Journal of Development Studies special issue on natural resources

The Journal of Development Studies is brining out a special issue on Natural resources with the following papers:


Elissaios Papyrakis ([uea.ac.uk] University of East Anglia)

The Resource Curse - What Have We Learned from Two Decades of Intensive Research: Introduction to the Special Issue

There has been increasing interest in the so-called ‘resource curse’, that is the tendency of resource-rich countries to underperform in several development outcomes. This has generated a mountain of (often contradictory) evidence leaving many floundering in the flood of information. This special issue compiles eight papers from some of the most prominent contributors to this literature, combining original research with critical reflection on the current stock of knowledge. The studies collectively emphasise the complexities and conditionalities of the ‘curse’ – its presence/intensity is largely context-specific, depending on the type of resources, socio-political institutions and linkages with the rest of the economy.

read on here [tandfonline.com].


Frederick Van Der Ploeg ([oxcarre.ox.ac.uk] OxCARRE, University of Oxford) and Associate researcher Steven Poelhekke ([sites.google.com, Vrije Universiteit Amsterdam)

The Impact of Natural Resources: Survey of Recent Quantitative Evidence

The cross-country empirical evidence for the natural resource curse is ample, but unfortunately fraught with econometric difficulties. A recent wave of studies on measuring the impact of natural resource windfalls on the economy exploits novel datasets such as giant oil discoveries to identify effects of windfalls, uses natural experiments and within-country econometric analysis, and estimates local impacts. These studies offer more hope in the search of quantitative evidence.

Read on here [tandfonline.com].

Emma Gilberthorpe ([uea.ac.uk] University of East Anglia) & Dinah Rajak ([sussex.ac.uk] University of Sussex)

The Anthropology of Extraction: Critical Perspectives on the Resource Curse

Attempts to address the resource curse remain focussed on revenue management, seeking technical solutions to political problems over examinations of relations of power. In this paper, we provide a review of the contribution anthropological research has made over the past decade to understanding the dynamic interplay of social relations, economic interests and struggles over power at stake in the political economy of extraction. In doing so, we show how the constellation of subaltern and elite agency at work within processes of resource extraction is vital in order to confront the complexities, incompatibilities, and inequities in the exploitation of mineral resources.

read on here [tandfonline.com].

Elissaios Papyrakis ([uea.ac.uk] University of East Anglia), Matthias Rieger ([weebly.com] Erasmus University Rotterdam) & Emma Gilberthorpe ([uea.ac.uk] University of East Anglia)

Corruption and the Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI) has received much attention as a scheme that can help reduce corruption in mineral-rich developing economies. To our knowledge, this paper provides the first empirical attempt (using panel data) to explore how EITI membership links to changes in corruption levels. We also examine whether the different stages in EITI implementation (initial commitment, candidature, full compliance) influence the pace of changes in corruption. We find that EITI membership offers, on the whole, a shielding mechanism against the general tendency of mineral-rich countries to experience increases in corruption over time.

read on here [tandfonline.com].


Doug Porter ([worldbank.org] Worldbank) & Michael Watts ([berkeley.edu] UC Berkeley Geography)

Righting the Resource Curse: Institutional Politics and State Capabilities in Edo State, Nigeria

The poor record of liberal reforms sponsored by the international community in postcolonial settings underscores the real politik of institutional change. What we call a ‘new normal’ in development policy and practice foregrounds the role of agency – leadership, networks of connectors and convenors, entrepreneurs and activists – but it has less to say about the political and economic conditions of possibility in which agents operate. The putative powers of agency seem most challenged in contexts of extreme resource dependency and the resource curse. The particular case of Edo, a state in the oil rich Niger delta region of Nigeria, illustrates the intersection of agency and structural conditions to show how ‘asymmetric capabilities’ can emerge to create, constrain and make possible particular reform options. 

Read on here [tandfonline.com].


R. M. Auty ([lancaster.ac.uk] University of Lancaster)

Natural Resources and Small Island Economies: Mauritius and Trinidad and Tobago

Historically, small economies, especially resource-rich ones, underperformed on average relative to their larger counterparts. Small island economies appear still more disadvantaged due to remoteness from both markets and agglomeration economies. Yet a comparison of two small island economies with similar initial conditions other than their mineral endowment suggests that policy outweighs size, isolation and resource endowment in determining economic performance. Resource-poor Mauritius adopted an unfashionable policy of export manufacturing that systematically eliminated surplus labour, which drove economic diversification that sustained rapid GDP growth and political maturation. Like most resource-rich economies, Trinidad and Tobago pursued policies that absorbed rent too rapidly, which impeded diversification and created an illusory prosperity vulnerable to collapse.

Read on here [tandfonline.com].

