G77 Ministerial Meeting

Governance of Natural Resources and Industrialization

28-29 November 2014, Tarija, Bolivia

CONCEPT NOTE
This concept note details the rationale, focus and structure of the Ministerial Meeting which will
provide a forum for discussing analytical frameworks and exchanging successful experiences on the
governance and management of natural resources and industrial development amongst members of
the Group of 77 and China (G77). It aims at enhancing the capability and capacity of the G77
policymaking community to effectively manage their natural resources and to implement
industrialization strategies in support of sustainable development priorities. The event will be
organized by the Plurinational State of Bolivia, as Chair of the G77 and China in coordination with the
United Nations Industrial Development Organization (UNIDO) and the United Nations Regional
Commissions, namely the Economic Commission for Latin America and the Caribbean (ECLAC), the
Economic Commission for Africa (ECA), and the Economic and Social Commission for Asia and the
Pacific (ESCAP).

1. Background
Today, countries of the global South face similar challenges in terms of sustaining growth,
diversifying their economies and productive structures so as to make them fit to compete in
international trade and global value chains, creating decent jobs that ensure income, and advancing
the overall well-being of their people in a more sustained and equitable way. While many G77
countries have large natural resource endowments, these are yet to lead to wide-scale prosperity
and welfare of their people. On the contrary, many resource-rich economies face enormous
difficulties in translating resource revenues into increased productive activities, sustainable patterns
of production and consumption, and sustainable economic growth with commensurate equity across

society and a healthy environment.1 Unclear or poor governance will continue to pave the way to
illegal and unsustainable use of natural resources.2 Without serious targeted mechanisms for
effective governance, conflicts over natural resources will also often be accentuated, as different
sets of actors seek to utilize resources based on their specific needs or priorities.
At the recent G77 Heads of State Summit held from 14-15 June 2014 in Santa Cruz, Bolivia, G77
policymakers have decided to address this important challenge. The Santa Cruz Declaration For A
New World Order of Living Well therefore stipulates that natural resources should be used to []
invest in the economic diversification, industrialization and social programmes [] (para 41) so as to
obtain greater benefits for their people. It further urges the international community to provide
technical and capacity-building assistance to developing countries [] to support them in obtaining
the maximum benefits from the extraction and use of those resources in line with sustainable
development [] (para 42).
G77 governments also emphasized the pivotal role of industrialization in this context. It is a key
strategy to respond to the above challenges and generate the required income and jobs to empower
individuals and households, and allow countries and peoples from the South to develop their
economies and societies in order to fulfil human needs in harmony with nature and respect for
Mother Earth. The Santa Cruz Declaration affirms that industrial development and value addition,
together with science, technology and innovation, are, among others, essential elements for
developing countries to attain higher development levels in a sustained way, as the industrialization
process can generate higher productivity, more jobs and skills and positive spillover effects on the
economy (para. 83). Further to developing downstream value-addition, the demand for
upstream engineering and technical services, logistics, infrastructure and supply chains in the
extractive sectors provides another key opportunity to create dynamic linkages with the rest of
national economies.
Moreover, the need to better tackle effective natural resource governance and inclusive and
sustainable industrialization to eradicate poverty and achieve sustainable development for all is
widely acknowledged as the international community is gearing up to design the new development
priorities beyond 2015. Being the largest intergovernmental grouping of developing countries in the
United Nations, the G77 was founded to articulate and promote the collective economic interests of
the South. The G77 hence not only assumes a critical role in the debate, but also has the most to
gain from a post-2015 agenda that underscores the prioritization of these important issues.
For all of the above, the current Chair of G77, the Plurinational State of Bolivia, decided to organize a
Meeting of Ministers particularly of industry, economy, finance, energy, mining, or oil & gas - on
the issue of governance of natural resources and industrialization.

The Resource Governance Index shows that based on an assessment of Institutional and Legal Setting;
Reporting Practices; Safeguards and Quality Controls; and Enabling Environment, only 11 countries worldwide
meet satisfactory standards of natural resource governance.(reference:
http://www.resourcegovernance.org/rgi/report).
2
Oviedo (2010)

2. Objectives
The event aims at:

Creating awareness for how G77 countries can reap the benefits of their natural resources
through appropriate regulatory frameworks, contract and pricing systems and ensuring
effective and transparent property and exploitation schemes, rents appropriation and
distribution mechanisms, and management so as to share natural resource wealth equitably
among society and generations;
Sharing experience, best practices, and lessons learned of sound governance mechanisms
for sustainably managing natural resources, and incorporating inclusive and sustainable
industrial development issues into regional and national development policies and
strategies;
Sharing experience, best practices, and lessons learned of fiscal regimes for extractive
sectors, particularly those that ensure progressive taxation during commodity price boom
cycles, resource rent taxes, windfall profit tax, and progressive tax brackets tied to price
thresholds.
Forging stronger regional and inter-regional cooperation for natural resource governance
and industrial development among G77 countries and deriving recommendations for
appropriate mechanisms to facilitate such cooperation, including through South-South
cooperation; establishing partnerships to protect globally shared resources.
Raising political awareness for G77 development priorities, including equitable resource
governance and inclusive and sustainable industrialization, in international fora and the
future development agenda.

