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31. Resource-Backed Loans: Pitfalls and Potentialloan

Author:
David Mihalyi, Aisha Adam, and Jyhjong Hwang
Publication Date:
02-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Through “resource-backed loans” (RBLs) countries access finance in exchange for, or collateralized by, future streams of income from their natural resource wealth. The authors of this report reviewed countries’ past experiences with RBLs across sub-Saharan Africa and Latin America from 2004 to 2018. They identify risks and opportunities RBLs pose and provide recommendations for countries considering taking RBLs in the future. The researchers identified 52 RBLs, 30 of which were taken by countries in in sub-Saharan Africa and 22 in Latin America. They are distributed across 14 countries in the two regions. Thirty-eight were lent by Chinese policy banks, seven are from commodity traders, four are from other Chinese state-owned enterprises, one is from Korea Exim, one is from Nigeria and one is from Russia's Rosneft. Forty-three of the loans are backed by oil, six by various minerals, two by cocoa, and one by tobacco. The total loan amount represented in the dataset is $164 billion, of which $66 billion went to Africa and $98 billion to Latin America.
Topic:
Natural Resources, Finance, Resource-Backed Loans, and Revenue Management
Political Geography:
Africa, Sudan, Brazil, South America, Venezuela, Nigeria, Angola, Ghana, Ecuador, Guinea, South Sudan, and Congo

32. Beneath the Surface: The Case for Oversight of Extractive Industry Suppliers

Author:
Robert Pitman and Kaisa Toroskainen
Publication Date:
09-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Large oil, gas and mining projects are usually associated with a few big names such as Shell, Exxon, Rio Tinto, Gazprom and Codelco. These are rights holders—companies that receive licenses from host governments to extract resources. Typically, however, lower-profile companies do much of the work to take natural resources out of the ground. These are suppliers—companies that provide the goods and services that make extraction happen. They range in size from multibillion-dollar international conglomerates to specialized or local firms that may only have a handful of employees. This report makes the case for greater oversight of extractive industry suppliers. It explains the economic significance of extractive industry suppliers and identifies the main stakeholders involved in supplier governance. It considers policy areas where the impacts of poor supplier governance play out and reviews how governments, rights holders, state-owned enterprises (SOEs) and suppliers are beginning to share information on the economic impacts of suppliers, how these disclosures feature in global transparency and reporting initiatives and what more can be done.
Topic:
Corruption, Natural Resources, Tax Systems, Coronavirus, Industry, COVID-19, and Revenue Management
Political Geography:
Global Focus

33. Building a Sustainable Electric Vehicle Battery Supply Chain: Frequently Asked Questions

Author:
Patrick Heller, Ethan Elkind, and Ted Lamm
Publication Date:
04-2020
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The global transition from fossil fuel-powered vehicles to electric vehicles (EVs) will require the production of hundreds of millions of batteries. The need for such a massive deployment raises questions from the general public and critics alike about the sustainability of the battery supply chain, from mining impacts to vehicle carbon emissions. Growing demand for the mineral inputs for battery production can provide an opportunity for mineral-rich countries to generate fiscal revenues and other economic opportunities. But where extraction takes place in countries with weak governance, the benefits expected by citizens and leaders may not materialize; in some cases extraction might even exacerbate corruption, human rights abuses and environmental risks. Many EV proponents and suppliers are aware that supply chain governance problems pose a challenge to the evolution of the EV industry, but outstanding questions remain about how these challenges materialize. This brief, jointly published by UC Berkeley School of Law’s Center for Law, Energy & the Environment (CLEE) and the Natural Resource Governance Institute (NRGI) provides basic information on the EV battery supply chain and key battery minerals, such as cobalt and lithium, and addresses the following questions: What does the supply chain for EV batteries comprise? How do carbon emissions from EVs compare to traditional internal combustion engine (ICE) vehicles? What are the most significant challenges in managing the mineral extraction necessary for the EV supply chain, and what sustainability and human rights initiatives apply?
Topic:
Civil Society, Corruption, Government, Human Rights, Natural Resources, Governance, Regulation, Legislation, and Supply Chains
Political Geography:
Global Focus

