussia,
second, to have a real control on the territory and a better knowledge of the population (the very
idea of census indeed came as an outcome of taxation). Moore therefore concludes that taxation
has induced a process of optimization of the state bureaucratic apparatus and has built
institutional capacities that have been expressed through good governance. These elements are
very important because they can account for an historical explanation to why developed resourcerich countries have limited levels of corruption and rent-looting (see Norway, Canada etc.). This
triple, intertwined development of democracy-taxation-efficient bureaucratic apparatus is the
unique result of European and more generally Western history. Why didn’t this phenomenon take
place in Sub-Saharan African countries? Blaming the presence of natural resources for corruption
and lack of democracy, as some theorists of the resource curse do, seems to be a feeble and shortsighted excuse. It is more likely that the causes be found in the legacy left by colonialism; in the
opaque and conflicting process of decolonization; in the hesitant, dubious process of state
formation, usually influenced by internal conflict and the global power-play of the Cold War; in the
institutional vacuum left after colonial state apparatus fled the newly-independent states and so
on and so forth. All these issues will not be discussed here, due to space constraint, but they
should be the subject of more research, as they might shed light on the real reasons for lack of
democracy in developing countries.
The issues addressed so far have amply shown that lack of democracy and high levels of
corruption in resource-dependent countries are attributable to the process of state formation, the
lack of a fiscal regime and engagement of citizens in budgetary decisions, among other factors.
What policies can be devised to tackle these issues? Let us first address policies to increase
transparency. One policy promoted by many international initiatives, as will be discussed in the
next chapter, is to disclose the payments made by companies to governments and the payments
received by governments from companies. Publishing them though is not enough. First, there
must be a compulsory mechanism to make sure that the discrepancies among these data may with
time tally, which means that a monitoring body needs to have enforcing powers to first
investigate, and then punish who is to blame for the discrepancies. Moreover, the disclosure of
payments should provide the grounds upon which governments can develop the expertise
required to eventually disclose their budget expenditures. All steps of resource-revenues
collection, distribution and allocation should be disclosed, to really allow civil society and
legislators to keep the government accountable. Strict regulations should at that point be
implemented and punishment provided for those individuals and/or agencies which line their
pockets with revenues. Moreover, training should be provided to governmental personnel to
14
strengthen their skills and emphasize the slowdown that corruption causes to a national economy.
A different strategy has been implemented in Alaska to assure that administration doesn’t loot
rents and at the same time to provide a greater spread of benefits: rents are directly distributed to
citizens, through individual/family bank transfers. This could have positive or negative effects,
according to the level of management capacities and likelihood of the community to commit what
it receives into savings. In addition, disclosed data should be made available to the population,
adequately to the prevailing levels of literacy and to the possibility of citizens to use different
sources of information. Therefore, if the majority of the population does not have access to
internet, reports should be disclosed in a way that is accessible for everyone. Finally, policies need
to be created also in importing countries as well, to regulate the behavior of extractive companies,
so that they don’t fall in the traps set by corrupted governmental officials or even worse, induce
corruption to obtain more incentives for investment through their own attempts at corruption.
For what concerns accountability and democracy, a more efficient bureaucracy should be trained,
that can be present on the entire national territory and have an informed knowledge of its own
population. Investment in state capacity building is required, and one way is through training
provided by international consultancy such as Revenue Watch Institute. School could be a channel
to empower the young population, to educate it to request more of their governments and
demand accountability. In addition, fiscal regimes need to be enhanced, taxation must be
systematized and become population-based rather than dependent on resource-rents. A practical
police implemented so far in this sense was the Sustainable Budget Index, operating in Botswana
since 1994, which provides that resource revenues be used only to finance investments and
stabilization funds, whereas ‘non-investment’ spending is financed exclusively via non-resource
revenues.
15
Chapter 3 – Transparency initiatives for the extractive industries – the
EITI
This chapter discusses the role of transparency initiatives for the extractive industries, which have
been implemented in recent years to tackle corruption and lack of accountability in the fuel and
mining sectors of resource-rich countries. The main focus is on the Extractive Industries
transparency Initiative (EITI), which has been extolled as a solution for promoting economic
growth, social development and good governance. For instance, Dr. Shekou M Sesay, Minister of
Presidential Affairs in Sierra Leone stated that “‘. . . the EITI is a laudable idea, which if
implemented to the spirit and letter will ensure prudent management of the dividends from
mining and go a long way to alleviate extreme poverty among [our] people” (Hilson&Maconachie
2008 p.81). Other supporters have affirmed that “the EITI can change the behaviour of oil
exporters without conditionality or force”, “the EITI provides a means to ensure that the citizens
of petro-states reap the benefits of trade in oil” (Aaronson 2008), and that it can increase
accountability and “help governments secure a fair share of companies’ income” (Wire Dusseldorf
2011). More generally, EITI’s supporters believe that, if followed conscientiously, this initiative can
enhance economic performance, reduce poverty, fight corruption and promote government
accountability. In order to assess the validity of EITI supporters’ claims, the present chapter will
verify to what extent the EITI Requirements comprised in the EITI Rules, 2011 edition apply the
policies suggested at the end of each paragraph in chapter 2. These policies, being the result of the
study of the mediating variables that influence the resource curse carried out in chapter 2, provide
a framework of analysis that will be used to test the degree of success of this initiative (for the
complete framework please see Appendix 2). The focus of this analysis will be on policies to
promote transparency and accountability, as it is the argument of this paper that EITI and other
international transparency initiatives are not capable of addressing the problems induced by the
resource curse with regard to poor economic performance, poverty and social inequality.
Nevertheless, this chapter includes a brief analysis of the possible indirect effects that EITI can
have on economic growth and poverty. Transparency and accountability-enhancing policies are
summarized in Table 2 and Table 3 respectively and will be the core of a comparative analysis with
EITI’s objectives, criteria and requirements (for the full list, see Appendices 3 and 4).
