Tuesday, November 22, 2011

A Resource Curse Prescription For Kurdistan?

Is the Iraqi region of Kurdistan about to feel the effects of the Resource Curse?  That's the feeling you get from this piece in Foreign Policy about the development boom currently underway in the Kurdish capital Erbil. 
While suddenly finding vast reserves of a highly-valued natural resource should be a blessing for an under-developed country or region, history has often shown the opposite to be true: rather than focusing on development projects that build infrastructure and improve the lives of the public at-large and establishing a scheme so that all the citizens can share in the windfall produced by the resource in question, what tends to happen is that vast sums of money are spent on lavish, but ultimately ineffectual projects, corruption is rampant, and while a few individuals become fabulously wealthy (typically individuals who are members of or friends with the ruling regime), the masses tend to stay in poverty, sometimes their living conditions actually worsen as has happened in the Niger Delta in Nigeria.  That is the resource curse.
And early indications are it is starting to take shape in Kurdistan.  Iraq is widely believed to have the last remaining untapped, easy-to-access oil reserves on the planet – an unintended side effect of decades of sanctions levied against Iraq's former ruler, Saddam Hussein.  It just so happens that a large portion of those reserves lie in the northern portion of the country, in the areas now controlled by the Kurds.  The Kurds are eager to exploit these resources and have begun signing contracts with foreign oil companies.  This has led to a massive influx of foreign cash to Erbil.  But how much of that cash is making its way to average Kurds at this point is unclear.  That, as FP notes, Erbil now has three luxury hotels under construction, but no modern hospitals, is not a good sign.
To make matters worse, the Kurds and the national government in Baghdad are still negotiating over who actually controls the northern oil fields and how the revenue will be divided, meaning there's no master plan for how the oil revenues will be used, nor apparently is there adequate oversight of the oil projects getting underway, all of which makes it likely that Kurdistan could be the latest victim of the resource curse.
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