34. A Race to the Bottom and Back to the Top: Taxing Oil and Gas During and After the Pandemic

Author:
David Manley, David Mihalyi, and Colin Fleming
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Earlier this year as people around the world responded to the coronavirus pandemic, their demand for oil tumbled. At the same time, OPEC and Russia initially failed to agree to coordinate supply cuts. Consequently, the price of a barrel of Brent crude oil fell from $60 in December 2019 to $20 in April 2020. As of this publication, the price is $43. If the price stays low, and if oil executives expect the price to remain low, companies may lobby governments to reduce taxes and other costly regulations. Payments to governments are often larger than costs for a company, so there is pressure on governments to reduce taxes to keep projects viable. This briefing considers the following key questions: Where will the oil price go next? What is the impact on currently operating projects, undeveloped projects, and those that are yet to be discovered? How should governments respond in changing oil and gas taxes? Will governments try to “race to the bottom,” but then lose a race back to the top? Key messages: There’s no certainty over future prices. Some rise is likely in the next few years, even if an energy transition results in a structural decline in the oil price in the longer-term. Governments must consider this uncertainty and probable rise when taxing oil and gas. Tax breaks on most currently operating projects are likely a waste of public money. Some governments may be pressured into reducing tax on projects awaiting development. But they must identify which projects would become viable with lower taxes, and which do not need a tax break. If in doubt, governments should consider whether a project that needs a tax incentive really will provide value for the country. For most countries, relative to total oil and gas produced, the production from projects that could be delayed or cancelled is small. But not so for the “new producer” countries like Senegal and Guyana. Changing taxes to make a country more attractive has the most impact before companies have invested – e.g., in attracting investment in licensing rounds. But setting low taxes now could force a government to raise taxes later if prices rise again. If a tax break is unavoidable, governments could use a “sunset clause” to limit the duration of the tax break. Ideally, governments should set progressive tax regimes that respond to changes in profit. But as many taxing authorities struggle to measure profit, governments could set simpler tax regimes based on sales revenue or prices – but must prepare to change tax rates in the future, and be prepared for the repercussion for a government’s credibility with investors. Governments should disclose contract terms detailing tax changes, tax exemptions, incentives and estimated break-even prices of projects to help government auditors, local think tanks, and the public check and support tax policy decisions.
Topic:
Oil, Natural Resources, Gas, Tax Systems, Commodities, Coronavirus, and Revenue Management
Political Geography:
Global Focus

35. China’s Monopoly on Rare Earth Elements—and Why We Should Care

Author:
June Teufel Dreyer
Publication Date:
10-2020
Content Type:
Commentary and Analysis
Institution:
Foreign Policy Research Institute
Abstract:
According to geologists, rare earths are not rare, but they are precious. The answer to what appears to be a riddle lies in accessibility. Comprising 17 elements that are used extensively in both consumer electronics and national defense equipment, rare earth elements (REEs) were first discovered and put into use in the United States. However, production gradually shifted to China, where lower labor costs, less concern for environmental impacts, and generous state subsidies enabled the People’s Republic of China (PRC) to account for 97 percent of global production. In 1997, Magniquench, then-America’s leading rare earths company, was sold to an investment consortium headed by Archibald Cox, Jr., son of the same-named Watergate prosecutor, with two Chinese state-owned metals firms, San Huan New Materials and China National Nonferrous Metals Import and Export Company. The chairman of San Huan, son-in-law of paramount leader Deng Xiaoping, became chairman of the company. Magniquench was shut down in the United States, moved to China, and reopened in 2003, where it fit in well with Deng’s Super 863 Program to acquire cutting-edge technologies for military applications, including “exotic materials.” This left Molycorp as the last remaining major rare earths producer in the United States until its collapse in 2015.
Topic:
International Trade and Finance, Natural Resources, Exports, and Supply Chains
Political Geography:
China and Asia

