Reflecting on the recent news that Afghanistan is sitting on a large hunk of mineral wealth, Paul Collier warns of the many pitfalls that the country must avoid if it is to benefit from the new find. It’s a good read for those interested in good, natural resource policy. One thing bothered me though: Afghanistan is in central Asia, but all but one of Collier’s examples are from sub-Saharan Africa (brief excerpts below), the sole exception being Malaysia:
- “Consider how in Sierra Leone diamonds enabled the Revolutionary United Front to evolve from a protest movement into a lethal diamonds racket.”
- “In eastern Congo, $1 billion in gold is being extracted and exported annually, yet because the government lacks control over the territory the revenues for the national Treasury last year were a mere $37,000.”
- “Nigeria is a prime example of what happens when the local population pays the price for extraction without reaping the rewards.”
- “To avoid such fallout, Afghanistan should follow the example of Botswana, which has used diamond revenues to build roads, power lines and schools, raising the economic standard of the country from very poor to upper-middle income.”
- “Malaysia, likewise, has used revenues from tin and oil to diversify its economy and create jobs â€” building, for example, a manufactured exports zone in the impoverished region of Penang.”
- “Here a cautionary example is Zambia, where a copper boom has been a bonanza for Chinese companies, but copper exports of around $3 billion a year generate a mere $100 million in tax revenue for Zambians.”
There are some fundamental things that all natural resource-based economies need to get right, and Collier touches upon them here, but perhaps these fundamentals interact in interesting ways with geographically-correlated attributes. Most of Collier’s academic work on the subject has been limited to Africa, so there is a little bit of extrapolation going on here.
Places like Sierra Leone and Nigeria offer powerful examples, but perhaps we can reap even greater insight by looking at Afghanistan’s similarly-endowed neighbors like Uzbekistan and Turkmenistan, or perhaps nearby Kazakhstan?