What Should We Know about the Extractive Industries Sector?
Economists, public finance professionals, and policy makers working in resourcerich
countries are frequently confronted with issues that require an in-depth
understanding of the extractive industries (EI) sector, its economics, governance,
and policy challenges, as well as the implications of natural resource wealth for
fiscal and public financial management (PFM). The objective of the two-volume
Essentials for Economists, Public Finance Professionals, and Policy Makers, published
in the World Bank Studies series, is to provide a concise overview of the extractive-
related topics that economists, public finance professionals, and policy makers
are likely to encounter. Volume I, The Extractive Industries Sector, provides an
introduction to the sector, including an overview of issues core to its economics,
institutional framework, project and investment cycles, and contract management,
and a description of the components of sector governance and policy.
Volume II, Fiscal Management in Resource-Rich Countries, addresses the fiscal
challenges typically encountered when managing large revenue flows from the
EI sector. Since oil and mineral taxation, including subnational revenue sharing,
has been extensively addressed elsewhere, the Essentials provide only brief treatment
of this topic, while referring the reader to relevant sources.
This initial overview provides a common introduction to the two volumes. To
this end, it first outlines several key characteristics and challenges that distinguish
the EI sector from other sectors. It then reviews experiences of countries that
have undertaken successful extractive-led development, and synthesizes key
findings from literature on the so-called resource curse hypothesis (which argues
that countries rich in oil and minerals have lower growth and worse development
outcomes than their peers). It concludes by introducing the two volumes in turn.
How Does the EI Sector Differ from Other Sectors?
The EI sector occupies an outsize space in the economies of many resource-rich
countries. Specifically, it accounts for at least 20 percent of total exports, and at
least 20 percent of government revenue, in 29 low-income and lower-middleincome
countries. In eight such countries the EI sector accounts for more than
90 percent of total exports and 60 percent of total government revenue (IMF
2012). Meanwhile, the expansion of the extractive sector has spurred investment