Opportunities and Challenges That Transnational Corporations Present to The Governance of Natural Resources.

Opportunities and Challenges That Transnational Corporations Present to The Governance of Natural Resources.

Natural resources form the basic framework of life on earth for human beings and animals. Natural resources encompass all the naturally occurring supplies needed for maintaining, promoting, and thriving of lifeforms on earth such as land, forests, rocks, water, fossil fuels, animals, minerals, sunlight, and air. Mining and extraction of these natural resources form some of the most critical and most sought activities, especially by multinational corporations. Arguably, the most sought-after kinds of natural resources include fossil fuels, forests, minerals, and rocks. Mining and extraction of natural resources is mainly done by transnational corporations since they have the capacity and the resources needed for mining and extracting the natural resources. These include having the financial as well as equipment sophistication necessary for mining and extraction of natural resources. So that there is a controlled and sustainable approach of mining and extracting natural resources, there is a system of governance that dictates and directs the transnational corporations regarding how they conduct their business.    When mining and extracting natural resources, transnational corporations present contextual opportunities and challenges in the governance of natural resources.

The governance of natural resources remains vital in establishing and maintaining sustainability. This stems from looming fears from scholars and governments concerning the rapid depletion of natural resources. For instance, natural resources such as the natural forest cover are rapidly depreciating due to uncontrolled and illegal logging. Additionally, regions such as the United Arab Emirates have fears that oil and natural gas will be almost depleted in the next five to ten years (Rudra and Jensen, 2011). As such, the need for ensuring there is governance of natural resources cannot be underestimated. Therefore, transnational corporations, in conjunction with international treaties as well as the host countries, have established a system and approach of governing mining and extraction of natural resources. However, the governance of natural resources mainly focuses on the extractive industries and multinational corporations which have vested interests in products such as oil, natural gas, coal, minerals, and other related fossil fuels.

Opportunities

The governance of natural resources by transnational corporations presents some tremendous and beneficial outcomes for the host nation, the home country and the corporation itself.

Economy opportunities

For many nations that have deposits of natural resources such as oil, gas, minerals, and fossils, the extractive industry governance by multinational corporations creates the potential for significant economic growth. Such advantages help the host nation to build capacity regarding the state of their economy, especially the developing countries. For instance, it is with the discovery of oil and natural gas that regions such as the UAE, Saudi Arabia, and Nigeria began to develop their economy at a faster rate. The impetus becomes even more significant with the governance of oil and natural gas being given to transnational corporations such as Gulf Oil, Shell, BP, Conoco, and Chevron corporations. Such firms ensure there is economic development in the host countries. For instance, oil and natural gas management by transnational corporations in Saudi Arabia have led to increased per capita income and an increase in the nation’s gross domestic product.

Extractive firms, especially in developing countries, have been significantly linked to economic growth and development. While financial circumstances may vary from one country to another, the proceeds gained from the TNCs governing the extractive, production, processing, and sale of the natural resources such as oil, gas, and minerals contribute substantially towards the growth and development of the host nation’s budgets. For instance, the governance of the extractive industry by the TNCs as well as the local governments has made significant economic improvements in countries such as Nigeria whereby the gross domestic product, from the extractive domain, contributes more than 20% of the GDP. The main TNCs in the area also help the nation economically by contributing approximately 69% of the total budgetary revenues. The governance of natural resources in countries such as Azerbaijan by TNCs has seen oil and natural gas become the leading export products. Studies and projections for the nation remain indicative that revenues from the extractive industries are likely to double the current $60 billion GDP of the country in the next three years which will be a crucial milestone towards the development of the nation’s economic capacity (Wise and Shtylla, 2007). At the macro-natural resources governance level, the extractive industries and the TNCs generate substantial amounts of revenue for the host states. These come in the form of royalties, income tax, and other profit-sharing approaches such as mergers, acquisitions, and franchising. For example, in the year 2005, the Shell group alone paid approximately $18 billion in the form of state taxes in countries whereby the TNC operates.

Promoting small and medium businesses

Transnational corporations, in the governance of natural resources, become significantly influential in promoting small and medium business. In this context, TNCs ensure to work with local ventures such as trading with them. For instance, a firm such as Chevron corporation is known to have a policy of subcontracting small local ventures in the supply of products and services such as stationery, office supplies, internet services, and general implements. As such, TNCs end up promoting the development of such ventures as well as growth into big firms. Such forms of partnerships also help the local nations in creating and developing more investment options, including the promotion and fostering of creativity and innovation in the local nation investment domain.

Infrastructure development

With the TNCs being partly in charge of governing the natural resources, they can work with local governments in the development and improvement of infrastructure. For example, extractive companies and corporations such as Shell when operating in nations such as Nigeria and Saudi Arabi have contributed significantly to the development of infrastructure in the regions. In the process of mining oil, natural gas, and minerals like gold, the TNCs require a colossal intrastromal capacity (Watts, 2004). The ideal helps ensure that all the natural resources and the supplies needed reach to and from the mining fields. For instance, the local governments, and communities, in the host nations benefit from the presence of the TLCs since the firms have to create the infrastructure they need. Such firms, in the governance of natural resources, have to come up with projects such as railways, roads, dams, waters systems, power grids and systems, telecommunications, pipelines and ports. In the developing countries that have oil, natural gas, and minerals, they benefit a great deal by the governance of natural resources being in the hands of the TNCs (Olawuyi, 2018). As such, the TNCs help the local and host nations to address the infrastructural gaps that serve to ensure the challenge of transforming the resource wealth becomes a long-term development prospectus in terms of regional development.

