Last week saw the World Bank lowering its 2016 forecasts for 37 of 46 commodity prices, amid fears of further economic slowdown in many major emerging economies. Over the course of 2015, commodity prices fell 30.7 percent, with energy dropping 39.3 percent and non-fuel prices falling 19.1 percent, according to the IMF. This is grim news, especially for countries that are heavily dependent on natural resources. And yet despite the gloomy forecasts, some countries appear to be weathering the storm better than others.

Take Bolivia. With a GNI per capita of $2,220, the country heavily depends on natural resources. Gas and mining account for 74 percent of national exports, and 32 percent of fiscal revenues. And yet despite the declining prices and resultant loss in revenues, Bolivia’s economy held up well last year.

Kazakhstan, like Bolivia, was hit hard by the fall in oil prices, but has managed to waver the storm so far, thanks to its substantial foreign reserves. 

Mongolia and Zambia, on the other hand, suffered more significant slowdowns last year. Mongolia's growth in 2015 was at its lowest in over four years. The country continues to face challenges, weighed down by the fall in commodity prices and the slowdown in China, its main trading partner. In Zambia, economic growth in 2015 dropped to below 4 percent, the lowest since 1998 and the national currency collapsed following falling copper prices.

So what can resource-rich countries do to beat the resource-curse and better weather the cyclical nature of commodities markets? And how should development partners like the World Bank Group engage with their resource-rich country clients?

A recent IEG evaluation, World Bank Group Engagement in Resource-Rich Developing Countries: The Cases of Bolivia, Kazakhstan, Mongolia, and Zambia, looked at the experience of four countries with one common characteristic. All four have rich endowment with and dependence on non-renewable natural resources.

IEG's report identifies three inter-related areas that resource-rich developing countries consistently grapple with, namely the prudent management of revenues; economic diversification through finding growth and employment in the non-extractive sectors; and ensuring that the benefits of economic growth and revenues are widely shared within the society, contributing to human development, poverty reduction, and environmental sustainability.

Not surprisingly, management of revenues and economic diversification come up high on the list of findings. Resource-rich developing countries need to build up reserves during the upswing phase of commodity prices to counter the inevitable downward cycles. However, this calls for policy consensus across the political spectrum, something that can be difficult to achieve, especially when the commodity prices are high and so are the populist pressures to increase public expenditures, even when not economically justified.  At the same time, even at the upswing phase, extractive sectors may not generate much employment. Therefore, resource-rich countries also need to promote policies and create an environment conducive for development of  non-extractive sectors.

IEG's evaluation found, however, that the concept of economic diversification has been rather elusive for many governments as well as the Bank Group, particularly as far as precise definition and metrics are concerned. In fact, one of the most successful resource-rich countries, Chile, prefers to use the term "innovation" rather than "diversification" to describe its policies in this area. 

In all the four countries studied, the IEG report found that significant progress was registered in poverty reduction. However, all countries continued to grapple with inequality and a growing gap between urban and rural incomes.

The challenge for many of these countries is to design and implement the right human and social development investments. That means supporting better quality education and ensuring that social transfers are fiscally sustainable, for instance.

Some of the most important steps a government can take are focusing on the fundamentals: maintaining macroeconomic stability, investing in infrastructure, improving the business climate, and encouraging private investment.

Many of the report's findings and recommendations speak to the World Bank Group's role in working with resource-rich countries. The report notes that the main challenge for the Bank Group, especially when the prices are high, is how to stay relevant and competitive while maintaining honest and frank dialogue about challenges facing Resource-Rich countries,.

Overall, IEG's evaluation finds that the World Bank Group is well-positioned and technically equipped to effectively assist resource-rich countries particularly in implementing policies and strengthening institutions for prudent management of natural resources and revenues derived from their exploitation.

The report, however, recommends that the World Bank Group develops a consistent framework for engagement in resource-rich countries, one that is driven by the defining characteristics of these countries - their rich endowment with nonrenewable natural resources and dependence on revenues from their exploitation.

