Resources of the community ... No ... not so quick

One would think that natural resources would be an asset of the community, but sadly, the rule of law may have preempted what seems like common sense so that the legal reality is something very different.

Not simply money

Resources are not simply money. Resources are many things. The most important are:

• Human resources, and
• Natural resources

• Organizational infrastructure
• Enabling environment
• Physical infrastructure
• Production equipment
• Working capital
• Money
• Knowledge

Resources

The resources are people, natural resources, infrastructure, material and equipment, financial resources and knowledge. For resources to get committed to development purposes there must be value adding and there must be a “return” to the owners of the resource.

Success in development needs resources. The world has the resources to achieve amazing success and development progress, but resources need to be managed so that there is economic value adding as a result of their use. It is time to end zero-sum development and replace it with initiatives that are economic value adding and benefit both the funding entities and the users. It is time to do development making best possible use of local resources in collaboration with needed outside resources.

Importance of local resources

The failure of development is due in large part to the failure to use effectively local resources. The value of local resources is well recognized and international business has made huge fortunes be exploiting local resources, but the business model has been all about the corporate bottom line, and nothing much about creating value from these resources in and for the host community.

It is possible for local resources to become the investment driver in local communities. External resources added on top of local resources can create huge wealth, and it is reasonable that this wealth improves the quality of life of the local community.

In the development space there has been a complete unlinking of these various resources so that resource use has been very inefficient and ineffective.

If we look at the resource situation from a global perspective, there are enormous resources. If we look at the way the resource flows are going on, there is a total disconnect between resources available and resources needed. This is a process problem. This is not a resource problem, at any rate from a global perspective.

If we look at resources in a community, there are likely to be some resources, but rarely all the resources needed to operate a “closed” economy successfully.

Resources are being wasted

Resources are an issue. It is not that there are not enough resources. There are lots of resources. It is just that resources are used in very wasteful ways.

And there is also a situation where assets that ought to be resources are liabilities simply because of the process and organization of development.

Development needs resources in order to be effective. But more important than the absolute amount of resources is the way they are used. Economic progress is a dynamic process, and a small amount of resource well placed will do more good than a massive amount of resources badly utilized.

There are four principal resources: human, natural, material and financial. It is possible to argue that these resources are abundant, but badly distributed. Certainly, it can be argued that the resources are not distributed in the optimum way for development progress.

This chapter addresses the issue of resources both from the perspective of resource availability as well as how resources are mobilized and allocated to priority works. The chapter explores ways in which available resources can be used to achieve maximum economic value adding and progress towards the goal of success in development. This chapter highlights the importance of all resources. Resources are not just money and financial resources.

What are natural resources used for?

In the short term, the world has an abundance of natural resources. The problem is that the world's resources are not being used to support economic value adding activities that benefit all the stakeholders, but only to benefit certain key stakeholders, especially top corporate executives, investors and often senior government officials and regulators. Even though the SOUTH has enormous natural resources they have not been used in ways to create economic value adding for the SOUTH. The development and investment process has suited those with poweer and in control, but not society as a whole.

How are human resources used?

The world has an enormous pool of labor, and over the past two decades there has been a trend for this to become one very large global pool. Education and training has improved over the years and the skills of these workers have improved substantially. The result is that there is now a very large pool of labor and now substantially surplus to business needs. If the classic market economy is applied, the outcome of this surplus is downward pressure on wages ... and this is what has happened bit by bit over the last two decades. Some workers are now earning more because they now have skills, but many others are earning less because the jobs are moving to low wage areas.

The worker wage pressure is an issue that needs to be addressed, and drives in part the design of the TVM framework of metrics.

Organizational infrastructure

The formal sector organizational infrastructure for success in development in the SOUTH is not strong. This includes government, the legal and regulatory frameworks and the banking sector and the local enterprise sector. But in spite of this NORTH business seems to be able to invest and profit when it sees opportunity for itself.

Physical infrastructure

The physical infrastructure in the SOUTH is generally poor and deteriorated. Enormous economic value adding would be achieved with major investment in infrastructure, but it is long term and should be part of an integrated program.

The material and equipment used for productive activities in the SOUTH is also limited, and in most cases old and dilapidated. The applies in all areas of the enterprise economy, but especially among small and medium scale enterprises (SMEs). Investment in incremental materials and equipment for production can have and enormous economic value adding impact.

Finance is limited in the SOUTH, but abundant in the NORTH. But investors from the SOUTH are scared about investment in most places in the SOUTH. In order to get comfort, the main vehicles for investing in the SOUTH are the paper of the World Bank and the similar regional development banks (RDBs), but this feeds into essentially low performance on-lending to the SOUTH. Most other vehicles for investing in the SOUTH are also committed to investment models that extract wealth from the SOUTH for the benefit of the investor without much economic value adding remaining in the host communities. Getting finance into the SOUTH in ways that are going to facilitate economic value adding sufficient to build the economies in the SOUTH and satisfy investors is going to be the way and is the challenge

Knowledge is a final element of resources in development. Knowledge is not just data, nor just information. Knowledge is part facts and part experience. The SOUTH has a lot of knowledge, and so does the NORTH. Up to now the NORTH has too much tended to ignore the knowledge of the SOUTH. And too much, in my view, the SOUTH has tried to bundle knowledge (technical and technology) with financing, and mostly has lost out on both.

Using resources for net value adding

The challenge is twofold. The first is to mobilize resources in ways that give satisfaction to those that own or control resources, and the second is to make use of the resources in ways that create “economic value adding” and enough surplus to pay for the use of resources.

In order to make the best use of resources and to generate the maximum of economic value adding in the SOUTH it is of importance to make use of resources in a well balanced manner. When the minimum of resources is used to the maximum of benefit, the economic performance of the global economy can be improved immensely. The best results are going to be achieved if the least amount of resource is consumed in net economic value destruction.

The resources are people, natural resources, infrastructure, material and equipment, financial resources and knowledge. For resources to get committed to development purposes there must be value adding and there must be a “return” to the owners of the resource.

Success in development needs resources. The world has the resources to achieve amazing success and development progress, but resources need to be managed so that there is economic value adding as a result of their use. It is time to end zero-sum development and replace it with initiatives that are economic value adding and benefit both the funding entities and the users. It is time to do development making best possible use of local resources in collaboration with needed outside resources.

Financial resources

Africa and the SOUTH needs investors that are looking for a high return on a small investment, and want their investment to be earning well for a long time. Africa and the SOUTH needs to get away from reliance on international investors who are looking for a big return on a big investment and an early and easy exit strategy.

There are enough financial resources in the modern world to finance anything that is low risk and economic value adding. The challenge is to create financing vehicles and the financial intermediaries that will make it possible for the capital markets to operate for the benefit of their investors and development at the same time.

It was said of the Rothschild Bank in the Victorian era that they had the best information in the financial community, and that this was the secret of their success. It is still true in modern times that information is key to development performance.

While manipulated information has the potential for scandal and crisis in the financial community, good information can be the foundation for a new era of success in development investment.

The pool of financial resources is substantial, both in the institutional capital market and among private investors and philanthropic organizations, but is not going to flow into socio-economic investment until there is the right system of metrics and structure so that the risk is low and the results credible.

Know-how

Know how is importamt. There is enough technical know how for development success to be achieved anywhere modern people with resources choose to work. Developing countries need technical support as well as investment.

Management

Good management of limited development resources should aim to focus the use of development resources where there can be the most economic valueadd, and therefore the most benefit for the host community and the local people. Good management is only possible when there is organization and structure as well as basic resources required.

Making the best use of resources

Why does the prevailing process waste resources? What results can be achieved when available resources are best used?