High energy and mineral prices have led many countries onto the difficult development path of exploring for and extracting sub-soil natural resources, exporting these resources, and using the ensuing revenues to drive sustainable economic development. Historically, some countries, like the USA or Australia, have managed this path well. But since circa 1980, so many countries have failed at this, that the terms ‘Dutch disease’ (Economist 1977) and ‘natural resource curse’ (Auty 1993) have become common parlance. German technical cooperation (TC) seeks to help partner countries overcome this ‘curse.’ The TC Guidelines “Sustainable Economic Development in Resource-Rich Countries” (GIZ 2015) address the technical levers available to TC practitioners active in this field, and categorise these levers along three thematic fields: (i) national strategic planning, (ii) employment creation, and (iii) local economic development. 

This study serves as a supplement to the Guidelines. It illuminates the political economy mechanisms of the ‘resource curse,’ introduces and evaluates general solutions, and points to concrete political pitfalls that implementers of the TC Guidelines may encounter in the field.

The Resource Curse

How the resource curse works (or, according to some, if it even exists) has become a prominent and hotly debated topic in economic and political development circles. The identified resource-curse symptoms (virtually all are disputed, but the tentative consensus in the literature is that for resource-dependent developing countries, reoccurring forms of these symptoms do indeed exist) are the following:

• Economically, extractive sectors often exist in isolation from the rest of the economy, which makes skill and technology spillovers difficult. In raising the currency, resource extraction runs the risk of crowding out other sectors that are better suited for pro-poor growth, notably manufacturing. This can keep resource rich countries overly dependent on one single commodity, and the erratic swings in resource prices make them overly unreliable revenue sources for government planning. 

• Politically, resource-dependent countries have been found to be more prone to dictatorial forms of government; run higher risks of falling victim to outbreaks of civil war; and are perceived to have, all else equal, higher levels of corruption and weaker governance institutions.

• Societally, these phenomena are mirrored in figures showing that countries reliant on resource extraction tend to provide few opportunities for women to work and live independent lives; tend to have unusual chasms between the incomes of the rich and the poor; tend to have low scores on the Human Development Index such as child survival or education levels; and tend to be overly plagued by polluted air, ground, or water bodies near extraction sites.