36. The Impact of COVID-19 on Vulnerable Mineral Supply Chains

Author:
Thomas J. Duesterberg
Publication Date:
07-2020
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
This report will concentrate on select examples of the growing US vulnerability to global competitors due to shortages of key mineral resources in our domestic supply base. Dependence on China for raw materials and competition with its manufacturing firms is also a key focus. Shortages do not always indicate a problem because our close allies in mineral-rich countries like Australia and Canada can mitigate gaps in domestic supply. However, China’s growing control over many basic materials, and its history of using that control as leverage for its own economic and political goals, makes this a cause of concern for the continued strength of the US manufacturing economy.
Topic:
Natural Resources, Economy, COVID-19, and Minerals
Political Geography:
China, Canada, Australia, North America, and United States of America

37. When the Water Runs Out: The Rise (and Inevitable Fall) of the Deserts of Southwest Afghanistan and its Impact on Migration, Poppy and Stability

Author:
David Mansfield
Publication Date:
04-2020
Content Type:
Research Paper
Institution:
Afghanistan Research and Evaluation Unit (AREU)
Abstract:
There are up to 1.4 million people in southwestern Afghanistan whose livelihoods are under threat. These people reside in the former desert areas of Farah, Nimroz, Helmand and Kandahar. In the 1990s, this region was largely barren uninhabited land, apart from the valley of Khash Rud in Nimruz and the lower part of Marjah. Drawing on fieldwork conducted over a 10-year period, and using high-resolution remote imagery, this paper charts the processes that led to the encroachment, settlement and transformation of the deserts of the southwest. It documents how patterns of migration to these areas varied over time and by location, and details how these once barren landscapes were transformed into areas of permanent settlement. The paper then provides evidence of how this rapid transformation has impacted the population that reside there, and outlines the threats to the long-term viability of their livelihoods. Finally, the paper recommends solutions to the pressures on this population, not just in addressing the factors that drive migration to these former desert areas, but also interventions that might ease the economic, social and environmental challenges that those living there currently face, potentially preventing a massive displacement of people within Afghanistan, to neighbouring countries and possibly further afield.
Topic:
Environment, Migration, Natural Resources, Water, and Ecology
Political Geography:
Afghanistan and South Asia

38. Sustainable Water Resource Development Scenarios and Water Diplomacy in the Lower Mekong Basin: Policy Implications

Author:
Han Phoumin
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper uses the current results of the Basin-wide water resource development scenario assessment of the Council Study of the Mekong River Commission Secretariat (MRCS) to analyse potentials benefits for economic development to meet the ambitious goal of the riparian states of the Lower Mekong Basin (LMB) countries for poverty reduction and, at the same time, analyse the risks of potential trans-boundary trade-off, which will require an appropriate mechanism to be in place. The scenario assessment results present both opportunities and risks associated with different levels of water resource development in the Mekong countries and the implications of the water diplomacy for both the lower and uper mekong basin. All scenarios could be broadly placed into three main categories with different timeframes and assumptions. Scenario M1 – the early development scenario – characterises baseline water resource developments in 2007; Scenario M2 – the medium-term definite future scenario – characterises existing, under-construction, and firmly-committed water related developments in 2020; and Scenario M3 – the long-term planned development scenario – characterises the planned water developments in 2040 in addition to those assigned for 2020 for implementation over the following 2 decades. The main scenarios aggregate combinations of water resource developments enabling the cumulative assessment of environmental, social, and economic effects in the Member Countries. The Scenarios will bring both economic opportunities in terms of benefits from water resource development as well as risks related to biodiversity changes, the environmental damages and losses of livelihoods, and the dependency on the natural resources of the Mekong River. Each of the scenario results presents the trans-boundary trade-off which requires appropriate skills, capacities of the LMB riparian countries, and water diplomacy to discuss and negotiate for the solutions. Finally, this paper provides some suggestions and policy implications that could be possible mechanisms and solutions for sustainable water resource development in the Mekong region.
Topic:
Environment, Natural Resources, Water, and Sustainability
Political Geography:
Asia, Vietnam, Thailand, and Laos

