July 23, 2008
Resource Curse leads to Wastage
Star Biz did a feature of a commentary I had sent in. Would have been good to have the commentary published in full, but it’s good to have it covered here.
Wednesday July 23, 2008, Star Biz
The “resource curse” or “paradox of plenty”, which refers to the phenomenon by which countries take for granted their natural resources, eventually led to wastage and corruption, she said.
“The paradox is that natural resources do not necessarily bring greater growth and development to a country, and in fact the reverse may be true,” she said in a comment paper titled Promoting Revenue Transparency in Malaysia.
Yeoh said: “For example, between 1960 and 1990, per capita incomes in resource-deficient countries grew two to three times faster than resource-reliant export-driven countries.
“Based on the International Monetary Fund’s definition, a country is considered resource-reliant if at least 26% of its national revenues come from the extractive industry (oil, gas, minerals, etc).”
To this end, Malaysia is a resource-reliant country with 44% of its national budget derived from revenues from the oil and gas (O&G) industry.
“Have these massive revenues been collected, managed and distributed responsibly?” she asked.
To “clarify” monetary matters in the local oil industry, “some organised analysis” could be helpful to track money streams, she said.
This could be divided into two sections – revenues and expenditures handled by the governments, she said.
“Once revenues have been generated by the O&G companies and paid over to the government, the more important issue is how they are managed.
“If the government decides that it should reduce subsidies, allocated amounts for development must be truly used in their proper manner.
“Alternatively, subsidies can be sustainable if they are explicitly directed to serve poor-targeted policies – this is usually a sign of a progressive social structure,” Yeoh said.
She also said it was vital to manage the country’s wealth for the benefit of future generations.
The O&G industry is overseen by Petronas, which is governed by the Petroleum Development Act 1974 which specifies that it reports directly to the Prime Minister. Petronas’ accounts should be tabled to Parliament instead – an institution of greater oversight, she added.
Comments are closed.