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Begin New Search Topic Natural Resources Author Alan Gelb

1. How Should Donors Respond to Resource Windfalls in Poor Countries?

Author:
Alan Gelb, Anton Dobronogov, and Fernando Brant Saldanha
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. This paper considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance. The paper develops some ideas on how a donor like the International Development Association might structure its program of financial transfers to mitigate volatility. The paper outlines ways in which the International Development Association could use hedging instruments to vary disbursements while still working within a framework of country allocations that are not contingent on oil prices. Simulations suggest that the International Development Association could be structured to provide a larger degree of insurance if it is calibrated to hedge against large declines in resource prices. These suggestions are intended to complement other mechanisms, including self-insurance using Sovereign Wealth Funds (where possible) and the facilities of the International Monetary Fund.
Topic:
Economics, International Trade and Finance, Natural Resources, and Foreign Aid
Political Geography:
Uganda, Kenya, Tanzania, and Ghana

2. How Much Does Natural Resource Extraction Really Diminish National Wealth? The Implications of Discovery

Author:
Alan Gelb, Kai Kaiser, and Lorena Viñuela
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The paper considers the process of discovery for subsoil resources, including both hard minerals and hydrocarbons and estimates its magnitude in recent years, as derived from the sum of extraction and changes in proven reserves. Spurred on by technology change and strong market conditions, discovery has been substantial for most minerals. The value of discovered reserves is high relative to the costs of exploration, particularly when low social discount rates are used to value potential production in the future. Discovery is therefore valuable and should be considered as adding to national wealth through increases in proven reserves. Many countries can continue to generate resource rents far longer than indicated by current reserve estimates and this has implications for decisions on how to plan to spend or save rents. With the high response of discovery to prices and technology, environmental constraints (climate change, water) are more likely than the actual exhaustion of resource deposits to limit resource-based development. The divergence between private and social valuation of discoveries may also justify measures taken by countries to encourage exploration, including through the provision of geo-scientific data to increase interest in discovery as well as competition among mining companies. More information is needed on the payoff to such investments, some of which are supported by donors. However, exploration is, of course, only a slice of the resource value chain. Many countries will need to improve management along the entire chain if resource wealth is to benefit their development.
Topic:
Climate Change, Development, Environment, Natural Resources, and Water

3. Oil for Uganda – or Ugandans? Can Cash Transfers Prevent the Resource Curse?

Author:
Alan Gelb and Stephanie Majerowicz
Publication Date:
07-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In 2009, commercially exploitable reserves of oil were found in the Albertine Lakes Basin in Uganda. Along with a number of new oil exporters, Uganda now faces the challenge of using the new resources to advance its development agenda, while avoiding the corrosive effects oil often has on governance. This paper considers the tradeoffs and potential impact of alternative uses of the oil rent. It argues that alternative approaches towards absorbing rents should be judged from two perspectives – the direct impact on growth and living standards, and the indirect effect on governance. The Ugandan authorities favor using the oil revenues to build much-needed infrastructure; while this could have very large benefits, evidence of Uganda's already deteriorating governance and mounting corruption raise questions about its capacity to wisely invest the oil revenues. This paper considers an alternative—distributing oil rents to the population through cash transfers—as a potential tool to mitigate some of the governance risks associated with oil revenues by giving Ugandan citizens a stake in their own resource wealth, and considers the strengths and limitations of such an approach.
Topic:
Oil, Natural Resources, and Governance
Political Geography:
Uganda and Africa