Natural Capital, Resource Dependency and Poverty in Developing Countries

  A substantial proportion of the population in low and middle-income countries is concentrated in marginal areas and on ecologically ‘fragile’ land, such as converted forest frontier areas, poor quality uplands, converted wetlands and so forth. This “dualism within dualism” pattern is symptomatic of a process of resource-based development that often perpetuates rather than alleviates problems of rural poverty and resource degradation. Development in low and middle-income economies is accompanied by substantial resource conversion that leads often to benefits that are inequitably distributed. Moreover, such problems are exacerbated by government policies that favor wealthier households in markets for key resources, such as land. That is, the abundance of land and natural resources available in many developing countries does not necessarily mean that exploitation of this natural wealth will lead either to sustained economic growth, widespread benefits or substantial rural poverty alleviation. The increased concentration of the rural poor in marginal land and resource areas continues, and this in turn will generate the conditions for additional resource conversion through a process called “frontier resource expansion”.   

If this “vicious cycle” is to be reversed, there are essentially two roles for policy reform within developing economies. First, specific policies must be aimed at overcoming the structural features of “dualism within dualism” in resource use patterns. Second, policies must also be introduced that improve the overall success of resource-based development that is accompanied by frontier land expansion. Specific policies include reform of land, tax, credit and other economic policies that generally reinforce the dominance of wealthier households in natural resource and land markets and promote the speculative investment in these resources as tax shelters. Specific investments must overcome the under-investment in human capital in rural areas, particularly by those poor households concentrated on fragile land, who must also be targeted with investments in the agricultural sector to provide effective credit markets and services to remote areas. Better integration between frontier-based activities and more dynamic economic sectors means a greater commitment to promoting “agro-industrialization” generally, as well as improving the productivity of frontier lands and resource-based systems.