Using Natural Resources for Development: Why Has It Proven So Difficult?

May combine two claims.

Mehlum, Moene, and Torvik (2006) found the negative growth effect of resource richness present and larger only in countries with poor institutional quality, with a break-even point around Botswana's institutional quality.

“Important later contributions include Mehlum, Moene, and Torvik (2006) who interact resource abundance with institutional quality and find the negative effect of resource-richness on growth to be present (and larger) only for countries with poor institutional quality, the break-even point being around the institutional quality of Botswana.”

• cites Mehlum, Moene, and Torvik (2006) sourcePartly supported

  Section 4 (Testing; page unavailable) reports a positive resource-abundance–institutional-quality interaction and says the resource curse weakens as institutional quality rises, disappearing above an index threshold of about 0.93. Section 1 (Introduction; page unavailable) describes Botswana as resource-rich with strong growth and a favorable corruption score, but does not place its institutional-quality index near that threshold. The Botswana break-even comparison is therefore unsupported by our copy. (LLM, conf=0.88)

  Experimental — accuracy not yet measured

May combine two claims.

Using regional data for Colombia, higher oil prices increased conflict while increases in coffee prices had the opposite effect, possibly by increasing the value of devoting labor time to coffee production.

“Dube and Vargas (2013) add an interesting twist: using regional data for Colombia, they find that higher oil prices increased conflict while increases in coffee prices had the opposite effect, possibly by increasing the value of devoting labor time to coffee production.”

• cites Dube and Vargas (2013) sourceSupported

May combine two claims.

Other tradable activities are displaced partly as factors of production are drawn into resource extraction and partly as they are employed to meet increased demand for nontradables arising from domestic spending of resource revenues.

“Other tradable activities will be displaced, partly as factors of production are drawn into resource extraction, and partly as they are employed to meet increased demand for nontradables arising from domestic spending of resource revenues (Corden and Neary 1982).”

• cites Corden and Neary 1982 sourcePartly supported

  In ‘Effects of the Boom on Outputs,’ the paper describes manufacturing contracting as labour moves into the booming energy sector and as increased demand for services contributes to a real appreciation. But its later analysis (p. 837) says that, under some factor-intensity configurations, the spending effect can instead raise manufacturing output and overall de-industrialisation is not assured. The claim’s unqualified ‘will be displaced’ overstates that result. (LLM, conf=0.86)

  Experimental — accuracy not yet measured

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In some cases government take has been exceptionally low; Zambia's copper industry after privatization had an effective royalty rate of 0.6 percent, one-tenth that of comparable mining projects.

“An example is the Zambian copper industry which, following an unsuccessful privatization, was resold with a fiscal regime that was equivalent to an effective royalty rate of 0.6 percent, one-tenth that of comparable mining projects (Adam and Simpasa 2011).”

• cites Adam and Simpasa 2011Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

When governments have sought to invest savings from resource revenues, results have often been inefficient in design and implementation, with numerous white elephant projects, and resource-rich countries perform poorly on the IMF's index of public investment management efficiency.

“When governments have sought to invest savings from resource revenues, the results have often been inefficient in both design and implementation.There are numerous white elephant projects, and resource-rich countries perform poorly on the IMF's index of public investment management efficiency (Dabla-Norris, Brumby, Kyobe, Mills, and Papageorgiou 2012).”

• cites Dabla-Norris, Brumby, Kyobe, Mills, and Papageorgiou 2012Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

The growth performance of resource-rich economies as a group has generally been poor, although Botswana, Malaysia, and Chile have done well.

“Third, the growth performance of all the resource-rich economies as a group has been generally poor, although a few countries have done well-for example, Botswana, Malaysia, and Chile.”

May combine two claims.

Botswana's Pula Fund has been successful in managing long-run investments and stabilization; government spending is de-linked from current resource revenues, and revenues not meeting spending and investment criteria are invested abroad.

“Botswana's Pula Fund has been successful in managing both long-run investments and stabilization.Spending by Botswana's government has been de-linked from current resource revenues, and revenues that do not meet government spending and investment criteria are invested abroad through the fund (IMF 2012b).”

• cites IMF 2012bNot matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

Among resource-rich developing economies, volatility measures typically exceed those of non-resource-rich countries by 50 percent for mineral-rich countries and more than 100 percent for oil-rich countries.

