Wednesday, March 14, 2012

The Curse Of Being Rich In Natural Resources (Yes, You, Malaysia!)

We have heard this again and again, the curse of being too reliant on natural resources. There are of course exceptions, countries which are resource rich and deployed their gains well, invested in their people and education system, such as Australia and Norway ... but by and large resource rich nations are always underperforming.


Josh Haner/The New York Times
Thomas L. Friedman won the 2002 Pulitzer Prize for commentary, his third Pulitzer for The New York Times. He became the paper’s foreign-affairs Op-Ed columnist in 1995. Previously, he served as chief economic correspondent in the Washington bureau and before that he was the chief White House correspondent. In 2005, Mr. Friedman was elected as a member of the Pulitzer Prize Board.
Mr. Friedman joined The Times in 1981 and was appointed Beirut bureau chief in 1982. In 1984 Mr. Friedman was transferred from Beirut to Jerusalem, where he served as Israel bureau chief until 1988. Mr. Friedman was awarded the 1983 Pulitzer Prize for international reporting (from Lebanon) and the 1988 Pulitzer Prize for international reporting (from Israel).







EVERY so often someone asks me: “What’s your favorite country, other than your own?”


I’ve always had the same answer: Taiwan. “Taiwan? Why Taiwan?” people ask.

    Very simple: Because Taiwan is a barren rock in a typhoon-laden sea with no natural resources to live off of — it even has to import sand and gravel from China for construction — yet it has the fourth-largest financial reserves in the world. Because rather than digging in the ground and mining whatever comes up, Taiwan has mined its 23 million people, their talent, energy and intelligence — men and women. I always tell my friends in Taiwan: “You’re the luckiest people in the world. How did you get so lucky? You have no oil, no iron ore, no forests, no diamonds, no gold, just a few small deposits of coal and natural gas — and because of that you developed the habits and culture of honing your people’s skills, which turns out to be the most valuable and only truly renewable resource in the world today. How did you get so lucky?”
    That, at least, was my gut instinct. But now we have proof.
    A team from the Organization for Economic Cooperation and Development, or O.E.C.D., has just come out with a fascinating little study mapping the correlation between performance on the Program for International Student Assessment, or PISA, exam — which every two years tests math, science and reading comprehension skills of 15-year-olds in 65 countries — and the total earnings on natural resources as a percentage of G.D.P. for each participating country. In short, how well do your high school kids do on math compared with how much oil you pump or how many diamonds you dig?
     The results indicated that there was a “a significant negative relationship between the money countries extract from national resources and the knowledge and skills of their high school population,” said Andreas Schleicher, who oversees the PISA exams for the O.E.C.D. “This is a global pattern that holds across 65 countries that took part in the latest PISA assessment.” Oil and PISA don’t mix. (See the data map at:http://www.oecd.org/dataoecd/43/9/49881940.pdf.)
    As the Bible notes, added Schleicher, “Moses arduously led the Jews for 40 years through the desert — just to bring them to the only country in the Middle East that had no oil. But Moses may have gotten it right, after all. Today, Israel has one of the most innovative economies, and its population enjoys a standard of living most of the oil-rich countries in the region are not able to offer.”
    So hold the oil, and pass the books. According to Schleicher, in the latest PISA results, students in Singapore, Finland, South Korea, Hong Kong and Japan stand out as having high PISA scores and few natural resources, while Qatar and Kazakhstan stand out as having the highest oil rents and the lowest PISA scores. (Saudi Arabia, Kuwait, Oman, Algeria, Bahrain, Iran and Syria stood out the same way in a similar 2007 Trends in International Mathematics and Science Study, or Timss, test, while, interestingly, students from Lebanon, Jordan and Turkey — also Middle East states with few natural resources — scored better.) Also lagging in recent PISA scores, though, were students in many of the resource-rich countries of Latin America, like Brazil, Mexico and Argentina. Africa was not tested. Canada, Australia and Norway, also countries with high levels of natural resources, still score well on PISA, in large part, argues Schleicher, because all three countries have established deliberate policies of saving and investing these resource rents, and not just consuming them.
    Add it all up and the numbers say that if you really want to know how a country is going to do in the 21st century, don’t count its oil reserves or gold mines, count its highly effective teachers, involved parents and committed students. “Today’s learning outcomes at school,” says Schleicher, “are a powerful predictor for the wealth and social outcomes that countries will reap in the long run.”
    Economists have long known about “Dutch disease,” which happens when a country becomes so dependent on exporting natural resources that its currency soars in value and, as a result, its domestic manufacturing gets crushed as cheap imports flood in and exports become too expensive. What the PISA team is revealing is a related disease: societies that get addicted to their natural resources seem to develop parents and young people who lose some of the instincts, habits and incentives for doing homework and honing skills.
    By, contrast, says Schleicher, “in countries with little in the way of natural resources — Finland, Singapore or Japan — education has strong outcomes and a high status, at least in part because the public at large has understood that the country must live by its knowledge and skills and that these depend on the quality of education. ... Every parent and child in these countries knows that skills will decide the life chances of the child and nothing else is going to rescue them, so they build a whole culture and education system around it.”
    Or as my Indian-American friend K. R. Sridhar, the founder of the Silicon Valley fuel-cell company Bloom Energy, likes to say, “When you don’t have resources, you become resourceful.”
    That’s why the foreign countries with the most companies listed on the Nasdaq are Israel, China/Hong Kong, Taiwan, India, South Korea and Singapore — none of which can live off natural resources.
    But there is an important message for the industrialized world in this study, too. In these difficult economic times, it is tempting to buttress our own standards of living today by incurring even greater financial liabilities for the future. To be sure, there is a role for stimulus in a prolonged recession, but “the only sustainable way is to grow our way out by giving more people the knowledge and skills to compete, collaborate and connect in a way that drives our countries forward,” argues Schleicher.
    In sum, says Schleicher, “knowledge and skills have become the global currency of 21st-century economies, but there is no central bank that prints this currency. Everyone has to decide on their own how much they will print.” Sure, it’s great to have oil, gas and diamonds; they can buy jobs. But they’ll weaken your society in the long run unless they’re used to build schools and a culture of lifelong learning. “The thing that will keep you moving forward,” says Schleicher, is always “what you bring to the table yourself.”

