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Natural resources: blessing or curse

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Vivian Ojo

on 28 January 2014

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Transcript of Natural resources: blessing or curse

Natural resources:
NAME
Definitions
A blessing or curse?
Natural resources- materials or substances such as minerals forests and water and fertile land that occur in nature and can be used for economic gain- For the purposes of this question we shall look at oil and diamonds- the more controversial
Economic development- refers to the sustained impacts of policy makers that promote increased standard living and sustained economic health
We will define curse or blessing in relation to its effects on economic development
Blessings
POLITICAL POTENTIAL
Through organizations and cartels, countries can gain stronger international economic ties and more political influence eg. Nigeria in Opec

Much of China's interest in Africa is linked to natural resources
CURSE
Resource Curse Thesis
-- Richard Auty in 1993
Idea that countries rich in natural resources often have lower economic growth than countries without an abundance of resources
Economic growth
Global GDP after discovery of coal as a means of manufacturing and mass production
Economic growth in terms of pure rise in GDP is undeniable
-Equatorial Guinea has a ppp adjusted GDP of $30000 according to the CIA Fact book
-Mainly attributed to the discovery of oil in
- Top 5 African GDPs are all countries with high resource endowment.
South Africa, Nigeria,
Egypt, Algeria, Angola
There is undeniable correlation between oil consumption and growth in GDP
According to Theodore Ahlers, Hiroshi Kato, Harinder S. Kohli, Callisto Madavo and Anil Sood, there is likely to be increased "competition for finite natural resources” Chapter 12 in Africa 2050 Chapter Realizing the Continent's full Potential
These are 2006 Energy flows from The energy library
"Land of abundance"
"The Paradox of Plenty"
BUT its not just oil
-South Africa was the United States' 36th largest supplier of goods imports in 2011.

-U.S. goods imports from South Africa totaled $9.5 billion in 2011, a 15.7% increase ($1.3 billion) from 2010, and up 126% from 2000.

-The five largest import categories in 2011 were:
Precious Stones (platinum and diamonds)
($3.6 billion), Vehicles (cars) ($2.2 billion), Iron and Steel ($853 million), Machinery ($448 million), and
Ores, Slag, Ash ($402 million).
...And these have positive impacts
By definition- natural resources connote independence.
-Because they are the primary ingredients to majority of the products we use, any country that does not have natural resources will depend on another.
Case studies outside and inside
Malaysia
is well-endowed with natural resources in areas such as agriculture, forestry and minerals. It is an exporter of natural and agricultural resources, the most valuable exported resource being petroleum. At one time, it was the largest producer of tin, rubber and palm oil in the world.
- According to Stephen Elias and Clare Noone
“Indonesia’s
economic performance has been shaped by government policy, the country’s endowment of natural resources and its young and growing labour force.”
Purtajaya Malaysia
Jakarta Indonesia
The Ojo-Wang Natural resource management model
4 critical components of our model (ADD)
Adding value- (growing the industry) Brazil example
Diversification- non oil reliance
Distribution/sustainability- Botswana example
So we tried to come up with our own model and w thought we might ask some experts in development, or visionaries in the field about this question....
Kofi Annan from the African progress panel

Causes

Dutch Disease
Volatility of revenues from global commodity market swings
Government mismanagement of resources
Weak or corrupt institutions
Social Inequality

Equatorial Guinea
Per capita income: $35,000
BUT, estimate that 75% of population lives on less than $700/year (Remer)
Discrepancy? Concentration of wealth & corruption
... and Inequality Often Leads to Conflict

Sudan (oil rents are 18% of GDP)
Angola's Conflict Diamonds
Natural Resources Can Also Create Dependencies

Commodity Traps
Export raw materials, import back in with value added on
Environmental Issues & Unsustainability

A lot of the resources being exported are not renewable - depletion of resources & economic dependence could pose a serious threat to these countries
Oil spills in Niger Delta

Figure 1. Growth in world GDP, compared to growth in world of oil consumption and energy consumption, based on 3 year averages. Data from BP 2013 Statistical Review of World Energy and USDA compilation of World Real GDP.
Being the world’s biggest supplier of diamonds has worked very well in Botswana’s favour, so much so that from 1965 to 1999, she had the highest per capita growth rate in the world (Moss, Saving Ghana From Itself 2009)
References

CIA factbook- oil

The Guardian online http://www.theguardian.com/business/economics-blog/2012/aug/06/africa-natural-resources-economic-curse

Terra Lawson-Remer, Beating the Resource Curse in Africa: A Global Effort http://www.cfr.org/africa-sub-saharan/beating-resource-curse-africa-global-effort/p28780

John Page, Rowing Against the Current: The Diversification Challenge in Africa’s Resource-Rich Economies (Washington, DC: Brookings Institution, 2008)

Theodore Ahlers, Hiroshi Kato, Harinder S. Kohli, Callisto Madavo and Anil Sood, “Competition for finite natural resources” Chapter 12 in Africa 2050 Chapter Realizing the Continent's full Potential

Todd Moss, Saving Ghana From Itself ( 2009)
http://www.ustr.gov/countries-regions/africa/southern-africa/south-africa

The Observatory of Economic Complexity www.atlas.media.mit.edu/

UNDP HDI Statistics http://hdr.undp.org/en/statistics/

WorldBank databank
Source: UNDP HDI
Source: World Bank Databank
Source: CIA World Fact Book
Source: The Observatory of Economic Complexity
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