Global Policy Forum

Press Release

Developing countries that rely heavily on oil or mineral exports suffer higher rates of poverty and child mortality, and spend more on their militaries than similar countries with more diverse economies, according to a study released today by Oxfam America.

"Extractive Sectors and the Poor" comes on the eve of a new yearlong World Bank review of its oil, gas, and mining investments. The report contests the conventional economic wisdom that developing nations prosper by extracting and exporting their oil and mineral wealth.

"Oil and mining investments are highly profitable for the World Bank, but our research shows they do little to help the poor," said Keith Slack, policy advisor for Oxfam America. "This report should encourage the World Bank and other development institutions to re-think their approach to oil extraction and mining as poverty reduction tools."

Michael Ross, University of California, Los Angeles, professor and former Visiting Scholar at the World Bank, authored the study. The study reveals that oil- and mineral- dependent countries have significantly worse records on poverty indicators than states with similar levels of income but little or no oil and mineral wealth. For example:

· The more that developing countries rely on exporting minerals, the worse their standard of living is likely to be, according to a United Nations measure that factors per capita income, health, and education; Zambia, Zimbabwe, and Kazakhstan showed marked declines in the 1990s.

Oil- and mineral- dependent developing countries have higher infant and child mortality rates, than other countries with similar income levels. In these cases, oil dependency is linked to malnutrition. Worldwide, an average of 26.5 children per thousand are malnourished. In oil-rich Nigeria, the rate is 37.7 per thousand, and in oil-rich Yemen it is 51.7, one of the highest rates in the world.

· Developing countries that are dependent on oil and mineral wealth face a much higher danger of civil war than resource-poor nations in any given five-year period. They spend a far higher percentage of their budgets on their militaries, diverting funds from programs that directly address the needs of the poor.

"These findings are especially worrisome for countries like Chad and Kazakhstan, which are almost certain to become more oil dependent in the next decade, in part with encouragement and financing from the World Bank," Slack said.

Oxfam America recommends that international financial institutions such as the World Bank take a number of measures to address these problems, including:

· Helping poor countries diversify their economies to make them less dependent on oil and mining;

· Only supporting oil and mining projects in countries that are democratic and committed to using revenues for poverty reduction purposes;

· Supporting the creation of mechanisms for transparent monitoring and controlling of revenues.

Recent protests against the World Bank have focused on that institution's support for large-scale oil and mining projects, which critics see as environmentally and socially destructive. As a result, the Bank will begin a review of its involvement in these sectors, consulting with industry representatives, governments, and nongovernmental organizations. The Bank launches the review in Brussels on Oct. 29.

"The Bank should begin its review by questioning whether these sectors really do contribute to sustainable poverty reduction," Slack said. "To find out, the Bank must speak to people in areas most directly affected by oil and mining projects."

Oxfam America is committed to searching for lasting solutions to hunger, poverty, and social injustice, and to educating the public worldwide on the realities of poverty and the need to establish a future that is equitable, environmentally sustainable, and respectful of the rights of all peoples.

The complete report can be found online.

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