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This book examines the reduction of natural resource revenue dependency in resource-rich countries. Such countries experience lower economic growth due to factors of high volatility in commodity prices, reduction in accountability, undermining of the competitiveness of other economic sectors, and weak power of institutions. The analysis is based on an identified gap in the literature regarding how private sector development and public sector development affect the degree of dependency on resource revenue in natural resource-rich countries. This book studies the interaction between private and public sector development with dependency on natural resources, specifically exploring whether the two diversified factors lead to a decrease in the degree of dependency, which is important for economic growth and to overcome the "resource curse". Economic diversification is viewed as a long-term solution to the high economic dependency from natural resources. Private sector development and public sector reforms may lead to this diversification. The analysis of the book helps to shed light on private sector development, public services sector privatization, and a taxation system to diversify sources of income, with the objective to reduce dependency on natural resources extraction. This book is an invaluable read for public policymakers, the public and private sectors, law makers, and scholars of developmental studies.
MENA holds more than 60% of oil and nearly 50% of gas reserves, making its economy very vulnerable to price fluctuations. This volume investigates the effect of natural resources and the role of policies on achieving higher and sustained growth through economic diversification.
'Natural Resources: Neither Course nor Destiny' brings together a variety of analytical perspectives, ranging from econometric analyses of economic growth to historical studies of successful development experiences in countries with abundant natural resources. The evidence suggests that natural resources are neither a curse nor destiny. Natural resources can actually spur economic development when combined with the accumulation of knowledge for economic innovation. Furthermore, natural resource abundance need not be the only determinant of the structure of trade in developing countries. In fact, the accumulation of knowledge, infrastructure, and the quality of governance all seem to determine not only what countries produce and export, but also how firms and workers produce any good.
Since the 1960s the per capita incomes of the resource-poor countries have grown significantly faster than those of the resource-abundant countries. In fact, in recent years economic growth has been inversely proportional to the share of natural resource rents in GDP, so that the small mineral-driven economies have performed least well and the oil-driven economies worst of all. Yet the mineral-driven resource-rich economies have high growth potential because the mineral exportsboost their capacity to invest and to import."Resource Abundance and Economic Development" explains the disappointing performance of resource-abundant countries by extending the growth accounting framework to include natural and social capital. The resulting synthesis identifies two contrasting development trajectories: the competitive industrialization of the resource-poor countries and the staple trap of many resource-abundant countries. The resource-poor countries are less prone to policy failure than the resource-abundant countriesbecause social pressures force the political state to align its interests with the majority poor and follow relatively prudent policies. Resource-abundant countries are more likely to engender political states in which vested interests vie to capture resource surpluses (rents) at the expense of policycoherence. A longer dependence on primary product exports also delays industrialization, heightens income inequality, and retards skill accumulation. Fears of 'Dutch disease' encourage efforts to force industrialization through trade policy to protect infant industry. The resulting slow-maturing manufacturing sector demands transfers from the primary sector that outstrip the natural resource rents and sap the competitiveness of the economy.The chapters in this collection draw upon historical analysis and models to show that a growth collapse is not the inevitable outcome of resource abundance and that policy counts. Malaysia, a rare example of successful resource-abundant development, is contrasted with Ghana, Bolivia, Saudi Arabia, Mexico, and Argentina, which all experienced a growth collapse. The book also explores policies for reviving collapsed economies with reference to Costa Rica, South Africa, Russia and Central Asia. Itdemonstrates the importance of initial conditions to successful economic reform.
By 2050, humanity could devour an estimated 140 billion tons of minerals, ores, fossil fuels and biomass per year three times its current appetite unless the economic growth rate is decoupled from the rate of natural resource consumption. Developed countries citizens consume an average of 16 tons of those four key resources per capita (ranging up to 40 or more tons per person in some developed countries). By comparison, the average person in India today consumes four tons per year. With the growth of both population and prosperity, especially in developing countries, the prospect of much higher resource consumption levels is far beyond what is likely sustainable if realised at all given finite world resources, warns this report by UNEP's International Resource Panel. Already the world is running out of cheap and high quality sources of some essential materials such as oil, copper and gold, the supplies of which, in turn, require ever-rising volumes of fossil fuels and freshwater to produce. Improving the rate of resource productivity (doing more with less) faster than the economic growth rate is the notion behind decoupling, the panel says. That goal, however, demands an urgent rethink of the links between resource use and economic prosperity, buttressed by a massive investment in technological, financial and social innovation, to at least freeze per capita consumption in wealthy countries and help developing nations follow a more sustainable path.
This paper discusses the main challenges faced by resource-rich nations in promoting equity; describes policy tools available for managing exhaustible natural resources; and analyzes the relationship between resource wealth and state fragility. It is argued that human capital accumulation, innovation, and technology diffusion can help escape the trap of low growth and resource dependence that plagues so many developing countries. But to make this possible, resource-rich nations must sustain strong citizen participation in the policy making to hold governments accountable and ensure the inclusive management of resource wealth.
Natural capital constitutes a quarter of total wealth in low-income countries. This publication demonstrates that natural resources can contribute to growth, employment, exports and fiscal revenues and highlights the importance of policies encouraging the sustainable management of these resources.
A comprehensive analysis of natural resource use and economic development in poor countries, first published in 2005.