• The curse of natural resources (SDA) plagues many countries. They have abundant natural resources but are unable to prosper their people.
  • Several factors cause the curse of natural resources that hit many African countries. Even Saudi Arabia is also said to be affected.
  • Based on the study results, China is also said to be affected by the curse of natural resources that occurs in several regions and Indonesia.

Jakarta, CNBC Indonesia – Many countries have abundant natural wealth, from coal, crude oil, natural gas, and gold to diamonds. However, this wealth has yet to make the country prosper. This is called the curse of natural resources (SDA).

Launching Investopedia, the most common cause of the curse is the country’s focus on developing only one industrial sector, for example, mining, and there is crude oil drilling.

Poor governance and corruption are also causes. When a country’s wealth is concentrated in just a few industries, the government can abuse its power.

There is also the factor of investment that only flows to a few sectors, as well as employment so that other industries do not develop,

Some countries often mentioned as being affected by the curse of natural resources are Angola, Nigeria, Zambia, Sierra Leone, Venezuela, and Saudi Arabia.

Angola, for example, is a country that is very rich in natural resources but has one of the world’s lowest gross domestic products (GDP). Launching data from the World Bank, Angola’s GDP value in 2021 is only US $ 67.4 billion. Meanwhile, GDP per capita is less than US$ 2,000.

Angola has abundant crude oil, natural gas, and diamonds. Its crude oil production was more than one million barrels per day in February 2023, according to CEIC data.

Unlike Angola, Saudi Arabia is starting to escape the curse of natural resources. Saudi Arabia has begun to diversify its economy.

Prince Mohammed bin Salman, crown prince and de facto leader of the Kingdom of Saudi Arabia, has launched significant changes since 2016 through the “Vision 2030” project. The main goal is to release the Saudi economy from dependence on crude oil.

Some “crazy” projects, such as Neom, designed as a futuristic city, then the Red Sea and Paradise Island projects, cost hundreds of billions of US dollars. Even Saudi Arabia’s deputy minister of investment, Saad Al-Shahrani’s Vision 2030 projects will attract US$3.3 trillion and US$480 billion foreign investors in 2021 – 2030.

That’s fantastic, but it will double Saudi Arabia’s revenue and economic growth.

The initial idea for Vision 2030 came from research conducted by consulting firm McKinsey Global Institute (MGI) in 2015. The study showed how Saudi Arabia is heavily dependent on crude oil.

Crude oil sales account for 42% of total GDP, 90% of total exports, and 87% of state revenue. You can imagine how chaotic Saudi Arabia will be if oil prices fall.

In the research, MGI also stated that productivity-driven growth could save Saudi Arabia’s economy when crude oil prices fall.

According to MGI, Saudi Arabia must invest in high-growth sectors such as mining and metals, petrochemicals, tourism and hospitality, healthcare, finance, manufacturing, etc.

The estimated investment value required is US$4 trillion until 2030 to make these changes. However, the investment value will be worth the result, the jobs created are estimated to reach 6 million, and Saudi Arabia’s GDP could double in 2030.

Based on data from the World Bank, Saudi Arabia’s GDP value in 2014 amounted to US$ 746 billion. If it doubles in 2030, it could reach US$ 1.5 trillion.

China and Indonesia

China may be the country with the second-largest economy in the world, but the curse of SD also looms. China is indeed one of the largest commodity importers in the world, but it is also endowed with abundant natural resources.

For coal, for example, in 2021, China produced 3.7 billion tons of coal, much higher than Indonesia’s around 500 million tons, according to Worldometer data. China is the largest coal producer as well as the largest importer. This means that the need in the country is indeed substantial.

China’s economy in recent decades has skyrocketed, becoming the leader. But lately, it has begun to show a significant slowdown. Many predict that China will not be able to break through double-digit growth again. The long-term average is even expected to be around 4%.

Journal research published by Elsevier tried the curse of SDA that hit China. The journal with the title Is China Affected by the Resource Curse? A Critical Review of the Chinese Literature examines 44 study papers published at the provincial and municipal levels from 2005 to 2017.

As a result, most of these studies state that the curse of natural resources does exist, especially in China’s central and western regions—however, some studies also SDA the opposite. So the curse of natural resources is still ambiguous.

Similar to China, the curse of natural resources also occurs in several regions in Indonesia. Publish What You Pay (PWYP) Indonesia, in its release in September 2020, wrote that several areas are affected by the curse of natural resources.

Previously, PWYP Indonesia held a Knowledge Forum (PKF) entitled “Resources Curse, Corruption and Natural Resources Governance (Resource Curse Index of Natural Resources Rich Regions in the Mineral and Coal Mining Sector in Indonesia) on August 6, 2020, which Dr. Hania Rahma attended.

Dr. Rahma is an observer of natural resource issues and an academic from the University of Indonesia with a dissertation on the phenomenon of the natural resource curse. The dissertation attempts to answer whether Indonesia has a natural resource curse and how big it is.

He used the Regional Resource Curce Indonesia (RRCI) index to measure the degree of natural resource curse in 33 provinces in Indonesia. As a result, regions or areas with a high natural resource curse are in East Kalimantan, West Papua, Papua, Riau, and Aceh.

Source: CNBC Indonesia