3.1 Transparency initiatives for the extractive industries
The EITI is one of several international transparency initiatives for the extractive industries that
have flourished in recent years. Admittedly, most of these target importing countries’
governments and work in their home country (such as Transparency International and Oxfam
America). Others are broader initiatives, aimed at finding solutions for an array of problems of
resource-rich countries, including transparency and accountability, such as the Natural Resource
Charter, the OECD Due Diligence Guidance and the ICMM Good Practice Guide. An international
initiative which is closer in scope to the EITI is Publish What You Pay campaign (PWYP). Launched
16
in 2002 by a coalition of NGOs, it came as a reaction of the international community to the
disclosure of mismanagement and embezzlement of oil and mining revenues in several African
states and the degree of corruption and bribing of international companies pinpointed by reports
from Global Witness (GW) such as “A crude awakening”. Among its founding members are GW,
Open Society Institute, Oxfam GB, Save the Children UK and Transparency International UK, soon
to be joined by other important NGOs such as Human Rights Watch, Partnership Africa Canada
and a number of groups from resource-exporting countries. Today, it counts hundreds of NGOs
over 70 countries, whose objectives are to promote transparency of company payments (‘publish
what you pay’) and government revenues (‘publish what you earn’); to ensure transparency of
government expenditure, “as an essential way to addressing the poverty, corruption and
autocracy that too often plague resource rich countries” (PWYP 2011); and finally to achieve
transparency of contracts and licensing procedures, which should be aligned with best
international practice. PWYP is not a standard, but an international campaign carried out by NGOs
in their domestic countries. It therefore supports and relies upon EITI for a structured mechanism
of disclosure. Nevertheless, it provides an interesting framework of policies: indeed, unlike EITI, it
stresses the importance of disclosure of government expenditures and plies for a stricter control
of the oil and mining industries, mainly through the public disclosure of licensing procedures and
contracts.
3.2 Case study – the EITI
The EITI “in a nutshell, is a globally developed standard that promotes revenue transparency at the
local level” (EITI website). Proposed by UK former Prime Minister Tony Blair in 2002 at the World
Summit for Sustainable Development in Johannesburg, it received financial support from the UK
Government and the World Bank in 2003. During the same year, the UK government launched
pilot projects in Nigeria and Kazakhstan, counting on the participation and support of a number of
extractive and importing countries, companies and civil society organizations. The actual initiative
as a global framework for extractive industries, took off in 2005-2006, when the EITI criteria were
written, the EITI International Advisory Group formed and the validation mechanism for compliant
countries set in motion. The objective of the EITI, as stated in its Association article n.2, is: “to
make the EITI Principles and Criteria (...) the internationally accepted standard for transparency in
the oil, gas and mining sectors, recognising that strengthened transparency of natural resource
revenues can reduce corruption, and the revenue from extractive industries can transform
economies, reduce poverty, and raise the living standards of entire populations in resource-rich
countries.” (EITI website) In 2011, the EITI governance was better defined, as the EITI Board and
International Secretariat were established. The EITI is implemented in 36 countries as of August
2012, 14 of which are compliant and 22 candidates. The first step for a country to be involved in
EITI is to sign up for Candidate status, which can be obtained by meeting five requirements,
among which the creation of a domestic multi-stakeholder group (MSG) which comprises
representatives from companies and civil society and that oversees the implementation of the
entire process. Within eighteen months, countries need to publish their first report, disclosing
17
data related to the taxes paid by companies and the revenues received by governments. The data
of the report need to be assessed by a reconciler, an organization appointed by the MSG, which
must ensure that company and government data reconcile, must address and possibly explain
discrepancies, and suggest solutions to overcome them. Within two and a half year, the Candidate
state needs to complete a Validation process, which consists of an evaluation from an
independent consultant, usually appointed by the EITI Board, which makes sure that all
requirements have been met and that the country is progressing towards the EITI objectives.
Finally, Compliant states need to adhere to all requirements over time, otherwise the Board can
require a new validation process or delist the country from EITI. For more details on phase-tophase requirements please see Appendix 3. The following paragraphs will provide an analysis of
EITI’s most important requirements, on the grounds of the policies suggested in chapter 2, as
already mentioned.
EITI and transparency
Promoting transparency in resource-rich countries is the fundamental purpose of EITI. This
paragraph will assess to what extent EITI complies with the policies highlighted in chapter 2 to
promote transparency.
Table 2: Policies suggested in chapter 2 to promote transparency
Suggested policy
Specific purpose of the policy
1. Disclosure of data regarding payments made
by companies to governments and payments
received by governments from companies
(collection level)
2. Auditing by an independent body with
enforcing power to assess the quality of
disclosure, investigate discrepancies and
punish wrongdoers
3. Provision of fines and punishment for
corrupted officials and companies
Expose corruption through discrepancies in
data
4. Develop expertise and skills of governmental
officials at all bureaucratic levels, increase
their funding so that they may carry out
informed disclosures
5. A realistic assessment of the potential of
disclosed data to be spread, also considering
the characteristics of the population, and
implementation of alternative ways of
Increase the negotiating skills of governmental
officials to acquire more independence from
companies, and provide a smooth process of
disclosure
Expand the outreach of the initiative to the
greatest number of citizens
Increase enforceability in order to promote
effectiveness of policies
Mandatory anti-corruption domestic laws
both in producing and importing countries
18
publishing data if internet is not accessible by
the majority of the population
Policy n.1 and the creation of a final report that comprises disclosed data are at the basis of EITI
transparency mechanism and are provided for by the Preparation Requirements (see Appendix 4).
The process of disclosure has had varying levels of success from country to country. In some
countries, the great discrepancies found by the reconciler between payments and revenues have
been made up for. A positive example of implementation is Nigeria, whose 2005 report identified
a discrepancy of approximately $560 million owed by companies. By ‘closing the loopholes’
highlighted by the report, the country now saves $1 billion a year (Meyer 2011). On the other
hand, reports are not always useful. For instance, Fair Links (2012), in character of auditor of the
2008-2009 DRC EITI report, affirms that the declarations of the State on one side, and of
companies on the other, have shown significant anomalies that have made impossible an
informed assessment of the real payments made by mining companies. Substantial anomalies
have emerged from a series of other reports. Gillies (2011) for instance notices some “things that
make you go ‘hmmm’” in Cameroon’s 2006-2008 reports: first, the government had to pay
royalties to the companies, rather than the other way round; second, the mining companies’
payments were reported to reduce in that period while government’s receipts showed an increase
of incoming revenues; surprisingly, figures match in 2008. A point that emerges from these
examples is therefore the importance of reports’ quality, which depends on the trustworthiness of
the data collection process. This can be biased in a number of occasions: if not all companies or all
governmental agencies disclose their data, or if they don’t follow a proper product-disaggregation
model to pinpoint the revenues coming from each good, if governmental agencies are not fully
aware of the amount of revenues that they receive and that they are supposed to distribute or if
they do not have the funding and the enforcing power to carry out investigation regarding the
discrepancies highlighted in the report.
This leads us to policy n.4 –develop expertise and funding of governmental officials to increase
their independence from companies and to provide a smooth and efficient process of disclosure.
