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Solutions to Resources Problems Elusive

[Editor’s note: VOA Khmer recently spoke with specialists in the field of natural resource management in developing countries and learned that Cambodia is not alone in struggling to use natural resources to benefit its citizens. The resource curse, where natural riches fail to help the poor, is a worldwide scourge, the global experts told VOA Khmer in numerous interviews. Below is Part 3 of the original VOA Khmer weekly series, airing Sundays in Cambodia.]

Experts say there are potential solutions to the problems in managing natural resources in developing countries, but these are hard to exercise in practice. The professional management required to properly exploit resources such as timber, oil and minerals are generally lacking in developing countries, while trust between governments, the international community and business leaders is shaky.

Somit Varma, director of the oil, gas, mining and chemicals department of the World Bank, told VOA Khmer in an interview in his Washington office that if natural resources are managed well, they can have a tremendous positive impact for the country and the people.

Revenue wisely used, he said, can build roads, hospitals and schools and to train civil servants, all of which help the average citizen. But that kind of wise management can only come from government commitment.

“To help this succeed, you really need the country to have ownership,” Varma said. “They need to be fully committed to making sure that they will do their piece of it, which is they will put in the regulations, they will put in incentive, they will put in laws, they will monitor the laws, they will be transparent, they will communicate it to the public. All of that, and their development partners will help them if they don’t know how to do that, help to build capacity to do that.”

Paul Collier, an Oxford University economist and author of “The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It,” told VOA Khmer by phone that laws and regulations must be in place to protect the environment and the benefits of local citizens.

“There’re not strong private incentives to do that, and so that’s why you need regulations to make sure that local population is properly compensated and protected,” Collier said.

Other challenges are in capacity, skill, experience and professional human resources for efficient management of a project.

In that sense, the commitment of both government and development partners is needed, Varma said.

“It’s not the desire,” he said. “ The desire may be there, but the capacity to actually do it. It takes years to build capacity. You need both sides to make this work.”

Money needs to be reinvested in the country because natural resources don’t last forever, Collier said. Long-term investment leads to assets that then replace natural resources when they are gone.

“The natural resource revenue is not going to last forever,” he said. “If the country extracts natural resources, it’s at some stage going to run out of them.”

William Ascher, a professor of government and economics at Claremont McKenna College, in California, and author of “Why Governments Waste Natural Resources: Policy Failures in Developing Countries,” said the method and the system with which the government gets the money and spends it is important.

The government should collect the resources rent, then put it in the central budget. Central budget officials then decide how the money should be spent on behalf of the public, in short- and long-term investments, for example, or in education, healthcare, infrastructure, and so on.

“Two of the most successful cases are Chile in South America, which is probably still the world’s largest producer of copper,” Ascher said. ”There, the funds go into a stabilization fund, which smoothes out the microeconomic impact of having high prices or low prices, and then it’s up to the finance ministry and the planning agency to decide how the resources should be spent.”

“Another quite good case in Africa is Botswana, where there’s considerable mining,” he said. “There’s a lot of wealth being produced from diamonds. And there, too, despite the fact that the state is involved, the management of the resources has been quite healthy.”

Collier said effective and efficient governance is one of the keys to the success in natural resource management.

He cited Norway, Australia and Canada as successful examples in coping with natural resource booms and busts. Good governance can stabilize the economic growth regardless natural resource boom or crash.

“In fact if you have enough governance, there’s no resource boom,” Collier said. “You go up in the short term and then you are up even more in the long term. That’s Norway, the richest country in Europe, Australia, Canada.”

Natural resources are public properties. Once the private sector participates in their management, regulations and effective law enforcement must be in place to secure public benefits. The private sector can participate through service contracts, management contracts, leases and concessions.

But without proper management, resources are in danger of over-exploitation, and when those exploiting the resources have effective access to them, they try to reap as many benefits as possible before the resource runs out.