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The Hague International Model United Nations Qatar 2017 | 24 – 27 of January 2017
Forum: General Assembly 2
Issue: Ensuring economic diversification of natural resource dependent nations
Student Officer: Amna Salatt
Position: Deputy Chair
Introduction
Managing natural resources is a very critical task that many developing countries currently face.
The term natural resources refers to agricultural and mineral assets, as well as use of water and forests.
Examples of natural resources are metals from the Earth such as silver, gold, and iron. A very crucial
natural resource that we are heavily reliant on is fossil fuels, due to the high energy content and
affordability.
The world as we know will no longer be the same when we, as humans, take full advantage of
our natural resources to the point that they begin to dwindle and deplete. Non renewable natural
resources are used for a country’s economic gain through the means of global trade and local use. This
means that the resource cannot be readily replaced naturally on a level equal to consumption, leaving a
decrease in the abundance of the product.
Fossil fuels are not considered to be sustainable nor renewable due to the time period that they
need in order to form. These nonrenewable resources may take billions of years, in order to become
desirable for humans to use. Nevertheless, many nations are over dependent on the benefits that natural
resources present, which leads to a tendency of concentrated production and revenue patterns while
other sources of income are dispersed throughout the economy. Although natural resources will
inevitably be used in some form in order to keep an economy alive, there are circumstances in which it
could lure a nation into a volatile state of a selective economy.
Historically, there has always been a method of exchanging natural resources, also known as
bartering. However as skills and technology evolved, countries were able to develop products and
services, allowing a range and variety of income to enter the economy. Thus, diversified economies
emerged into the world while other less developed nations were left reliant on natural resources to
survive. Countries that have an abundant supply of these resources tend to use them for economic gain,
exporting their minerals all over the world in exchange for revenue. However, countries tend to be more
dependent on their resources because of the different ways they can be used. Minerals such as fossil
fuels and coal are two major ways of generating electricity across the world, leaving the nation’s
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economy reliant on these resources, not only due to global trade, but also national handling. It is globally
understood that using nonrenewable resources such as fossil fuels, lead to environmental impacts
contributing to global warming, causing many organizations to develop alternative energy sources that
decrease our carbon footprint.
The term ‘Dutch Disease’ was used to describe the struggles of the Dutch economy. It is
currently used as a reference to economies that are over dependent on natural resources. Among the
frustrations of a developing economy, the resource curse brings misery and insecurity to a country and
its people. This perilous outcome is measured in poverty and deprivation- often in countries with large
resource endowments. The correlation between natural resource dependency and authoritarianism is
apparent. As Larry Diamond of Stanford University has observed, “there are twenty-three countries in the
world that derive at least 60% of their exports from oil and gas and not a single one is a real democracy”.
Eliminating a crucial link of responsibility between government and citizens causes a reduction in tax
activity and allows better social services to be delivered to the nation effectively. Improvements in
facilities and services are considered to be a major advantage, however due to the overwhelming wealth
generated, corruption seems to be an inevitable route. Together, they consolidate the control and
authority held by regime supporters and the elitists, sharpening income inequality. The Middle East is a
consistent example with its long history of oil rich land; Saudi Arabia being the perfect example.
When a nation discovers abundant resources such as large oil reserves, it begins to target a
sector that is guaranteed to become a high income industry. This leads to workers transferring from one
sector to the resource heavy sectors, resulting in higher wages given by the government. Following the
discovery of huge resource reserves, the Dutch disease has a paradoxical impact on an overall
economy. With countries investing in a specific sector, natural resource revenues allow the exchange
rate to increase, decreasing the competitiveness in other sectors of the economy. Ultimately this leads to
a sharp rise in foreign currency, leaving the country’s other products to become less price competitive on
the export market, making the national currency of a country to significantly increase in value. Industries
such as the manufacturing industry begin to suffer. Resulting in a negative impact on the economy,
making product prices to decrease in value, leaving agricultural and manufacturing sectors
underdeveloped, specifically during the ‘boom’ period for resource based economies. Commodity-rich
countries face many challenges during this time. During the 1970s to the 1980s, almost 97 developing
countries that exhibited a high ratio of natural resource exports to GDP had a low growth rate.
