Resources Policy

Volume 69, December 2020, 101878

The role of forest resources, mineral

resources, and oil extraction in economic progress of
developing Asian economies
Author links open overlay panel Yongming Huang a b, Syed Muhammad
Faraz Raza a, Imran Hanif c, Majed Alharthi d, Qaiser Abbas e, Syed Zain-ul-Abidin
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Abstract

This study determines the role of natural resources’ utilization, foreign direct
investment (FDI), and fossil fuel consumption in economic growth by utilizing
panel data of 25 developing Asian countries from the period 1996 to 2016.
Pool Mean Group (PMG) regression is used for this purpose, and the results
show that the rent received from forests has a sizeable share in the economic
growth of developing Asian Countries. The study shows that an increase in
FDI is stimulating economic growth in developing countries. However,
although the utilization of natural resources has a positive impact on
economic growth, the results show a statistically insignificant role of natural
resources in improving economic growth. Finally, the results show that the
rent obtained from forest resources, mineral resources, and oil extraction
makes a significant contribution to economic growth. The findings highlight
that FDI and the rent received from the pool of natural resources are
significant contributors to economic growth, as they are both helping to
develop industrialization in the nations concerned and improve the level of
per capita income. However, the findings also suggest that there is a need to
consider the limited availability of natural resources and to deal with this
situation by (a) developing policies that can ensure the efficient use of such
rent received from the natural resources by importing advanced technologies
from developed nations and (b) using the rents from natural resources to
promote the business environment and attract FDI in developing countries.

Introduction

In this modern era, almost every country is experiencing great volatility in its
economic affairs. In particular, the developing countries are facing this
problem because they are focused on enhancing growth. It is true to say that,
whether the country is either developed or developing, and every country
wants to increase its growth to become more stable and developed. In this race
to increase growth, the emerging nations have been found to be abundant in
resources that will increase their growth swiftly (Shahbaz et al., 2019;
Cavalcanti et al., 2011). The natural resource of oil has a comprehensive
influence on the growth of developing economies, such as Azerbaijan,
Kazakhstan, Turkmenistan, and Russia (Bildirici and Kayikci, 2013). While
there are some problems, such as excessive reliance on resources while lacking
efficiency and sustainable policies to enable coordination of these resources to
promote economic growth (Khan et al., 2020; Satti et al., 2014). The
developed economies are one step ahead of developing countries because of
their sustainable resources and sustainable growth policies. Their policies
enabling proficient use of their energy and natural resources to raise their
growth level without any hazards differ from those of developing economies
(Guan et al., 2020; Apergis and Payne, 2014; Omri and Kahouli, 2014). The
focus of the present study on developing Asian economies as the continent
covers 29.4% of the Earth's land area and caries 60 percent of the world's
population (World Development Indicators, 2016). More importantly, the
developing Asian regions of South East Asia, South Asia, Central Asia, the
Middle East, and Western Asia have been blessed with high reserves of natural
resources. Almost 25 percent of the coal assets in Asia are located in East Asia
and Southeast Asia (World Energy Council, 2016). Whereas China is one of
the world's leading mineral producers (United States Geological Survey
(USGS), 2016), central Asia is abundant in oil, gas, coal, and uranium
resources. Moreover, the South Asian Region has been blessed with many
natural resources, such as oil, gas, fertile lands, trees, and minerals (World
Development Indicators, 2016). Though the Asian countries are rich in
resources, there is a need to use these natural resources efficiently to achieve
sustainable growth.

