Resource curse

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star
Resource curse
Mountains in Rizal province are seen in this February 7, 2021 photo.
Philstar.com / EC Toledo IV

Imelda Marcos once commented that the Philippines is a rich country pretending to be poor. Perhaps it was her way of justifying her luxurious lifestyle that was widely criticized worldwide as inappropriate for a leader of an impoverished country where most Filipinos are living on less than a dollar a day.

But, was Imelda right about the Philippines being a rich country?

In terms of natural resources, the Philippines is richer than Japan and South Korea. But then as now, we suffer from what is known as the “resource curse”. This concept suggests that the abundance of natural resources can lead to negative outcomes, including economic instability, corruption, social inequality, and political problems. The resource curse is also known as the “paradox of plenty.” It is typical in many African countries.

Japan and South Korea are not considered resource-rich countries in the traditional sense as they lack abundant natural resources like oil, gas, or minerals. But what Japan and South Korea did not have in terms of extensive natural resources, they have successfully built strong economies by relying on other factors, such as human capital, a highly skilled workforce that is tops in technology and innovation.

Then, there is Singapore.

I came across an article published by the Lee Kuan Yew School of Public Policy (LKYSPP) explaining Singapore’s success despite its utter lack of natural resources. The only resource they started with is its people and it was all that they needed.

According to Terence Ho, who wrote the article, “Singapore succeeded because of – rather than in spite of – a lack of resources.”

The “resource curse” is about countries that focus on the extraction of their abundant natural resources, but the wealth accumulates in the hands of a few companies and oligarchs who control the resources, enriching the few rather than the many. The exploitation is also reckless, damaging the environment.

Doesn’t that sound like the Philippines?

We have abundant deposits of gold, nickel, chromite, coal, limestone, geothermal energy and forests. But the public outcry on the environmental damage and political corruption in mining and forestry activities is such that we are unable to properly exploit our resources to benefit economic growth.

According to the World Bank, the Philippines is still a lower middle-income country with a GNI per capita equal to $3,950 in 2022.

What happened? As if we don’t know!

According to the Singapore article, without particularly mentioning the Philippines, “The truth is that it is hard for economic growth to take off in countries that are beset with conflict or corruption. There is also the question of political constraints. Leaders may know what must be done for their country, but may be unable to act due to political constraints.”

Of course, resource curse is not inevitable. But ensuring the equitable distribution of benefits is crucial in avoiding the negative impacts associated with resource curse. Our politicians and economic elite will never allow effective governance, transparency, and policies to make that happen.

The Singapore article cites the book Why Nations Fail: professors Daron Acemoglu and James Robinson draw a contrast between “extractive” states – where rulers and elites pursue policies that benefit a narrow elite – and “inclusive” states – where wealth and power are more equitably distributed. They make the case that states with inclusive political and economic institutions have the best chance of success.

So, we are doomed, it would seem.

Then, there is also the Singapore experience that suggests human capital development is perhaps the most important channel of inclusive development. Says the article:

“The MNCs invested in Singapore primarily to tap the workforce here for production. Hence, it was in both the Singapore government’s and the MNCs’ interest to invest in worker skills. Industry training centers were set up in partnership with companies such as Tata, Rollei and Philips. Concurrently, Singapore devoted a large share of government spending to basic, vocational, and technical education to support the needs of the economy.”

What does the Singapore paper suggest to overcome the resource curse?

“For a start, they should ensure that the profits from non-renewable resources are reinvested in economic and social programs, particularly education, to support other income-generating activities.”

The Singaporean formula is simple: inclusive, substantial and smart investment in people. That is specially needed for a country like ours with 91 percent learning poverty. Precisely because of our horrible situation, we should invest more heavily in our people: education and healthcare should top our to-do list.

The LKYSPP paper points out that even with Singapore’s world-class infrastructure and accumulated substantial financial reserves, future success will still boil down to people. “The next round of development will depend on technology and innovation, underpinned by the quality of human capital.

“Investing in people must remain at the heart of Singapore’s social policy too. The high cost of living in a global city makes it necessary to increase social transfers and collective support to supplement incomes.

“At the same time, we must remain focused on skills and training to improve jobs and incomes, with Singapore’s infrastructure and ecosystem allowing workers here to enjoy a wage premium above what their skills alone can command…

“Redoubling efforts to give every child a good start and providing continuous learning opportunities to Singaporeans of all ages will also enable everyone to contribute towards and share in the country’s progress…

“The bulk of funding should be directed towards enhancing employability, whether through industry-led training or the curation of subsidized courses from which workers may choose.”

People, indeed, are our best natural resource. OFWs and BPO workers have held up our economy through the last few decades, bringing in the dollars, in the absence of any significant manufacturing in the country. But we must invest in people’s training so they can get better paying jobs.

So, here is the winning formula based on Japan’s, South Korea’s and Singapore’s experiences. However, we need a government that recognizes what it must do and has the ability to implement what it knows must be done.

Then again, the break-up of KathNiel is more important to many. We are a joke.




Boo Chanco’s email address is [email protected]. Follow him on X or Twitter @boochanco

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