3. Thematic Focus
The event may be organized as a series of thematic dialogues on key G77 priorities in the area of
natural resource governance, industrialization, and industrial cooperation. Substantive background
papers will be prepared for each thematic dialogue to introduce the topic and frame the discussion.
It is suggested to have about six to seven plenary dialogues which will cover the following thematic
clusters:

A) Governance of Natural Resources

Natural resource governance involves a complex array of issues that should be considered and
factored in policy-making, including: rights and culture, legal frameworks and institutional
structures, building capacity, policy influencing, community empowerment, social and gender
equity, communications and lesson learning from success factors and best practices as well as

innovations to improve natural resource governance.3 Regional delivery of natural resource

management (NRM) can play an important role to address such issues4.
The first cluster envisages 3 panel discussions around the most pressing issues of natural-resourcebased development with a particular focus on the role of governance. It is suggested that it
incorporates a focus on:

Governance of natural resources and sustainable development

The majority of resource-rich G77 countries have experienced difficulties in achieving sustained
growth, development progress and shared prosperity. This panel will address the drivers for this
paradox and outline strategies and policies to tackle the central economic dynamics and
structural constraints - including weak institutions, lack of technical capacities, and the
counterproductive effect of rentierism on national fiscal regimes that hinder fiscal sustainability
- underlying the poor governance of resources. Furthermore, the assessment of the relationship
between natural resource governance, economic growth and social policies will look at its
impact on the quality of institutions and their mechanisms in facing macroeconomic and fiscal
challenges. In targeting sustainability to 2030 and beyond, it is necessary to integrate social,
economic, and environmental indicators and natural resource targets so as to balance the
tradeoffs in sustainable development, investment, and natural resources objectives. It is also
important to deal with conflict resolution, meeting agreed standards of prior and informed
consent and ensuring transparency in investment policy and operations.

Management of the income from natural resources and experiences of redistribution

Resource- endowed countries are often characterized by increasing inequalities between rich
and poor. This trend is supported as natural resource rents may introduce a rent seeking culture.
The discussion will analyse how the political economy of natural resources, which may imply
poor management of revenues and corruption in these sectors reinforce the paradox of plenty.
It will further elaborate on how strengthened institutions, practices of good governance and
revenue distribution can improve the long-term outlook. Ultimately, the economic
mismanagement of revenues reduces the governments take, hampers competition and
reinforces both economic and political monopolistic tendencies. The impact of the paradox is
further intensified if political corruption (i.e. extraction of revenues and power preservation) is
prevalent. The discussion will look at effective incentives and mechanisms that succeeded in
curbing such forces including strengthening institutions of checks and balances, accountability
and control. Particular emphasis will be given to governance mechanisms that ensure that rents
are not dissipated as current expenditure by governments, but rather accumulated and
effectively invested in high social return public investments, such as human capital
accumulation, infrastructure and technological upgrading, reversal of human capital gaps of
disadvantaged groups. These long-term investments have significant positive spill-over effects,
3
4

See Jordi (2011)

Julie et al (2006)

bolster macroeconomic and fiscal stability, as well as the States capacity to shoulder long term
public investments.

Property rights, negotiation , and international arbitration

The legal and policy considerations governing how extractive industries and their regulators
conduct business also impact how sustainable the consequent economic development trajectory
is. The regulatory frameworks for natural resource extraction and the allocation of property
rights are different in every country and often shaped by a dynamic economic, social and cultural
interplay. National institutional capacity therefore assumes a critical role in administering the
prevailing law and policy frameworks as well as negotiating contracts that bring about fair
conditions and benefits. Otherwise, the negative aspects of resource wealth will outweigh its
positive contribution. In light of the looming opportunity for international arbitrage between
resource-rich countries that seek foreign investment, these issues will also have to be discussed
at a regional and global level. The discussion also aims at identifying best practices by assessing
cases of countries that have recently (re)negotiated contracts for resource extraction.

B) Inclusive and Sustainable Resource-based Industrialization

The second day will feature 3 panels concentrating on policies and industrialization models that use
natural resources in an environmentally sound manner as a springboard for economic
transformation and lasting outcomes which generate quality and more knowledge-intensive jobs,
sustain growth, alleviate poverty and reduce income inequality. Industrial policies are seen to play a
particular role in achieving these outcomes by helping to develop linkages between the extractive
industries sectors and the local economy and by using resource revenues to invest in structural
change that spurs economic growth, diversification and competitiveness.