    14 comments:

    flyer168 said...

    Yes indeed and a great article by Thomas L. Friedman

    Just to share this…

    Singapore: Lee Kwan Yew: At 85, The Fire Still Burns By Ahmad Mustapha « Blog yOur Mind - http://all4one4all.wordpress.com/2009/12/07/singapore-lee-kwan-yew-at-85-the-fire-still-burns-by-ahmad-mustapha/

    There are five countries around this region. There is Malaysia , and then Indonesia . To the east there is the Philippines and then there is that small enclave called the Sultanate of Brunei. All these four countries have abundance of natural resources but none can lay claim to have used all these resources to benefit the people.

    Poverty was rampant and independence had not brought in any significant benefits to the people.

    But tiny Singapore without any resources at all managed to bring development to its citizens. It had one of the best public MRT transport systems and airlines in the world and it is a very clean city state. Their universities, health care, ports are among the best in the world.

    It is impossible to compare what Singapore has achieved to what all these four countries had so far achieved.

    It was actually poor management and corruption, and nothing more.

    Everything is done for the vested interest of the few.

    Malaysia, Indonesia and the Philippines and the Sultanate of Brunei need good management teams. They would not be able to do this on their own steam.

    I would advise that they call on Kuan Yew to show them what good governance is.
    Why look East to Japan when it is just next door. Across the causeway.”

    Why are Jews so powerful and Muslims so powerless? :: Weekly Blitz - http://www.weeklyblitz.net/394/why-are-jews-so-powerful-and-muslims-so-powerless

    There are only 14 million Jews in the world; seven million in the Americas, five million in Asia, two million in Europe and 100,000 in Africa. For every single Jew in the world there are 100 Muslims. Yet, Jews are more than a hundred times more powerful than all the Muslims put together. Ever wondered why?...

    You be the judge.

    Shalom.

    curious said...

    Hi Dali
    This is one woman banner I like including yesterday's. May I know where I can download these pictures.
    Thanks.
    Carole

    Unknown said...

    what mr friedman says is true. but good counter examples are united states, norway, australia and canada. soon it would be china, india and brazil. it was european countries resource-rich benefits that give them the head start to dominate the world in the 1500s to 1900s. this was the thesis for jared diamond's book "germs, steel and guns"

    african countries are good examples of being resource-poor with low GDP.

    government policies also decides the economic fate of a nation. south-north korea and east-west germany comes to mind.

    being resource rich is one of the factors, but not the only factor.

