Natural resources,governance and institutional quality: The role of resource funds

This paper investigates the relationship between resource funds, governance and institutional quality in resource-rich countries. The study is motivated by the relatively recent and inconclusive debate on resource funds and on their role in the addressing of the “resource curse”. The estimation results suggest that resource funds may be associated with governance and institutional quality improvements. The analysis complements the debate on the tools of addressing the “resource curse” and on the determinants of governance and institutional quality. The findings remain important for their policy implications. The estimation results suggest that resource funds may prove useful tools in the hands of the policy makers in the attempt to address governance and institutional quality deterioration induced by resource abundance.     

Natural resource abundance in Nigeria: From dependence to development

There are several strategies open to an economy in its attempt to attain sustainable economic development depending on its historical background and resource endowment. One of such is the resource-led strategy. Nigeria is superabundantly rich in crude oil and has reaped billions of petrodollars. However, the country seems to be facing the problem of successfully translating this huge oil wealth into sustainable development. This paper employs the vector error-correction methodology in examining the long-run impact of the huge oil wealth accruing to Nigeria on its economic development. Indicators such as per capita GDP (PGDP), household consumption, infrastructural development (electricity), and agricultural and manufacturing output growth rates are examined. The results suggest a significant positive long-run impact of per capita oil revenue on per capita household consumption and electricity generation, while a negative relationship is established for GDP, agriculture and manufacturing. Even for those variables with negative relationship at current period, there exist positive relationships at subsequent lags. Thus, oil revenue, if properly managed and invested, could be effectively used to induce oil-led development in Nigeria provided the current inhibitions of corruption, lack of transparency, accountability and fairness in its use and distribution are removed.     

Is there a Dutch disease in Botswana?

The Dutch disease is regularly evoked in the resource curse literature and remains a frequent explanation for the poor economic performance found in many resource-rich countries. Given Botswana's high rate of per capita GDP growth, it might seem superfluous at first glance to ask whether or not there is a Dutch disease in Botswana. Yet, Botswana merits study here both as a significant potential exception to any posited inevitability of the Dutch disease and also because the debate on whether or not Botswana has avoided the Dutch disease is far less settled than is indicated by its economic growth record. Botswana currently suffers from many of the symptoms of the Dutch disease but not for the causal reasons posited in the Dutch disease model. Indeed, many of the explanations for the lack of diversification found in Botswana's mineral-dependent economy have nothing to do with either diamond revenues or the Dutch disease. Botswana has done about as well managing its resource wealth as could realistically be expected but it is unlikely to succeed in diversifying its economy away from diamonds anytime soon.     

Corporate Social Responsibility and development in Africa: Redefining the roles and responsibilities of public and private actors in the mining sector

This paper revisits the role of Corporate Social Responsibility (CSR), suggesting the usefulness of adopting a holistic and historical perspective. It underlines the importance of taking into account the evolving regulatory frameworks within which mining activities take place in order to consider the changing roles played by the various actors involved, whether multilateral, national or local, public or private. In this broad context it then becomes possible to revisit issues of legitimacy, responsibility, and accountability, which CSR strategies aim to address. The article draws attention to the shortcomings of strategies, whether bilateral or multilateral, public or private, which, in an attempt to respond to problems of risk and legitimacy faced by mining companies, have put forward measures in the name of CSR that do not address the origins that give rise to such problems and, in so doing, tend to mask the very nature of the difficulties at hand. The analysis leads to quite different conclusions as compared to those that result from the adoption of a shorter term and investment-led perspective.     

Natural resources dynamics: Exhaustible and renewable resources,and the rate of technical substitution

In this paper we study both exhaustible and renewable resources in an endogenous growth model. In particular, we consider the hypotheses in which the rate of technical substitution (RTS) between those two inputs is or is not equal to one. Moreover, we depart from a basic theoretical framework to account for the negative externality constituted by waste accumulation. Finally, a comparative analysis is made between Pigouvian tax and waste recycling, as an environmental policy to correct market failure represented by refuse accumulation.     

How can public–private partnerships contribute to security and human rights policy and practice in the extractive industries? A case study of The Democratic Republic of Congo (DRC)

Across sub-Saharan Africa, the presence of foreign large-scale mining companies is increasing. This is in part a result of depleting resources in countries such as Canada, United States and Australia, and in part from a more favorable national mine investment climate in several mineral-rich African countries. Their increased presence raises important questions around the potential role and function of Corporate Social Responsibility (CSR) in the sector. In post-conflict and/or fragile states, CSR has further implications for conflict and risk mitigation strategies to ensure the protection of human rights. One CSR approach increasingly being considered is the public–private partnership, whereby companies, public donors, and development agencies leverage their relationships for mutual benefit. There is merit in exploring its function in post-conflict fragile states, where socio-economic needs are high and the capacity of the state to respond to a variety of mine governance challenges is limited. Two case studies from the Democratic Republic of Congo (DRC) are presented, and their policy implications, discussed.     