“Amongst resourcerich developing economies, measures of volatility (for example, the coefficient of variation of export revenues) typically exceed those of nonresource-rich countries by 50 percent for mineral-rich countries and more than 100 percent for oil-rich countries.”

May combine two claims.

In the 2000s, resource-rich countries grew faster, but per capita growth was similar in resource-rich and non-resource-rich countries.

“It was not until the 2000s (a period of rising commodity prices) that resource-rich countries grew faster, although even then per capita growth was similar in both groups of countries (IMF 2012b).”

• cites IMF 2012bNot matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

National oil companies formed largely in the 1970s now control 90 percent of world oil reserves and over 70 percent of production.

“In the oil sector, the formation of such national oil companies occurred largely in the 1970s, and such firms now control 90 percent of world oil reserves and over 70 percent of production.”

May combine two claims.

The experience of national resource companies has been mixed: some attained world-class efficiency, such as Saudi-Aramco and Petronas, while others failed to manage effectively and saw dramatic output declines, such as the Nigerian National Petroleum Corporation and Zambian Consolidated Copper Mines.

“Some of them have attained world-class efficiency levels, like Saudi-Aramco and Petronas of Malaysia.Others have failed to provide effective management, in some cases leading to dramatic declines in output, like the Nigerian National Petroleum Corporation and Zambian Consolidated Copper Mines.McPherson (2010) details further country experiences.”

• cites McPherson (2010)Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

Among developing countries, average per capita growth rates of resource-rich economies equalled those of non-resource-rich economies in the 2000s, after being 1 percent per year lower in the 1990s.

“Looking just at developing countries, there has been a recent improvement in the relative performance of resource-rich economies, with average per capita growth rates of resource-rich developing economies equalling those of nonresource rich in the 2000s, after being 1 percent per year lower in the 1990s.”

May combine two claims.

Zambia's fiscal terms were revised in 2008, breaching fiscal stability assurances, but no action was brought against the government.

“These fiscal terms turned out to be unsustainable and were revised in 2008, breaching the fiscal stability assurances that had been given, but no action was brought against the government (Daniel and Sunley 2010).”

• cites Daniel and Sunley 2010Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

There are many instances of resource rights being awarded nontransparently and possibly corruptly, so they do not end up with the best-qualified investor.

“The use of auctions is now widespread (particularly for oil, less so for hard-rock minerals), but there are many instances of rights having been awarded in ways that are nontransparent and possibly corrupt, and thus not ending up with the best-qualified investor.”

• cites The Economist 2014Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing).

Of the twelve prospectively resource-rich countries, nine are in Africa.

“Of the twelve “prospectively” resource-rich countries, with new discoveries that are yet to be fully developed, nine are in Africa.”

May combine two claims.

Adjusted net savings are strongly negative for many resource-rich low-income economies, and resource rents are negatively correlated with savings rates.

“As is apparent, this measure of adjusted national saving is strongly negative for a large number of resource-rich low-income economies, and there is a negative correlation between resource rents and the savings rate.”

May combine two claims.

In 25 of the 51 resource-rich countries, resources account for more than three-quarters of exports; in 20, they provide more than half of government revenues.

“In 25 of these countries, resources make up more than three-quarters of exports, and in 20 of them resources provide more than half of government revenues.”

May combine two claims.

Placing resource revenues in offshore funds may suit capital-rich economies but does little to promote development in capital-poor countries.

“Placing the revenues in offshore funds may be appropriate for capital-rich economies, but does little to boost economic development in a capital-poor country.”

Classified as probably not a substantial claim. May combine two claims.

For a capital-abundant country, the usual answer is to accumulate foreign assets in a sovereign wealth fund; for a capital-scarce country, the priority is to build domestic assets including human and physical capital.

“For a capital-abundant country, the usual answer is to accumulate foreign assets in a sovereign wealth fund, such as Norway's Pension Fund.For a capital-scarce country, the priority is to build domestic assets-including human as well as physical capital.”

May combine two claims.

Direct distribution to citizens may reduce corruption and improve investment quality, but the link from citizen dividends to efficient investment is questionable in countries with poorly developed financial institutions.

“Direct distribution to citizens may reduce the risk of corruption and improve the quality of investments undertaken, although the link from citizen dividends to efficient investment is questionable in a country with poorly developed financial institutions.”

May combine two claims.