Natural resources bring a somewhat sense of security, however the results Dutch disease cause
slower development rates, inequality, and sometimes a higher percentage of poverty, leading the country
to eventually become insecure. Stagnant growth and economic contraction are the results of this
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‘resource curse’. Rather than contributing the advancement of infrastructure, social peace and equality,
this curse has often brought hardship and tyranny to these nations. A diversified economy shows a clear
state of operating different revenue streams as well as providing the nation with a sustainable path for
development since they are not heavily reliant on a specific source of revenue.
Definition of Key Terms
Natural resources
Natural resources are materials and substances such as fertile land, minerals, bodies of water and
forests. Minerals include silver, gold and iron, which are a long term result of plate tectonics. These
resources are usually used for economic gain.
Non renewable resources
Usually formed from organic carbon material that is compressed and heated over billions of years to
transform into crude oil and natural gas. This also refers to metals from the Earth such as gold, iron
and silver, which are formed due to long term geological processes.
Resource curse
When a country has an abundance of natural resources and experiences stagnant growth by
focusing on a single industry.
Dutch Disease
An economic term used to describe the negative impacts a country develops when there is an
increase in the value of their currency and hurts competitiveness in non resource sectors. It is
usually in correlation with the discovery of large natural reserves.
Contraction
A period in the business cycle when the economy as a whole is in decline
GDP
Gross domestic product is the monetary value of all finished goods and services within a country in
a particular time period.
Recession
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Also referred to as an ‘economic slump’, when overall activity in an economy is in decline, lasting
more than a few months. It is noticeable in industrial production, employment and wholesale retail
trade.
Volatility
This refers to the uncertainty or risk about the changes in a security’s value. High volatility indicates
that security can spread over a larger range, resulting in the price of the security to rapidly change
over a short amount of time.
Background Information
Natural capital is another term for renewable and non renewable natural resources that provide
revenue and benefits to a country and its people. There are different types of natural resources, such as
oil, gas, land, bodies of water, and minerals. The benefits that are presented from natural capital include
food, energy, medicine and raw materials to be used in further manufacturing processes as well as
benefits that are not obvious, such as climate regulation, pollination and recreation. There are other
forms of generating capital, such as financial, manufactured, human, and intellectual capital, however
the consumption of natural resources is increasing year by year. With 1.9 million barrels per day
increase from 2015, nearly double the historical average, which is 1 mb/d in just the oil industry alone, it
is clear that we have become more dependent on our depleting natural resources.
It is quite cleat that dependence on natural resources is inevitable. However it becomes
problematic when a country is entirely focused on a single resource such as oil or gas, which can result
in slow economic growth rates and poverty. The “Dutch disease” is a paradoxical situation, which occurs
when countries with an abundance of non renewable natural resources experience stagnant growth. The
cycle occurs when a nation entirely focuses on a single industry while neglecting other sectors. This
process consists of foreign powers investing in the natural resource sector of the economy, therefore
raising the inflow of foreign currency. This cycle hurts competitiveness in non resource sectors by raising
a country’s exchange rate therefore resulting in other sectors being underdeveloped, leaving an
economy to entirely rely on natural resources. Consequences include volatility related to commodity
prices, which specifically affects weak state economies and other non resource industries (agricultural
and manufacturing) during boom periods. Angola is an example of an oil and diamond rich country that
despite having the world’s highest growth rates from 2005 to 2010, scored a low 0.49 on the human
development index.
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Diversifying an economy is vital to long term economic growth, however it is extremely difficult for
resource rich countries that remain increasingly reliant on natural capital usually generated by oil
production or mining. Diversification will support the economy in many ways, on a national and
international level. Firstly, it will reduce exposure of economies to volatility in uncertainties when it comes
to the global market. Secondly, it will help create job opportunities in private sectors that are needed to
engage the younger population into the workface. Thirdly, it would assist the country to increase
productivity and develop a sustainable economy. These benefits ensure a country’s security in
maintaining sustainable growth, decreasing dependency on natural resources.
