The impact of resource wealth on economic growth, governance, and conflict in Afghanistan

Abstract

Immense natural resource wealth lies buried within Afghan soil. The potential revenue stream resulting from the extraction of minerals and hydrocarbons from the country has been identified as a replacement for international aid and ultimately as a catalyst for self-sustaining economic growth. Political instability and the potential adverse effects of resource abundance in underdeveloped countries, however, pose challenges to this assertion. Afghanistans long history of aid dependence is used as a proxy measure in this study to assess the impact of large revenue streams on political and economic institutions. While research found that foreign aid had a detrimental effect on institutional quality within Afghanistan, the study also determined that a critical difference exists between the method in which aid was dispersed, and the manner in which large-scale resource revenue payouts will necessarily occur within the country. Initial observations suggest that the realization of the countrys economic potential has positively affected government institutions charged with developing the mining sector. While analysis of aid programs in the country shows flaws in governance and monetary policies, there are indications that the incentives induced by the emerging mining sector have triggered a shift toward a future-oriented development strategy amongst political and economic leaders.