Swapping Natural Resource for Development: why is it strange?

When the Minister of Finance of the Republic of Liberia returned from the just ended FOCAC meeting in China and announced that he had signed an agreement to explore the possibility of swapping natural resources for development (infrastructure), many pundits decried him and pontificated that either there is nothing called natural resource swap or that it was a bad thing for the country.

Maybe it was the phraseology “natural resource swap” that confused many of us but the fact remains that this is what all poor countries or resource rich countries do in order to accelerate development. When has that become a bad thing? The path we have taken all along has been we sell our natural resources and use the rent to undertake development. In the case of a “natural resource swap” we are intending to use the future proceeds (or the value) from our natural resources to undertake development today. Either way, we are exchanging (swapping) the natural resources for infrastructural development. I am not too sure what is unclear or bad about this?

Another area that others complained about was the mention of the name “China.” What is wrong with pledging or selling natural resources to China in exchange for infrastructural development? Even if we sell the natural resources to European or American companies, they go on to sell to China.  So what is the big deal? Also what is wrong with Chinese companies implementing infrastructural projects? We have all been to China and have seen the massive infrastructural development taking place. China is even overtaking a lot of “developed” countries when it comes to infrastructural development and so there is nothing inherently bad about Chinese companies implementing development projects. It is done all over the world.

I am totally aware that Western powers believe that because they are incapable of competing with China in the area of economic development for poor countries, they try to scare poor countries about dealing with China. When you ask them to do what China is doing for poor countries, they are not willing, able or prepared to do so. They pretend as if they have more concern about poor countries when the fact is that they are more concern about the graudal erosion of their power and influence in poor countries. These Western countries are accusing China of what they (Western powers) did when they were calling the shots on these countries. I believe that all their fears and suspicions are based on what they know they did to poor countries. Well, one would wonder what is the down side of dealing with China? If they screw us like the Western powers did then we are where would have been anyways because the Western powers have never wanted anything better for us. So China is worth the risk (if that is what she turns out to be). Maybe it could be better and then we are winners.

So the Minister’s efforts of engaging in a natural resource swap with China and Chinese companies is in the best interest of the country if it happens. It will mean that we will have better infrastructure that will improve the lives of the ordinary people. Matter of fact, we will still sell those natural resources and if we use the rents wisely, we will build infrastructures in the future to improve the conditions of our people. So if we can build the infrastructure now and pay with the natural resources in the future, is that a bad thing?

And from all available information, the agreements are negotiated with each party seeking it’s best interest. Nothing these agreements do not mean that your natural resources will be auctioned. If your negotiating team auctions them, it means that they would have done so whether or not they were doing it for infrastructure today or the rents tomorrow. In dealing with China, like every other country, we need to smart and be prepared to negotiate hard and tough. Nothing is a given and no one is obligated to seek your interest above theirs. No country in the West will do that. In fact, they screwed us before and that is why we are here. Have we forgotten?

Author: JAMES F. KOLLIE

I am a Liberian professional with passion for pro poor economic development and grassroot political organizing. I have read public policy, corporate finance and accounting at various levels. I have worked in government, private sector and non-profit sector.

7 thoughts on “Swapping Natural Resource for Development: why is it strange?”

  1. My take on this issue is that, while I agree that our natural resources be used to develop our nation, I think the best way to do so is to have an independent firm conducting survey and coming up with the total value of our resources. Having one firm or country swapping our resources without an independent firm conducting survey on it’s values, I think it’s wrong. My take, Sir.

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    1. It doesn’t work like that. You have to do your own work (feasibility study) to know what you have so that you can know how much it’s worth. Whether you are swapping the reosurce for development or selling it and then use the proceeds to do development, you still need to know what you are swapping or selling.

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      1. Then it still boils down to my lil man understanding that we should first of all know the value of our resources before attaching swapping cost to them. Now, did the minister of finance and his team carry out such study? If yes, what’s the outcome of said study? The citizens needed to be aware of such before embarking on the swapping deal negotiations. My take, Sir.

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  2. We need a very patriotic , smart and informed team to handle the negotiate of issue with the swap.
    I also believe alot of fear resides with the fact that , the value of resource to be swap is yet undefined, and the measure of development that could be derived from the swap, is not articulated to the common mind. I stand to be corrected.

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  3. Comrade, while one may agree that the phraseology seems to create a hype. This is even buttress by the fact that accountability and transparency remains a HUGE challenge. With these thoughts, one must be quickened to ask a number of questions needing answers; what were the net benefit from those previous arrangements? What are the pitfalls? What lessons have we learned? Would be benefit the MOST is we build our capacity and manage our own resources? Why a RUSH for a swap? Have we exhausted our internal strategies which when utilized could allow us to generate way beyond the proposed SWAP amount of $2.5bn as indicated by the MOF? Where is the study which valued our proposed SWAP at $2.5bn?

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    1. The 2.5 billion is not the total value of the resource to be swapped; it is an advance against the future value. Because you expect more from the resources, you are taking a loan against that future flow so that you can do development today. Let’s not allow anyone to deceive us that with significant infrastructure we can develop using internally generated resources. That is greatest misstatement of facts on earth. It will NEVER happen

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  4. The so-called resources-for-infrastructure-development (R4ID) in the Africa continent is principally the People’s Republic of China (PRC) invention and a new model to extract the continent’s richly abundant natural resources and entrap its peoples into an infinite and perceptual debt and loan scheme.

    Incidentally, there is ample evidence that the rapid infusion of unconditional Chinese investment and financing in certain African countries strengthens a political structure that allows an elite to use resource wealth for unproductive and self-serving ends at the expense of the citizenry.

    R4ID swaps in Angola, the Democratic Republic of the Congo, Gabon, Ghana and Nigeria, are extreme examples.

    Liberia, with its endemic bad governance and corruptible tendencies, shall most likely be at risk and in danger in the China-Liberia resource swapping tango. The scheme is unpropitious and inappropriate, and it must be vehemently discouraged and categorically disabused.

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