In Search of Higher Returns: Can Extractive Industries Help Build Peace?

If you’re a government pondering the development of newly discovered natural resources, how do you avoid the so-called “resource curse” – the tendency of high value extractive resources, like oil, gas, or minerals, to, instead of prosperity, bring corruption, entrenched poverty, and even violence?

It’s clearly possible – not every resource-rich state faces the challenges of the Niger Delta or the Congo. But according to a new report from Chatham House, it’s not easy, especially if there are already security and stability problems.

Investing in Stability: Can Extractive-Sector Development Help Build Peace? finds that the socioeconomic benefits of extractive industries rarely trickle down to local communities or contribute to peace in fragile and conflict-affected states. “There is intuitive appeal to the logic that development of an extractive sector can help contribute to peace and stability via economic development,” write authors Rob Bailey, Jolyon Ford, Siân Bradley, and Oli Brown. “However, a considerable body of literature argues the opposite, and draws a link between resource development and the risk of conflict.”

Great Expectations

From Afghanistan to Myanmar, the development of valuable natural resources has been touted as a potential path towards peace in conflict-affected states. The report doesn’t completely disagree with this assessment, finding that resource development, if managed correctly, can contribute to conditions that support peace. But it’s highly fraught and very rare.

Resource extraction is inherently “high-tech, capital-intensive, and cyclical,” says the report, which makes it difficult for meaningful and sustainable benefits to trickle down to workers and communities. The extractive industry accounts for just one to two percent of total employment in most countries. Sustained, long-term growth requires the creation of “forward and backward linkages” in a diversified economy where the mining sector is an input for more advanced products manufactured domestically. The historical record of governments achieving such is “patchy at best,” says the report.

 

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