Maputo, April 10, 2014 - The importance of prudent management of natural resources for sustainable economic growth is the subject of the most recent publication prepared by the World Bank; the public launch of which took place today at the Faculty of Economics, University Eduardo Mondlane (UEM), sealing a knowledge partnership with the largest university in the country.
"The World Bank is a knowledge institution. Thanks to its extensive experience of development work, it has become a reliable source of development knowledge. This report and our dialogue series aim at establishing a platform to sharing that knowledge, thus contributing to public debate and ultimately inform policy making in various fields of public policy in Mozambique,” said Mark R. Lundell , World Bank Country Director in Mozambique .
The launch of this highly anticipated publication marks the beginning of the Development Dialogue Series program in Mozambique, and it drew a wide range of stakeholders, including development partners, researchers, policy makers, students, and media.
“Evidence-based debates deepen everyone’s knowledge and inform the process of policy-making,” said Alicia Herbert, Representative of DFID Mozambique, which provided co-funding for the research. “We are pleased to support the World Bank in the preparation of this publication, which brings important elements of analysis on such a topical issue, which is the prudent management of income flows from natural resources so that Mozambique avoids being trapped in the so called resource curse."
Indeed, the study uses the Wealth Accounting method to discuss how best to use subsoil wealth in Mozambique. It indicates that the development of gas and coal puts Mozambique on an unprecedented opportunity to accelerate development and improve the welfare of its population. But to generate income in a sustainable way that wealth must be wisely used, and transformed into other forms of wealth.
The Wealth Accounting method, which measures the number of assets that a country has to generate its income, teaches us something about the sustainability of growth in the context of abundance of natural resources, and it provides some answers as to why some countries have become poorer in the long run despite being rich in natural resources.
"The Wealth Accounting framework shows us that the relationship between wealth and economic growth is not always positive, especially for resource-rich countries. Many of those countries grow their wealth depleting their subsoil wealth without investing it in other types of capital, thus exhibiting a negative or zero growth in their assets over the same period. In other words, in rich natural resources economies the high GDP growth cannot always be associated with a growing asset base, but often only reflects the depletion of natural capital," said Enrique Blanco Armas, Senior Economist at the World Bank in Mozambique and lead author of the paper.
Taking into account new developments in the coal and gas sectors in Mozambique, the country's wealth doubles, but it remains paradoxically one of the poorest in Africa. So the question is: will this wealth improve the welfare of Mozambicans? It depends on how it is managed, particularly the portion of proceeds invested versus spent, concludes the report. In the last decade, Mozambique, like many other countries in sub-Saharan Africa and a great number of resource-rich countries grew depleting their natural resources - this means that economic growth does not seem sustainable in those places. To ensure the sustainability of growth, it is important to invest income derived from natural resources and ensure that those investments are productive and create the expected returns. Investing in the quality of institutions that manage public investments is therefore crucial in this process.