Natural Resources and Violent Conflict - WaterWiki.net

22 michael ross12 of the 20 as “highly indebted poor countries”—the most troubledcategory of states—even though they earn large sums of foreign exchangefrom the sale of their resources. Since 1990, five of them havehad civil wars. Table 2.4 also lists the world’s 20 most oil-dependentstates. Here, too, the record is grim. Three of the top six states areclassified as highly indebted poor countries, and, once again, five of the20 suffered from civil wars in the 1990s. 5What Can Be Done?The international community could take two types of measures thatwould help resource-rich economies. These suggestions and the othersin this chapter are preliminary ideas only, designed to stimulate furtheranalysis and discussion.Promote Diversification through Trade Liberalization. One way toreduce the dependence of governments on resource revenues is to helpthem to diversify economically. States with more diverse exports arebetter protected against international market fluctuations and are lessprone to the resource curse. For oil and mineral exporters, one obviousroute to diversification is to develop downstream industries, whichcan process and add value to raw materials. Many downstream enterprisesuse large numbers of low-wage workers and, hence, offer specialopportunities to the poor.Yet downstream industries in oil- and mineral-dependent statesrarely succeed. One reason is that the advanced industrial statesplace higher tariffs on processed goods than on raw materials toprotect their own manufacturing firms against competition. The statesin the Organisation for Economic Co-operation and Development(OECD) place no tariffs at all on the import of much unprocessed oiland many minerals, including aluminum, copper, crude oil, lead, nickel,tin, and zinc. Yet if oil- and mineral-rich countries wish to add valueto these raw materials and export them in refined or processedform—such as aluminum kitchenware, copper wire, or plastic resins—they quickly run into OECD tariffs and nontariff barriers (table 2.5).By removing the tariffs and nontariff barriers to value addedgoods, the OECD states could help the resource-dependent states todiversify.Find Better Ways to Reduce Revenue Volatility. Many of theproblems caused by resource dependence come from the volatility ofresource revenues. For the last century, the international prices forprimary commodities—including oil and minerals—have been more