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INTERNATIONAL POLICY CONFERENCE “COMPETITIVENESS & DIVERSIFICATION: STRATEGIC CHALLENGES IN A PETROLEUM-RICH ECONOMY”. Managing Natural Resources for Development. Kamil Kamaluddeen. 14 – 15 march 2011, Accra, Ghana. United Nations Development Programme.
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INTERNATIONAL POLICY CONFERENCE “COMPETITIVENESS & DIVERSIFICATION: STRATEGIC CHALLENGES IN A PETROLEUM-RICH ECONOMY” Managing Natural Resources for Development Kamil Kamaluddeen 14 – 15 march 2011, Accra, Ghana
United Nations Development Programme Managing Natural Resources for Development Regional Bureau for Africa Freetown, August 2010
Structure • Avoiding the Resource Curse • Investing for Human Development • Learning and Developing Capacity
The “resource curse?” Or a double-edged sword? Source: Pineda, J., & Rodriguez, F. (2010). Curse or Blessing? Natural Resources and Human Development. HDRO background papers..
Largest growth “accelerations” in Africa. Source: Own elaboration based on WEO data.
Avoiding the resource curse- I • Break away from the “conflict trap" • Strengthen governance and institutions to constrain patronage and to improve the management of public spending • Mitigate the “Dutch Disease” • Promote and support tradable sectors affected by appreciation of the real exchange rate. Especially agriculture. • Invest to increase the productivity of the economy, consistent with absorption capacity, and increase the import content of public spending – spending in infrastructure would do both.
Costs of volatility in Africa: collapses in growth led to income stagnation. Source: Adapted from Jorge Arbache and John Page. 2007. “More Growth or Fewer Collapses? A New Look at Long Run Growth in Sub-Saharan Africa.” Policy Research Working Paper 4384.
Avoiding the resource curse- II • Mitigate boom and bust cycles • Institutionalize “stabilization funds” (e.g. Chile); • Index prices in sales to foreign companies to the international price • Consider indexing sovereign debt to the international price • Use derivatives to hedge against commodity price volatility (e.g. Mexico)
Hedging brought stability – and a windfall gain – to Mexico’s oil revenues. Source: Financial Times.
Investing for human development • General principle: ensure that total wealth does not diminish – weak sustainability (e.g. Botswana) • Distribute resources to “three pots”: • i) physical and human capital (infrastructure; basic social services) • ii) social protection/transfers • iii) “future generations” fund
Different priorities for different levels of development • physical and human capital • (infrastructure; basic social services • ii) social protection/transfers • iii) “future generations” fund Poorer countries: focus on spending consistent with absorptive capacity: might require an “investment fund” to park part of the money until capacity exists • Richer countries: focus on savings to enhance welfare of future generations (e.g. Norway).
Learning from other countries Shared goals of preserving social stability and accelerating economic growth; Credible and stable cadre of “technocrats” that interact and influence political leaders; Strong constituencies outside of the natural resource sector that push for prudent and effective spending; Link investments to explicit objectives of economic and social progress, helping citizens to understand the allocation decisions: the potential of the MDGs. Source: Gelb, Alan and Sina Grasmann. 2010. “How Should Oil Exporters Spend their Rents?” CGD Working Paper 221. Washington, D.C.: Center for Global Development..
UNDP’s contribution: developing capacity and sharing information Developing capacity to manage the technical aspects of natural resource management (regional program on negotiations already exists) Developing capacity to plan and implement effective spending plans (on health, education, social protection) – augment “absorption capacity” Enhance information of citizens in general and especially those outside of the natural resource sector Establish links between spending and progress towards the MDGs
Importance of natural resources in Africa declining but still highest. Source: Ploeg, Frederick van der (2008) Challenges And Opportunities For Resource Rich Economies. Working Paper. OxCarre.
Investing for human development-II • Different priorities for different levels of development: • Poorer countries: focus on spending to meet basic needs (water, food, and basic education and health services), basic infrastructure (roads, power, communication networks), and social protection – consistent with absorptive capacity: might require an “investment fund” to park part of the money until capacity exists. • Richer countries: focus on savings to enhance welfare of future generations (e.g. Norway).
