many people in the so-called developing world, including even some highly experienced economists, hold the view that adding value to natural resources is the gameplan out of poverty for low-income countries. But in a rapidly growing number of research publications, contrary insights and results are showing up. Many who have looked at the matter critically are tending to disagree more and more robustly. Notable among dissenters are the Harvard-affiliated scholars: Charles Sabel, Ricardo Hausmann and Dani Rodrik. Among some of the issues and insights that cast strong doubt on the natural resource value addition (NRVA) theory are the following: 1. Historically, major transitions from low-income to high-income havent really involved this NRVA approach. Britain grew rich on other peoples natural resources. Malaysias game-changer was neither palm oil-based biofuels nor tin trinkets. 2. Many so-called natural resources are themselves products of historic accidents. There is nothing about Ghana that makes cocoa really native as a resource here. Our advantages in cocoa production is itself purely a product of policy intervention. In that sense, a countrys natural resources can in a sense be socially constructed. 3. The old idea that neighbours tend to specialise in complementary products and therefore that regional trade can be driven by comparative advantage is clearly not borne out by practical evidence. Neighbours very often specialise in the same kind of things. Yet, except in places like Africa, regional trade continues to expand. The factors that drive trade are clearly driven more by firm (corporate and entrepreneurial) behaviour rather than national endowments per se. 4. At any rate, around the world, there is a consistent picture of countries, regardless of their national income, not adding value to their natural resources. Saudi Arabia exports most of its oil raw. Australia exports most of its iron and other natural resources raw to China. The US sells more raw chicken to Ghana than it does canned chicken. Canada sells more raw salmon than it does canned salmon, and China is its 4th largest market. 5. Natural resource industries tend to lack very strong connections to other industries. This means that as a country grows its competence in a particular natural resource sector through value addition, the spin-offs tend to be very low. An industry like electronics on the other hand is so interconnected that as one climbs the sophistication ladder in electronics, whole new industries will be born. 6. Knowledge in natural resource sectors is less mobile than other sectors thus growing competence in a natural resource sector translates much less easily to participation in broader global supply chains, and less easily into the ability to source capital and talent more broadly geographical. There are several other reasons and factors to consider, but these are useful as a starting point for reflection.
Posted on: Sat, 29 Mar 2014 19:27:09 +0000
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