Gavin Hilson ([surrey.ac.uk] University of Surrey) & Tim Laing (University of the West Indies)

Guyana Gold: A Unique Resource Curse?

This article offers explanations for the underwhelming economic performance of Guyana, a country heavily dependent on the revenue generated from gold mining. Here, government intervention has spawned a gold mining sector which today is comprised exclusively of local small and medium-scale operators. But whilst this rather unique model appears to be the ideal blueprint for facilitating local development, the country seems to be experiencing many of the same setbacks that have beset scores of other resource-rich developing world economies. Unless these problems are anticipated, properly diagnosed and appropriately tackled, a resource curse-type outcome is inevitable, irrespective of the context.

Read on here [tandfonline.com].

Pipelines through native land. Developments in Northern British Columbia.

Oil and gas retrieved in Canada's most northern parts and Alberta's tar sands is generally speaking geographically far from 'world markets'. Proposals to fix this with new pipelines have faced delays because of such things as environmental risks highlighted by the those that rely on the land for other sources of income. For instance, this is among the reasons for the delay of the KeystoneXL pipeline, proposed to bring Alberta's oil to refineries in Southern USA.

The other route is to bring the oil and gas westwards through British Columbia, where it can reach the coast, and carriers can ship it to Asia, where major demand growth is expected to come from for the future. Although these proposals too ran in objections of First Nations, and alternative route, proposed by another company, has recently won their support.

Many pipeline proposals for the route west have run in strong opposition from First Nations in Alberta. Their opposition is to large extent based on the risk that a pipeline poses to their traditional hunting and fishing ground. Although poverty is major problem in some of those communities, proposals by international construction companies have not everyones favour. "The answer is still no" [fernwoodpublishing.ca], a book consisting of series of interviews conducted by two academics with representatives of the region, details their arguments and objections to such plans, in this case particular the one proposed by Enbridge.

An another gas pipeline was recently rejected by Lax Kwa'laams who where offered CA$1B for their consent of a gas terminal on their lands, an island in front of the B.C. main coast in the region of Price Rupert, at the mount of the Skeena river. The dangers that the first nation sees has both to do with the construction phase, that could harm marine life in an area used by salmon to mature before moving up-river, the impact of pipeline on the seabed marine life, as well as the impact on marine environment of daily arrival and departure of LNG carriers. For these reason they recently rejected the plan (CBC.ca, Globe and Mail, HuffingtonPost.ca).

As these articles highlight, and is also part of the discussions in the "The answer is still no", it is not that First Nations reject every such development, although this is occasionally how it is portrayed (sometimes quite viciously, labelling environment protestors and first nations terrorists, Globe and Mail, see also the recent interview with the newly elected Ms Universe, Ashley Callingbull-Burnham). A direct competitor proposal to the Enbridge pipeline, Eagle Spirit Energy Holding, recently gained (newswire.ca, prnewswire.ca) the support of First Nations, including those of Lax Kwa'laams. The trick? Eagle Spirit offers [financialpost.com] a different stake in the project to first nations, proposes a route that circumvents more of the vulnerable waters, going more through grounds of first nations supportive of the plan, and ends in a different area at the coast where it is expected to cause less environmental harm to the wider region. It helped too that the company is headed by members of local first nations, and the plan was made in direct consultation with first nations in B.C. and in cooperation with first nations in Alaska and Alberta. This contrasts with the lack of sincere consultation of Enbridge as perceived by First Nations.

The underlying dynamics are about balancing the (deemed inevitable) development of arctic and other previously hard to extract natural resources, the impact of such developments on local communities to their traditional income sources (forestry, fishing, hunting etc), their (hedonistic) value of the local environment and the benefits that may accrue to local communities from resource extraction. A non-negligible factor also appears to be the process through which these plans are pushed through and property rights. Much of the power of first nations comes from their rights as traditional dwellers of the land, whereas the federal and provincial government still tends to see these lands as theirs, or crown land, to do with as they please.

Although I tried my best, I'm not entirely confident that I presented all facts and views entirely correct. Comments are welcome below or by email.  

Azerbaijan jails journalist who exposed president's family links to gold mine ownership

A court in Azerbaijan sentenced, Khadija Ismayilova, a journalist to 7.5 years in prison for tax evasion and embezzlement (see reports by the Guardian, incl. response of mother, FT, and Radio Free Europe).

Working for Radio Free Europe, she has exposed the links of the family of the President Aliyev to profitable Azerbaijan businesses, including a Gold mine [rferl.org] in the west and mobile phone operator.

