How can Extractive Resources Support Human Development - Research Paper Example

INTRODUCTION Extractive resources are the raw materials underneath the surface of the earth, such as metals, oil, gas, minerals and other aggregates from the earth. The industry that is involved in the operations and processes of extractions of natural resources from the earth is known as extractive industry. Extractive resources are obtained from the earth after discovering them in a specific place or region. There are a number of extractive resources scattered across the world. Majority of the extractive reserves are located in developing countries however, most of them are unable to utilize them due to insufficient resources. Extractive resources are also known as natural resources but these are the non-renewable form of natural resources. Major extractive resources include energy (oil, gas and coal), minerals (sand, gravel, stones, clay and shell) and metals (gold, iron, steel, aluminum, copper, zinc, lead and silver etc). For the extraction of all these resources different methods are used to obtain a pure form of energy, minerals and metals. Taking into account the nonrenewable nature of natural resources, extractive resources are intrinsically unsustainable monetary activities. The principle of strong sustainability obliges that current human activities do not dispense with future alternatives, would preclude mining as good option. The companies operating in extractive industry are working to explore natural resources in different parts of the world and are then extracting them to obtain its pure and useable form. Mining companies investigate for and extract minerals and metals including copper, gold, silver, platinum, precious stones, clay, gravel, shells, coal, iron, zinc and nickel. Once extricated, these assets are refined into materials for assembling, vitality creation or for immediate shopper buy, for example, gems. Large mechanical mining companies are ordered by their size, proprietorship structure and concentrate on particular minerals. Oil and gas companies investigate for and extract natural gas and crude oil, which are eventually refined and sold as transportation energizes and for power generation purposes. Extractive industry is researching aggressively to explore other types of extractive resources to ensure economic growth and community development in the long run (Wyse and Shtylla, 2007). All extractive resources are not available in every part of the earth and there are some specific regions around the world popular for certain types of extractive resources. For example, most of the Arab countries are blessed with oil resources. Similarly, most of the minerals rich countries are African countries whereas metal rich countries are Saudi Arabia, Guinea, Indonesia, Kazakhstan, Mexico, Peru, India, USA, Ukraine, China, Chile, Brazil, etc. Though, almost all parts of the earth have natural resources but the above stated regions are the blessed ones. A country with abundant reserves of extractive resources are linked to the fortunes of wealth, development, economic growth and community development by fulfilling their own needs and by exporting oil/gas/metals and minerals to countries that do not have enough resources. Extractive resources are considered as fortune for those countries that have proven reserves, however, these reserves are rapidly depleting and too much dependence on these resources can lead to several issues in the coming years. Although, extractive resources have a great contribution in human development, but unfortunately, its extraction process is lengthy and costly and is not affordable for many countries. The Extractive Resources And Human Development Extractive resources have been found beneficial for the humans in different forms such as for human development, community development, trade development, economic growth etc. for years, extractive resources has contributed aggressively in the well being of human however, these resources are expected to deplete due to its increasing use which is assumed as a potential threat for the human development in the coming years. The impact of extractive resources on human development in different sectors is as follows. Jobs and Career Development Opportunities One of the most important support of the extractive industry in human development is the jobs and career development opportunities. As it is stated above that majority of the extractive reserves are located in developing countries where economies are weak, unemployment is on its peak and many aspects of the country are waiting for development due to the lack of resources. Extractive companies are exploring extractive reserves in developing countries and are creating jobs and career development opportunities for the natives of those countries. Although, extractive industry is not labor intensive and it needs an experienced and skilled manpower, however, compared to other industries extractive industry employment offers a higher income. In this regard extractive resources can provide a better opportunity to the people to earn a better life for them and to improve their living standards. For example, during 2006 and 2007, entry level wages offered by Barrick Gold in South America were 130%-215% higher than the standard minimum wages of those countries (Wyse and Shtylla, 2007). Job opportunities in extractive industry motivate people to develop their career in this field and has offered them opportunities to become a crucial part of these companies. Potential workers are getting experience in the field of extractive resources and are also getting exposure to developed countries for career development. The demand for extractive resources is increasing rapidly and the work of extractive companies is also increased, which in turn create lots of opportunities for people in developing countries and it is expected that in the coming decade more people will get benefits from developing careers in this industry. To improve their operations, Extractive resource companies are investing in technical vocational training and tertiary education facilities in different fields. Such investments from the employers are increasing the skills and capabilities of potential