Why Some Countries Fail to Negotiate Fair Natural Resources Contracts

04 Feb 2014

Drawing insights from new institutional economics, this paper proposes an analytical narrative and framework to examine differentiated levels of beneficiation. The framework hypothesizes that the varying degree of beneficiation  over  time  and  space  is  not  the  result  of  ignorance  or accident   but   of   deliberate   choices   by   government   after   careful examination of potential cost and benefits. Building on the agency theory, it proposes four hypotheses that high levels of beneficiation seem to be correlated with strong legal and political oversight over discretionary contract negotiations. The first hypothesis (H1) proposes that Very low level of beneficiation but high level of corruption and uneven development outcomes; H2: Fairly good level of beneficiation but uneven development outcome across space and different political constituencies; H3: Fairly good level of beneficiation; high levels of corruption; strong patronage/rent seeking and probable slow improvement in development; H4: High level of beneficiation and strong sustainable development outcomes.


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