Creation of job opportunities

The governance of natural resources by TNCs translates into the creation of jobs in the local and home nations. By establishing extractive, manufacturing, and production bases in an area, the TNCs become critical players in ensuring that there are more jobs available to the people in the region. For instance, big transnational corporations such as Shell and BP are important in creating more job opportunities, especially in developing and third world countries, whereby jobs are scarce. The people in the regions that these firms operate from are thus employed as groundsmen, cleaners, security officers, engineers, accountants, managers, and supervisors, among other positions (Castree, 2004). This advantage goes on to have critical implications in the governance of natural resources since the host governments feel they are receiving more significant help the corporations and hence it becomes easy for the TNCs to manage the extractive industry.

Additionally, by providing the people in the host nation with jobs and an opportunity trade, other factions of development and growth become available. For instance, there is increased economic growth since people have the buying power, which also improves the state of business and investment. Additionally, people can establish more small and medium businesses since they can get jobs, work, and save money for the same.

Provision of counsel and direction

Transnational corporations also offer guidance and direction in the governance of natural resources.  Since the multinational firms are well vast, equipped, and experienced in how to start, run, and manage the extractive industries, they play a significant role of giving counsel to local and host states regarding how they can best utilize the resources they have. For instance, when a firm such as Shell, BP and chevron want to invest in the extractive industry of a nation, part of the signed memorandum of understanding is to give counsel. Here, the local and host states learn the trade of natural resource management (Giddens, 2002). For instance, the recent discovery of oil and natural gas in the northern parts of Kenya and the continued extractive activities in South Sudan, Nigeria and Saudi Arabia among other nations have benefited from TNCs and their ability to manage the trade.

Another advantage that TNCs offer to the governance of natural resources is how management becomes an integral element of the community through factions such as corporate social responsibility as well as the integration of cultural diversity ideas. Governance of natural resources goes beyond the industrial and extractive processes into how the trade interacts with people and helps in the community. As such, the TNCs play a critical role in ensuring that the element of corporate social responsibility becomes part of the mission and vision of the extractive industries (Watts, 2005). For instance, the TNCs are involved in helping the community in matters such as sponsoring games and other extra curriculum activities. Here, they promote sports such as football, volleyball, athletics, and swimming, among others. Such initiative helps in ensuring that governance of the natural resources by both the local, host states and the TNCs transcends into the community and be part of it. Concepts such as cultural diversity also come into play when looking at how TNCs affect the governance of natural resources. TNCs help in showing the local and home states that apart from the daily extractive processes, other factions such as ensuring people not only love and promote diversity, but they see the construction as part of globalization and thus inculcate a positive human spirit (Bieri and Boli, 2015). Therefore, the tenet of TNCs and their involvement in the governance of natural resources becomes a faction of how nation-states can become more integrated with the community via channels such as practising corporate social responsibility and ensuring cultural diversity remains part of the TNCs impetus.

On the other hand, TNCs also present contextual challenges in the governance of natural resources. Since most of the TNCs, especially in the developing nations are big foreign firms, the local governments often find themselves in a negotiation table trying to find mutually beneficial outcomes. However, the TNCs may use the concept of resource and infrastructural capacity coupled with poor economic status to take advantage of such states and exploit them in terms of the governance of natural resources. One of the challenges that TNCs present in the governance of natural resources the concept of limited inclusive decision making. When making decisions in terms of how the natural resources are going to be managed, from the inception of the idea to the selling of the products, TNCs, especially for developing nations and those who cannot be fully extractive, exploit and take advantage of them. Countries such as Kenya and Sudan, for instance, TNCs extract the oil and natural gas, export it to their home nations as crude, unrefined products and then come later with the finished products to sell it back to them (Nelson, 2012). Notably, such nations do have the capacity nor the ability to mine and extract the crude oil. Therefore, the multinational firms at play do not engage the governments in making all the decisions since the products are not even refined and processed in the country. The TNCs also create institutional barriers that the host and home nations cannot mitigate or negotiate with such as hiring their own managers, auditors, and engineers who follow the set standards, for which the host nations have no control.

Additionally, in the management of natural resources, the TNCs may present challenges such as taking up big chunks of land and also exploit other resources in the name of the extractive process. When large oil corporations such as Shell, BP, and chevron among others become interested in the extraction of natural resources from a given country, they are likely to ensure they have taken vast areas of land and also be keen on finding out which other resources such as water and forest cover they can exploit as part of their mining and extractive expeditions (Perreault, 2005). This plan may end affecting the basic livelihood of the people in the community since taking up resources like water and forests may limit the ability of the local community to access them for their use. In the meantime, and especially for developing countries, they have no much power regarding how the TNCs operate in their activities. Such trends go further to affect and potentially threat the livelihood of people living in the area as well as pastoralists who rely heavily on some resources such as forests.

Moreover, another challenge that TNCs present in the governance of natural resources in the context of devolution. Here, Moreover, another challenge that TNCs present in the governance of natural resources in the context of devolution. Here, the TNCs are always keen to ensure that they do not transfer sufficient decision-making power to the local authorities or host nations. The idea behind is to ensure the TNCs remain in total control of the natural resources and this often happens for developing power form the impetus of lacking the capacity to conduct the mining of natural resources on their own with dependence on TNCs (Tandon, 2015). Therefore, the TNCs maintain a strict locus of control on the natural resources in the host countries, ensuring to export almost anything and everything they extract and mine to their destination of choice. This case leaves the hoist nation with little or no power over their own natural resources. The situation becomes even further critical in the event that all the rights regarding mining, extraction, processing, and selling of the final outcome products remain in the control of the TNCs. nnnnnnnn

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