Resources are an Asset

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?

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Getting Data About Resources

Data about resources not going to be easy

Getting data about resources may not be easy. The key is to get as much data about resources in the community as possible, and to have these data organized so as to have some utility. A lot of personal and corporate wealth has been accumulated because there has been misinformation about resources … making data about resources transparent may not be popular!

About Local Resources

People are the most important

A reminder about people

The role of people was highlighted in the previous sector … a reminder that people are the key resource for progress and success. People … the human resource … are absolutely central to everything. People are the reason why a society exists, people are the society, and people are the resource that may be used to produce much of what is valuable for society. Without people … what is the point? But with people there can be goals that are worth achieving and a resource that helps get to the goal.

People need other resources … and must get organized so that the critical resources can be mobilized.

Organization is a resource

Success is determined by the ability of people in the community to organize and get resources deployed for the benefit of the community … to build value for the community. Organization is very important … it gives a framework for doing things. Organizational structures and the framework of law and regulation are enabling resources or constraints. Organizations are a key to making it possible for all sorts of resources to be mobilized and used in an effective way.

Natural resources

Natural resources are important … natural resources are enablers of activities that have value, or the natural resources, or lack of natural resources may be a critical constraint. Nature … the physical environment … is a key determinant of what is possible. Getting organized with some planning makes it possible to use natural resources in ways that benefit the community.

Production resources

Material resources of various sorts are important … in many cases machinery and equipment, vehicles, etc. are needed to have a productive society. The per capita use of energy has been used as a proxy for progress … as a proxy for the amount of machinery being used.

Infrastructure

Infrastructure is a resource … again, the infrastructure is another determinant of the productivity of the community.

Knowhow

Knowhow is important and it may be associated with people or it may be associated with organizations. Knowhow can facilitate progress or it can constrain progress. Education and training are activities that helps to build knowhow and the capacity to do things.

Money … loans and credit

Money helps … but money in a vacuum does nothing.

Resources are another way of thinking about means.

Success is a function of people … and how people organize themselves so that the resources that are available get used for the benefit of society.

Analysis About External Resources

Using external resources may be very bad

Who gets the benefit?

The use of external resources has the potential to have bad outcomes for very many reasons. Most external resources come with conditionality whether it is simply about how resources are to be used, or whether it relates to the way the resources made available are to be repaid.

ODA performance is appalling

Too much of the wrong measures

Official Development Assistance (ODA) is appalling … but the institutions engaged in the funding and implementation of ODA have been able to avoid any accountability for the appalling performance by “spinning” the data so that tiny progress is accorded an inordinate amount of PR and hype.

World Bank and the disbursement proxy

The World Bank has used disbursement as a proxy for progress in its projects for most of the past fifty years. This is an easy number for the World Bank to calculate … but that is about the only advantage of using this as a measure of anything.

Many ODA agencies use activity as proxy for impact

Many ODA agencies use activity as proxy for impact, and this is almost as bad as disbursement. In order for there to be development progress, there have to be development activities … but progress, that is impact on the community, may or may not come from activities. Reasons for this may be simple or complex … it does not really matter. If the goal is progress or impact on the community, then this is what should be measured.

Malaria

Since 2000 there has been a rapid scaling up of the fund flows for malaria control interventions. By 2008 the annual fund flow might have been as much as $2 billion with only minimal performance reporting about these fund flows. One statistic that has been widely used is the “bednet coverage achieved” … a measure of activity, and not a measure of impact. What is worrisome is that the link between bednet coverage and reduction in the burden of malaria is based on rather small studies with quite mixed results. Worse, the studies ignore the potential side effects of the emergence of resistance to the active chemicals over time and the cost of the program over time. Malaria control performance ought to be based on the cost of the interventions over time and the value of the malaria burden reduction over time … and in this light the spending to date has performance has probably been very weak.

Foreign direct investment (FDI)

Foreign direct investment brings an inflow of investment, brings an increase in jobs, brings some improvement to infrastructure, brings perhaps some improvement to health and education … but at a price. The price is that the investment is used to exploit something of local value like natural resources (for example timber or minerals) which are finite and eventually are depleted. The local employment remuneration is usually very small compared to the value of the exploitation of the resources and small relative to profits that are exported from the area. In some cases … too many … the exploitation leaves massive long term pollution that is ignored totally in the initial investment proposal presentations. The improvement in infrastructure is usually modest … or to the extent that it is significant mainly of use to move exploited resources out of the area. Social welfare assistance is usually small compared to the scale and value of the resources being exploited.

The business model that has been used for Western FDI for the past fifty years has been almost all bad … worse, in fact than much of the mercantile investment of the colonial era. The modern corporate FDI may, in fact be described best as corporate colonialism.

Humanitarian relief

Official Development Assistance (ODA) has not grown as fast as humanitarian relief during the past three decades … it is more “popular” with donors and easier to get taxpayer support. But it is rarely structured to support a development agenda and merely serves to help people survive rather than being part of an agenda to help people to progress.

The best way to describe the humanitarian relief sector is to say it is a global economic welfare system … and sending all the wrong signals to developing countries now for about 60 years.

Donor fatigue has been a problem for a very long time … and donors move on to something more fashionable or more suited to donor country taxpayers' fancy rather than staying with funding initiatives that are good but “boring” and might possibly get result and delivery serious progress. Good development is long term … in fact inter- generational. Nothing of sustainable significance can be achieved in a two year time span … or even five years.

The project form of organization is one of the core problems of the ORDA sector. There is little that is right about this form of organization for development. The project form of organization has its history in the building of large civil engineering works likes dams, canals, railroads and highways … but is totally unsuited for support to health, education and small-scale agriculture.

Worse the project is a vehicle for fund control by donors by-passing the local Ministry of Finance that ought to be providing oversight control to funds flowing through government into projects. Whatever happened to the idea of “single treasury account” for the control of government moneys?

Projects that are funded by outside agencies like the World Bank, USAID and others usually have employment terms that are way better than the local civil service … and totally unaffordable within the local economy under non-project circumstances. This makes it easy to recruit good staff … but what happens at the end of the project. The international project staff walk away and go on to another project somewhere else. The local staff become unemployed … and likely “mad as hell”!

Problems With Rule of Law