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Last Updated: Wednesday, 22 August 2007, 15:41 GMT 16:41 UK
'Curse' of Liberia's resources
By Mark Doyle
BBC World Affairs Correspondent

Liberian rubber plantation
Rubber is a key resource, but Liberia remains poor

A few miles outside Monrovia, capital of the west African state of Liberia, the humid scrubland gives way to seemingly endless vistas of tall, geometrically spaced rubber trees.

This is one of the largest rubber plantations in the world.

Drive on, and after a few hours you will find yourself in deep virgin forest full of tropical hardwoods.

It is the largest remaining portion of the once-great Upper Guinea Forest, which used to spread across west Africa.

Look carefully through the forest cover and you will find miners panning for gold and diamonds.

Soon enough, you will then come across a railway that was built solely for the evacuation of iron ore.

It leads to a vast iron-ore mountain range in the north of the country that is currently being rehabilitated with a $1bn investment.

Welcome to a resource-rich, but still dirt-poor Liberia.

The peace however remains fragile, threatened... most importantly, by the unresolved issue of who will exploit and who will benefit from Liberia's natural resources
Liberia resources report

A new report has highlighted the economic dangers facing countries that rely heavily on the export of raw materials.

The report concentrates on Liberia, but other economists say it highlights a problem prevalent in countries as diverse as Venezuela, Burma and Russia.

The study of Liberia - by the Canadian lobby group Partnership Africa Canada and a group of Liberian lawyers called Green Advocates - looks at the country's history of plantation-style and mining-camp exploitation of tropical timber, rubber and minerals.

It concludes that the raw materials sector requires a major re-organisation so that more of the population has a stake in it.

And it warns that Liberia has an urgent, once-in-a-lifetime opportunity to address this issue, with its first democratically-elected government protected by a temporary United Nations peacekeeping force.

Elites

At first glance Liberia's overwhelming problem has been its war.

But the authors of the new report - called Land Grabbing and Land Reform - say there is a wider problem.

They argue that the raw materials sector has been organised almost exclusively to benefit a wealthy elite.

Liberian rubber plantation
Ordinary people have not seen resources turn into schools

Ordinary people saw the resources vanish - the trees being chopped down, for example - but did not see schools and hospitals coming back in return.

Liberia's modern-day economy was developed and exploited by expatriates and the small elite of "Americo-Liberian" freed slaves who colonised the country in the 19th Century and ended up dominating the indigenous Africans.

"The elites and the government structures they erected," the report says, "came to be seen as illegitimate, engendering first resentment, and in time hatred.

"The support given by rural youth to several of the militia groups early in the civil war," the authors write, "is testimony to this fact."

In this sense, the war was not the cause of the poverty of Liberia but a consequence of it, and the reliance on the export of raw materials was a factor in creating that poverty.

Some economists go further, saying the endowment of natural resources in both poor and middle-income countries is one of the "traps" that prevents them from growing as rich as developed nations.

North Sea oil platform
North Sea oil became a "disease" for the Dutch economy

In his recently-published book The Bottom Billion, British economist Paul Collier argues that resource riches are rarely a path to sustained growth - except perhaps in places with a low population and massive windfall wealth such as the Gulf oil states.

More typical examples of the so-called "resource curse" are in countries like Nigeria, Venezuela or Russia.

Here, oil and gas resources - relatively easy pickings for the governments and elites - have "crowded out" the potential for economic growth brought about by manufacturing or service industries that have created so many jobs in countries like China and India.

Economists have a term for this crowding-out. They call it "the Dutch disease" after the effects of North Sea oil on the Dutch economy.

"It goes like this," explains Mr Collier. "The resource exports cause the country's currency to rise in value against other currencies. This makes the country's other export activities uncompetitive."

Yet these other activities - manufacturing for export, for example - might have been the best vehicles for sustained economic growth.

The volatility of prices of other raw material exports from poorer countries - especially but not exclusively in Africa - is also not conducive to long term investment and growth.

Clear link

Paul Collier argues that resource wealth can also be a curse because it induces autocracy by allowing elites to buy their way into power.

But, he says, countries end up in a "resource trap" which does not generate the sustained income growth and security that can promote democratic accountability.

Raw diamonds
Liberian communities benefit little from diamonds, the report says

"Many of the middle-income, resource-rich societies," the economist writes, "notably Russia, Venezuela and countries in the Middle East, could well be caught in [this trap]."

The report on Liberia says there remains a clear link between the country's natural resources and possible future conflict.

"The fighting... ceased only in 2003 with the departure of Charles Taylor and the arrival of UN forces," the report says, adding: "The peace however remains fragile, threatened... most importantly, by the unresolved issue of who will exploit and who will benefit from Liberia's natural resources."

On diamonds - the proceeds from which fuelled the wars in Liberia and neighbouring Sierra Leone - the report says there has been little effort by the government to make the gems benefit local communities or the artisanal miners themselves.

It says the ministry of lands, mines and energy "has resisted engaging with civil society".

This attitude, say the authors, is in sharp contrast to the forestry sector where there has been wider consultation on how to reverse the illegal logging operations conducted by foreign companies working under the umbrella of Charles Taylor's government.

But the report warns that despite this there is a danger that the huge pressure to give viable employment to ex-combatants from the war has led to commercial logging, once again, being given priority over long term sustainable community forestry.

This highlights the dilemma of the government of Liberia. In the short term it has an urgent need to find jobs for hundreds of thousands of unemployed young people. Many of the men among them participated in the war.

The government feels pressure to get industries up and running immediately. But there is a danger, the report says, that many of the elite "see the return of peace as simply a chance to return to business as usual, an opportunity to recreate the Liberia they and their forebears knew, and exploited, for more than a century".

On rubber, the report says the big plantations in Liberia have been extracting raw rubber for more than 70 years but have "so far not manufactured so much as a single rubber band in the country".

It says a far-sighted review of the industry could begin a long-delayed shift to secondary processing and manufacturing.

The report recommends that the government of Liberia should hold a wide-ranging nationwide debate on the future of the country's natural resources that begins with local consultations and culminates with a national conference chaired by the president.


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