Challenges with eradicating illegal mining in Ghana: A perspective from the grassroots

This paper argues that artisanal mining communities are somewhat bound to their operations, and helps explain why formalisation, alternative livelihood projects and military intervention—the traditional strategies employed by governments to tackle illegal mining—have proved ineffective. Findings from recent research carried out in Noyem (Eastern Region of Ghana) are used to illustrate why illegal artisanal mining is such a deeply rooted activity in sub-Saharan Africa. The analysis provides four explanations in support of this: a heavy involvement of traditional leaders in operations; the mindsets of many operators toward alternative income-earning activities; the numerous and diverse range of employment opportunities provided by the sector; and the level of investment in operations.     

Input–output analysis in an oil-rich economy: The case of Azerbaijan

This paper aims to provide empirical research to identify the linkages between final demand–total output, final demand–total supply, value-added ratios and prices, and also to analyze total factor productivity growth using input–output framework for 25 sectors. Studying the input–output tables for 2001 and 2006, the research estimates impact and response multipliers of non-oil sectors, as well as non-oil trading sectors. The results are important from the view of development of non-oil trading sectors and diversification of the economy in order to avoid the “resource curse”.     

Reforming small-scale mining in sub-Saharan Africa: Political and ideological challenges to a Fair Trade gold initiative

In sub-Saharan Africa, artisanal and small-scale mining (ASM) has caused a range of environmental, social and economic problems. Most of the donor support pledged to improve conditions in the sector to date, however, has failed to facilitate marked improvements, in large part because emphasis has been placed on technical interventions; at the same time, impoverished miners’ needs and concerns have been seriously overlooked. It is against this background that this paper critically examines the underpinnings and potential of “Fair Trade gold” as a solution to many of the problems plaguing the ASM sector and a mechanism for alleviating the hardships of its operators. Unlike the majority of ASM-support support measures implemented in the past, “Fair Trade gold” is entrenched in the discourse of “partnership” and “participation”. To ensure its effectiveness initiatives must be adapted according to the specificities of ASM.     

The great metals boom: A retrospective

The metals boom that ran from 2003 to 2008 represented the most powerful and sustained such boom since the Second World War. As the boom gathered momentum, the notion began to emerge that commodities were at the beginning of a multi-year ‘super cycle’ driven by demand growth in the emerging economies and, in particular, China. The persistence of the boom helped sustain this belief right up to the point when metal prices collapsed in the second half of 2008. Looking back over the period, much of what occurred can be readily explained by the unusual strength of the demand shock and the lagged response of the supplying industry, with prices receiving an additional boost from the activities of commodity investors. There is, however, some evidence to suggest that the combination of downward pressure on the costs of manufactured goods and upward pressure on the costs of mineral commodities which accompanied the boom marked a shift in the terms of trade between these two product groups. This in turn seems to have brought to an end the sustained decline in real terms metal prices that occurred in the years following the boom of the 1970s. In sum, the key structural change taking place may not have been on the demand side of the industry as the super cyclists maintained, but on the supply side.     

Mercury: An agent of poverty in Ghana's small-scale gold-mining sector?

There is consensus worldwide that the artisanal and small-scale mining (ASM) sector is comprised of individuals who are trapped in a vicious cycle of poverty, lacking the necessary financial and technological means to improve their standards of living. Minimal work, however, has been undertaken to identify the very factors behind miners’ plight, which inevitably vary from country to country. This paper uses a case study of Ghana to argue that an increased dependence upon mercury for amalgamation in artisanal gold-mining communities is one such—albeit overlooked—“agent of poverty”. There is mounting empirical evidence which suggests that dealings with the monoponistic middlemen who supply mercury, purchases of costly medicines to remedy ailments caused by mercury poisoning, and a lack of appropriate safeguards and alternatives to amalgamation, are preventing gold miners from improving their practices and livelihoods. The solution to the problem lies in breaking this cycle of dependency, which can be achieved by providing miners with robust support services, mercury-free technologies and education.     