EITI does not really tackle this issue, as it deals with training and funding only in regard to civil
society. Requirement 6 indeed provides “that civil society is fully, independently, actively and
effectively engaged in the process”, that governments must “take steps to ensure that civil society
and company representatives are able to adequately prepare for full and active participation” and
that it must address “potential capacity constraints affecting civil society participation relating to
the EITI, whether undertaken by government, civil society or companies” (EITI Rules 2011 p.19).
However, it is arguable that this is not enough. EITI, being born as a coalition of NGOs primarily,
like PWYP, continuously stresses the role and importance of civil society’s engagement in the
process, but often seems to overlook the fundamental role that an informed and capable
administration can play in implementing EITI’s objectives. Therefore, EITI should improve its
requirement 6, by adding that not just civil society, but also administrative personnel need
adequate training against constraints and pressure that are usually put upon them by
19
multinational corporations, and to increase their knowledge of the mining sector, before the
country can engage in the EITI process. However, an improvement has already taken place in as
much as the 2011 edition of EITI Rules provides a new sign-up requirement, namely requirement
5, which demands the MSG to be created prior to the candidature of the country, so that it can be
prepared to face the challenges of EITI implementation and doesn’t cause delays on the
publication of reports. This has the positive effect of forcing the country to address these issues as
a starting point for the candidature to EITI, so that reports’ quality and timeliness be assured.
Regarding policy n.5, the assessment of the potential of the disclosure report to reach the greatest
number of citizens, EITI provides in Requirement 18 that “the EITI Report [must be] made public…
widely disseminated and openly discussed by a broad range of stakeholders” (EITI 2011, p.27).
Moreover, it stresses the need of accessibility, comprehensiveness and comprehensibility of the
report, which must be published online, distributed in hard copies to key stakeholders and
advertised in public events. If the purpose of this policy is to simply make available the report to a
number of stakeholders, then it can be argued that requirement 18 provides a comprehensive
blueprint, upon which individual governments can build. However, if the purpose of the diffusion
of disclosed data about the extractive industries is to create awareness among the country’s
population of the importance of their natural resources and of the efforts that the government,
together with the initiative, is implementing to promote a fairer distribution of wealth, then it
seems that a more pervasive policy should be implemented. One possibility could be to make
copies of the report available to local schools, churches and other centres of cultural aggregation,
in which case it is more likely that the report may “contribute to public debate”.
For what concerns policies n.2 and n.3, the main concept behind them is whether the
international initiative (be it EITI or PWYP) has mandatory force inside domestic legislation or not.
It can be easily argued indeed that to reach the highest levels of compliance and effectiveness, the
auditing body or the initiative’s board that appoints it, should have enforcing powers, in order to
be able to carry out investigation on the causes of discrepancy, provide fines and punishment, and
have prosecuting power against wrongdoers. This implies that international standards would be
integrated in domestic legislation and take up a mandatory approach. Such position is supported
by PWYP (Le Billon 2006-2007). On the other hand, the EITI is based on a voluntary approach: it is
true that “governments should review the legal framework to identify any potential obstacles to
EITI implementation” but at the same time “the EITI should fit comfortably within the legal
framework alongside fiscal control mechanisms (…) [and] should not involve extraordinary
demands on the government” (Requirement 5, EITI 2011 p. 17). Interestingly though, the Rules
keep the opportunity open “to incorporate EITI requirements within national legislation or
regulation” when “it may be necessary” (ib.). Aimed at providing candidate countries with
independence and freedom to implement the objectives following their own preferences, this
flexible approach has pros and cons. It surely attracts more participants, particularly in terms of
companies, as most businesses have resisted the disclosure advocated by PWYP, on the grounds of
contractual confidentiality and competition (Le Billon 2006-2007). Nevertheless, arguably this is
counterproductive because it allows countries to adhere to EITI only as a façade-mechanism to
cleanse their reputation. The implementation of EITI has indeed been associated with a
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reputational boost for notoriously corrupt countries like Nigeria: “The adoption of the EITI
underscored Nigeria’s determination to make a clean break with the past by fighting corruption
and improving governance… The credibility boost facilitated Nigeria’s debt cancellation by the
Paris Club and lifted its profile in the eyes of investors” stated Nigeria’s former minister of finance
in 2008 (Meyer 2011). These positive effects on countries’ reputation are used by EITI as an
incentive to increase countries’ participation to the initiative: “benefits for implementing countries
include an improved investment climate by providing a clear signal to investors and international
financial institutions that the government is committed to greater transparency” (EITI website).
EITI and accountability
The question that the international community should ask is whether the improved reputation of
EITI compliant states is justified by actual improvements in transparency and accountability. In
fact, it is not clear how EITI intends to address the issue of accountability. Table 3 summarizes the
policies suggested in the previous chapter regarding accountability.
Table 3: Policies suggested in chapter 2 to promote accountability
Suggested policy
6. Disclosure of data regarding distribution
and allocation of rents
Specific purpose of the policy
Monitor budget expenditures and destinations
of resource revenues to hold governmental
agencies accountable
7. Reorganization of the taxation system
Enhance the administrative control of the
central/regional governments on the territory
8. Training of state bureaucracy and
Enhance expertise and skills of administrative
investment in capacity building
personnel
9. Training of domestic monitoring bodies, for Enhance the role of legislators in mediating
instance parliaments, by international
between the citizens and the government
consultancy like Revenue Watch Institute
10. Insert civic education in schools
Empower citizens, specially the youth, and
educate them to require more of their own
governments
Of the five policies suggested (6-10) to promote accountability, EITI arguably fails to address any. It
does not deal with school-level education (n.10,) or with training for state administration (n.8), as
its main focus is on empowering civil society. Moreover, as it tries to have the minimum possible
impact on state legislation and regulation, it does not enhance the taxation system (n.7) (although
this could be argued to go beyond its purpose, as it is a state function that is not related to the
extractive industries, despite being at the core of accountability and representation). In addition, it
does not empower parliaments as possible mediators between the interests of the state and the
grievances of the population over mining-related issues (n.9), first because it arguably regards civil
society as the rightful representative of the population, second because as already mentioned, it
21
does not provide compulsory changes in the legislation. On top of this, EITI seems to overlook the
importance of the disclosure of data regarding distribution and allocation of rents (n.6) as a means
to monitor corruption in budgetary expenditures. This is a significant policy challenge that needs
to be addressed, as corruption doesn’t take place merely during transactions between companies
and government, but also during the allocation of revenues to different governmental agencies.