An efficient path of domestic investment will generally differ from the actual path of revenue, often building up more slowly and being less volatile, suggesting the need for a parking fund.

“One is that the efficient path of domestic investment will, quite generally, be different from the actual path of revenue, often building up more slowly and being less volatile.This suggests the need for a “parking fund”-that is, a way of placing revenues offshore until they can be used efficiently in the domestic economy.”

May combine two claims.

Scarcity of public funds suggests government investment in infrastructure and public health and education should offer high social returns, but scarcity does not automatically mean high-return projects are immediately available.

“Scarcity not just of capital as a whole, but of public funds in particular, suggests that government investment in infrastructure and in public health and education systems should offer high social returns.However, scarcity of funds does not automatically imply that high-return projects are immediately available.”

May combine two claims.

Mongolia established a citizen dividend scheme but scaled it back dramatically in 2012 after exaggerated election promises led to transfers exceeding resource earnings.

“Mongolia established a scheme, but it was scaled back dramatically in 2012 after exaggerated election promises led to transfers that exceeded resource earnings (Yeung and Howes 2015).”

• cites Yeung and Howes 2015 sourceNot checked — no full text of the source

May combine two claims.

van der Ploeg and Poelhekke (2009) decomposed the effect of resource dependence on growth into direct and volatility effects, finding the direct effect positive but often dominated by the negative indirect effect through volatility.

“A study by van der Ploeg and Poelhekke (2009) decomposes the effect of resource dependence on growth into a direct and a volatility effect, finding that the direct effect is positive but often dominated by the negative indirect effect through volatility.”

• cites van der Ploeg and Poelhekke (2009) sourceNot checked — no full text of the source

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

Citizen dividend schemes are rare in developing countries.

“Citizen dividend schemes are rare in developing countries.”

May combine two claims.

Transfers of resource revenues to the private sector are often achieved through highly inefficient mechanisms, with fuel subsidies being the most notorious example.

“Transfers of resource revenues to the private sector are often achieved through highly inefficient mechanisms, with fuel subsidies being the most notorious example in which oil exporters are among the highest subsidisers.”

Probably not a substantial claim: may not pass S4 (based). May combine two claims.

Government can smooth spending across generations and in response to short-run business cycle fluctuations, mitigating resource-induced macroeconomic instability.

“Furthermore, government can smooth spending, both across generations and also in response to short-run business cycle fluctuations, mitigating the risk of resource-induced macroeconomic instability.”

May combine two claims.

The case for government control of resource revenues derives from scarcity of public funds and the need to increase public investment in human and infrastructure capital; resource revenues can fund such investments without distortionary taxes.

“The case for government control is derived from the scarcity of public funds in developing countries and the need to increase public investment in human and infrastructure capital.Resource revenues can fund such investments without imposing taxes that will be distortionary and can be hard to administer in low-income countries.”

Classified as probably not a substantial claim. May combine two claims.

Initial discovery and development of a natural resource deposit requires investment by firms with considerable technical expertise, which in developing countries are generally foreign-owned.

“Initial discovery and development of a natural resource deposit requires investment by firms with considerable technical expertise.In developing countries, these firms are generally foreign-owned.”

May combine two claims.

At least some fraction of public sector saving is perceived to ultimately accrue to the private sector, which can lead to expectations of lower future taxes or higher pensions and change private sector behavior in ways that may undermine government policy.

“At least some fraction of public sector saving will be perceived to ultimately accrue to the private sector-for example, leading to expectations of lower future taxes or higher pensions-which can lead to changes in private sector behavior that may undermine government policy.”

• AssumptionRests on an assumption: At least some fraction of public sector saving is perceived by the private sector as ultimately accruing to it.

May combine two claims.

The process for allocating resource licenses can raise difficulties; auctions are often useful but not appropriate in all cases, such as when there is a single dominant bidder.

“First, the process through which licenses are allocated can raise difficulties.Ideally, this process is transparent, competitive, and can secure a high fraction of the rent for the state.Auctions will often be useful, but are not appropriate in all cases: for example, where there is a single dominant bidder.”

May combine two claims.

An economy with large natural resource exports can become overly dependent on one volatile income source, and that volatility can destabilize the macroeconomy.

“An economy with substantial exports of natural resources can become overly dependent on a single volatile source of income, and this volatility can destabilize the macroeconomy.”

May combine two claims.