Major Countries and Organizations Involved
Angola
The nation had the fastest growing economy, reaching 20% in 1995, however decreasing over
the years to around a 3% annual growth. Angola’s main generation of wealth is derived from oil, which
makes up more than half of all its exports. However, the country has an abundance of other natural
resources, such as iron ore, manganese and diamonds. Due to their extensive diamond reserves, it is
the country’s second largest inflow of foreign revenue. The country also focuses on their mining sector,
which has encouraged a boom in construction, allowing banking and telecommunication companies to
assist the growth of tourism. Many industries are left undeveloped, such as manufacturing, with limited
factories that generally process food such as sugar, beer and fish. Their agricultural industry is struggling
due to the land mines scattered from war, maintaining a serious threat to farmers, leaving many areas
untouched due to the danger that may arise. Despite their growing economy, companies or individuals
retain the majority of wealth, with little being invested back into their nation. Around 55% of the nation
remains below the poverty line, surviving in vast slums and managing on less than a dollar a day.
Gulf Cooperation Council
The Gulf Cooperation Council consists of Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the
United Arab Emirates. As an oil rich region, they possess about 54% and 40% of the world’s
conventional oil and gas reserves, as well as large undiscovered reserves. These natural resources
have played a critical role in the advancement of each respective country, probably nowhere else have
these resources played a critical role as much as in the GCC. The gas industry will continue to expand
immensely, due to the gradually growing need, as well as the increasing substitution of gas as a primary
fuel in cases of power generation across the globe.
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The economic boom has led to rising income per capita levels and therefore increasing energy
consumption and demand. Some of the GCC countries rank among the highest energy consumers per
capita worldwide; the World Bank data on energy consumption (kg of oil equivalent per capita), shows
that in 2012, Qatar ranked as the number one nation with the highest energy use, while other countries
in the region ranked alongside in the top listed consumers. However with the significant decrease in oil
prices, and decrease in the governments’ revenue, the sustainability of oil and gas consumption is highly
questionable in the GCC region.
United Nations Industrial Development Organization
In many developing countries, specifically the less developed countries, the population often live
in a subsistence economy without the opportunity of education on industrial skills and services which
results in poverty and persistent unemployment. Therefore, entrepreneurship allows billions of men and
women living in rural and urban areas to achieve social and economic mobility; transforming their
economies and enhancing sustainable development. The United Nations Industrial Development
Organization supports the investment and technological development using entrepreneurship
development. They provide services to improve business policies for the private sector, supporting the
creation of productive services and capacities. In addition, the United Nations Industrial Development
Organization (UNIDO) assists the development of entrepreneurial culture and skills through the
improvement of public services in order for businesses to form a rewarding environment for
entrepreneurial actions and achievements. This practical entrepreneurship curriculum is introduced at
secondary school and training centers and institutions, particularly targeting the youth before entering
the workforce. Training includes elements of ICT; teaching basic entrepreneurship as well as practical
experiences using advanced technology, therefore preparing the youth for market and workforce
requirements within a networked information society.
Venezuela
The Venezuelan economy largely depends on oil exports. With oil prices at an all time low, the
economy is struggling to grow. The economy shrank 7.1% in the third quarter of 2015 alone, according to
their government. It has continued to shrink for seven consecutive quarters since the start of 2014. With
inflation on the rise to 141% over this year, the country is doomed and is struggling with the economic
meltdown that seems to be inevitable. The IMF predicts inflation will rise to 204% by the end of 2016.
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Timeline of Events
Date
Description of event
Japan attacks and seizes Manchuria without government’s consent in order to
1931
ensure a steady supply of natural resources.
1938
Oil found in Kuwait
Persia nationalizing Anglo-Iranian Oil Company and taking over oil installations.
1951
Overall struggle to nationalize Iranian oil.
Discovery of large natural gas field in Groningen, Netherlands. Eventually hurting the
1959
competitiveness of the Dutch economy, referred to as ‘Dutch Disease’.
Nicaragua files border case against Honduras, claiming that international law gave
1999
them the right to “explore and exploit” natural resources.
10, Dec 2005
China and Portugal vow to increase their economic cooperation in resource rich
former Portuguese colonies in Africa.