An overview of global gold market and gold price forecasting

The global gold market has recently attracted a lot of attention and the price of gold is relatively higher than its historical trend. For mining companies to mitigate risk and uncertainty in gold price fluctuations, make hedging, future investment and evaluation decisions, depend on forecasting future price trends. The first section of this paper reviews the world gold market and the historical trend of gold prices from January 1968 to December 2008. This is followed by an investigation into the relationship between gold price and other key influencing variables, such as oil price and global inflation over the last 40 years. The second section applies a modified econometric version of the long-term trend reverting jump and dip diffusion model for forecasting natural-resource commodity prices. This method addresses the deficiencies of previous models, such as jumps and dips as parameters and unit root test for long-term trends. The model proposes that historical data of mineral commodities have three terms to demonstrate fluctuation of prices: a long-term trend reversion component, a diffusion component and a jump or dip component. The model calculates each term individually to estimate future prices of mineral commodities. The study validates the model and estimates the gold price for the next 10 years, based on monthly historical data of nominal gold price.     

Linkages in Ghana's gold mining industry: Challenging the enclave thesis

By 2009, Ghana was the second-ranked African producer after South Africa, and had become the world's ninth largest producer of gold, at some 3.8% of global production, up from 2.6% five years earlier. Gold production volumes and revenues rose significantly over the decade from 2000. Yet gold mining tends to be perceived negatively in Ghana, and is seen as providing far less than it should in terms of public revenue, employment, skills development and spillovers, and localised economic development. Gold mining is often depicted as having an enclave status, disconnected and isolated from the rest of the economy. In contrast, the research findings here demonstrate that after a period of strong investment and growth, gold mining can no longer be viewed as an enclave activity: it is in fact more deeply linked into the Ghanaian economy than hitherto understood, through a set of as yet under-researched but promising economic linkages, notably backward linkages, which can potentially be strengthened by policy and support measures.     

Green accounting and sustainability of the Peruvian metal mining sector

This paper estimates the true economic income of Peru’s metal mining sector for the period 1992–2006, using a model of green economic income based on Hamilton (2000). The total depletion of natural capital caused by metal mining is calculated by estimating, on the one hand, the depreciation of mining resources (using the Hotelling rent approach) and, on the other, the environmental degradation provoked by metal mining activities. The results show that the total loss of natural capital represents between 31% and 51% of the metal mining GDP and between 2% and 4.9% of Peru’s GDP. On the other hand, correcting the usual GDP measure produced by the traditional National Account System (NAS) for the total loss of natural capital caused by mining activities shows that the GDP traditional measure overestimated by 51–64% the true economic income generated by Peruvian's metal mining sector during the period 1992–2006. The importance of the generation, taxation, and disposition of mining economic rents for Peru’s sustainable development in the future is also discussed.     

Social responsibility and resource extraction: Are Chinese oil companies different?

In order to meet China’s rapidly increasing demand for oil, Chinese oil companies have been investing in oil production around the world. This article addresses one specific aspect of the more generalized fears expressed about China’s increasing demand for natural resources which is the impact that its oil companies will have on the corporate social responsibility (CSR) movement. In doing so, it limits its analysis to the three main Chinese oil companies: the China National Petroleum Corporation (CNPC), the China Petroleum and Chemical Corporation (Sinopec) and the China National Offshore Oil Corporation (CNOOC) and their investments in sub-Saharan Africa.     

Broadening the statistical search for metal price super cycles to steel and related metals

During the past five years, industry analysts have proclaimed that metal prices are in the early phase of a ‘super cycle,’ driven primarily by Chinese industrial expansion. Academic economists have generally been very skeptical about the presence of long cycles. A time-series econometric analysis by Cuddington and Jerrett [2008. Super cycles in real metals prices? IMF Staff Pap. 55(4), in press], however, has used band-pass filtering techniques to isolate super cycles in the prices of six metals traded on the London Metal Exchange (the ‘LME6’). This paper extends the search for super-cycle behavior to three additional metal products that are critical in the early phases of industrial development and urbanization: steel, pig iron, and molybdenum (a key ingredient in many steel alloys). There is strong evidence of super cycles in these three metals, although their timing differs to some extent from the super cycles found for the LME6.     

From landfill to water,land and life: The creation of the Centre for stone materials aimed at secondary processing

This paper focuses on the creation of a Centre for the recycling of stone materials. The Centre will be able to offer a range of activities amongst which is the improvement of the production chain of the Orosei Marble district in Sardinia, Italy. Several companies operate within the marble producing area, specializing in both quarrying and stone processing. They have formed a Consortium in order to rehabilitate an area of more than 17 ha. The restoration will be carried out through an environmentally sustainable procedure. The area was previously used as a landfill for waste deriving from marble quarrying and processing. At that time unshaped blocks of various sizes (which are unsuitable to block-cutter sawing), waste deriving from both block sawing and slab/strip cutting (such as broken slabs, strips, tiles) and microfine dust from filter presses of water treatment plants were representing an environmental problem. The local administration was struggling to find new areas which could be used for landfills, resulting in an additional cost for the landfill, ultimately affecting the variable production costs. The project involves the building of a venue to be used for temporary storage, treatment of wastes produced by both quarrying and primary processing, in order to make them suitable as secondary raw materials. The project also deals with the catch basin hydrology of the area involved in the project, the building of a multifunctional centre, the landscaping and other environmental features such as vehicle traffic and slopes greening.     