Ultimately, what matters is the management of revenues and their expenditures, as this
determines the amount of money that will reach the poor and needy. This fundamental aspect has
been provided for in the objectives of PWYP and in the action plan of Oxfam America: the latter
has recently released a video stressing the number of intermediaries that the oil industry in
particular has, and the “right to know” of people living in oil-exporting countries “where does the
many go?” (PWYP 2012). In addition to what previously said, an important question rises from an
analysis of EITI: how can non-democratic governments enhance accountability through the EITI?
Hilson and Maconachie (2008) indeed highlight that “the majority of Africa’s EITI signatories …
[are] countries with long histories of corruption, civil violence, and/or dictatorships. Examples
include Chad, Equatorial Guinea, and Sierra Leone.” (p.63). They repeatedly ask how EITI intends
to provide greater accountability, if such countries, despite being recognized as compliant, have
evidently neither changed their political structure, nor have they reduced in any way the
phenomenon of ‘spoil politics’ whereby elites loot and distribute resources to aliment political
patronage. This disillusionment seems to be shared even by EITI stakeholders. In a survey carried
out by Revenue Watch Institute (in Dykstra 2011), it emerges that the two main reasons why
participants joined EITI are to “increase transparency through publication of company payments
and government revenues” and to “increase accountability of the government for extractive
revenues”. When asked if they thought EITI actually provided participants with a framework for
the implementation of these objectives, respondents were divided as it was not clear to them the
link between EITI and accountability. One respondent even stated “Accountability is not actually
on the EITI agenda” (p.5). Interestingly, when asked how accountability could become part of the
EITI process, the majority answered by increasing government’s support for the implementation of
EITI and specifically, they called for EITI “to be more integrated in government regulation of the
sector and for oversight bodies such as parliament and the supreme audit institution to be more
engaged in the process” (ib.) This is a very interesting result, because it confirms the necessity of
greater involvement of legislating bodies, as highlighted by policy n.9, and of a greater degree of
enforceability of the standard, as argued by policies n.2 and n.3.
EITI and economic growth
As mentioned before, EITI’s supporters argue that a thorough implementation of EITI can bring
about an improvement of resource-rich countries’ economic performance. Despite these claims,
none of the policies highlighted in chapter 2 for withstanding Dutch disease, harnessing the
positive results of booming mineral-commodity demand, and promoting trade with industrializing
countries seems to be among the EITI Requirements. Principle 7 of EITI affirms that an
“environment for domestic and foreign investment” can be enhanced by transparency, and
therefore it can be argued that it suggests an indirect effect that EITI might have on the economy
of resource-rich countries. McDowell (2009), Board member of EITI, confirms this indirect effect
22
and states that EITI, by improving good governance, can contribute to a “better investment
climate”. However, Hilson & Maconachie (2008) argue that good governance and transparency are
not needed to attract investment in Sub-Saharan Africa: companies have never restrained from
investing in Chad and Nigeria, among the more corrupt states in the world, nor did wide-spread
conflict discourage them from exporting diamonds and other resources from Sierra Leone and
DRC. This topic needs further discussion by EITI stakeholders, in order to prove EITI’s positive
impact on economic performance.
EITI, poverty and inequality
Again, this analysis finds no adherence between EITI’s rules and the policies suggested in chapter 2
to tackle inequality and poverty (for a summary of the relevant policies please refer to Appendix
2). Nevertheless, it may be argued that EITI does have some indirect impact on poverty-reduction,
through its empowerment of civil society stakeholders. The domestic NGOs that are part of the
Multi-stakeholder Group in each EITI country address the problems of the poor and the
disadvantaged daily, and advocate the rights of those affected by mining-related issues. In so far
as the EITI meetings are a forum for the debate of such issues, and allow civil society to raise its
voice and be heard by government and companies, it can be argued that EITI has a positive
influence on poverty and inequality reduction. Interestingly, the Revenue Watch Institute survey
on EITI (Dykstra 2011), shows that civil society representatives in EITI implementing states feel
that EITI’s greatest benefit is to have increased “dialogue between stakeholders” and, more
specifically, the relationship between civil society and the government. This data therefore
confirm the validity of EITI as a forum of discussion and as a channel for civil society’s grievances
to be heard. However, EITI arguably fails to promote policies that address poverty and inequality
at a structural level.
The EITI’s new strategy
Some of the issues highlighted in this paragraph have been or are being addressed at the moment
of writing. A first step forward can be detected when comparing the EITI 2005 Rules edition with
the 2011 version. Probably the most important addition is a much clearer explanation of EITI
requirements, which were identified as mere ‘suggested actions’ previously. Particularly, an
important improvement has been made in relation to Suggested Action n.11, which has been
transformed in Requirement 11, as figure 5 shows.
23
Figure 5: Suggested Action 11 vs. Requirement 11 (Sources: EITI Sourcebook 2005 and EITI Rules
2011 respectively)
This change is significant in as much as it introduces a degree of compulsion in the disclosure
mechanism and a much better formulation of what the government is expected to achieve. There
is still some contradiction: how can EITI criteria be applied to all companies (point a) if it provides
that some companies might not participate to EITI (point c, iv)? It is clear that there has been an
effort to implement a greater degree of compulsion, as a matter of fact the possibility to change
domestic legislation and regulation is not eluded anymore. However, as long as the standard is not
integrated in the domestic legislation, some companies will probably refuse to participate, and this
undermines the very existence of EITI. Progress has also been made during the July 2012 Oslo
meeting, which has expressed the necessity for mandatory disclosure of licenses and licenseholders, for reporting “by each company and each revenue streams as part of the minimum
[disaggreagation] requirements” (p.3), and for further discussion on the issues of local content,
midstream payments, licensing, project-level reporting and social expenditures. These seem to be
encouraging steps, as they push the EITI in the direction of revenue-expenditure disclosure and
greater enforceability of the standard.
24
3.3 Conclusion
The present work was aimed at answering the question of whether transparency initiatives for the
extractive industries, and particularly the EITI, can tackle the negative outcomes presented by the
resource-curse theory. This question was posed in the light of the claims carried out by EITI’s
supporters that EITI contributes to enhance governance, economic growth and poverty reduction
in resource-rich countries. The analysis of the EITI carried out in this paper has clearly shown the
inadequacy of EITI to live up to the claims of its supporters.
Chapter 1, after reviewing the existing literature on the resource curse, has emphasized the need
for further discussion of the variables that influence the resource curse.
