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German development cooperation seeks to help partner countries turn extractive resource wealth into sustainable eco-nomic development. For this, the Sector Project “Sustainable Economic Development” has devised the technical coop-eration (TC) Guidelines “Sustainable Economic Develop-ment in Resource-Rich Countries” (GIZ 2015). This study supplements the TC Guidelines with a political economy framework that can help practitioners avoid pitfalls when implementing the Guidelines’ suggested approaches. The study takes political economy theories to explain (1) the dy-namics within the circle of a country’s top political elites; (2) the dynamics between these political elites, domestic firms, and the state’s technocrats tasked with nudging firms toward global competitiveness; and (3) the dynamics between the top-level political elites (in the capital city) and provincial politicians in the extraction area. Several case studies are used to illustrate how natural resource rents influence each of these three political economy relations. Three remedies are addressed: transparency & accountability, advocated by the West; resources-for-infrastructure barter trades, preferred by China; and distributing resource revenues to citizens equally via direct cash transfers, tried by Mongolia. Lastly, the study draws closer to the TC Guidelines. Applying the political economy lens developed throughout the study, the final section discusses the dynamics likely to be encountered when implementing the Guidelines’ approaches, i.e. assist-ing partner countries in long-term strategy development; consensus finding among stakeholders; improving technical education; organising business and worker interests; and giv-ing local communities the means to claim their rights. The study’s aim is to explain why donor-driven reforms (be they for better governance or SME linkage promotion) sometimes fail to meet their intended goals: reformed policies – while outwardly appearing like OECD-institutions – can have an inwardly different function, one that caters to the logic of co-opting elites in order to stabilise the political settlement.

The Political Economy of Extractive Resources

Resource Key: NL2ASU6Y

Document Type: Report

Creator:

Author:

  • Elvis Melia

Creators Name: {mb_resource_zotero_creatorsname}

Place: Bonn and Eschborn, Germany

Institution: Deutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ)

Date: 2016

Language:

German development cooperation seeks to help partner countries turn extractive resource wealth into sustainable eco-nomic development. For this, the Sector Project “Sustainable Economic Development” has devised the technical coop-eration (TC) Guidelines “Sustainable Economic Develop-ment in Resource-Rich Countries” (GIZ 2015). This study supplements the TC Guidelines with a political economy framework that can help practitioners avoid pitfalls when implementing the Guidelines’ suggested approaches. The study takes political economy theories to explain (1) the dy-namics within the circle of a country’s top political elites; (2) the dynamics between these political elites, domestic firms, and the state’s technocrats tasked with nudging firms toward global competitiveness; and (3) the dynamics between the top-level political elites (in the capital city) and provincial politicians in the extraction area. Several case studies are used to illustrate how natural resource rents influence each of these three political economy relations. Three remedies are addressed: transparency & accountability, advocated by the West; resources-for-infrastructure barter trades, preferred by China; and distributing resource revenues to citizens equally via direct cash transfers, tried by Mongolia. Lastly, the study draws closer to the TC Guidelines. Applying the political economy lens developed throughout the study, the final section discusses the dynamics likely to be encountered when implementing the Guidelines’ approaches, i.e. assist-ing partner countries in long-term strategy development; consensus finding among stakeholders; improving technical education; organising business and worker interests; and giv-ing local communities the means to claim their rights. The study’s aim is to explain why donor-driven reforms (be they for better governance or SME linkage promotion) sometimes fail to meet their intended goals: reformed policies – while outwardly appearing like OECD-institutions – can have an inwardly different function, one that caters to the logic of co-opting elites in order to stabilise the political settlement.

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