The evolution of the Canadian mining industry: The role of regulatory punctuation

In this study, we analyze the evolution of Canada's mining industry from 1929 to 2006, focussing on the determinants of the number of firms in the industry and why this number changed over that period. Most empirical studies of industry evolution have focused on manufacturing industries that share similar structural characteristics. Perhaps because of this, extant models of industry evolution tend to ignore industry-specific and national-specific factors that can cause atypical trajectories, that is, heterogeneous industry evolution. Initial inspection of the Canadian mining industry shows that it is atypical in that it exhibits “negative skew” over time in the number of firms rather than the typical “positive skew.” We review two dominant theoretical approaches to industry evolution: the density-dependence theory and variants of industrial organization economics. We also consider possible sources of industry evolution heterogeneity, focussing particularly on “regulatory punctuation”. Using Canadian mining data, we find that the traditional models do not fully explain the changes in population size in Canada's mining industry. As a result, we introduce a number of hybrid models. The results from these hybrid models suggest that Canadian-specific regulatory punctuations, particularly the introduction of significant new taxes, environmental legislation, and incentives have shaped the trajectory of mining firm participation.     

A collaborative approach to address the cumulative impacts of mine-water discharge: Negotiating a cross-sectoral waterway partnership in the Bowen Basin,Australia

The social and environmental impacts of rapidly expanding coal and gas industries have generated high levels of public concern and there is increasing evidence of cumulative impacts. In the Bowen Basin of Queensland (Australia) water quality issues have triggered a collaborative response to coordinate monitoring efforts, integrate data and information and undertake regional analysis to inform landscape-scale management. Collaborative governance is promoted as a response to complex environmental problems, such as cumulative impacts. However, application of this approach to the resources and energy sectors remains a significant research gap. This paper reports the results of action research in the 2 years taken to negotiate the establishment of collaborative governance arrangements to address mine-water discharge impacts in the Bowen Basin. The long establishment phase has been required to refine objectives, build trust, develop governance mechanisms and secure resourcing commitments. The partnership established involves more than 20 organisations including regulators, resources and energy companies, agricultural industries and research organisations. The breadth of participating sectors is a significant innovation, but also represents a major challenge in establishing this model of regional environmental governance. Promising strategies adopted to manage these tensions have included neutral brokerage, facilitative leadership, establishing legitimacy of the collaboration and credibility of its reports. The case study provides a cautionary tale of the pursuit of the promise of ‘everyone working together’ to address cumulative impacts. Policy implications include the need for extended commitment and integration of collaborative and other responses.     

Uncertainty in exhaustible natural resource economics: The irreversible sunk costs of Hotelling

According to Pindyck (2007) there are three important aspects of uncertainly in environmental economics: (1) the benefits and costs of environmental policy tend to be highly non-linear, (2) environmental policy tends to involve important irreversibilities, where investment in pollution abatement can impose an irreversible, sunk cost on society, and where certain pollutants can stay in the environment forever and build up to cause even more future harm in which case investment in abatement can cause an irreversible, sunk benefit to society, and (3) environmental policy involves long time horizons and yet the discount rate society should use is uncertain for determining the net present value of costs and benefits of pollution abatement. These same uncertainties also affect non-renewable, exhaustible, natural resource economics and in particular the use of the Hotelling rule: (1) the costs, benefits and transversality conditions of using the Hotelling rule can be highly non-linear, (2) the Hotelling rule involves important sunk cost irreversibilities, which will be explained here, and (3) the Hotelling rule can involve long time horizons with uncertain discount rates. All three of these problem make it extremely difficult for a market to use in any way the Hotelling rule, yet by the sheer number of articles in non-renewable natural resource economics, one would believe that it is the basis of all resource markets. In this article, we concentrate on the sunk cost irreversibilities of using the Hotelling rule. The idea of the Hotelling rule is to optimally store a non-renewable resource, but the optimization is highly dependent on the actual reserves that are available to extract. However, reserves of underground exhaustible resources are often unobservable at the beginning stages of extraction which makes using the Hotelling Rule difficult.