Guyana is named among 61 low or middle income countries that depend on minerals for more than 25 percent of their tangible exports and is also identified among 20 which might be especially vulnerable to the “resource curse,” where substantial changes in commodity prices could severely affect their development.
So says a publication by the Oxford Policy Management, a think tank that gives advice to countries on finding solutions for reducing social and economic disadvantage. The publication was released in December 2011.
The group’s report, entitled “Blessing or curse? The rise of mineral dependence among low- and middle-income countries,” said that the number of low and middle-income countries, defined as “mineral-dependent” countries, increased by more than 30 percent between 1996 and 2010, from 46 to 61 countries.
It said that over this period, Guyana was among eight low and middle-income countries that became dependent on non-fuel minerals. The group also included Montenegro, Laos, Burkina Faso, Bolivia, Georgia, Somalia and Ghana.
According to the publication, six low and middle-income countries became dependent on fuel-based minerals—Belarus, Belize, Chad, Cote d’Ivoire, Myanmar and Timor-Leste. By 2010, it added, more than 80 percent of non-fuel, mineral-dependent states were low and middle-income countries, compared to about 70 percent of fuel-dependent countries.
“Overall, 45 countries depend on fuel-based minerals and 40 countries depend on non-fuel minerals, nearly half of which are in Africa,” the report said.
It noted that the level of dependence among non-fuel, mineral-dependent countries has increased sharply since the boom in commodity prices started in 2004.
“For many low- and middle-income countries, the biggest increases in non-fuel, mineral dependence over the last 15 years have occurred during the last five years, between 2005 and 2010,” it added.
The report said that non-fuel, mineral-dependent countries are more likely to have lower economic development than other countries, including countries dependent on oil and other fuel minerals.
Countries that depend on either non-fuel or fuel minerals are also more likely than other countries to suffer from institutional governance problems such as corruption and political instability, it added.
“We found a significant, negative correlation between institutional development, measured by the World Bank’s Worldwide Governance Indicators (WGI), and countries that are dependent on either fuel or non-fuel minerals. In other words, mineral dependence tends to be associated with poor institutional governance,” the report said.
The report said that for countries to avoid the resource curse and turn mineral dependence to their advantage, they must understand and manage the macroeconomic impacts of large inflows of foreign exchange, particularly the effects on the real exchange rate; use mineral receipts to invest in productive assets that will have multiplier effects, such as infrastructural projects; and integrate extractive industries more closely into other economic activities through public-private partnerships.
It said that those countries must also pay attention to the local social and economic impacts of mineral-extraction industries, focusing on open, informed debates with local stakeholders, and keep expectations of local employment and revenue within realistic bounds, in order to reduce unnecessary social tensions.
The report said countries hoping to stave off resource curse must introduce accountability mechanisms, including well-resourced inspectorates, “to avoid corruption and other governance problems.”