Bilateral investment treaties and contract-specific stabilization agreements offer investors some protection against breach of contract, and such agreements are judged to have provided security mainly by steering countries toward renegotiation rather than unilateral action.

“Bilateral investment treaties offer investors protection against breach of contract.Where such treaties do not exist, countries can offer contract-specific stabilization agreements that guarantee terms (or equivalent value), the credibility of which can be reinforced by offering international arbitration and waiving sovereign immunity.Some of these agreements have been breached (as in the Zambian”

• cites Daniel and Sunley 2010Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

Nigeria's Excess Crude Account has helped stabilize the economy but its effectiveness has been weakened by state governments' failure to ratify the federal Fiscal Responsibility Act, lack of sound legal foundation, and ad hoc disbursements.

“Nigeria's Excess Crude Account has played some role in stabilizing the economy, but its effectiveness has been undermined by failure of many state governments to ratify the federal Fiscal Responsibility Act that set up the fund; by absence of sound legal foundation; and by “ad hoc disbursements” (IMF 2011).”

• cites IMF 2011Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

Collier (2007) estimates that the value of known subsoil assets per square kilometer in Africa is one-quarter of those remaining in OECD countries, likely because of lack of exploration rather than resource-barren geology.

“The scale of the problem is indicated by Collier (2007), who estimates that the value of known subsoil assets per square kilometer in Africa is just one-quarter of those remaining in OECD countries, which seems to be most likely a consequence of lack of exploration rather than resource-barren geology in Africa.”

• cites Collier (2007)Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

The resource endowments of many developing countries remain underexplored and underexploited.

“These upstream stages of resource management are complex, and the resource endowments of many developing countries remain underexplored and underexploited.”

May combine two claims.

Cameroon initially received praise for an offshore extra-budgetary account to manage oil revenues, but about half of its total oil revenue subsequently disappeared.

“Gauthier and Zeufack (2011) study the experience of Cameroon, which was initially praised for setting up an offshore (and extra-budgetary) account to manage oil revenues, but from which about half of Cameroon's total oil revenue subsequently disappeared.”

• cites Gauthier and Zeufack (2011)Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

Investors may be deterred by hold-up risk because investments are sunk and long-lived, and governments have an incentive to change contractual and fiscal terms once investment is in place.

“Added to this, investors may be deterred by risk of hold-up.Investments are sunk and long-lived, and governments, present and future, will have an incentive to change contractual and fiscal terms once the investment is in place.”

Classified as probably not a substantial claim.

The permanent income hypothesis implies that after discovery of an exhaustible resource, consumption should rise by the expected annuity value of the discovery, with excess revenues invested to finance that consumption increment in perpetuity.

“Economists' usual characterization of this approach is the permanent income hypothesis which implies that, following a discovery of an exhaustible natural resource, consumption should increase by the expected annuity value of the discovery, with revenues in excess of this being invested to build a stock of assets sufficient to finance the consumption increment in perpetuity.”

May combine two claims.

Stabilization funds have generally performed poorly, with repeated boom-bust episodes.

“The overall record on stabilization funds has been poor, with multiple episodes of boom and bust.”

May combine two claims.

Investments in discovery and extraction of nonrenewable resources are inherently risky because of geological and price uncertainty, and investors are further deterred by uncertainty in the local economic, institutional, and political environment.

“Second, investments in discovery and extraction of nonrenewable resources are inherently risky due to geological and price uncertainty.Investors are further deterred by uncertainty surrounding the local economic, institutional, and political environment.”

May combine two claims.

Kazakhstan's government saved around one-third of oil revenue in a sovereign wealth fund, but the private sector ran up foreign debt of similar magnitude, leading to a severe crash in 2007-2008.

“In Kazakhstan, the government acted prudently, saving around one-third of oil revenue in a sovereign wealth fund.But the private sector ran up foreign debt of a similar magnitude, leading to a severe crash in 2007-2008 (Esanov and Kuralbeyeva 2011).”

• cites Esanov and Kuralbeyeva 2011Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

May combine two claims.

In many other countries control is diffuse, often with national resource companies engaging in off-budget quasi-fiscal activities such as running fuel subsidy or social welfare programs.

“In many other countries control is diffuse, often with national resource companies engaging in off-budget quasi-fiscal activities, such as running fuel subsidy or even social welfare programs.”

May combine two claims.