Chapter 2 has therefore offered thoughtful insights into the factors that are the more likely causes
of the ‘curse’. The following elements have been of particular relevance: first, the analysis of the
new trends in economic growth of resource-dependent countries has disproved the axiom at the
core of the resource-curse theory, namely that resource-rich countries perform worse than other
countries, while uncovering the important phenomenon of a significant and constant rise of prices
caused by China’s mineral demand, which if properly managed, can arguably offer resourceexporters the opportunity to ‘break the curse’ for good; second, an assessment of the claims that
resource-rich countries are plagued by higher levels of poverty and social inequality because of
their resource endowment, has shown that such issues are caused by a number of political, social
and cultural factors that are intrinsic to the social fabric of society and are the result of countryspecific problems; third, the appraisal of the causes for the lack of democracy and transparency in
resource-rich countries has brought to light the existence of a triple, intertwined process of
development of democracy, taxation, and an efficient bureaucratic apparatus, as the unique result
of European history, which has not occurred in most developing countries because of the legacy
that colonialism has left behind. A further contribution of Chapter 2 has been the suggestion of
policies to create a framework that can arguably address, at least to a certain extent, the problems
of poor economic growth, high levels of poverty and social inequality, and lack of transparency
and democracy.
Chapter 3 has used this framework of policies to test the validity of EITI as a solution to the
resource curse. The results of this analysis are the following: EITI achieves its best performance
with regard to the implementation of transparency and disclosure of revenues in resource-rich
countries; the mechanisms that allow greater transparency fail to thoroughly address the issues of
accountability and good governance, which are not even clearly pursued by EITI requirements; EITI
needs to improve the enforceability and compulsory character of its disclosure mechanism if it
wants countries’ reports to be truly informed about the dynamics of the extractive industries;
moreover, EITI needs to broaden its target and promote training and capacity-building of the
domestic legislators. In addition, it can be argued that the reason why EITI fails to promote
economic growth and poverty reduction is because these objectives go beyond EITI’s scope.
25
Therefore, this paper suggests that EITI, despite contributing to transparency in the extractive
industries, should revise its objectives, focusing on more realistic goals, particularly the
enhancement of transparency, which is the reason why EITI was created to begin with.
26
Appendix 1: Ethical Approval, Geography Risk Assessment Form and Geography Research Ethics
Screening Form
Ethical Approval E-mail:
Date: Wed, 18 Jul 2012 14:41:26
Dear Shady Anayati,
KCL/11-12_1852 Certification schemes and international standards for the extractive industries
I am pleased to inform you that full approval for your project has been granted by the GGS Research Ethics
Panel. Any specific conditions of approval are laid out at the end of this email which should be followed in
addition to the standard terms and conditions of approval:
- Ethical approval is granted for a period of one year from the date of this email. You will not receive a
reminder that your approval is about to lapse so it is your responsibility to apply for an extension prior to
the project lapsing if you need one (see below for instructions).
- You should report any untoward events or unforeseen ethical problems arising from the project to the
panel Chairman within a week of the occurrence. Information about the panel may be accessed at:
http://www.kcl.ac.uk/research/ethics/applicants/sshl/panels/.
- If you wish to change your project or request an extension of approval you will need to submit a new
application with an attachment indicating the changes you want to make (a proforma document to help
you with this is available at: http://www.kcl.ac.uk/research/ethics/applicants/modifications.html).
- All research should be conducted in accordance with the King's College London Guidelines on Good
Practice in Academic Research available at:
http://www.kcl.ac.uk/college/policyzone/index.php?id=247&searched=good+practice&advsearch=allwords
&highlight=ajaxSearch_highlight+ajaxSearch_highlight1+ajaxSearch_highlight2
If you require signed confirmation of your approval please forward this email to [email protected] indicating
why it is required and the address you would like it to be sent to.
Please would you also note that we may, for the purposes of audit, contact you from time to time to
ascertain the status of your research.
We wish you every success with this work.
With best wishes
Yours Sincerely,
GGS Reviewer
27
Appendix 2: Summary of policies suggested in chapter two
Suggested policy
Induce
economic
growth
 Reserve funds
 Stabilization and future funds or WB and IMF
loans
 Investment in infrastructure
 Trade agreements with industrializing
countries
 Training for national and local governmental
personnel
 Open bidding of mining rights, monitored by
independent body (i.e. EITI)
 Accessible education and specific training at
secondary-school and university level
 Development of domestic linkages, for
instance regulations about the sale of
percentages of production to local
manufacturers
 Policies to support labour-intensive sectors,
like agriculture
 Social policies to tackle specific case-related
issues, such as financial help to those hit by
AIDS and their families
 ‘barter contracts’
Fight
1. Disclosure of data regarding payments made
corruption
by companies to governments and
payments received by governments from
companies (collection level)
2. Mechanism with enforcing power to
investigate discrepancies and punish
wrongdoers
3. Disclosure of data regarding distribution and
allocation of rents
4. Develop expertise and skills of
governmental official at all levels
5. Provision of fines and punishment for
corrupted officials and companies
6. A realistic assessment of the capacity of
reception of domestic population of
disclosed data and implementation of
alternative ways of publishing data if
internet is not accessible by the majority of
the population
Improve
 Disclosure of data regarding distribution and
accountability
allocation of rents
 Reorganization of the taxation system
 Training of state bureaucracy and
Tackle
inequality
and poverty
Specific purpose of the policy
 Cushion effect, counterbalance boombust cycles
 Contrast Dutch disease and provide
profit through investment
 Fight Dutch disease and allow future
growth
 Exploit the surge of demand
 Increase negotiating skills to achieve fair
contracts with mining companies
 Benefit from increased competitiveness
in international markets
 Develop long-term skills and build
domestic human capital
 Stimulate industrialization and reduce
the enclave nature of mining
 Diversify the economy and increase
employment rates
 Empower citizens and provide assistance
to victims of disease or war
 Provide infrastructure that can benefit
the poor
7. Expose corruption through discrepancies
in data
8. Increase enforceability in order to
promote effectiveness of policies
9. Fight corruption at the different levels of
distribution and allocation of resources,
not just at collection level
10. Increase independence from companies
on one hand and provide a smooth
process of disclosure
11. Mandatory anti-corruption domestic
laws both in producing and importing
