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I N C LU S I V E G R E E N G R O W T H: T H E PAT H WAY TO S U S TA I N A B L E D E V E LO PM E N T

extractive industries—with major investments ongoing or planned—it is particularly important that these countries act now to avoid the resource curse. History shows that countries that have successfully managed concentrated natural resources for economic development have tended to have a cadre of strong technocrats, pointing to the importance of developing human capital. Countries that have recently become resource abundant, such as Mongolia and Mozambique, need to be as transparent with their rents as possible (through the Extractive Industries Transparency Initiative and other means); set up a means of smoothing volatile revenue, such as a fi scal stabilization fund; and focus on policies and programs to build human capital and competitive industries. Even where growth has been rapid, the presence of nonrenewable resources can skew income distribution in undesirable ways. In Equatorial Guinea, for example, one of the richest and most resourcedependent countries in Africa, 77 percent of the population lives on less than $2 per day (Goldman 2011). Institutional innovations can help countries avoid this outcome. Botswana and Norway, which have strong institutional capacity, have managed their resource rents well. That even countries with a history of political instability—such as Chile, Indonesia, and Malaysia—have used resource rents effectively for economic development suggests what can be achieved (Gelb and Grasmann 2010).16

Managing resource revenues How can policy makers promote effi cient production, rent recovery, and rent reinvestment in ways that support broader economic growth? First, they can adopt saving mechanisms, such as fiscal stabilization funds and saving funds, which help smooth expenditure and ensure that funds are used only when the country has the capacity to absorb the new investment. Second, they can use the nonrenewable

resource rents to help overcome market failures or deficiencies—such as inadequate skills, poor health and social protection, lack of infrastructure (especially electricity), and high business transactions costs. Third, they can avoid using these rents to promote industries in which their country has no or little comparative advantage. The World Bank’s comprehensive wealth accounts—notably, its adjusted net savings (A NS) indicator — assess whether countries rich in subsoil assets are using their natural capital to support sustainable development through rent capture and reinvestment (World Bank 2005b, 2010b). These accounts can help countries assess whether they are on a sustainable development path. Unlike national accounts, which measure gross savings and depreciation of produced capital but do not record changes in the stocks of human and natural capital, ANS measures the change in a country’s national wealth. Since 2000, many lowincome, resource-rich countries have failed to leverage their nonrenewable resources for broader development. In fact, their ANS indicators were negative for several years and were relatively low when positive, suggesting that they may be running down their total wealth (figure 5.2). Highincome non- OECD countries are also exhausting their natural resource wealth. The Wealth and Valuation of Ecosystem Services Initiative is being used to pilot incorporation of natural resource depletion or restoration, including renewable natural resources, into national accounts in a number of OECD and developing countries.

Practicing sustainability in mining The largest source of employment in nonrenewable industries comes from artisanal and small-scale mining. This sector contributes to livelihood development, creating tens of thousands of jobs in many countries and hundreds of thousands in several countries (including the Democratic Republic of

Inclusive Green Growth  
Inclusive Green Growth  

As the global population heads toward 9 billion by 2050, decisions made today will lock countries into growth patterns that may or may not b...