Will Somaliland Be Safe From The Risks of Resource Curse in Case Oilfields are Found in Some Parts of its Country

[Deeq A.]

 

In today’s world, the extraction of oil resources in the third world is seen as a “necessary evil”. Many stable nations turned into an abyss of failure, as a result of massive injections of windfall profits from the proceeds of non renewable energy.

We will deeply look into analysis some of those countries who suffered the plight of oil exploration which often referred to as a “Resource Curse” or “Paradox of Thrift.”

Equatorial Guinea, a former colonial power of Spanish was one the poorest nations in the Central Africa before a large oil supplies were found in 1994, within a decade its oil production rose from 17,000 bopd in 2006 to a record 375,000 bopd in 2005. Its population is approximately half million people. The extraction of oil has attracted many profit seeking companies from the Western Countries who have never before heard of this tiny nation on the Atlantic Ocean.

Under the autocratic regime of President Teodoro Obiang Nguema, Equatorial Guinea became a classic criminal state, with many top level institutions involved in various illicit behaviors; He was also charged with a number of human rights violations. The United States maintained a close relationship with this dictator to keep him in office just for the benefit of its Giant Oil Corporations. For example, in 2006, the then Secretary of the State Condoleezza Rice welcomed Washington to Obiang as a “good friend” of the United States.

The oil struck caused a serious tribal cleavage among the different communities who used to live in a peaceful manner, in earlier times; it has also brought about a high level corruption at the top ranks of the bureaucracy. Obiang, the President of the nation bought a multi-billion “mansion” outside Washington DC. His son Teodorin, has become a frequent visitor in Manhattan and Paris, where he is famous for driving his many fancy cars. With the vast income generation by the oil industry other sectors of the economy, most notably agriculture crumbled while inequality and poverty persist. Rising sectoral inflation and devaluation in currency have also added to the seriousness of the situation.

Sierra Leone is geographically located on the West Coast of Africa, it gained its independence from Britain in 1961, and it belongs to a vast abundance of diamonds. The people of this nation suffered terrible social and economic costs as a result of its civil war and fight over diamond control. The diamond wars caused heinous crimes against humanity in the form of murder, rape, and mutilation. The war between 1991 and 1994 claimed over 75,000 lives, caused 500,000 Sierra Leoneans to become refugees, and displaced half of its 4.5 million people. The prosperity from the rapid rise in income of diamond deals has precipitated a thriving sex industry, with the outcome of a high prevalence of AIDs patients. It is fact that foreign hands were collaborating with these atrocities, especially some of its neighbors who were acting as the “main financiers,” in this war of interest.

As practically witnessed in many countries who managed to strike their potential resources, it turned into an abyss of failure because of massive injections of windfall profits from the proceeds of non renewable energy.
Venezuelan politician once said: “Ten years from now, twenty years from now, you will see oil bring us ruin; oil is the devil’s excrement.” Among other socio-economic factors of resource curse literature include the following:

 Dutch Disease Effect – The Dutch Disease gets its name from the effects of oil discoveries on the economy of the Netherland in the 1960s and 1970s. The newfound oil created an export boom, but the domestic economy soon suffered from inflation and decline in manufacturing exports that led to lower economic growth and rising unemployment. The decline in the strength of other sectors in the economy is the crux of the “Dutch Disease Effect.” The oil boom of the 1970s and 1980s produced similar outcomes in countries as varied as Saudi Arabia, Nigeria and Mexico.

 Devaluation in currency – trade imbalances cause devaluation in currency as country’s export becomes less expensive while on other hand imports are more expensive due to the concentration of one sector of the oil resource economy. It also largely affects the skills of professional workers by getting new placements in the oil resources sector, and leaving job markets to the unskilled or semi-skilled laborers.

 Political Entrepreneurs – the massive resources create powerful tribal leaders who effectively take control of certain areas within the country particularly, in the regions where the non renewable energy were extracted and may have a power base, which could facilitate to recruit groups who fight on their behalf.

 Rent seeking behavior – economic gains from the government by particular individuals often happen under such cases. Government funds directly go into the hands of a few individuals who would reciprocate their supports in times of opposition, or political upheavals. Patronage politics, nepotism, enclave economies, kleptocracy, and other forms of immoral acts also further complicate the situation.

Over the past years, some oil explorer companies were offered oil concessions to dig oil resources in our country; it has not yet fully succeeded in this trial. However, we all knew how the situation was when some of these foreign explorers came into our country, and how people reacted in this scenario, the main important question is: Will Somaliland follow similar steps to those nations, or will it be a mature nation enough to manage the common sharing of their communal interest?

By Abdulqadir Omer Jama
janaale59@gmail.com