Managing Natural Resource Wealth for Development (original) (raw)

Developing Countries Extraction of Value from Natural Resources The Devil is in the Detail

Developing Countries' Extraction of Value from Natural Resources - The Devil is in the Detail, 2023

By Mwiza Mbewe The world of natural resource commodities is fraught with accusations. On the one side, the companies that undertake extraction of the natural resources are often accused of deriving greater benefits than the owners of the natural resource base, that is, the countries. On the other side, the companies also accuse the countries of practising resource nationalism. The back-and-forth accusations tend to be emotive especially on the part the countries' nationals and more so when the individual countries are dependent on single commodities as the main drivers of their economies.

On the political economy of reforms in the extractive sector

ECDPM GREAT insights Magazine, 2017

Poor or inappropriate policies, governance and institutional structures have commonly been blamed for the resource curse that plagues so many developing countries. Instead of focusing on mainly technical remedies, more effort should be dedicated to designing reforms that are incentive-compatible with key stakeholders that can drive or hinder such reforms, and to promoting initiatives that can enhance domestic incentives towards a pro-development path in resource-rich countries. When properly managed, natural resources can effectively contribute to sustainable and equitable development. Yet too often, resource-rich countries have failed to capitalise on the benefits and transformative potential of their natural endowment. The poor performance of some resource-rich countries can be explained by a number of economic factors, including possible negative effects through the terms of trade, the cyclical long term price fluctuation of commodities, short term high price volatility of commodities, the crowding out of manufacturing and the Dutch disease, according to which the natural resources sector grows at the expense of manufacturing, and associated notably with real exchange rate appreciation. Poor macroeconomic management and budgetary processes, as well as the absence of coherent long-term strategic approaches, policies and mechanisms are other common factors. Power relations and institutional settings also often explain the resource curse. Natural resources create rents, which affect incentives and behaviour of political and economic actors. Political elites play a central role in the collection and allocation of these rents and the distribution of revenues generated directly and indirectly by the exploitation of natural resources. Accordingly, they may pursue self-interest objectives rather than development goals in the management of natural resources, and thus capture these rents. Economic actors are also more likely to engage in wasteful rent-seeking activities, thus diverting resources away from the productive sector. Rents in turn affect the economic structure, political framework, institutional setting and power relations within a country, particularly where patronage prevails. Foreign partners, governments or companies, in the pursuit of their own interests, have also at times contributed to reinforce these negative tendencies and the associated resource curse. The competition for the control and allocation of natural resources and the revenues they generate may lead to political instability, conflicts and authoritarian regimes. In other words, power relations, politics and governance matters a great deal!

Translating the extractive resources to economic growth and transformation

Journal of Sustainable Development Law and Policy (The)

Most African countries are heavily endowed with natural resources. This gives the continent both the potential for, and threat to, growth/development. Natural resources yield "rents," or profits from their production, which are crucial for resource-led development. The literature on the "rentier state" and how resource rents interact with institutions and political economy dynamics shows that rent flows through the socioeconomic system influence development outcomes. Although the natural resources sector provides significant opportunities for the near term, it also does have significant risks for future generations, and the costs and benefits of resource extraction are seldom borne equitably. Ensuring social equity is a major challenge in natural resource governance, generally falling to governments to referee trade-offs and protect the most vulnerable, including current and future generations. It is critical, therefore, for the continent to address itself to important policy questions to ensure that natural resources are a boon for Africa's sustainable growth

Natural Resources -The disease of rich/poor countries

Global demand and prices for oil, gas and minerals have increased dramatically in recent years, not least driven by the economic successes of a number of emerging economies. These developments could provide an opportunity for mineral-rich countries to push economic and social development. But past experiences have raised concerns that the current situation could result in another missed opportunity to promote economic development and social inclusion. This contradiction calls for identifying the factors that make mineral-rich countries fail or succeed in promoting development objectives. There is a substantial and well summarised body of literature highlighting differences in the economic, political and social outcomes of resource-poor and resource-rich countries. Much of this work has pointed out that countries that have relied heavily on the exploitation of mineral resources have generally done worse than others, at least over the past couple of decades. Different explanations have been given for what may have gone wrong. The recent upswing in the extractive industries has provided this debate with new current and it has provoked more policy advice on how countries at risk could escape the 'resource curse'. The recent consensus suggests that differences in economic and social performance can be explained by crosscountry variations in the 'quality of institutions'. That is, countries with good institutions have been more likely to benefit from resource wealth. However, the policy implications of this observation have remained inconclusive. The institutional 'resource curse' literature has left the causal linkages that link institutions to positive development outcomes under-specified and it has under-highlighted a number of theoretical and methodological challenges. While it is a first step to propose that institutions matter, more still needs to be done to understand why institutions matter and how and when they change. It is necessary to adopt a more conceptual approach to identify the role of institutions in mineral-rich countries. Institutions are important for solving distributional conflicts and for managing the transformative processes that underlie such conflicts… Drawing on the political economy of taxation, the paper discusses the prospects for improving the development capacity of mineral-rich states… Economists noticed towards the end of the 1980s that poorly endowed economies had generally outperformed those with abundant resource wealth. They first proposed that this could have been the result of a number of adverse macro and microeconomic effects. These effects have included the well-known 'Dutch Disease', the deterioration of terms of trade and the crowding out of investment in other economic sectors. But

"Corruption in Resource Rich Countries and the Limited Effect of Good Governance Initiatives"

The "resource curse" principle highlighted by Sachs and Warner holds that countries rich in natural resources tend to be less developed economically than countries with less natural resources1. This multifaceted principle has been subject to lengthy debate and its proponents have held that the abundance of natural resources has adverse effects not only on the economy of a country, but also on its governmental and societal institutions. Strong correlations have been found between the abundance of natural resources and authoritarian rule, political instability and, in some cases, civil war2. In addition, high levels of corruption and opacity are also common and noticeable aspects of resource rich countries. In an attempt to tackle corruption and encourage transparency, several good governance initiatives have been put in place. Among them, the Extractive Industries Transparent Initiatives (the "EITI") and the Transparency International's Mining for Sustainable Development (the "TI M4SD") are the most popular. The question attempted to be answered in this paper is: to what extent do these anti-corruption tools assist in improving transparency and reducing corruption in petroleum developing countries?

Resource curse: A comparative study

Research Papers in Economics, 2014

Weak economic performance of most oil rich countries states that natural resources are more curse than blessing for these countries. Resource curse theory examines the negative effects of rich natural resources on economic growth from an economic and political perspective. Since 1960s appreciation of real domestic exchange rate (Dutch Disease) was explained as the main reason for poor economic performance of oil rich countries. But since 1990s, other causes such as long lasting ineffective institutions, corruption and rent seeking are considered to be other major political reasons behind backwardness of most resource rich countries. These political features are the corner stone of Resource Curse theory. In this paper we examine the viability of Resource Curse theory for Iran, Russia and Norway to see whether natural resources are curse or blessing for these countries. Furthermore, we compare main macroeconomic and good governance indicators from 2000 to 2010 of Iran with Turkey and ...