workers to develop their career. Extracting companies are also investing in other sectors in the developing countries such as agriculture, transport, finance, small and medium enterprises and telecommunication etc., to reduce their risk of loss because extractive resources are nonrenewable resources and due to increase in demand the reserves of these resources are depleting rapidly. Additional to private sectors, extracting companies are investing in social and community interests such as education, health, sports, culture and environment to generate medium term benefits from them (Wyse and Shtylla, 2007). Economic Growth Extractive resources actively contribute in the economic growth of the countries, therefore, the presence of such resources in a country is considered as a big fortune. It has been observed that many developing countries have financed their development activities via resource extraction. Examples of such countries include Saudi Arabia, Dubai, Africa, China, Chile, etc. Extractive resources powers the global economy. It likewise helps significantly to the national economies of nations from which the energy, minerals and metal assets are extracted. while the macroeconomic effect of extractive resource industry is critical and as a rule, if not consistently, positive, the microeconomics effect extraction ventures is much more uneven, and could be extraordinarily improved if organizations acquire certain explicit policies and practices to stretch financial opportunities. Extractive resources are increasing tax revenues of developing countries that have enough extractive reserves and are also increasing their export potential. Extractive economies have great potential to grow compared to those without extractive resources. Extractive resources are contributing to the reduction of unemployment and poverty and are increasing per capita income, GDP and exports. For instance, in Nigeria, the extractive business helps 20% of the nation's GDP. Similarly, in Saudi Arabia, oil and gas resources are making 50% of GDP and 90% of earnings from exports (OPEC.org). The investments made in extractive resources are yielding a higher return making it an attractive industry for investors. On the other hand, the attractiveness of extractive resources for investors allowed governments to impose taxes on extracting companies to increase their tax revenues. The extraction of natural reserves reduces their dependencies on other countries that save a huge amount of money that otherwise they have to spend on importing such things. The increase in job opportunities increases the participation of the labor force and is reducing unemployment and dependencies on government aids. The expansion of economic opportunities in countries and communities where they work in the best interest of extractive companies. It can diminish their production costs, give coherence of supply and distribution channels for products and services, improve social permit to work, and alleviate danger and potential clash. At domestic level, extractive organizations produce a significant level of income for host governments as eminences, taxes and other profit-sharing programs. For instance, in 2005, Shell Group paid $18 billion in the form of taxes to different governments for the companies operations all over the world (Warner & Michael, 2007). The effective allocation of income streams from the extractive resources can fund public goods and services, for example, training, Education, health care, industrialization and infrastructure. Reduction in Poverty and Robbery Increasing job opportunities are offering ways for the people to earn a good living for them and for their families. This has brought out a significant reduction in unemployment and also in poverty and robbery. People are trying to exploit opportunities available for them in the industry of extractive resources and are also trying to get benefits from their work experience in the long run. The increase in per capita income encouraged people to spend openly in productive and social activities. Such an improvement reduced dependencies on government aids and allowed governments to invest that money in other productive sectors. Educational programs offered by extracting companies are also educating people towards social activities. The improvement of economic conditions of the countries are automatically improving the lifestyle of their residents, creating job opportunities in other sectors, health conditions, education and social life of people. An improved economic condition will also kick out the inflation and increases the value of national currency. All these things will automatically eliminate poverty and involvement in criminal activities (Warner & Michael, 2007). Improvement in Life Style Happiness and life quality have a direct relation with GDP per capita. An increase in GDP and per capita income automatically increases employment opportunities, labor productivity and opportunities to improve quality of life and social presence. People working in the extractive resources industry have opportunities to earn more than those who are working in other sectors because the minimum wages in this industry are between 130% to 215% higher than other sectors of the country. Higher earnings mean they have high power of spending amount on their basic needs and other goods and services necessary for an improved lifestyle. The improvement in GDP and national economy results in long run sustainability of rural towns, regional cities and remote communities. Government spending on development programs will also increase, which is vital to a luxury and improved lifestyle. On the other hand, people’s spending on education, sports and other social activities will also increase that will improve the level of awareness among people about their rights and about available opportunities. Savings and investments in small business will be increased by the improvement of quality of life that will benefit the country and the people in the long run. Human Capital Development Most organizations in the extractive business are involved in endeavors that enhance the wellbeing, training, education, experience, and aptitudes of their employees, business partners, as well