- Norway supports the Natural Resource Charter
The ‘resource curse’ refers to the paradox that abundant natural resources, specifically non-renewable resources like minerals and fuels, for various reasons have tended to deter economic growth and human development outcomes in many countries.
The purpose of the Natural Resource Charter is to assist the governments and societies of countries that are rich in non-renewable resources to manage those resources in a way that generates economic growth, promotes the welfare of the population and is environmentally sustainable.
The Charter is based on principles that have guided Norway’s own management of petroleum resources and that are vital to equitable and sustainable resource policies everywhere. Especially important is transparency and accountability. Norway’s experience is relevant also to other countries with abundant natural resources.
We hope the Charter will serve as an international standard for extractive resource policies and are willing to work closely with and support the Charter. Norway’s Oil for Development programme and the backers of the Charter have already agreed to cooperate to make sure that the Charter has the intended impact.
Petroleum production plays an important role in many developing countries. Revenues from the oil and gas sector may be vital resources for economic and social development. Unfortunately, in many cases it proves difficult to translate petroleum resources into welfare for the people. Hence, many developing countries that are rich in natural resources still score low on international development performance indices and are caught in the “resource curse”.
The resource curse (also known as the “paradox of plenty”) refers to the paradox that countries and regions with abundant natural resources, specifically non-renewable resources like minerals and fuels, have tended to have less economic growth and worse development outcomes than countries with fewer natural resources. There are many possible reasons for this, including a decline in the competitiveness of other economic sectors, volatility of revenues from the natural resource sector due to exposure to global commodity market swings, government mismanagement of resources, or weak, ineffectual, unstable or corrupt institutions.
The purpose of the Natural Resource Charter is to assist the governments and societies of countries that are rich in non-renewable resources to manage those resources in a way that generates economic growth, promotes the welfare of the population and is environmentally sustainable. The Charter is a set of precepts for governments and societies on how to best manage the opportunities for development created by natural resources. It was drafted by an independent group of the world’s foremost experts in economically sustainable resource extraction, assembled by Paul Collier, Director of the Centre for the Study of African Economies at Oxford University.
The precepts were chosen to cover the process from discovery, and the decision on whether to extract or not, right up to decisions concerning the use of revenues generated for sustainable development. They were developed as guidelines for countries seeking to maximize the benefit of diminishing resources. The precepts are primarily focused on economic management and governance issues but also tackle a wide range of related issues, including the environmental management and sustainability of extraction, the local impact of resource extraction and opportunities for localized benefits, as well as considerations of whether or not to extract at all.
The Norwegian government supports the work of Collier and his associates on the Charter. The Norwegian experience is proof that well-managed petroleum resources can contribute significantly to a country’s development. Norway is the sixth largest oil exporter and the second largest gas exporter in the world. Petroleum activities have contributed significantly to economic growth in Norway and to the financing of the Norwegian welfare state. Around 140,000 Norwegians are employed by petroleum-related businesses. In 2009, the petroleum sector accounted for almost a quarter of national value creation in Norway. Revenues from petroleum activities are allocated to a separate fund, the Government Pension Fund Global, the value of which is now about EUR 350 billion.
The conditions for awarding licenses to oil companies have been among the key factors behind the successful Norwegian petroleum management system. Significantly, companies have been required to develop local content, thus helping establish what has become a robust and competitive Norwegian supply industry. There were also incentives to transfer technological know-how to Norway, developing an extensive Norwegian skills base. Moreover, the Norwegian government made certain that it received an optimum share of petroleum revenues.
Norway had the advantage of being a developed country with good democratic governance long before we discovered oil. Our experience is therefore unique and cannot be directly applied to developing countries. Still, a lot of what we have learned is relevant also to other countries with abundant natural resources. Moreover, over the years we have accumulated a considerable human and technical capacity in petroleum management that we wish to share with resource-rich developing countries. For these reasons the Norwegian government in 2005 established a technical assistance programme called Oil for Development.
The aim of the programme is to promote economically, environmentally and socially responsible management of petroleum resources. Just like the Natural Resource Charter, it takes a comprehensive approach to resource, environment and revenue management. Good governance, transparency and anti-corruption are vital components in all the petroleum related assistance we offer. For the time being, the Oil for Development programme is engaged in more than 20 countries worldwide. Fourteen of these countries are in Africa, including Angola, Ghana, Sudan, Mozambique and Nigeria among the partners.
The Natural Resource Charter complements our work through the Oil for Development programme. The Charter is based on principles that have guided Norway’s management of petroleum resources and that are vital to equitable and sustainable resource policies everywhere. Especially important is transparency and accountability. The Charter therefore also complements the Extractive Industries Transparency Initiative (EITI) very well. We hope the Charter will serve as an international standard for extractive resource policies and are willing to work closely with and support the Charter. Our Oil for Development programme and the backers of the Charter have already agreed to cooperate on two issues:
- Investing in investing, related to how to increase the absorptive capacity of oil-producing developing countries. This is an issue at the heart of the current international discussion of spending from the oil fund in Timor-Leste.
- Measuring and monitoring, aiming to work out an internationally accepted set of indicators that can measure the progress of governance in oil producing states. Oxford University aims to become an international centre for gathering and evaluating such measurement. Our Oil for Development programme has developed a check-list for assessing the state of petroleum-related governance which may provide valuable input in this regard.
How can we make sure that the Charter makes a difference? What is the way ahead? One issue is the status of the initiative. There are obvious advantages to keeping the Charter a non-governmental scheme. However, in the longer term we should consider whether the Charter should be adopted and promoted by the United Nations or the World Bank.
Another question is whether the Charter should be further strengthened regarding direct economic and social effects of petroleum development. These include employment opportunities, deliveries of local goods and services, the provision of new infrastructure (ports, roads etc), the establishment of training and educational facilities, and improvements in health and other public services.
Also the potential of petroleum development as a basis for local and regional economic development could be explored in the further development of the Charter. The same applies to the role of spatial and land use planning to guide developments.
We are grateful to Paul Collier for his invaluable efforts at developing the Natural Resource Charter and also for his many other initiatives to assist developing countries maximize the benefits of their natural resources. Most recently he has drawn our attention to the importance of effective taxation and capital flow regimes. Also in this regard we agree wholeheartedly. That is why the Norwegian Government will now step up efforts to assist developing countries to increase their tax revenues and to prevent illicit capital flows. This is another essential prerequisite for long-term, sustainable poverty reduction.