countries
12. Increase capacities of citizens to be
informed about the fight against
corruption
 Monitor budget expenditures and
destinations of resource revenues
 Enhance the administrative control of
the central/regional governments on the
28
investment in capacity building
 Training of monitoring bodies, for instance
parliaments, by international consultancy
like Revenue Watch Institute
 Insert civic education in schools
territory
 Enhance expertise and skills of
administrative personnel
 Enhance the role of legislators in
mediating between the citizens and the
government
 Empower citizens, specially the youth,
and educate them to require more of
their own governments
29
Appendix 3: Full list of EITI Principles and Criteria (Source: EITI Rules, 2011 Edition)
30
Appendix 4: EITI requisites (Source: EITI Rules, 2011 Edition)
31
Reference list
Armour, I.D. (2012), A History of Eastern Europe 1740-1918: empires, nations and modernization,
Bloomsbury Academics, 2nd edition
Auty, R. (1993) Sustaining Development in Mineral Economies: The Resource Curse Thesis, London:
Routledge
Bannon I., Collier P. ( eds.) (2003) Natural Resources and Violent Conflict-options and actions, World Bank
Publications
Bauer, A. (2011) Managing and Spending Resource Revenues Well, Revenue Watch Institute Briefing
Bond, P. (2008) The looting of Africa, Globalization and the Washington Consensus: its influence on
democracy and development in the south. Lechini G. (ed.). Buenos Aires : CLACSO, Consejo
Latinoamericano de Ciencias Sociales
Collier, P. and Hoeffler A. (2002), Greed and Grievance in Civil War, Centre for the Study of African
Economies
Collier, P. and Hoeffler A. (2005) Resource Rents, Governance, and Conflict, Journal of Conflict Resolution,
Vol. 49, (4) 625-633
Collier, P. and Hoeffler, A. (1998) ‘On Economic Causes of Civil War’, Oxford Economic Papers, 50, 563–73
Davis, G.A and Tillon J.E. (2005) The resource curse, Natural Resources Forum, Vol. 29, pages 233–242
Davis, G.A. (1995) ‘Learning to Love the Dutch Disease: Evidence from Mineral Economies’, World
Development 23.10: 1765–80 in Rosser, A. (2006) Resource Curse: A Literature Survey, Institute of
Development Studies Working Papers
De Soysa, I. (2000) ‘The Resource Curse: Are Civil Wars Driven by Rapacity or Paucity?’ in Rosser, A., (2006)
Resource Curse: A Literature Survey, Institute of Development Studies Working Papers
Dunning, T. (2005) Resource Dependence, Economic Performance, and Political Stability, Journal of Conflict
Resolution, Vol. 49 No. 4, August 2005 451-482
Dykstra, P. (2011) Learning from Success and Challenges, Revenue Watch Institute Briefing
Gelb, A. and Associates (1988) Oil Windfalls: Blessing or Curse, New York: Oxford University Press in Rosser,
A., (2006) Resource Curse: A Literature Survey, Institute of Development Studies Working Papers
Gillies, A. (2011) What makes a good EITI report?, Revenue Watch Institute Briefing
Ginsburg, N. (1957) Natural Resources and Economic Development, Annals of the Association of American
Geographers, 47, 197-212
Good, K. (2005) Resource dependency and its consequences: The costs of Botswana's shining gems, Journal
of Contemporary African Studies, 23:1, 27-50
32
Heap, A. (2005) China - The Engine for a Commodities Super Cycle, New York, Citigroup, Smith Barney in
Economic Commission for Africa –ECA (2012) Minerals and Africa’s Development, Economic Commission for
Africa Publications
Hilson, G. and Maconachie R. (2008) “Good Governance and the Extractive Industries in Sub-Saharan
Africa”, Mineral Processing and Extractive Metallurgy Review: An International Journal, 30:1, 52-100
Humphreys, M. (2005) Natural Resources, Conflict, and Conflict Resolution: Uncovering the Mechanisms,
Journal of Conflict Resolution, Vol. 49 (4) 508-537
Karl, T.L. (1997) The Paradox of Plenty: Oil Booms and Petro-States, Berkeley, Los Angeles and London:
California University Press
Le Billon, P. (2001) Angola's political economy of war: the role of oil and diamonds, 1975-2000, Journal of
African Affairs, 100, 55-80
Le Billon, P. (2001) The Political Ecology of War: Natural Resources and Armed Conflicts, Journal of Political
Geography, 20, 561–84
Le Billon, P. (2004) The Geopolitical economy of ‘resource wars’, Geopolitics, 9:1, 1-28
Le Billon, P. (2005) The resource curse, The Adelphi Papers, 45:373, 11-27
Le Billon, P. (2006-2007) Securing Transparency: Armed Conflicts and the Management of Natural Resource
Revenues, International Journal of Natural Resources and Conflict, Vol. 62, No. 1, pp. 93-107
Le Billon, P. (2008) Diamond Wars? Conflict Diamonds and Geographies of Resource Wars, Annals of the
Association of American Geographers, 98 (2), 345-372
Luciani, G. (1987) ‘Allocation vs. Production States: A Theoretical Framework’ in Rosser, A., (2006) Resource
Curse: A Literature Survey, Institute of Development Studies Working Papers
Meyer, A. (2011) EITI’s Role in Revenue Transparency, Revenue Watch Institute Briefing
Moore, M. (2000) Political Underdevelopment: What Causes Bad Governance?, Public Management Review
3.3: 385–418
Moore, M. (2004) Revenues, State Formation, and the Quality of Governance in Developing Countries,
International Political Science Review, 25 ( 3), 297–319
Nankani, G. (1979) Development Problems of Mineral Exporting Countries, Staff Working Paper 354
(August), Washington, DC: World Bank in Rosser, A., (2006) Resource Curse: A Literature Survey, Institute of
Development Studies Working Papers
Prebisch, R. (1950) The Economic Development of Latin America and its Principal Problems, Lake Success,
NY: United Nations in Rosser, A., (2006) Resource Curse: A Literature Survey, Institute of Development
Studies Working Papers
Reno, W. (2007) Patronage Politics and the Behavior of Armed Groups, Journal of Civil Wars, 9:4, 324-342
33
Robinson, J., Torvik, R. and Verdier, T. (2002) Political Foundations of the Resource Curse, Centre For
Economic Policy Research Discussion Paper Series No 3422 in Rosser, A., (2006) Resource Curse: A
Literature Survey, Institute of Development Studies Working Papers
Ross M. (2001b) Timber Booms and Institutional Breakdown in Southeast Asia, Ann Arbor: University of
Michigan
Ross, M. (2001) Extractive Sectors and the Poor, Oxfam America Publications
Ross, M. (2004) What Do We Know About Natural Resources and Civil War? Journal of Peace Research 41.3,
337–56
Ross, M. (2011) The Political Economy of Petroleum Wealth in Low-Income Countries: some policy
alternatives, paper prepared for the IMF High Level Seminar, “Commodity Price Volatility andInclusive
Growth in LICs,” Washington DC, September 21, 2011
Rosser, A. (2006) Resource Curse: A Literature Survey, Institute of Development Studies Working Papers
Rostow, W.W., (1960) The Stages of Economic Growth: A Non-Communist Manifesto, Cambridge University
Press
Sachs, J.D. and Warner, M. (1995) Natural Resource Abundance and Economic Growth, National Bureau of
Economic Research Working Paper 6398 (December) Cambridge, MA: National Bureau of Economic
Research
Schumpeter, J. A. (1991 [ 1918] ) ‘The Crisis of the Tax State’ in Moore, M. (2000) Political
Underdevelopment: What Causes Bad Governance?, Public Management Review 3.3: 385–418
Singer, H. (1950), The Distribution of Gains Between Investing and Borrowing Countries, The American
Economic Review 40.2 (May), papers and proceedings of the sixty-second Annual Meeting of the American
Economic Association: 473–85 in Rosser, A., (2006) Resource Curse: A Literature Survey, Institute of
Development Studies Working Papers
Snyder, R. and Bhavnani R. (2005) Diamonds, blood and taxes: A revenue-centered framework for
explaining political order, Journal of Conflict Resolution, Vol. 49 (4): 563-97.