as legal groups. As an initiative, many companies adopted hospital programs in local communities to subject-specific educational activities such as math, science, accounting and engineering to financing for stand-alone specialized professional training/vocational centers. Such community speculation programs normally fall in the domain of an organization's corporate citizenship group or establishment, at either the national or headquarters extent. Investments made by extractive firms in human capital development have a tendency to concentrate on particular expertise. In a few cases, they additionally target particular characteristics, for example, groups of indigenous people, youth and women. Diversified methodologies to limit improvement and incorporation won't consistently profit all fragments of the community. Extractive resources firms can possibly upgrade their effects by making monetary opportunities with a focus on the most unprotected segments of the productive community, for example, youth and women (Zarsky and Stanley, 2013). Support for developing legal infrastructure For effective operations in the extractive industry, it is vital to have a strong and safe environment of the region where a company is dealing with its current project. Unfortunately, developing countries are not able to get benefit from their natural resources, therefore, international extractive resource companies are operating there in search of mutual benefits. To have a firm and safe working environment, extractive resource companies are supporting developing countries to design and implement a more better and diverse legal and regulatory policies to effectively control and govern their extractive resources for the betterment of the country. For the purpose, the United Nations also developed a program named UNDP (United Nations Development Program) where they are helping developing countries to improve their legal infrastructure to get benefits from their extractive resources. It has been found that in many cases the discovery of oil or any other extractive resources raised domestic conflicts, political instability and economic downturn, therefore, to avoid such issues every country must design a reliable and realistic legal and regulatory policies in assistance with UNDP (Zarsky and Stanley, 2013). Indirect Jobs Opportunities The induction of the extractive resource project in a country offers a number of indirect jobs opportunities for the people of that country. For example, for the extraction of oil and gas the numbers of indirect job opportunities will also increase. Indirect jobs mean jobs that are not directly involved in the process of extraction. With a boom period of gas and oil extraction, the suppliers require more sales persons to sale their products, gas stations and petrol pumps will also hire more man power to increase their daily sales, the oil and gas pipeline construction companies will offer new jobs and some other opportunities will be there for local people such as in pipeline transportation companies, petroleum refineries, petroleum and petroleum products wholesalers, lubrication and grease producing companies etc. With the creation of these indirect jobs opportunities, extractive resources support human development and can help jobless people to live a better life. LIMITATIONS OF THE EXTRACTIVE RESOURCES SUPPORT TO HUMAN DEVELOPMENT Everything has a dark and bright side therefore; extractive resources support to human development has also some limitations. Because of these limitations, it is hard for extractive resource companies to provide a sustainable support to human development. The first and largest limitation of the contribution of extractive resources in human development is its non-renewable nature. Nonrenewable resources are called fossil fuels that are not sustainable sources because the formation of fossil fuels takes billions of years. On the other hand the demand for energy obtained from such resources is high that leads to a rapid depletion of these resources. In this regard the human development support from extractive resources is not sustainable and it is expected that in coming few decades such resources will be depleted completely. At that time the process of human development from extractive resources will reach to its end. People and governments will once again confront to issues like unemployment, economic downturn, poverty, reduction in social activities, poor quality of life and an overall poor economy. The end of the support of extractive resources to human development will restart the cycle of development. The focus of the extractive industry is mainly on the extractions of the resources from proven reserves while the need is to focus on exploration of extractive resources in such countries that remained untouched (Zarsky and Stanley, 2013). Second issue with the extractive resource sustainability is its excessive use in developed countries and poor infrastructure in developing countries where extractive resources require extracting properly. The poor legal and regulatory issues of developing countries are restricting extractive companies (both national and international) to operate in such countries or to invest in human development in these countries. Because of poor legal and regulatory infrastructure, most of the natives of extractive resource rich countries are still living below the poverty line with no access to their basic needs and rights. Corruption is another biggest limitation in the path of extractive resources support to human development. Corruption has emerged rapidly in the extractive resources industry and some political bodies are using their power to get personal benefits from such resources despite considering the benefits of the overall country. They are making settlements with extractive companies and are making black money. In every country there must be a department of fair people whose responsibility will be to deal with extractive companies in accordance with government policies. Unfortunately, transparency is the biggest issue of extractive industry that is resulting in underdevelopment, domestic conflicts and economic downturn. Governments have no proper policy or accounts of keeping records of the royalties