Avoiding the Resource Curse – Political and Economic, Domestic and International Factors to Foster Competitive Arrangements

Once an economy starts to specialize heavily in the extraction and export of natural resources, several negative repercussions in the wider domestic economy tend to arise. Such problems are often described as the “paradox of plenty” or the “resource curse” and they have occurred both in developed and developing countries. This paper summarizes the current debates surrounding the “resource curse” (RC) and highlights their major features, including a more systematic reflection of approaches to resource management and, particularly, resource governance arrangements. The sections summarize some of the key features of the RC, set out the specific institutional settings that are conducive to its occurrence, examine the delicate role of government and state-owned enterprises, and address the need for a complex and, at times, paradoxical set of interventions to induce domestic institutional change and avoid the RC. A number of references are made to the case of Mongolia.