Following the adoption of the Sustainable Development Goals (SDGs) by the UN General Assembly, I would like to highlight a focal point of sustainable human development–utilizing natural resource revenue as a tool for sustainable human development.
“There’s only so much amount of aid countries can rely on. Indeed, often you can’t rely on aid in the sense of relying on certain amounts every single year… it goes up, it goes down… governments fall in and out of love with the donors… so it’s not so reliable,” said Mr. Nolan.
“At the end of the day, a State operates on the basis of its own revenue collection. And a developmentally-oriented State, a State that actually wants to promote development through infrastructure, health, education spending, needs to raise most of the money itself.”
He added that raising revenue does not necessarily mean going into the rural areas and heavily taxing people. “It actually means taxing the better off in the society and also taxing companies, both domestic and foreign, more effectively.”
Tax rates, he noted, are very low in many low-income countries, in some cases under 15 per cent of gross domestic product (GDP). This could easily be increased by a series of reforms, as well as by better structuring of taxation in the extractive industries and greater attention to the transfer of money out of the country.
Meeting UN-backed climate goals requires leaving the vast majority of natural energy resource in the ground. But sustainable development is contingent on both the intrinsic (electricity) and market value of natural resources; one would be hard pressed to find a development practitioner that does not believe this revenue source is an essential piece of the development financing puzzle.
Developed countries have had decades, if not centuries, of using natural resources limitlessly in their pursuit of development; reliable access to energy is an indispensable part of poverty alleviation, economic growth, and modernization. We are essentially asking the worlds poorest countries to forgo the cheapest form of electricity available in the name of environmental sustainability (do as I say, not as I did). To reconcile this clear mismatch between ability to pay and necessity, the developed world must do more to reach it’s target of $100 billion per year by 2020 to help poorer countries fight climate.
The “Natural Resource Curse“:
The “Natural Resource Curse”–the misappropriation of resource revenue–robs the worlds poorest countries of a needed source of development finance. Often times the natural resource curse finances armed conflicts, which cause immeasurable human suffering, roll back development gains, and make future development much more difficult (conflict is often associated with poverty and malnutrition which stunts physical and cognitive development, can prevent children from going to school, and can cause trauma that leads to lifelong psychological issues).
The Natural Resource Curse is not inevitable, but fighting it requires good governance and the security capacity to counter those who wish to extract revenues for their own privilege. Battling the Natural Resource Curse also requires effective sanctions regimes–by driving ill-gotten natural resource revenues to the black market, and attacking that black market and related international money laundering, international criminals and terrorists would lose an important source of funding.
Sanctions, of course, require broad based cooperation. There is a risk that in this era of disorder and instability, the international community might “ease up” on bad-but-stable governments. The importance of good governance of natural resource revenues shows this would be a short-sighted and ultimately counter-productive strategy for fighting international crime and promoting sustainable human development.
If the world is to simultaneously address the needs of Least Developed Countries (LDCs) and reach climate targets, we must focus on making sure LDCs leverage all the resources they do extract to maximize social welfare. Effective “South-South Cooperation“–the sharing of best practices between developing countries–would greatly enhance this effort.
Given the importance of the source, the propensity for corruption (“Resource Curse”), and the need to leave much of the existing deposits in the ground, when it comes to properly managing natural resource revenues for sustainable human development, there is little margin for error.
Natural Resources and the SDGs:
Fortunately, proper natural resource revenue management is addressed many times throughout the proposed SDG text:
Goal 1. End poverty in all its forms everywhere
1.4 by 2030 ensure that all men and women, particularly the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property, inheritance, natural resources, appropriate new technology, and financial services including microfinance.
Goal 5. Achieve gender equality and empower all women and girls
5.a undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance, and natural resources in accordance with national laws
Goal 12. Ensure sustainable consumption and production patterns
12.2 by 2030 achieve sustainable management and efficient use of natural resources
Goal 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
16.4 by 2030 significantly reduce illicit financial and arms flows, strengthen recovery and return of stolen assets, and combat all forms of organized crime
16.5 substantially reduce corruption and bribery in all its forms
16.6 develop effective, accountable and transparent institutions at all levels
16.7 ensure responsive, inclusive, participatory and representative decision-making at all levels
Goal 17. Strengthen the means of implementation and revitalize the global partnership for sustainable development
17.1 strengthen domestic resource mobilization, including through international support to developing countries to improve domestic capacity for tax and other revenue collection
17.3 mobilize additional financial resources for developing countries from multiple sources