and tax revenues of general public generated from extractive resources and even they do not have a record that how the revenues are spent on human development  (Bebbington, 2012). Lack of linkage between foreign investors and local industries is also restricting extractive resources to support human development in developing countries. Every country has its own extractive industries, but unfortunately, extractive industries in developing countries are not able to bear the expanse of extracting resources from the earth. Extraction is a lengthy and complicated process that needs to have full monetary assistance. Lack of resources for extraction compelled such countries to import such products from other countries at a higher cost without having any improvement in economy and human development. Linkages are long term contracts between international investors and local independent firms in the industries. Linkages have been found effective in economic and human development, technology transfer etc. (Bebbington, 2012). Development ventures on a larger scale in non-renewable natural resources (e.g. oil and gas, mining and drilling) have various health issues. Some of the impacts of these issues are immediate outcomes of extractive activities, such as workplace accidents, deaths, injuries connected with development initiative, however, there are likewise indirect cases that are the aftereffect of progressions in the physical and social environment after the introduction of a certain project. A change in the physical and social environment leads to several issues related to health, environment, cleanliness etc. Extractive industry needs to act in a way that exerts a minimum effect on the physical and social environment. There are many people who have a negative perception about the impact of extractive resources for the human development and it is the responsibility of the extractive industry to improve its image in the eyes of general public. Recommendations The extractive resource industry is highly beneficial in generating wealth for a country with its natural resources and it can better support human development compared to any other sector/industry. The key players of the extractive industry should understand the power of extractive resources and the need of exploration. Extractive resources are nonrenewable resources, therefore, continues use of these resources will soon reach to an end. On the other hand, the formation of fossil fuels or extractive resources takes billion of years and the end of available reserves means the end of human development. UNDP and other big organizations of extractive reserves should focus on the exploration of new reserves of energy, minerals and metals to guarantee a sustainable human development. Additional to the exploration of new reserves, such industries should also reduce its dependency on extractive resources and should explore renewable energy sources like water, wind and solar light/heat etc. With a blend of renewable and nonrenewable resources, extractive resources industry can better support human development in different walk of life. The revenues generated from extractive resources should be invested in the long term, but productive ventures to get a higher output/return. Apart from the above stated human development examples; extractive resources can support human development in some other ways. Most of the extractive resource companies are focusing only on the development of their employees in terms of skills and knowledge. They instead should focus on the development of communities by offering them free access to institutes to learn new skills and knowledge to utilize them in the future. Corporate social responsibility should be a must have policy for extractive resource companies because in this way they can eliminate the negative perception of people about this industry and can control the negative impacts of extraction on human development (Lungu and Mulenga, 2005). Conclusion This report explored that there are a number of ways with which extractive resources can support human development in the short term because the demand for energy and products of extractive resources is high as compare to the available proven reserves and extraction projects. Different aspects of human development through extractive resources has been discussed in the report which clearly showed that in the development of a community and society, extractive resources can contribute highly as compare to any other industry. However, the need is to explore a sustainable human development via extractive resources. There are some limitations of extractive resources that can harm human development in the long run, but if the key players of extractive industry design some effective strategies they can easily overcome those limitations. Developing countries have some huge reserves of extractive resources, but have lack of proper infrastructure and funds to extract natural wealth from the earth. The overall industry of extractive resources has potential to support human development, but it needs to have proper strategies, legal and regulatory infrastructure, control over corruption, CSR value and a proper infrastructure for generating and spending revenues. There is no doubt in the contribution of extractive resource to human development, but the question is how this support could become sustainable. References Bebbington, A. (2012). Social conflict, economic development and the extractive industry. 1st ed. London: Routledge.  Lungu, J. and Mulenga, C. (2005). Corporate social responsibility practices in the extractive industry in Zambia. 1st ed. Ndola, Zambia: Mission Press. Warner, Michael. (2007). Community Content: The interface of community investment programs with local content practices in the oil and gas development sector. Overseas Development Institute (ODI): London. Wyse, H. and Shtylla, S. (2007). The role of the extractive sector in expanding economic opportunity. Harvard University: Economic Opportunity Series, pp. 8-52. Zarsky, L. and Stanley, L. (2013). Can Extractive Industries Promote Sustainable Development? A Net Benefit Framework and a Case Study of the Marlin Mine in Guatemala. Environment & Development, 1, pp.131-154. Read More