Resource Governance. The handbook of Global Energy Policy Summary

Resource Governance Summary

Andrew Bauer and Juan C. Quiroz excerpt in Resource Governance focus on the management of natural resources. The authors appreciate that oil, natural gas, and minerals are the most sought resources in the energy industry. For years, more than 40 countries around the world have tried gas, minerals and oil as the means to economic growth and development. With the exception of Europe and the United States, countries in Africa, Central Asia, and the Middle East have failed in proper resources governance.  Cases of political instability, civil war, depletion of resources, and slow economic growth is rampant in the three continents. The authors define resource management and present the reader with effective strategies for managing the resources.

According to Bauer and Quiroz, resource governance is effective management of natural resources (245). It is imperative that resource management be characterized by accountability and transparency. The importance of complimenting resource governance by sound laws and regulations enforced by strong legal institutions like the justice system is paramount. The importance of reassuring the public of sound resource management is essential for promoting national stability. The authors give numerous accounts of how resource governance was a fundamental concept from 483 BC to AD 1708. Several causes for poor resource management are mentioned in the chapter. Firstly, government incompetence and lack of knowledge in oil, gas and minerals is common knowledge. Secondly, the impact of capital inflows that affect foreign exchange rates, therefore, low exports by resources-rich countries. Thirdly, countries in Africa, Central America, and the Middle East are rocked by unpredictable governmental decrees. Fourthly, rent-seeking activities affect institutional development in resourceful nations. Finally, lack of full public accountability by governments due to political interferences in resource governance.

Bauer and Quiroz provide a step-by-step framework for resources governance that countries can emulate in managing oil, gas and minerals (249). The first step involves deliberation on whether to conduct resource extortion. The decision process requires legal guidance in terms of licensing, cost-benefit analysis, and impact evaluation on social, political, economic, and environmental issues. The second step involves determining revenue sharing between contacted companies, government, and immediate communities. Revenue assessment and collection is the third step and requires increased government oversight, disclosure of contracts to the public and enforced governance rules. The fourth step is enshrining good revenue management practices as public investment in the natural resources increases.  Finally, sustaining development through a diversified capital investment across various economic sectors like agriculture, manufacturing, service industry and infrastructure.

Apart from the natural resources value chain, there are good public policies that compliment governance (251). First, the policy of securing a good deal must be guided by guaranteed large profits and economic growth. A return on investment in any natural resources extraction is critical in minimizing risks. To ensure good public policies, the inclusion of ideal fiscal arrangements between the governments and extractive companies is encouraged. The example of fiscal arrangements in resource governance includes concession agreements, production sharing contracts, and services contracts.

Revenue collection methods by the governments determine the sustainability of natural resources extraction. Major determinants in the collection of revenue include taxes, government competency, legislation, institutions and information systems. Countries like DRC and Iraq are characterized poor management marred with corruption has led to the collapse of oil and mineral industries respectively. Lack of proper revenue collection is contributed by the government lack of knowledge in the respective industries. By not monitoring volumes of resources extracted, extractive companies engage in misappropriation evidenced by outright theft. In this regard, the Extractive Industries Transparency Initiative (EITI) can be used in promoting the principle of voluntary disclosure (254). Ensuring that extractive companies and governments disclose full financial information to the public can promote accountability and public confidence. In recent years, the insignificance of EITI in handling challenges in oil, gas, and mineral industries is unnoticed (254).

Besides revenue collection, managing money collected from extracted resources is a necessity for resource governance (256). Norway is an example of sound resource governance as evidenced by diversified investments in health and infrastructure (255). The comparison between developed Norway and a third country like Azerbaijan show the importance of good revenue management practices. The management of revenue collected from natural resources in Norway is long-term and emphasis on the survival of future generations. The importance of basing revenue management on transformational benefits for both short and long-term must precede political ambitions. In managing revenue, establishing effective administrative mechanisms that are objective, save revenue surpluses and minimizes misappropriation is necessary. Finally, allowing for fiscal flexibility, developing investment rules and protecting oversight institutions must be enforced by government and energy consumers.

Notes

1. Resource governance for oil, gas and mineral industries must be characterized by transparency, accountability, and political good will.
2. Diversified capital investment in health, education and infrastructure proves that extortion of natural resources is beneficial from an economic, political, social, and environmental aspect.
3. The public input in making critical decisions especially in the collection, management, and sharing of revenue among the government and extractive companies is paramount.

 

Work Cited

Bauer, Andrew and Juan C. Quiroz. “Resource Governance.” The handbook of Global Energy Policy. 1^st ed. Ed. Andreas Goldthau. Hoboken: John Wiley & Sons, Ltd, 2013. 244-263 Print.