Countries with large nonrenewable resources can benefit significantly from them, but reliance on revenues from these sources poses major challenges for policy makers. If you are a senior ministry of finance official in a resource-rich country, what are the challenges that you would face and Consider some of the issues that you would likely encounter:
For many resource abundant countries, large and unpredictable fluctuations in fiscal revenues are a fact of life. Resource revenues are highly volatile and subject to uncertainty. Fiscal policies will need to be framed to support macroeconomic stability and sustainable growth, while sensibly managing fiscal risks. Also, there is a question of how to decouple public spending (which should be relatively stable) from the short-run volatility of resource prices.
What would you expect in a mineral rich developing country? High Government revenues from the mineral resources? Not always, and definitely not in the case of Zambia - until recently.
Zambia has a considerable wealth of mineral resources and its economy depends heavily on these minerals. Zambia's primary export, copper and copper-related products, account for as much as 77% of the country's exports.
These are some of the views and reports relevant to our readers that caught our attention this week.
World Humanitarian Summit: three tests for success
Thomson Reuters Foundation
After months of feverish consultation, preparation and speculation, the first-ever World Humanitarian Summit (WHS) will finally kick off in Istanbul on May 23. The two-day Summit will convene 6,000 aid leaders to decide on how better to respond to today’s defining crises. So, what will mark the difference between an anti-climactic letdown and a rallying achievement? Here are my three measures of success.
World Employment and Social Outlook
Over the past two decades, significant progress has been made in reducing poverty in the majority of countries. In emerging and developing countries, taken as a whole, it is estimated that nearly 2 billion people live on less than $3.10 per day (adjusted for cost-of-living differences across countries). This represents around 36 per cent of the emerging and developing world’s population, which is nearly half the rate that was observed in 1990, when the initial international commitments to reduce poverty were undertaken. During the same period, extreme poverty – defined as people living on less than $1.90 per day – declined at an even faster rate to reach 15 per cent of the total population of emerging and developing countries in 2012, the latest available year
Natural resources management, particularly in the extractives industry, can make a meaningful contribution to a country’s economic growth when it leads to linkages to the broader economy. To maximize the economic benefits of extractives, the sector needs to broaden its use of non-mining goods and services and policymakers need to ensure that the sectors infrastructure needs are closely aligned with those of the country’s development plans.
In Africa, especially, mining and other companies that handle natural resources traditionally provide their own power, railways, roads, and services to run their operations. This “enclave” approach to infrastructure development is not always aligned with national infrastructure development plans.
At this year’s Investing in African Mining Indaba in Cape Town, South Africa, leaders are not hiding their concerns about the commodities downturn.
Government representatives express their frustration for not having benefited enough during the boom. Policymakers lament the lack of planning that has left their countries with no cushion in their budgets, and companies are looking to cut costs so they can weather the storm. And most importantly, communities are feeling the economic impact as mines purchase less local supplies, generate fewer jobs and halt some operations.
Not only are things slowing down, but it seems a golden opportunity has passed us by. Fatima Denton, Director of the United Nations Economic Commission for Africa, highlighted that Africa is less industrialized today than it was in 1990. After the minerals super cycle of 2000-2013, the percentage of manufacturing of African economies actually declined from 12% to 11%.
When you ask young people from developing countries what they want for their country, they often say opportunity. The next generation wants jobs and knowledge; they want to be connected to the global economy.
Extractive industries can foster these types of opportunities through investment in skills training and transfer of technology to local workers and companies. These technical skills are demanded in the global marketplace today and empower workers to expand their horizons and lower their risk of unemployment.
We are discussing these issues today at a “Reconciling Trade and Local Content Development” conference we are co-hosting with the Mexican Ministry of Economy. This event aims to share knowledge on how investment in extractive industries can be leveraged to generate opportunities for economic diversification and employment.
