Exchange to Change January 2018 E2C January 2018 web | Page 17
RESEARCH
resources, the higher uncertainty and
its negative effect on the economy.
For instance, according to van der
Ploeg and Poelhekke (2009), 2.98
percentage point extra growth per
annum is lost due to the high volatility
of unanticipated output growth in
resource-rich Africa compared with
their South-East Asian counterparts.
The Governance Curse: in a context
of weak institutions, it is likely that
the resources lead to corruption,
rent-seeking and weakening of the
government. Resource abundance
also increases the political benefits
of buying votes through inefficient
redistribution (Mehlum et al, 2006)
and where the government is unable
to provide basic security, it encourages
or fuels internal conflicts (Collier
and Hoeffler, 2004). For example,
‘enormous natural resource wealth
in DR Congo gave Mobutu a constant
flow of income to help sustain his
power’ (Acemoglu et al., 2004) and has
been driving rebel group formation
and warlord competition.
Some good practices
and policies to avoid the
natural resource curse
Although not a panacea, there are
some general principles and policy
17
suggestions on how to avoid or
mitigate the detrimental impact of the
resource curse. For instance, based
on a literature review on the resource
curse, Sarraf and Jiwanji (2001) make a
number of suggestions:
Investment strategy: carefully analyze
absorptive capacity, all recurrent
costs, opportunity costs and
alternative options before investment
decisions; promote investment with
high social rates of return, particularly
in human capital and infrastructure.
Economic diversification: improve overall
economic performance, particularly
in non-mineral sectors, to reduce
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