    IMHO, for malaysia's case, having PETRONAS is a good thing. but i wish the politicians (BN and PR) doesn't think it's the only thing.

    jeremy tan said...

    now they resort to Lynas, such a pity.

    clearwater said...

    Is it a curse to be rich in natural resources? The answer is, it depends on how you use, or abuse, what is bountifully given by nature. Use it wisely and the nation prospers. Abuse it foolishly and the nation suffers. Of course, temptation thrives when there is easy abundance; that's the moral hazard. Much like rich kid, poor kid; I know what I would prefer to be!

    shan said...

    This is only the tip of the iceberg,watch for the next fiasco,the multibillion dollar scam in the malaysia cooperative sector,where billions have not been accounted for,with a partial vesting orders, and a detailed memorandum already submitted to the Prime Minister and the Performance management unit of the ETP with no response,which effects the 9000 malaysia cooperatives with ite membership of about 9 million

    Jeremiah said...

    Quite right as the Dutch disease is a well known economic phenomena. Taiwan has a large neighbour with ample labour and land apart from a thriving IT sector. Israel is rich in tech talent and knowledge workers. I would not be surprised if the number of Nobel prize winners (excluding the controversial peace prize) per capita is globally the highest for Israel.

    What does Msia have? Oil, palm oil and a complacent citizenry who loves food, shopping and wasting time in mamak watching English football.

    Joshua said...

    Quite right as the Dutch disease is a well known economic phenomena. Taiwan has a large neighbour with ample labour and land apart from a thriving IT sector. Israel is rich in tech talent and knowledge workers. I would not be surprised if the number of Nobel prize winners (excluding the controversial peace prize) per capita is globally the highest for Israel.

    What does Msia have? Oil, palm oil and a complacent citizenry who loves food, shopping and wasting time in mamak watching English football.

    flyer168 said...

    Hello,

    Next to share this...

    The Owners of the Country – YouTube - http://www.youtube.com/watch?v=9dY4WlxO6i0&feature=related

    Feb 15, 2007 George Carlin knows what's going on. We've been divided and conquered and its time to get our country back.

    David Icke - Do You REALLY Want to Know This?? – YouTube - http://www.youtube.com/watch?v=CSmgL43sSWY&feature=related

    Apr 3, 2011 A great speech on our society today.

    You be the judge.

    Shalom.

    flyer168 said...

    Correct version...

    "The Curse Of Being Rich In Natural Resources (Yes, You, Malaysia!)"

    Next to share this...

    The Owners of the Country – YouTube - http://www.youtube.com/watch?v=9dY4WlxO6i0&feature=related

    Feb 15, 2007 George Carlin knows what's going on. We've been divided and conquered and its time to get our country back.

    David Icke - Do You REALLY Want to Know This?? – YouTube - http://www.youtube.com/watch?v=CSmgL43sSWY&feature=related

    Apr 3, 2011 A great speech on our society today.

    Does it sound familiar in Bolehland???

    You be the judge.

    Shalom.

    Andrew said...

    On a micro level, look at the people of Malaysia. The Malays are like the resource rich countries and the Chinese and Indians akin to resource poor countries. You can see the Chinese does well in Maths and the resource rich-like race does not. The Indians are good professionals (doctors, lawyers). Without handouts, who would survive and thrive and who won't?

    Obviously that's generalizing but I believe the probability is very high if we do a comparison study to that effect.

    So we can tell which is going to be even more wealthy in the future ;-)

    3pmsupertrading said...

    cannot agreed more, no wonder malaysian are so retard and so easily manipulated.
    oh malaysia chinese cant speak proper mandarin, proper cantonese, even the hokkian is sucks. i once have taiwanese visitor asking me what is the local chinese speaking (chinese), they dont understand.

    Tom said...

    To reply 3pmsupertrading: Not all chinese in malaysia can't speak well in Mandarin....We got chinese school but not all chinese go to this school, some study in National School which the language is Malay, some in International school which the main language is "English". If you are not Malaysian, please don't comment wihtout understand the situation. We got mix race as well....

    Earth said...

    Malaysia boleh..