39. Reporte de Recomendaciones de Política: Hacia un Loreto más próspero

Author:
Ricardo Hausmann and Miguel Angel Santos
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Loreto es un lugar de contrastes. Es el departamento más grande del Perú, pero se encuentra entre los de menor densidad poblacional. Su capital, Iquitos, está más cerca de los estados fronterizos de Brasil y Colombia que de las capitales de sus regiones vecinas en el Perú - San Martín y Ucayali. Sólo se puede llegar a Iquitos por vía aérea o fluvial, lo que la convierte en una de las mayores ciudades del mundo sin acceso por carretera. Desde la fundación del departamento, la economía de Loreto ha dependido de la explotación de recursos naturales, desde el boom del caucho a finales del siglo XIX y principios del XX hasta la extracción petrolera y explotación de recursos forestales que predomina en nuestros días. Este modelo ha traído consigo daños ambientales significativos y ha producido un patrón de crecimiento lento y volátil, que ha abierto una brecha cada vez más amplia entre la economía de la región y la del resto del país. Entre 1980 y 2018, Loreto creció a una tasa promedio compuesta anual cuatro veces menor a la del resto del Perú. Es decir, mientras el resto del Perú triplicó el tamaño de su economía, la de Loreto creció algo menos que un tercio. En la última década (2008-2018), la región también se ha venido distanciando de sus pares amazónicos en el país (Ucayali, San Martín y Madre de Dios), que han crecido a una tasa promedio anual cinco veces mayor. En este período, el ingreso promedio por habitante en Loreto ha pasado de ser tres cuartas partes del promedio nacional en 2008 a menos de la mitad para 2018. Además del rezago económico - o quizás como consecuencia de él -, Loreto también se ubica entre los departamentos con peores indicadores de desarrollo social, anemia y desnutrición infantil del Perú. En este contexto, el Laboratorio de Crecimiento de la Universidad de Harvard se asoció con la Fundación Gordon and Betty Moore para desarrollar una investigación que proporcionara insumos y recomendaciones de política para acelerar el desarrollo de la región y generar prosperidad de forma sostenible.
Topic:
Development, Natural Resources, and Sustainability
Political Geography:
South America and Peru

40. Reporte de Recomendaciones de Política: Hacia un Loreto más próspero

Author:
Ricardo Hausmann and Miguel Angel Santos
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Loreto es un lugar de contrastes. Es el departamento más grande del Perú, pero se encuentra entre los de menor densidad poblacional. Su capital, Iquitos, está más cerca de los estados fronterizos de Brasil y Colombia que de las capitales de sus regiones vecinas en el Perú - San Martín y Ucayali. Sólo se puede llegar a Iquitos por vía aérea o fluvial, lo que la convierte en una de las mayores ciudades del mundo sin acceso por carretera. Desde la fundación del departamento, la economía de Loreto ha dependido de la explotación de recursos naturales, desde el boom del caucho a finales del siglo XIX y principios del XX hasta la extracción petrolera y explotación de recursos forestales que predomina en nuestros días. Este modelo ha traído consigo daños ambientales significativos y ha producido un patrón de crecimiento lento y volátil, que ha abierto una brecha cada vez más amplia entre la economía de la región y la del resto del país. Entre 1980 y 2018, Loreto creció a una tasa promedio compuesta anual cuatro veces menor a la del resto del Perú. Es decir, mientras el resto del Perú triplicó el tamaño de su economía, la de Loreto creció algo menos que un tercio. En la última década (2008-2018), la región también se ha venido distanciando de sus pares amazónicos en el país (Ucayali, San Martín y Madre de Dios), que han crecido a una tasa promedio anual cinco veces mayor. En este período, el ingreso promedio por habitante en Loreto ha pasado de ser tres cuartas partes del promedio nacional en 2008 a menos de la mitad para 2018. Además del rezago económico - o quizás como consecuencia de él -, Loreto también se ubica entre los departamentos con peores indicadores de desarrollo social, anemia y desnutrición infantil del Perú. En este contexto, el Laboratorio de Crecimiento de la Universidad de Harvard se asoció con la Fundación Gordon and Betty Moore para desarrollar una investigación que proporcionara insumos y recomendaciones de política para acelerar el desarrollo de la región y generar prosperidad de forma sostenible.
Topic:
Development, Natural Resources, and Sustainability
Political Geography:
South America and Peru