The most valuable contribution to long term sustainability comes from the ability of extractive industries to generate benefits through productive linkages with other sectors. The International Finance Corporation (IFC) helped make this happen in Barmer, India, where we supported a Skill Development Center that trained 7,000 people to work in the operations of Cairn Energy. Not only did this training create direct job opportunities for the local population, but the acquired skills fostered the creation of an entire eco-system of small and medium-size enterprises that provided products and services to the oil company and related sectors.
Tensions were high at the international Board meeting of Extractive Industries Transparency Initiative (EITI) in Berne, Switzerland. EITI Board members, 20 in all, including civil society representatives, investors, managers of multinational corporations, and implementing and supporting country officials, debated stridently for two days on issues like how EITI implementing countries are judged on whether they have met the requirements of the “Standard” set by the EITI. As my first EITI Board meeting, I was surprised to find such divergent views on operational issues when we clearly all agree on the end goal: increasing transparency in the extractive industries to decrease the space for corruption and enhance the development impact of revenues from the sector.
In 2013, EITI raised the bar of transparency with the introduction of a new Standard that requires more detailed reporting on extractive company and state owned enterprise payments, government receipts and a broader range of contextual information on the sector in EITI implementing countries. The first batch of reports produced under the Standard arrived between late 2014 and early 2015. Many EITI countries have so far struggled to meet the enhanced requirements of the Standard and concerns have been raised about how they will be assessed when they undergo the validation process (the quality assurance process that leads to the judgement of compliance with the EITI Standard).
The key in this commodities downturn is to develop win-win partnerships. A central theme at Indaba was the importance of hiring and training local people, and increasing the focus on local procurement which, in turn, helps diversify local economies through linkages to mines’ supply chains. Best practices in training for small and medium-sized enterprises in health, safety, environmental and quality standards were highlighted as well as initiatives to ensure women share in the benefits flowing from mining evenly.
Collaboration is also key to ensuring that the power generated for mining in Africa benefits communities. Power-mining integration is essential when you consider that Sub-Saharan Africa today only generates 80 gigawatts of power each year for 48 countries and a population of 1.1 billion people. Two-thirds of people in the region live entirely without electricity and those with a power connection suffer constant disruptions in supply. Without new investment and with current rates of population growth, there will be more Africans without power by 2030 than there are now.
The World Bank Group is searching internally and globally for 18 experienced and driven professionals to help achieve two ambitious goals: reducing the number of people living on less than $1.25 a day to 3% by 2030 and promoting shared prosperity by fostering the income growth of the bottom 40%. These leaders will be crucial to our plan to improve the way we work, so we can deploy the best skills and expertise to our clients everywhere, to help tackle the most difficult development challenges around the world.
Last month, the Bank Group’s member countries endorsed our new strategy which for the first time leverages the combined strength of the WBG institutions and their unique ability to partner with the public and private sectors to deliver development solutions backed by finance, world class knowledge and convening services.
Instrumental to the success of our strategy is the establishment of Global Practices and Cross-Cutting Solution Areas, which will bring all technical staff together, making it possible for us to expand our knowledge and better connect global and local expertise for transformational impact. Our ultimate goal is to deploy the best skills and expertise to our clients at the right time, and become the leading partner for complex development solutions.
We are accepting applications for the Global Practice senior directors who will lead these pools of specialists in the following areas: Agriculture; Education; Energy and Extractives; Environment and Natural Resources; Finance and Markets; Governance; Health, Nutrition, and Population; Macroeconomics and Fiscal Management; Poverty; Social Protection and Labor; Trade and Competitiveness; Transport and Information Technology; Urban, Rural, and Social Development; and Water.
- Public private partnership
- fiscal management
- Rural Development
- disaster risk management
- health nutrition and population
- Natural Resources Management
- global practices
- Urban Development
- Social Development
- Public Sector and Governance
- Labor and Social Protection
- Information and Communication Technologies
- Financial Sector
- Agriculture and Rural Development
- Macroeconomists for the Poor