The case for revenue transparency in the oil and gas ... - La'o Hamutuk

CHAPTER 1
What is a
resource
curse?
Studies have shown that
when governance is good
in resource-rich countries,
resources can generate large
revenues to foster economic
growth and reduce poverty.
However, when governance
is weak, they may instead
cause poverty and conflict. 4
Oil, gas and minerals are a source of great wealth in resource-rich
nations. The domestic use of such resources can spur the development
of industries and contribute to better social conditions through energy
production. On the other hand, the extraction and export of such
resources can generate enormous revenues which, if used properly,
could also be a catalyst for development in these nations. Unfortunately,
however, many resource-rich countries are not benefiting from this
wealth but instead are experiencing great poverty and unstable living
conditions. This phenomenon is commonly known as the “resource
curse” or “paradox of plenty.” The resource curse describes a situation
where, instead of boosting a country, natural resource wealth actually
leads to further corruption, repressive conditions, poverty and conflict.
Many countries that are rich in natural resources are badly governed.
Revenues generated from the sale of resources are often stolen or
squandered through corruption and a lack of government accountability. 1
The authority of sitting governments or power structures within a
country can therefore be maintained through the accumulation of
resource revenues into the hands of a few. Consolidation of revenues
by sitting governments, particularly those that rely on military means
to maintain power, can exacerbate repressive conditions. There is a
correlation between the rise and fall in the price of petroleum with the
rise and fall in the protection of human rights in major oil-producing
countries. 2
A lack of accountability and corruption allows enormous financial
opportunity for a select few at the expense of average persons,
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