In discussing the utilization of sustainable natural resources, one must

consider natural resource rents, which are the excess value after all costs and
returns. In this way, the surplus return of each natural resource and its share
in terms of economic growth can be dignified. The developing countries focus
more on their plentiful natural resources and earning revenues from them. In
general, the natural resource rents have enhanced economic growth (Shahbaz
et al., 2019; Yuxiang and Chen, 2011). There is a need to consider that the
Earth can carry limited resources there is a need of use such resources in a
dexterous manner, and meanwhile it is important to explore alternative
channels for economic growth (Koitsiwe and Adachi, 2015). In this regard,
foreign direct investment (FDI) is beneficial for natural resource rents to
enhance the growth of developing countries. There can be more opportunities,
better policies, and more plans by foreign investors to invest in these countries
to obtain benefits from natural resources and their rents. The positive
contribution of FDI with natural resource rents will boost economic growth, as
has happened in Malaysia (Solarin and Shahbaz, 2015).
Almost every country in all Asian regions is blessed with natural resources.
The developing countries lack resource sustainability as most of them are
abundant in non-renewable energy resources and do not use renewable
energy resources effectively to meet the criteria of resource sustainability. The
most commonly used non-renewable energy type is fossil fuel energy. Fossil
fuel energy is cheap, and it is easily available compared to other energy
resources. The emerging nations are depending on fossil fuel energy to
improve their growth in less time with less cost. But the wasteful allocation of
fossil fuel energy consumption can be destructive for economic growth (Soytas
and Sari, 2009), whereas the sustainable use of fossil fuel energy can be
productive for the growth of developing economies. In addition, the presence
of proficient natural resources and fossil fuel energy is considered to be
potentially productive for the growth of any economy that needs proper
planning and policies by policy developers (Khan et al., 2020; Mensah et al.,
2019). Over the last decade, the developing countries have been focusing on
their sustainable resources to both improve their growth and protect their
environment. In the case of developing Asian countries, they are limited to
allocating these natural resources in a productive manner. Their allocation of
natural resources, fossil fuel energy consumption, and effective foreign
investment to boost economic growth are still questionable. In this regard, the
primary objective of the study is to measure the influence of natural resource
rents on economic growth in Asian regions. The second objective is to examine
the influence of FDI on economic growth, and the third objective is to
determine the role of fossil fuels energy consumption on economic growth in
developing economies of Asia. The ultimate purpose of the study is to offer
policy implications for better utilization of natural resources to foster
economic growth in the region under question. The rest of the study is divided
into the following order.

Section two exhibits the review of literature, section three presents the
methodology and data, while section four presents a concise analysis of the
obtained results. Lastly, the verdicts of the study and future implications are
concluded in section five.

Section snippets

Literature review

The emerging economies are experiencing great volatility in response to

improving the level of their economic growth. Their production methods are
different from and far behind those of emerged economies. Although the
developing economies are clearly trying hard to achieve preferred sustainable
economic growth without any risk, their policies are inefficient in attaining the
desired economic growth. Almost every country has several natural resources
to improve its growth level. Natural
Data Sources

The panel data country list consists of 25 countries from South East Asia,
Central Asia, the Middle East, and Western Asia. The countries are selected
based on their income levels. The lower-middle-income and upper-middle-
income countries such as Cambodia, China, Indonesia, Malaysia, Mongolia,
Myanmar, Philippines, Thailand, Vietnam, Bangladesh, Bhutan, India, Nepal,
Pakistan, Sri Lanka, Kazakhstan, Kyrgyz Republic, Tajikistan, Uzbekistan,
Egypt Arab Rep., Iran Islamic Rep., Jordan, Lebanon,

Results and discussion

In this section, we analyze the utilization of natural resource rents, fossil fuel
energy, and FDI on the economic growth of developing Asian countries. The
first step of the empirical analysis contains a summary of the descriptive
statistics. The descriptive statistics consist of two parts: in the first part, the
overall fitness of the empirical model is assessed, as shown in Table 1.

The variation of variables from their mean point is highlighted by the

standard deviation. Each variable has

Conclusion and recommendations

This research of natural resource rents in the form of forest, mineral, oil and
natural rents, fossil fuel energy, foreign direct investment (FDI), and
economic growth in developing Asian countries is of great significance. We are
aware of the fact that natural resources are essential for the growth of any
developing country. The revenues generated from these natural resources
boost the economic growth. Meanwhile, FDI is also considered as a helpful
indicator for the growth generation process

Declaration of competing interest

None.

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