However, the gold mine is not the 'big thing' in Azerbaijan (the mine reportedly contains US$2.5B worth of minerals), oil and gas is. Although there is strong interest in this story from western governments, including the US [rferl.org], and international organisations, Azerbaijan position in the supply of natural gas from the Caspian sea to the same countries, makes a criticism muted. BP has largest stake in the gas project Shah Deniz in Azeri Caspian Sea, next to Socar, the national oil and gas company, followed with smaller stakes of others. Norway's Statoil and France' Total recently sold [bloomberg.com, see also FT] their stakes in the project.

Some human rights organisations now press governments to consider sanctions [eurasianet.org] on Azerbaijan for its crackdown on and jailing of human rights activists and journalists. As the article in Eurasianet indicates, the potential for sanctions has recently increased as the geopolitical position of and western corporate interests in Azerbaijan have diminished.

The situation that would make potential action against the Azeri government possible, may simultaneously also be the reason why the government is behaving as it does. Weakened links with western countries may make it feel more independent. At the same time, de decline of energy prices makes there less of the spoils to around, which may explain the resulting tendency of the more autocratic leaning governments to start using the stick to stay on top. This was also something that came up during our visit to Baku in February.

Ms. Ismayilova thought it funny she was jailed for things that she accuses the government and presidential family of. She wrote in her closing statement [rferl.org] to the court that she would continue exposing government abuse from prison.

New research: poor institutions, rich mines: resource curse in the origins of the Sicilian mafia

Paolo Buonanno (Univerisity of Bologna), Ruben Durante [rubendurante.net] (Science Po), Giovanni Prarolo [google.com] (University of Bologna) and Paolo Vanin [unibo.it] (University of Bologna) write on

Poor institutions, rich mines: resource curse in the origins of the Sicilian mafia

Abstract:
With weak law-enforcement institutions, a positive shock to the value of natural resources may increase demand for private protection and opportunities for rent appropriation through extortion, favouring the emergence of mafia-type organisations. We test this hypothesis by investigating the emergence of the mafia in twentieth century Sicily, where a severe lack of state property-rights enforcement coincided with a steep rise in international demand for sulphur, Sicily's most valuable export commodity. Using historical data on the early incidence of mafia activity and on the distribution of sulphur reserves, we document that the mafia was more present in municipalities with greater sulphur availability.
Published in the Economic Journal, available here

New Research: Sovereignty, the ‘resource curse’ and the limits of good governance: a political economy of oil in Ghana

Jon Phillips [kcl.ac.uk], Elena Hailwood and Andrew Brooks [kcl.ac.uk], all King's College London

write on

Sovereignty, the ‘resource curse’ and the limits of good governance: a political economy of oil in Ghana

Abstract:

The idea of a resource curse has influenced policy makers and led to calls for good governance to avoid the pitfalls of oil sector development. Through discussion of Ghana’s recent insertion into the global political economy of oil, this paper describes the limits of the resource curse framing and associated liberal institutional management approaches to the inherently political nature of oil exploration and production. The paper describes ways in which sovereignty has been exercised both in opposition to and in support of foreign capital, and the role of discourses of ‘good governance’ in structuring the material politics of resource access.

Published in Review of African Political Economy, available here [tandfonline.com].

New Research: Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers

Amany El-Anshasy [uaeu.ac.ae] (UAE University) , Kamiar Mohaddesby [cam.ac.uk] (Cambridge University), and Jeffrey B. Nugent [usc.edu] (University of Southern California), write on

Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers

Abstract:

This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961ó 2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such.

Available as working paper here [pdf, cam.ac.uk] 

New Research: Economic Freedom and Productivity Growth in Resource-rich Economies

A new paper by Minoo Farhadi [monash.edu.au], Md. Rabiul Islam [academia.edu], Solmaz Moslehi from Monash [moslehi.me] and Deakin Universities, Australia

published in World Development

Economic Freedom and Productivity Growth in Resource-rich Economies

Abstract:

The focus of this paper is to test whether free market institutions that protect property rights and support freedom of choice and voluntary exchange can change the curse of natural resources into a blessing. To examine the above question, this paper uses the Fraser Institute’s economic freedom index and its five sub-indices, namely government size, property rights, access to sound money, freedom to trade, and setting proper regulations. Using data from 99 sample countries over the period 1970–2010, the system GMM estimates suggest that the negative growth effects of resource rents may turn positive in countries with greater economic freedom.

