Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN) Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN)

Shared growth from renewable natural resources: Scoping study for a DFID work stream
December 2006
Stephen Jones, Evelyn Dietsche and Raania Rizvi
Oxford Policy Management

Acknowledgements: FANRPAN acknowledges the Pass website as the source of this report:

Executive Summary

The purpose of this report is to provide an overview of the main issues for the development of a work stream on Shared Growth from Renewable Natural Resources with common property characteristics (CPR). It is based on a review of the literature on the linkages between natural resources, growth, poverty and environmental sustainability. It highlights the main issues emerging, provides the elements of a conceptual framework for understanding the key relationships and identifies the main proposed outputs for the work stream.

The starting point is Hardin’s characterisation of the “Tragedy of the Commons” as the basic problem of CPR management, and the way in which research (summarised by Ostrom and others) has provided insights into how a wide range of institutional solutions to the problems of CPR management have in fact developed. This literature is focused principally on resource sustainability through controlling the terms of access to resources, including the identification of common “design criteria” which are associated with successful CPR arrangements, as well as the types of stress which may lead to the breakdown of effective CPR management. However this is only one criterion by which such arrangements should be judged. Potentially (especially given the multiplicity of possible institutional solutions to the problems of CPR management) there are trade-offs between the possible criteria of strong sustainability, weak sustainability, economic growth, poverty and inequality and conflict risk against which such arrangements may be judged.

The discussion also notes that this literature has tended to focus on relatively local and small-scale CPR management arrangements, and that the types of institutional challenges and potential solutions will vary significantly depending on the level (international, regional, national, subnational and local) at which management is required.

The nature of the policy and institutional challenge posed by CPR (and hence the likelihood that groups of users are able to develop effective institutional arrangements for management) will also depend on the range and number of potential users and stakeholders whose behaviour will need to be governed by the institutional arrangements that are developed. The physical characteristics of a resource and the technologies by which it is exploited (and hence its amenability to different forms of access control) will also structure the range of institutional solutions that are potentially available.

Since the 1970s there has been increasing evidence (particularly from comparative and econometric studies) of a negative link between natural resource abundance and development performance in terms of economic growth and poverty reduction. This literature has seen a progressive shift from explanations of the phenomenon that have focused on the particular problems of macroeconomic management that natural resources pose, to seeking to explain why governments have not been more successful in adopting policies that could address these problems. This has led to an increasing focus on the political and institutional factors that lead to policy choices that are typified by persistent fiscal extravagance, poorly managed exchange rates, protectionism and inefficient use of government revenue accrued from taxing natural resource exploitation.

Three strands of enquiry in this literature can be identified, distinguished by whether they seek to explain: (i) economic performance, (ii) the occurrence of civil wars and conflicts, or (iii) the political regime type.

The review of the literature calls into question the idea that there might be a “common chain of causality from NR endowment, through socioeconomics and political institutions to economic growth and development outcomes.” The literature is better understood as suggesting that while institutional arrangements for all aspects of NR are of central importance to development performance, causal relationships within this nexus are difficult to establish and there may be alternative institutional solutions to the challenges of NR management. This reinforces the need for caution about the generalisation of detailed policy conclusions and recommendations. Likewise, the advocacy by external agents (such as international development agencies) of institutional improvements is unlikely to be effective in bringing about positive change unless it is based on an informed analysis of the local incentive structure, and demonstrates how it can be made acceptable to those stakeholders most effectively able to block or drive such change.

The study proposes a broad framework for approaching the analysis of CPR arrangements that has four elements. The first element is a characterisation of the relationship between natural resource endowments, the wider social and political context and the broad framework of institutional arrangements. The second element is an analysis of the relevant group stakeholders in a particular CPR system in terms of both their interests and the distribution of power among them to exert influence over institutional design and operation. The third element is an assessment of the effectiveness and accountability of a particular CPR management system to the stakeholders in the system. The fourth element of a framework is the assessment of the operations of a particular CPR management regime in terms of impact on growth, poverty impact and environmental sustainability.

