The Consul : According to the resource curse literature resource abundant countries have lower rates of growth as compared with resources scarce countries.
Different explanations have been given to explain the phenomenon. The ‘Dutch Disease’ explanation derives its name from the Dutch economy’s poor growth performance after the discovery of oil in that country. This low rate of growth has been attributed to ‘sloth’ or laziness of resource abundant countries.
Other theories explaining the poor performance of resource rich countries are corruption, lack of institutional development and conflict. Corruption in a resource abundant country leads to loot and plunder of these resources, with the result that the local population is unable to enjoy the fruits of these resources.
And since institutions like an independent judiciary are unable to play their role, the loot and plunder of the resources continues. And it is not just a coincidence that mostly the resource abundant countries are prone to conflict. The conflict maybe internal due to resentment and a sense of exclusion in the local population against the exploitation of their resources by outsiders.
Or, it may be due to ‘greedy outsiders’ who invade other countries under different pretexts, couched in altruistic cloaks. But behind the smokescreen, the scramble for oil, gas, precious metals and stones in the less developed countries goes on.
It is against this scenario that I will discuss Pakistan’s natural resource situation. Baluchistan, Khyber Pukhtoonkhwa (KPK), Kashmir and Northern Areas are resource abundant regions of Pakistan.
We have abundant energy, agriculture and mineral resources, but these have not been exploited due to poor management, corruption and vested interests. We have enormous renewable and nonrenewable energy resources, which are more than that of oil rich Gulf countries .
The number of natural resources of Pakistan are the largest that includes salt mines, second largest coal reserves, fifth largest copper and gold reserves. We have more than 436.2 million barrels of oil and 31.3 trillion cubic feet of proven gas reserves. Our current oil production is 65,997 barrels per day, while gas production is 4 billion cubic feet per day. We have the world’s second largest coal deposits of 185 billion tons, equivalent to 618 billion barrels of crude oil.
Pakistan today is faced with the dilemma that in spite of being an agricultural country it is faced with food insecurity, having abundant rivers with enormous tributaries it is short of potable and irrigation water and in spite of possessing vast renewable and non renewable energy reserves, the country faces an acute energy shortfall. Pakistan is a perfect example of a resource curse afflicted country. Among the various explanations of the resource curse discussed above, Dutch Disease, corruption, lack of institutional development and conflict all appear to be relevant in the case of Pakistan. All these are taking their toll.
It is such a pity that Pakistan has the natural resources, it has skilled and competent managers and workforce, that are motivated and have the ability to move forward and deliver. These can bring tremendous benefits to the area and the local people through employment creation. But “greedy outsiders” interest conspiring with local vested interest is creating obstacles in the smooth development of our resources.
But agreements on the extraction of these resources have been awarded to foreign companies at throw away rates or at zero royalty, and vested outside interest conspiring with local vested interest is turning this blessing into a curse. The agreement for Saindek was better than some of the other agreements, but the agreement entailed export of raw gold and copper from Pakistan. According to available information the export of finest quality clay in Nagar Parker has been awarded to a friendly country for 100 years at zero royalty.
The Reiko Diq area in Baluchistan has large copper and gold reserves. Tethyan Copper Company (TCC) was awarded lease for exploration of 400 square kilometers in Reko Diq with identified reserves worth trillions of $s. If it were to exploit all these reserves, it would yield precious metals worth trillions of dollars.
After 18 years the company submitted a feasibility for only 3 km. Since TCC did not meet legal requirements of the Government of Baluchistan, they were not granted mining lease. But TCC won a case against Pakistan, which was not well contested by us resulting in imposition of heavy penalties on Pakistan.
Pakistan’s pink rock salt is being exported and re exported to India and Israel at very nominal rates who add value to it and makes billions of $s enabling both the countries to purchase armaments worth billions of $s to fight unarmed Kashmiris and Palestinians.
There are reports that brine from the Khewra salt mines is being given free of cost to a British multinational co. Similarly, water which is a scarce resource is being given free of cost to another multinational company along with free land leased in Karachi. These are just a few examples.
There are innumerable such examples where Pakistan’s precious natural resources are being given free of cost to rich countries and their companies. Pakistan is like an orphan child whose parents untimely death results in the loot and plunder of its property and assets by rich relations. Pakistan’s fuel and mineral resources are up for grabs and friends and foes are increasing their wealth through converting these into finished products, while Pakistan continues to impoverish.
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Natural resources, conflict and growth literature reveals that countries that export their resources in raw form suffer from resource curse. While countries that convert them into manufactured goods provide employment to their populations, generating incomes, leading to growth of output and prosperity.
In Pakistan successive governments have doled out our resources for free and have experienced great personal prosperity, while the people of Pakistan have become poor living “nasty, and brutish” lives. While the state of Pakistan continues to persecute them unsuccessfully, and not prosecuting others who are equally corrupt but on their best behavior towards state officials.
Now that CPEC is making the infrastructure available, we must try to convert our resources into finished products both for the home market and exports. Moreover, our extraction methods are very dated resulting in huge losses. We should import technology that will help in the safe extraction of minerals and stones.
This requires exploring state of the art technology and companies from the Russian federation, Turkey and other friendly countries. It also requires formulation of an industry cum area specific industrial policy which gives incentives to only those industries whose natural resources are found in abundance in those areas. For Balochistan, KPK and Azad Kashmir this means that we develop fuel, mineral, fruit and vegetable industries. This way we can change the resource curse which afflicts exporters of minerals and fuels into a resource blessing.
Professor Dr Shahida Wizarat
HOD Economics and Dean CESD, IOBM