New Research: On the relationship between resource funds, governance and institutions

New research from Stella Tsani (repec), of the The Centre for Euro-Asian Studies, University of Reading,

On the relationship between resource funds, governance and institutions: Evidence from quantile regression analysis

abstract:

This paper uses quantile regression estimation techniques so as to investigate the relationship between resource funds, governance and institutional quality by paying special attention to the distribution of the latter. The estimation results indicate that resource funds are associated with better governance and institutions. The positive correlation is identified for the entire distribution of governance and institutional quality variables indicating that resource-rich countries can benefit from the establishment of resource funds, irrespective of whether they are found at the lower or at the upper end of the ranking of governance and institutional performance. The results offer evidence in support of the view that resource funds are valid tools of insulation against the “resource curse” as manifested through governance and institutional quality deterioration. Resource funds may support policy making and strengthen governance and institutional formations not only in countries with good governance and institutions but also in countries which lag behind in the latter.

Paper published in Resources Policy [sciencedirect.com], it follows up on an earlier paper [sciencedirect.com] of her also published in Resources Policy.

New Research: Blocking the Pathway Out of the Resource Curse

A new working paper by Anar K. Ahmadov [ox.ac.uk], on

Blocking the pathway out of the resource curse: What hinders diversification in resource-rich developing countries?
Abstract:

This essay assesses the impact of geographic factors, trade openness and political institutions on one of the key possible avenues for addressing the “resource curse”: export diversification. It does so with refined data spanning 1960-2010 and in a single framework that uses instrumental variables approach to tackle endogeneity, omitted variable bias and measurement error issues that characterize many studies of the resource curse. The results show that natural resource-rich developing countries are less likely to achieve export diversity the more autocratic institutions they have, particularly weak executive constraints and low legislative effectiveness; the weaker the rule of law; if they are located in the Middle East or Africa; if they are landlocked or mountainous; and the richer they are in oil, but not in other resources. On the other hand, the quality of government and competitiveness of political participation do not predict export concentration. There is also little evidence to support the view that trade integration, trade policy and tariff rates matter for export concentration in this set of countries. While neither colonial experiences under British or French rule, nor having legal systems designed under English Common Law or French Commercial Code have significant effects, resource-rich developing countries with past socialist institutions are significantly more likely to have more concentrated exports. Population size, ethnic or religious fractionalization, and human capital do not seem to affect the diversity of exports. Finally, unlike oil wealth, abundance in non-fuel minerals, coal, and forest resources is associated with higher export diversity.

Available here [globaleconomicgovernance.org]

FT Special report on Azerbaijan

Since our visit to Baku [oxcarre.blogspot.com] a few weeks ago, we gained additional interests in the developments in Azerbaijan. Today, the Financial Times issued a Special Report on the country. available here [FT.com], with the main tag line:
Reform offers the best hope for national stability

IMF Fin&Dev: Sharing the Wealth

In last month's IMF publication Finance and Development, IMF Economists Sanjeev Gupta [sanjeevguptadocs.com], Alex Segura-Ubiergo [repec.org], and Enrique Flores [imf.org] wrote a piece on

Sharing the wealth

Countries that enjoy a resource windfall should be prudent about distributing it all directly to their people. The experience of the success stories suggests that natural resource wealth management requires a commitment to three interrelated principles: fiscal transparency, a rules-based fiscal policy, and strong institutions for public financial management. Some suggest that governments should give up their resource revenue and distribute it directly to the population. There are some good arguments to support this view—and strong arguments against it. Direct distribution is not a silver bullet. 

The article is a general audience edition of a discussion paper of them: Direct Distribution of Resource Revenues: Worth Considering? [imf.org pdf]

UK implements transparency guidelines for natural resource industry

The UK is moving forward in implementing transparency rules that aim to reveal the money flows between buyers, sellers and producers of natural resources. Last month it attained candidate status of the Extractive Industry Transparency Initiative. Since first January it's the first EU member state to implement the EU directive for extractive industries, which requires similar disclosure.

See here [ft.com] for the FT article, and here [resourcegovernance.org] from the Natural Resource Governance Institute.

New OxCARRRE Research: Emergence of Sovereign Wealth Funds

Newly posted at the OxCARRE Research papers, from Jean-François Carpantier (University of Luxembourg) and Wessel Vermeulen (OxCARRE)

Emergence of Sovereign Wealth Funds

Abstract:

This paper tests the theoretically founded hypothesis that the surge of SWF establishments is determined by three main factors: 1) the existence of natural resources profits, 2) the government structure and 3) the ability to invest usefully in the domestic economy. We test this hypothesis on a sample of 20 countries that established an SWF in the period 1998-2008 by comparing them to the roughly 100 countries that did not set up a fund in the same period. We find evidence for all three factors. The results suggest that SWFs tend to be established in countries that run an autocratic regime and have difficulties finding suitable opportunities for domestic investments. We do not find the net foreign asset position of a country to be similarly related to the explanatory variables, indicating that the establishment of an SWF is distinct from a national accounting result. We argue that our results indicate that it is relevant to study how an SWF interacts with the domestic economy and government policy.