Highest court in the UN grants Honduras sovereignty over four Caribbean islands
2007
due to the decades old dispute with Nicaragua.
13, Oct 2009
China and Russia sign a framework to ensure a steady flow of natural gas to China.
Relevant UN Treaties and Events

Millennium Development Goals- Ensuring environmental sustainability

Unilateral economic measures as a means of political and economic coercion against developing
countries, 22 December 2015 (A/RES/70/185)

Transforming our world: the 2030 Agenda for Sustainable Development, 25 September 2015
(A/RES/70/1)

Towards a New International Economic Order, 19 December 2014 (A/RES/69/227)
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
The United Nations in global economic governance, 9 July 2013 (A/RES/67/289)
Previous Attempts to solve the Issue
The
seventh
Millennium
Development
Goal
revolves
around
ensuring
environmental
sustainability, with the target of incorporating the principles of sustainable development into every
country’s policies and introducing new programs, as well as reversing the depletion of natural resources.
The achievements of the seventh goals include; decreasing the net loss of forest cover in recent years
due to a slight decrease in deforestation, naturally expanding forests in some countries. Although
deforestation remains problematic in many regions, it was reported that net loss in forest cover reduced
from 8.3 million hectares annually in 1990, to 5.2 million hectares annually within 2000 to 2010.
However, Asia experienced a net gain of 2.2 million hectares from 2000 to 2010.
Norway managed to decrease the threat of natural resource reliability by emphasizing on building
human capital by investing in education, raising the percentage of labor force participation and assisting
in productivity growth. As a result, human capital is now 82% of Norway’s national revenue, with just 7%
for petroleum. They have also invested in projects and organizations abroad, and gradually bringing in
their wealth. In addition, they have developed multiple export bases including seafood and aluminum.
This sovereign fund is referred to as the Government Pension Fund in Norway.
The State Oil Fund of Azerbaijan was established on the 29th of December 1999 as a long term
program which envisioned the use of increasing oil revenues in methods that would create sustainable
development. The long term development program focuses on the mobilization of domestic products of
the nation to enable them to be as efficient and beneficial as oil resources. The fund focuses on the
attraction of foreign investments and the establishment of multi operational export systems as well as an
efficient management system for revenues.
Possible Solutions
Reducing the threat of natural resource dependency can be combatted using different methods.
Slowing down the appreciation of the exchange rate by boosting the competitiveness of multiple sectors,
instead of focusing entirely on one. This method can be regulated by laws and legislation, making it
compulsory for there to be a certain percentage of laborers in a certain industry, therefore allowing the
workforce to be spread out across all sectors of the economy. Using laws ensures that there are strict
procedures in place to guarantee the productivity of all sectors, which will decrease the chances of the
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country reaching stages of the resource curse. Ideally, putting laws and legislations in place will allow all
sectors to create a path for a diversified economy to emerge.
Sterilizing the boom revenues ensures that the revenues do not enter the country at the same
time, all at once; instead, countries can save some of the revenues abroad in investments and special
funds and gradually bring them into the economy of their country; allowing the revenue to be saved for
future generations. Investing in the nations education will allow the youth to achieve social and economic
mobility through the advancement of human capital, providing an increase in competitiveness of multiple
sectors.
Another method is to create a foundation of skill based education among schools and learning
centers, in order to unlock the potential of the younger generations. Therefore, this will access a service
based sector in the economy that does not rely on natural resources. There are however other sectors,
such as tourism (and other generally tertiary sectors) that are also beneficial to a government.
Investing in renewable resources, such as solar and wind power will significantly decrease
dependency across the globe as well as helping the environment in terms of climate change. Ideally,
natural resource capital will follow the route of climate change policies, advancing as climate change is
being combatted, which leads to diversifying the nation’s economy.
However, the secret to diversifying the economy and improving governance in natural resource
rich countries, is to create a link of cooperation between three extremely important groups: international
financial institutions, private sector companies, and capital exporting companies. There is a crucial role
to be played by business investors and the government, on a national and international level. Financial
institutions include the World Bank, the International Monetary Fund, and the European Investment
Bank.
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