Read the full Report

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You write that: "Some of the most important steps a government can take are focusing on the fundamentals – maintaining macroeconomic stability, investing in infrastructure, improving the business climate, and encouraging private investment." Actually, the fundamentals are personal security, quality of life, education and health care. All other things, including those named above, are merely means to those ends. I know that WB realizes this, but I wish it would make it more explicit in all its writings. That could help WB to avoid much of the criticism it encounters. It would also help its economists to keep perspective and not put Intermediate Outcomes before Impact. Whether "Bolivia’s economy held up well last year" is relevant, but what really matters is how individual Bolivians experienced life last year. How the economy fared merely tells us how economically and fiscally sustainable the status quo is. It doesn't tell us about how the poorest decile got along, whether the education system was adequately funded considering available resources, or whether - arguably most important of all - the economy "held up" by operating in a way that, as an integral part of the wider global economy, is ecologically sustainable in the context of rapidly shrinking Andean glaciers.

Zambia has been independent for over 50 years. However, it seems not to have learnt to manage the adverse effects of the cycle of commodity prices. The economic diversification call goes back to the 1960-70s of the then ruling party, the United National Independence Party (UNIP). During that time most of the member countries of the Organisation for African Unit had a similar stance. There was an anti-colonial stance at the time. It is a call that we hear often when we are going through hard times. I hope this time that there will be more action than talk. Recently the African economies have been linking themselves to China. The challenges being faced by China should have been foreseen and are a wake up call for African governments. There is need not only to diversify but trade more within the African trade blocks. To improve the economic performance of African countries, there is also need to have good leaders (politicians as well as managers of industries), independent civil services and freeing the government institutions from fearing businesses connected to powerful politicians. Without good leaders who will observe principles of good governance, transparency and accountability, African countries would continue being under developed. There have been many civil service reforms across Africa but the service still under perform because of political patronage and appointment of political cadres to important positions. Though there are so called pro-poor development and public policies, the reality is different. The powerful lobby groups can get away, for instance, with corruption and including not paying or under paying taxes. The ordinary citizens cannot easily do that and do not usually get involved in designing policies; e.g. the removal of subsidies of the staple food or the abolishing of Windfall tax. Civil society is also weak and usually though vocal may not influence changes in government policies. It makes sense in time of higher prices of commodities to build reserves. However, the government tends to give concessions to foreign investors in major sectors of the economy in order to attract more foreign direct investment. Revenue Authorities also tend to be poorly managed and unable to manage collect appropriate revenues. There are still challenges of illicit flows of funds from Africa and an unmanageable informal sector and shadow economy. In the end its is the ordinary citizens and workers in the formal employment sector that bear most of the burden of government revenue. The challenge is to enhance fair revenue collection systems and also to build local entrepreneurs who can compete on the global market. The entire education system may also need to be refocused to produce innovative graduates and entrepreneurs. We need to focus on new areas of growing our economy including the emerging information industries. The current growing tertiary education sector seems to be galloping to produce a balloon of frustrated educated cadres; a time bomb. Most of the students tend to chase soft courses; i.e. humanity courses especially in business. There are, however, no corresponding new jobs to absorb the growing number of graduates from these new universities and colleges obtaining such qualifications. Even the employed graduates are getting more frustrated as they are obtaining more degrees and certificate without any corresponding rise in emoluments and career ladders. There are now many employees pursuing part-time studies. However, this does not mean an increase in productivity as a result of continuous education and workshops. A lot of workers are attending a lot of workshops but nothing continues to work or change in their work attitudes. Most of these employees are now professional students and concentrate more on their studies than work. Employers need to start evaluating the cost and impact of continuous education of these employees on productivity. The national debts will also need to be watched carefully and their repayments need to be factored in on any discussion of Zambia's future development. Zambia's new technocrats need to show that they are worth their salt. We now have of highly educated personnel in such institutions as the Ministry of Finance and its supported institutions. Lessons from the current and past economic crises, and the economic restructuring reforms of Zambia and other countries should be used to come up with new development programmes.

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