The fracture of Nigeria into 36 states reduced central authority and diminished the effectiveness of resource governance, for example by limiting implementation of the national Fiscal Responsibility Act.

“Each is militarily incapable of seceding from the 35 others but, by reducing central authority, the fracture has also diminished the effectiveness of resource governance-for example, by limiting the implementation of the national Fiscal Responsibility Act.”

May combine two claims.

To play its role effectively, a finance ministry must have control of incoming revenues, along with sufficient political will and power to resist competing demands.

“However, to play this role effectively the finance ministry must have control of incoming revenues, along with sufficient political will and power to resist competing demands.”

May combine two claims.

Natural resource wealth can provide both the motive and the means for insurgency, while also providing funds for the government or those with access to government funds to equip itself to retain power.

“As case studies (Klare 2001) and statistical analyses (Fearon and Laitin 2003;Collier and Hoeffler 2004) show, it can provide both the motive and the means for insurgency, while also providing funds for the government (or those with access to government funds) to equip itself to retain power.”

• cites Klare 2001Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

• cites Fearon and Laitin 2003 sourceNot checked — no full text of the source
• cites Collier and Hoeffler 2004Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

The threat of conflict matters in many situations where conflict does not actually occur.

“While actual conflict can be devastating, the threat of conflict also matters in many situations where conflict does not actually occur.”

May combine two claims.

Robinson and Torvik (2005) and Robinson, Torvik, and Verdier (2005, 2006) show that a substantial fraction of resource revenues can be dissipated through public sector employment of supporters, and if public employment is of lower social value than the alternative, real income can be reduced by a resource windfall.

“Robinson and Torvik (2005), and Robinson, Torvik, andVerdier (2005, 2006) show that it is possible that a substantial fraction of resource revenues are dissipated this way and, if public employment is of lower social value than the alternative, real income can be reduced by a resource windfall.”

• cites Robinson and Torvik (2005)Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

• cites Robinson, Torvik, andVerdier (2005, 2006)Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing).

A simple model in the literature assumes groups are powerful enough to obtain public spending for their projects even though the projects yield low social returns.

“the simplest of which is a model in which groups are powerful enough to obtain public spending for their projects even though the projects yield low social returns (Velasco 1999; Tornell and Lane 1999).”

• cites Velasco 1999Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

• cites Tornell and Lane 1999 sourceNot checked — no full text of the source

May combine two claims.

Ross (2012) shows that the democratic transitions that affected many countries in the 1980s and 1990s left most oil states untouched, a finding not due simply to the high incidence of autocracy in the Middle East.

“Ross (2012) shows that the democratic transitions that affected many countries in the 1980s and 1990s left most oil states untouched, a finding that is not due to simply the high incidence of autocracy in the Middle East.”

• cites Ross (2012)Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing).

A centralized system of financial control and authority can help with fiscal discipline.

“A centralized system of financial control and authority can help with fiscal discipline, too.”

May combine two claims.

Resource rents alter the leader's probability of staying in power, and hence the economic, political, and military strategies that are pursued.

“Resource rents alter the leader's probability of staying in power, and hence the economic, political, and military strategies that are pursued (Caselli and Cunningham 2009).”

• cites Caselli and Cunningham 2009 sourceNot checked — no full text of the source

May combine two claims.

There is usually little public or official knowledge of the actual scale of resource revenues, and there is often a tendency to overestimate wealth and ignore trade-offs.

“There is usually little public or even official knowledge of the actual scale of resource revenues, and there is often a tendency to overestimate wealth and ignore trade-offs.”

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

In Malaysia, past experience of ethnic conflict led the government to commit to inclusive growth.

“In Malaysia, past experience of ethnic conflict led the government to commit to inclusive growth (discussed further in the following section).”

May combine two claims.

Higher resource exports lead to some combination of higher imports or lower nonresource exports together with, depending on elasticities, an appreciation of the real exchange rate.

“This changing structure of the economy has a counterpart in the balance of payments, as higher resource exports lead to some combination of higher imports or lower nonresource exports together with (depending on elasticities) an appreciation of the real exchange rate.”

May combine two claims.

Structural change in an economy is not necessarily a problem, but it can have a negative effect on real incomes if it interacts with market failures.

“In itself, structural change in an economy is not necessarily a problem, but it can have a negative effect on real incomes if it interacts with market failures.”