Wantchekon, L. (1999), Why Do Resource Dependent Countries Have Authoritarian Governments? New
Haven, CT: Yale University in Rosser, A., (2006) Resource Curse: A Literature Survey, Institute of
Development Studies Working Papers
Reports
African Union (2009), African Mining Vision, sent by Antonio Pedro, UNECA
Economic Commission for Africa –ECA (2012) Minerals and Africa’s Development, Economic Commission for
Africa Publications
34
EITI Minutes of 20th EITI Board Meeting, EITI International Secretariat, Oslo, 30 July 20012, available on EITI
website
EITI Rules, 2005 Edition, Extractive Industries Transparency Initiative Source Book
EITI Rules, 2011 Edition, available online http://eiti.org/files/EITI_Rules_Validations_April2011_1.pdf
Fair Links (2012) Rapport de l’Administrateur Indépendant de l’IETIE sur les revenues 2008-2009
Global Witness (1998) A crude awakening, available at
http://www.globalwitness.org/sites/default/files/pdfs/A%20Crude%20Awakening.pdf
IMF (2012) Sub-Saharan Africa - Sustaining Growth amid Global Uncertainty, International Monetary Fund
Publications
Websites
Aaronson, S.A (2008), Oil and the public interest, available online http://www.voxeu.org/article/cantransparency-extractive-industries-break-resource-curse
EITI website: www.eiti.org
HDR (2011), http://hdrstats.undp.org/en/countries/profiles/BWA.html
McDowell , J.(2009) The Extractive Industries Transparency Initiative, Contributing to a better investment
climate, available at http://eiti.org/files/EITI%20%20Contributing%20to%20a%20better%20investment%20climate.pdf
PWYP (2012) http://www.publishwhatyoupay.org/category/topics/govt-expenditure
PWYP website: www.publishwhatyoupay.com
Wire Dusseldorf (2011), EITI – a brick in the fight against the resource curse, available online
http://www.wiretradefair.com/cipp/md_wiretube/custom/pub/content,oid,9852/lang,2/ticket,g_u_e_s_t/~/EITI_%E2%80%
93_a_brick_in_the_fight_against_the_resource_curse.html
35
Appendix 1: Ethical Approval, Geography Risk Assessment Form and Geography Research Ethics
Screening Form
Ethical Approval E-mail:
Date: Wed, 18 Jul 2012 14:41:26
Dear Shady Anayati,
KCL/11-12_1852 Certification schemes and international standards for the extractive industries
I am pleased to inform you that full approval for your project has been granted by the GGS Research Ethics
Panel. Any specific conditions of approval are laid out at the end of this email which should be followed in
addition to the standard terms and conditions of approval:
- Ethical approval is granted for a period of one year from the date of this email. You will not receive a
reminder that your approval is about to lapse so it is your responsibility to apply for an extension prior to
the project lapsing if you need one (see below for instructions).
- You should report any untoward events or unforeseen ethical problems arising from the project to the
panel Chairman within a week of the occurrence. Information about the panel may be accessed at:
http://www.kcl.ac.uk/research/ethics/applicants/sshl/panels/.
- If you wish to change your project or request an extension of approval you will need to submit a new
application with an attachment indicating the changes you want to make (a proforma document to help
you with this is available at: http://www.kcl.ac.uk/research/ethics/applicants/modifications.html).
- All research should be conducted in accordance with the King's College London Guidelines on Good
Practice in Academic Research available at:
http://www.kcl.ac.uk/college/policyzone/index.php?id=247&searched=good+practice&advsearch=allwords
&highlight=ajaxSearch_highlight+ajaxSearch_highlight1+ajaxSearch_highlight2
If you require signed confirmation of your approval please forward this email to [email protected] indicating
why it is required and the address you would like it to be sent to.
Please would you also note that we may, for the purposes of audit, contact you from time to time to
ascertain the status of your research.
We wish you every success with this work.
