General Assembly Second Committee: Economic and Finance
1. The Challenge of a Transparent Distribution of Natural Resources Revenues as a Step towards Elimination of Poverty and Conflict Outbreaks
In many countries, natural resources constitute a significant part of the total state revenue, bearing a potentially big role in fostering development and welfare of the country. While one intuitively tends to consider natural resource abundance as a blessing for country’s development however, various empirical studies demonstrated that resource rich countries tend to significantly underperform in growth expectations compared to resources poor countries of the same development stage. Instead, resource rich countries often suffer unstable growth cycles, high poverty rates and inequality. The reason for the surprisingly poor economic performance is the fact that resource rich countries often concentrate on the exploitation of their particular resource, disregarding investments in other economic sectors, especially in the productive industry (“crowding-out effect”). As a consequence, natural resource abundance often hinders, and does not back, the eradication of poverty in low-income countries.
In addition to the economic constraint, studies also reveal that resource rich countries face a greater risk of political instability. It may, for instance, give people living in particularly resource rich regions an incentive to form independent states and help rebel groups to finance. Such groups – particularly those seeking to secede because of natural resources in their region – are additionally bolstered if the incumbent government is characterized by corrupt elites bagging the revenues from resource depletion for private purposes rather than governments that use revenues transparently to raise living standards across the country. There is strong evidence in empirical literature that when a government gets greater revenue from natural resources, it is more likely to be corrupt and less accountable.
Such government practices are facilitated or fuelled by the fact that revenues gained from natural resource are often poorly traceable. Transparency of these flows – how government revenues received from the exploitation of natural resources enter the state budget and how they are spent – as a precondition for curbing corruption and diversion of national funds may therefore constitute a means to eliminate the economic stagnation and poverty increase often observed in resource rich countries. One way to enhance transparency are formalized reporting structures, of governments as well as of the resource extracting companies.
The challenge for the Second Committee will be to define principles and policy recommendations to better harness that natural resources bear for a country’s development.
2. Promoting Economic Progress through Attracting Investment to Post-Conflict Countries
There is no question that countries need active, equitable, and profitable private sectors if they are to graduate from conflict and from post-conflict aid-dependancy. The most important issues are not whether the private sector develops, but rather how and when it does so. Most importantly for policymakers, what can be done to ensure a favourable environment for attracting foreign private investments?
People of post-conflict countries and fragile states often face a desperate situation, with little or no infrastructure. Networks, if any existed prior to the conflict, are often largely destroyed or rendered unusable by mines following the conflict.
If there is a positive vantage from which to view the task ahead, it lies in the fact that policymakers will be starting from scratch. Governments have the rare opportunity to avoid the known mistakes and take bold action. If natural resources such as oil or minerals are present, they also have the opportunity to use the impending investments to jump-start the necessary infrastructure development.
For investors, the post-conflict environment provides attractive opportunities and the potential for high returns. However, foreign investors in post-conflict countries are also faced with unique economic and political risks. There may be inadequate or non-existent legal and regulatory rules, while governments may breach contractual obligations, interfere with the property rights of investors, or even nationalize or expropriate the investments. There is also the overriding fear that the investment climate may quickly deteriorate in the event of resumption of conflict.
In overcoming such risks, post-conflict countries must provide assurances and incentives to improve the investment climate, while ensuring that in return, investors provide net benefits to the local economy and society. The legitimate expectations of potential investors must be adequately protected by the host country’s legal and regulatory framework for foreign investment, including provisions for resolution of disputes between investors and the government.
Even though there is no universal scheme to attract investors to a post-conflict country due to the fact that they might have different problems as well as different sectors to invest in, there are certain questions that we all have to think about: What is the government’s role in facilitating entry by investors in post-conflict countries? What sector reforms and regulations should be implemented to attract the desired private investments? What are the first steps in developing legislature to ensure favourable conditions not only for the foreign investors but also for financial security of local enterpreneurs?
Yaroslava Lyashenko, Director
Yaroslava Lyashenko was born in Ukraine 25 years ago and ever since has been changing the countries of residence at a rapid rate. Having lived for 2 years in Siberia, Russia she soon moved to Germany with her family to start the first year of school in a small town near Wurtzburg. After moving back to Ukraine and having later completed one year of high school in USA Yaroslava moved to Kiev to pursue the university degree in International Relations. She has graduated with honors and started working for the British-Ukrainian Chamber of Commerce. Alongside with the job Yaroslava has by then been already a long-term member of a youth party called “Democratic Alliance”. She has soon realised that working toward the better and safer future was not just a hobby anymore but rather a professional as well as personal goal. Yaroslava has been awarded with a DAAD scholarship in MA “Peace and Conflict Studies” and is currently studying in the Marburg University. She has participated in several MUNs and is completely convinced in the idea that every student with any educational background should take part in this kind of conference at least once for it brings unforgettable experience and useful life skills.
Britta Labuhn, Vice Director
Britta is 24 years and studies a master’s degree program in International Economic Policy in Paris. She grew up in a small city in northern Germany where she also discovered her passion for MUNs. After having started her undergraduate studies at Münster University, she joined the MUIMUN organization team and she was also a member of Münster’s first delegation to the NMUN in New York in 2011. It will be her first time to sit on the other side of the table and chair an MUN. Britta has a passion for traveling, languages and foreign cultures and enjoys exchanging and discussing differing views. She is looking forward to lively and fruitful debates in the GA Second Committee and hopes that they will be a great learning experience for everyone involved!