Question

The States as a Regulator

1. The state interferes with the above extractive cycles. Do you agree or disagree with this statement? Explain in detail.

2. Countries who take over the extractive industry in the long run. Why does this mean? Explain in detail as to whether or not you agree with this statement.

3. Outside investment in the state’s natural resources means that the state will lose control of its resources. Do you agree with this statement? Explain in detail.

4. Can the state be an extractive operator? Explain how the state might accomplish this goal.

5. Is the state more effective as an operator than a private company? Why or why not? Explain in detail.

Answer 1

When you say "Regulator", how the state interferes into the business depends upon the definition of "regulator" as prescribed by the constitution or Parliament of the particular state/country. State does interferes in the extractive cycles, but its interference has multiple dimensions. Two main reason why state interferes into the extractive cycles are

1) Political reasons- In socialist countries like USSR, China, DPRK where there is existence of pure socialist Government where the state owns all the means of production, the state owns the firms which take care of the extractative processes.

2) Important industries- In some countries like that of India, in the legal framework there is a provision of establishing something called 'core industries". Which basically means for the existence and economics well being of the country there requires strong base of certain industries, an if these industries fall into the hands of private players there are chances of misuse, so these industries are owned by the state. This process of converting the privately owned industries Government owned is known as "nationlisation"

For example, I'll continue with the India example. So in 1947 when the country got independence coal and Iron and steell industry was declared as industry of national importance, and a Government run company Coal India limited was allowed to continue extraction of coal. This policy continued till 1991 until the economic reforms. So when you say countries who take over extractive industries in the long run it basically means nationalisation of the coal industry.

Yes, in most of the developing countries outside private investments in certain extractive industry is considrered as threat. The thing is for last 203 centuries these countries were exploitated by the Europeans, so after their independence whenever thers any update or news about outside investment in the extractive industyr the public react in a very stern manner

And about loosing contol of the resource, agin it depends upon type of government and its policies. Some governments are free promoter of private investment in this sector where as some governments are very skeptical of it.But eh statement that government looses control over the resource is completely wrong as all the natural resources of the country, the Government is the sole owner.of all the natural resources and its the government which "leases" these out to the private players for rent.

Yes state can be an extractive operator How? by launching a extraction company in which ore than 50% stake is of the government. In india firms like Coal Inia ltd, ONGC, IOC are perfect exmaple of this statements. But efficiency? ion it its the privcate sector ehich always triumphs.