With best wishes
Yours Sincerely,
GGS Reviewer
Appendix 2: Summary of policies suggested in chapter two
Suggested policy
Induce
economic
growth
Tackle
inequality
and poverty
 Reserve funds
 Stabilization and future funds or WB and IMF
loans
 Investment in infrastructure
 Trade agreements with industrializing
countries
 Training for national and local governmental
personnel
 Open bidding of mining rights, monitored by
independent body (i.e. EITI)
 Accessible education and specific training at
secondary-school and university level
 Development of domestic linkages, for
instance regulations about the sale of
percentages of production to local
manufacturers
 Policies to support labour-intensive sectors,
like agriculture
 Social policies to tackle specific case-related
issues, such as financial help to those hit by
AIDS and their families
 ‘barter contracts’
Fight
 Disclosure of data regarding payments made
corruption
by companies to governments and
payments received by governments from
companies (collection level)
 Mechanism with enforcing power to
investigate discrepancies and punish
wrongdoers
 Disclosure of data regarding distribution and
allocation of rents
 Develop expertise and skills of
governmental official at all levels
 Provision of fines and punishment for
corrupted officials and companies
 A realistic assessment of the capacity of
reception of domestic population of
disclosed data and implementation of
alternative ways of publishing data if
internet is not accessible by the majority of
the population
Improve
 Disclosure of data regarding distribution and
accountability
allocation of rents
 Reorganization of the taxation system
 Training of state bureaucracy and
investment in capacity building
 Training of monitoring bodies, for instance
Specific purpose of the policy
 Cushion effect, counterbalance boombust cycles
 Contrast Dutch disease and provide
profit through investment
 Fight Dutch disease and allow future
growth
 Exploit the surge of demand
 Increase negotiating skills to achieve fair
contracts with mining companies
 Benefit from increased competitiveness
in international markets
 Develop long-term skills and build
domestic human capital
 Stimulate industrialization and reduce
the enclave nature of mining
 Diversify the economy and increase
employment rates
 Empower citizens and provide assistance
to victims of disease or war
 Provide infrastructure that can benefit
the poor
 Expose corruption through discrepancies
in data
 Increase enforceability in order to
promote effectiveness of policies
 Fight corruption at the different levels of
distribution and allocation of resources,
not just at collection level
 Increase independence from companies
on one hand and provide a smooth
process of disclosure
 Mandatory anti-corruption domestic
laws both in producing and importing
countries
 Increase capacities of citizens to be
informed about the fight against
corruption
 Monitor budget expenditures and
destinations of resource revenues
 Enhance the administrative control of
the central/regional governments on the
territory
 Enhance expertise and skills of
administrative personnel
parliaments, by international consultancy
like Revenue Watch Institute
 Insert civic education in schools
 Enhance the role of legislators in
mediating between the citizens and the
government
 Empower citizens, specially the youth,
and educate them to require more of
their own governments
Appendix 3: Full list of EITI Principles and Criteria (Source: EITI Rules, 2011 Edition)
Appendix 4: EITI requisites (Source: EITI Rules, 2011 Edition)
Reference list
Armour, I.D. (2012), A History of Eastern Europe 1740-1918: empires, nations and modernization,
Bloomsbury Academics, 2nd edition
Auty, R. (1993) Sustaining Development in Mineral Economies: The Resource Curse Thesis, London:
Routledge
Bannon I., Collier P. ( eds.) (2003) Natural Resources and Violent Conflict-options and actions, World Bank
Publications
Bauer, A. (2011) Managing and Spending Resource Revenues Well, Revenue Watch Institute Briefing
Bond, P. (2008) The looting of Africa, Globalization and the Washington Consensus: its influence on
democracy and development in the south. Lechini G. (ed.). Buenos Aires : CLACSO, Consejo
Latinoamericano de Ciencias Sociales
Collier, P. and Hoeffler A. (2002), Greed and Grievance in Civil War, Centre for the Study of African
Economies
Collier, P. and Hoeffler A. (2005) Resource Rents, Governance, and Conflict, Journal of Conflict Resolution,
Vol. 49, (4) 625-633
Collier, P. and Hoeffler, A. (1998) ‘On Economic Causes of Civil War’, Oxford Economic Papers, 50, 563–73
Davis, G.A and Tillon J.E. (2005) The resource curse, Natural Resources Forum, Vol. 29, pages 233–242
Davis, G.A. (1995) ‘Learning to Love the Dutch Disease: Evidence from Mineral Economies’, World
Development 23.10: 1765–80 in Rosser, A. (2006) Resource Curse: A Literature Survey, Institute of
Development Studies Working Papers
De Soysa, I. (2000) ‘The Resource Curse: Are Civil Wars Driven by Rapacity or Paucity?’ in Rosser, A., (2006)
Resource Curse: A Literature Survey, Institute of Development Studies Working Papers
Dunning, T. (2005) Resource Dependence, Economic Performance, and Political Stability, Journal of Conflict
Resolution, Vol. 49 No. 4, August 2005 451-482
Dykstra, P. (2011) Learning from Success and Challenges, Revenue Watch Institute Briefing
Gelb, A. and Associates (1988) Oil Windfalls: Blessing or Curse, New York: Oxford University Press in Rosser,
A., (2006) Resource Curse: A Literature Survey, Institute of Development Studies Working Papers
Gillies, A. (2011) What makes a good EITI report?, Revenue Watch Institute Briefing
Ginsburg, N. (1957) Natural Resources and Economic Development, Annals of the Association of American
Geographers, 47, 197-212
Good, K. (2005) Resource dependency and its consequences: The costs of Botswana's shining gems, Journal
of Contemporary African Studies, 23:1, 27-50
Heap, A. (2005) China - The Engine for a Commodities Super Cycle, New York, Citigroup, Smith Barney in
Economic Commission for Africa –ECA (2012) Minerals and Africa’s Development, Economic Commission for
Africa Publications
Hilson, G. and Maconachie R. (2008) “Good Governance and the Extractive Industries in Sub-Saharan
Africa”, Mineral Processing and Extractive Metallurgy Review: An International Journal, 30:1, 52-100
Humphreys, M. (2005) Natural Resources, Conflict, and Conflict Resolution: Uncovering the Mechanisms,
Journal of Conflict Resolution, Vol. 49 (4) 508-537
Karl, T.L. (1997) The Paradox of Plenty: Oil Booms and Petro-States, Berkeley, Los Angeles and London:
California University Press
Le Billon, P. (2001) Angola's political economy of war: the role of oil and diamonds, 1975-2000, Journal of
African Affairs, 100, 55-80
Le Billon, P. (2001) The Political Ecology of War: Natural Resources and Armed Conflicts, Journal of Political
Geography, 20, 561–84
Le Billon, P. (2004) The Geopolitical economy of ‘resource wars’, Geopolitics, 9:1, 1-28
Le Billon, P. (2005) The resource curse, The Adelphi Papers, 45:373, 11-27
Le Billon, P. (2006-2007) Securing Transparency: Armed Conflicts and the Management of Natural Resource
Revenues, International Journal of Natural Resources and Conflict, Vol. 62, No. 1, pp. 93-107
Le Billon, P. (2008) Diamond Wars? Conflict Diamonds and Geographies of Resource Wars, Annals of the
Association of American Geographers, 98 (2), 345-372
Luciani, G. (1987) ‘Allocation vs. Production States: A Theoretical Framework’ in Rosser, A., (2006) Resource
Curse: A Literature Survey, Institute of Development Studies Working Papers
Meyer, A. (2011) EITI’s Role in Revenue Transparency, Revenue Watch Institute Briefing
Moore, M. (2000) Political Underdevelopment: What Causes Bad Governance?, Public Management Review
3.3: 385–418
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