Structural change and industrial diversification based on natural resources

The fact that structural change, meaning the reallocation of economic activity away from the
least productive sectors of the economy to more productive and knowledge-intensive ones, is a
fundamental driver of economic development has been well documented. The suggested
reasons are two-fold: the rise of new, more productive activities propels the economy forward;
and the movement of resources from traditional to newer activities ensures that productivity
gains are diffused to the rest of the economy. Consequently, natural resource revenues have to
be invested into strengthening competitive and productive sectors of the economy, building
infrastructure and innovation capacity and fostering human capital5. Strengthening local
participation in higher-technology sectors contributes to more inclusive and sustainable
outcomes. This debate will show how modern industrial policymaking drives not only GDP and
resilience but also jobs, income, and efficient natural resource allocation which are necessities
for achieving socially equitable and environmentally-sound growth. However, crafting and
5

McMillan and Rodrik. See also Structural change for equality (ECLAC, 2012)

implementing the right policy mix to kick-off this process is a complex undertaking. The
discussion should hence examine successful country cases and derive policy recommendations
for governments to facilitate this process.

Impacts of resource-based industrialization on local development

Realizing a resource-based industrialization agenda requires strategies that are strongly

embedded in local policies and industrial development programmes. The right approach to
pursue linkages opportunities that are located upstream, i.e. in the domestic sourcing of
engineering and technical services and supply networks to meet the demand of extractive
sectors, or through promoting downstream value-addition, is highly context specific. This
discussion will show how economic structures that foster local value-addition beyond the
primary extraction and create domestic linkages with local economies are necessary to benefit
from positive spill-over effects. In essence, it is about achieving an optimal fit between
commodity producers, current and potential suppliers as well as the processors of their output
so as to enhance the systemic competitiveness of any particular commodity value chain. The
economic benefits of resource-based industrialization come with an added responsibility of
ensuring that whole-life-cycle approaches are applied to reducing the impacts on ecosystems,
rural livelihoods and health. This is particularly important from an equity perspective and
requires technological, institutional and economic incentives in support.

Models of industrialization (public, public-private and private) and regional cooperation

The specific models used in pursuit of industrialization, whether the emphasis is on state-led
industry, private business activity or a hybrid between these models, have been highly contextspecific in the past and continue to be in the future. However, in todays interrelated world,
there is much to gain from working in cooperation. Especially in the context of resource
governance and industrial development, cooperation on the regional level as well as among
political groups such as the G77 can have a catalysing impact on national and regional levels and
help address many of the challenges outlined in the above sections. Topics to be discussed
include mechanisms for South-South industrial cooperation and public-private partnership
models that further regional economic development and value chain integration, facilitate
financing and investments, encourage entrepreneurship and innovation, include environment
sustainability criteria, and promote technology and knowledge sharing between all relevant
stakeholders. Furthermore, regional compacts to serve as common baselines for negotiations so
as to support regional policy-coherence and knowledge exchange could be discussed in this
context.

C) Going Forward
The wrap-up session should allow enough time for the chair and G77 Member States representatives
to discuss how to move forward, including the action proposed under point 4 Expected outcome.
6

4. Modalities
The event will be organized as a G77 meeting of Ministers of Industrialization and counterparts.

Date & Venue

The two-day meeting will be held in Tarija, Bolivia from 28 29 November 2014. More information
on the venue and logistical arrangements will be circulated in a separate note.

Participation

Invited participants are Ministers of Industry, Finance, Economy, Energy, Mining, or Oil & Gas or
equivalent of G77 member states. Participation at the ministerial level is encouraged. Furthermore,
senior management of relevant international and regional organizations will be invited.
In addition, participation at the meeting will be open to:
Representatives of G77 governments at the policy-making level,
Representatives of other international and regional organizations and bilateral
development partners,
Representatives of civil society groups, the private sector, and academia.

Expected outcome

A Chairs summary is envisaged as outcome of the meeting which will summarize the proceedings,
derive recommendations and suggest follow-up action. This summary should be submitted for
further discussion at the annual meeting of the G77 for formally agreeing on next steps.
A concrete initiative suggested for consideration of G77 Member States is to establish a High-level
Advisory Board on Governance of Natural Resources and Resource-based Industrialization in the
South. The Board will aim, among others, to provide voluntary high-level advice on policy and
politics and ensure cross-fertilization of successful public policies in the governance of natural
resources and transformational resource-based models of industrialization, including through
renegotiated contractual arrangements, revised regulatory frameworks and enhanced policy
coherence. Its membership will include, among others, leaders and high-level government officials
from the South who personally oversaw or were involved in such transformational policies in their
countries.
Based on the aspirations stated in the Santa Cruz Declaration, the meeting should also bring about
modalities and strategies to advocate for the inclusion of equitable resource governance and
inclusive and sustainable industrial development on a national, regional and global level in the new
development agenda.
7

Patronage, Funding, and Organization

The conference will take place under the patronage of the Government of the Plurinational State of
Bolivia in its capacity as Chair of the G77. UNIDO, ECLAC, ECA, and ESCAP will support the chair in the
substantive preparation of this meeting and provide its Secretariat.
The hosts aim for a broad representation of countries at the meeting. The UN Regional Economic
Commissions are invited to ensure participation of relevant ministers from their respective regions.
Participants will generally be required to finance their own travel and subsistence. However, travel
and subsistence costs of some ministers, keynote speakers and panel members may be funded. Air
transportation between Santa Cruz and Tarija and hotel accommodation (1+1) for Official
Delegations will be provided by the host government.
All participants are required to make their own visa arrangements.