The Global Knowledge Divide Can the Global Public Goods Perspective Enhance Understanding for Action?

1

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
2

United Nations Development Programme

• Managing Natural Resources for Development
• Regional Bureau for Africa
• Freetown, August 2010

3
Structure

• Avoiding the Resource Curse
• Investing for Human Development
• Learning and Developing Capacity

4
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..
5
Largest growth accelerations in Africa.
Source Own elaboration based on WEO data.
6
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.

7
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.
8
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)

9
Hedging brought stability and a windfall gain
to Mexicos oil revenues.
Source Financial Times.
10
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

11
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).
12
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..
13
UNDPs 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

14
United Nations Development Programme
15
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.
16
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).