In relation to the fisheries sector, two broad types of challenge of particular importance to developing countries can be identified. The first relates to the terms on which developing country fishers are able to access fish stocks in competition with other users and the limited influence that particularly poor fishers might be able to exercise even over access to inshore fish stocks on which they have traditionally relied, either because of lack of resources to protect Exclusive Economic Zones, or the selling of concessions for access by governments in return for revenue. Distant-water fish stocks represent a potential “Tragedy of the Commons” because of the difficulties of effective access control. The second relates to the management of local fisheries resources for which models of “co-management” are being explored. The Bangladesh case study illustrates the way in which the interests of powerful stakeholders tend to lead to the marginalisation of the interests of poorer people in protecting access to fish resources, and the possibility of “elite capture” of key institutions.

For forestry, the analysis discussed here suggests that (if the underlying assumptions about climate change and the effects of carbon emissions are accepted) there is an extremely large market failure related to the failure of markets to price carbon, which if internalised would substantially reduce incentives for deforestation (at a relatively modest cost in global terms). The challenge then becomes, first, how to establish global market mechanisms by which a price signal is provided by those with an interest in forest conservation and willingness to pay, and second, how to ensure that these price signals are passed through to those ultimately responsible for forest management. This is in a context of often ineffective property rights and the manipulation of government intervention by powerful interests which has led in many countries to poor records of forest management.

The main conclusions of the study are:

  • Local-level problems of CPR management can often be addressed successfully through local level institutions. Successful resource-management institutions are diverse, since there are typically many different ways in which the key design challenges for effective CPR can be addressed.
  • Where the number of stakeholders is much larger, diffuse, and widespread (particularly at the global level), CPR management can and does fail.
  • The performance of such systems will depend heavily on social and political factors, and poor people’s interests as resource users are likely to be systematically marginalised in many developing country contexts.
  • Such systems are however vulnerable and can break down in the face of pressure on and depletion of resources, ill-judged external interventions, wider conflict that undermines social capital, and attempts by powerful interests to secure access to resources.
  • There is not necessarily a trade-off between growth and poverty reduction objectives and environmental sustainability, but in practice there may be many cases where these objectives will be in conflict.
  • The process of successful development can be characterised as one by which natural resources and the flow of rents from them are transformed into more productive forms of capital. Many low income countries are failing to achieve this transformation and indeed are living off their capital.
  • A process of transformation of resources into growth, even if successful and inclusive and pro-poor at the national level, may leave global externalities unaddressed. The potential influence of deforestation on climate change and loss of biodiversity are probably the most significant examples. A critical challenge for any such systems will be how to ensure that national level incentives are effectively transmitted to the lowest level of decision-making, and to ensure that they operate in as pro-poor a manner as possible. Hence the effectiveness of national and local CPR management systems in key countries will be of central importance for the effectiveness of global initiatives.
  • The literature on the relationship between NR endowments and development outcomes is rapidly developing and has yielded some suggestive results. However, caution is needed in interpreting empirical results as providing clearly established causal mechanisms.
  • Initiatives towards more decentralised and participatory CPR management are an important part of current policy including in both the fisheries and forestry sectors. While there are important examples of success, doubts remain about the extent to which wider political and institutional constraints can be overcome.
The study suggests that the proposed work stream should focus on three broad areas:

  1. Supporting the development of diagnostic tools and approaches that can be used to inform and guide action, particularly at the level of CAS preparation.
  2. Development of models of CPR management, particularly in relation to the roles that external agencies can most effectively play in supporting policy and institutional reform and in relation to initiatives for more decentralised CPR arrangements.
  3. Joint global action to strengthen CPR – particularly around the agenda of institutional and policy development to support measures to address global market failures (for instance related to incentives to reduce deforestation) in a way that maximises the poverty reduction impact.

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