Natural resource rents are the revenues that a country earns from the extraction of a natural resource after considering the cost of extraction of the resource. Included in this category are oil rents, natural gas rents, coal rents, mineral rents, and forest rents. These revenues are called rents since the product is not manufactured, but just extracted. Since their supply is limited, these natural resources command high returns. Countries may allow international commercial enterprises to exploit these resources for which they are compensated in different ways, and most of them retain sovereign rights over their natural resources. Natural resource rents contributed 3.7% of the world GDP in 2009.
Countries with High Natural Resource Rent Incomes
Many countries are heavily dependent on the revenue from natural resource rents, as it accounts for a large portion of their Gross Domestic Product (GDP).
Kuwait's oil rent changed it from a desert state to a modern state. It used its revenues to modernize and provides its citizens essential services such as free healthcare, education, and social security. However the exploitation of oil was done in an ad hoc fashion and poor government policies and subsidies that have affected its efficiency. In the last few decades its economy has therefore deteriorated.
Oil and gas rents give the Republic of Congo 48.2% of its revenue. The governance is poor with no control over corruption, so it has suffered more from the 'curse of resources'.
Oil rents account for 43.3% of Equatorial Guinea's GDP. Though its per capita income was $35,000, the highest in Africa, 75% of the population lived on less than the equivalent of US $700 Dollars per year. The inequality has been created due to corruption, and an inefficient autocratic government, where the revenues was used more for armed conflict. Moreover they have also damaged the environment.
Iraq has 9% of the world's oil resources, much of which is not yet used. Furthermore, it has phosphate rock mines that are also one of the largest in the world. Together its two resources are worth nearly 16 trillion dollars. The natural resources rents contribute 41.5% of its revenue.
Saudi Arabia is rich in oil and gas, and accounts for 41.1% of its GDP. It has 20% of the world's stock of oil, and its gas reserves are the fifth largest in the world. Together these two natural resources are worth 34 trillion dollars.
Mineral rents from gold, bauxite, phosphates, lead, zinc, and nickel give the Solomon Islands 41% of its revenue.
The Democratic Republic of the Congo (DRC) has minerals worth nearly 24 trillion dollars. DRC is a major global supplier of copper, accounting for 14% of its global output, as well as coltan (70% of global output), diamonds (34% of global output), and gold. Though its mineral and oil rents account for 38.1% of its GDP, poverty in the DRC has been increasing in recent years nonetheless.
Gabon's natural resource rents amounting to 37.4% come from oil. Similar to DRC, it has however not been able to prosper, and has seen increasing poverty due to its resource rents.
Libya's oil, gas and gypsum rents are a major source of revenue (36.8%), with oil making up 95% of its export.
Mauritania is rich in iron ore, gypsum, copper, phosphate, diamonds, gold, and oil that contribute 33.6% of its revenue.
Risks Associated with Dependence on Natural Resource Rents
One of the dangers associated with resource rents is that a country is in fact liquidating their capital. In addition, studies indicate that countries dependent on natural resource rents, especially energy rents are prone to civil wars, when governance is poor. When the revenue from the rents are used only for current consumption, and not to build any other form of capital, the country is effective borrowing from its future.
What are Natural Resource Rents?
Natural resource rents are the revenues that a country earns from the extraction of a natural resource after considering the cost of extraction of the resource. Included in this category are oil rents, natural gas rents, coal rents, mineral rents, and forest rents. These revenues are called rents since the product is not manufactured, but just extracted.
Countries Earning Large Shares Of GDP Through Natural Resource Rents
|Rank||Country||% of GDP from Natural Resource Rents|
|2||Republic of the Congo||48.2%|
Your MLA Citation
Your APA Citation
Your Chicago Citation
Your Harvard CitationRemember to italicize the title of this article in your Harvard citation.