If you’re a government pondering the development of newly discovered natural resources, how do you avoid the so-called “resource curse” – the tendency of high value extractive resources, like oil, gas, or minerals, to, instead of prosperity, bring corruption, entrenched poverty, and even violence?

It’s clearly possible – not every resource-rich state faces the challenges of the Niger Delta or the Congo. But according to a new report from Chatham House, it’s not easy, especially if there are already security and stability problems.

Investing in Stability: Can Extractive-Sector Development Help Build Peace? finds that the socioeconomic benefits of extractive industries rarely trickle down to local communities or contribute to peace in fragile and conflict-affected states. “There is intuitive appeal to the logic that development of an extractive sector can help contribute to peace and stability via economic development,” write authors Rob Bailey, Jolyon Ford, Siân Bradley, and Oli Brown. “However, a considerable body of literature argues the opposite, and draws a link between resource development and the risk of conflict.”

Great Expectations

From Afghanistan to Myanmar, the development of valuable natural resources has been touted as a potential path towards peace in conflict-affected states. The report doesn’t completely disagree with this assessment, finding that resource development, if managed correctly, can contribute to conditions that support peace. But it’s highly fraught and very rare.

Resource extraction is inherently “high-tech, capital-intensive, and cyclical,” says the report, which makes it difficult for meaningful and sustainable benefits to trickle down to workers and communities. The extractive industry accounts for just one to two percent of total employment in most countries. Sustained, long-term growth requires the creation of “forward and backward linkages” in a diversified economy where the mining sector is an input for more advanced products manufactured domestically. The historical record of governments achieving such is “patchy at best,” says the report.

Corporations themselves can directly and positively impact peace conditions only when they make “exceptional commitments” or have “disproportionate influence over how a government manages the sector,” according to the authors.

Expecting such behavior is not realistic. A recent investigative report by the Center for Public Integrity and International Consortium of Investigative Journalists documents a string of abuses and involvement in local conflicts by mining companies in Africa, for example. Australian companies in particular have invested heavily in Africa’s extractives sector and have been cited for more than 380 deaths due to skirmishes and accidents at mines over the last 11 years. The report finds a pattern of more risky behavior by companies while operating on the continent, including conflict-ridden places like the Democratic Republic of the Congo, than elsewhere.

This suggests a pattern of behavior that is focused on lowering margins rather than maximizing social impact. Further, giving extractive industries a major role to play in the peace process could sideline other critical actors, like civil society and rights groups. Companies can make a difference in their policies but cannot (and, some would argue, should not) be the main peacebuilders during conflict.

Certification Schemes

Expecting any large-scale resource investments in fragile states to remain “conflict-neutral” is unrealistic given that it will inevitably leave some degree of impact, write Bailey et al. “Even a ‘do no harm’ approach can be harmful,” as firms with good intentions can cause unanticipated dangers in fragile contexts.

But that hasn’t stopped governments from trying. The European Union recently passed stringent legislation requiring nearly 880,000 companies to assess their supply chains for tin, tungsten, and tantalum mined in conflict zones. Canada also passed the Extractive Sector Transparency Measures Act that calls for 2,000 Canadian oil, gas, and mining companies to furnish detailed records of payments made to foreign governments.

Businesses in both OECD and lower-income countries have had difficulty following the new rules and the results have not always been what people expect. When the U.S. passed a measure similar to the European Union’s disclosure law in 2010, the initial lack of certification infrastructure created a de facto embargo on all mining from conflict areas and a backlash against the law.

“It was very difficult for us,” said Yves Bawa, a program manager for the International Tin Industry Association based in Africa’s Great Lakes region, at the launch of an update on conflict-free mining in the area. Keeping up with the proliferation of government- and industry-led certification initiatives is particularly difficult for smaller-scale artisanal miners.

At the same time, certification and taxation schemes have made progress in recent years. “It looks very different now,” said Bawa, who is Congolese. “For the first time, the government is using some taxes to send back for the social development at the community level.”

These measures are, however, ultimately designed to prevent extractive industries from contributing to violent conflicts, not bring them to an end.

Rigging Success

In cases where resources seem to have affected peace most positively, the Chatham House report finds that the conditions for peace already existed. In other words, resource development is necessary but not sufficient for peacemaking, and in the best cases likely to reinforce already stable situations where conflict has ended and the peacebuilding process has already began.

The report recommends following a transparent, inclusive, and evidence-based process to develop a decision-making framework for both companies and governments to assess conflict risk versus “peace-positive potential” in resource development proposals.

Even with the best-case donor support and technical advice, strong institutions capable of funding inclusive social programs take time to emerge. The authors recommend governments slow resource development down while working closely with development organizations to expand that capacity.

“The logic may still be that resource development is the ‘best bet’ in fragile contexts where few, if any, other prospects for economic transformation exist,” the report says. But extractive sector development remains risky and without any guarantee of shared prosperity. “For policy purposes, the relevant research question is perhaps not the counterfactual of ‘no resource development,’ but ‘a different path of resource development.’”