Edited by Jennifer I. Considine
Chapter 13: The economic case for staged development and providing appropriate incentives for good behaviour in the context of ‘resource curse’
Resource curse has come back onto the agenda as a result of the so-called super cycle of commodity prices that began at the start of the century. As a result, there has been much discussion about how it might be avoided or at least managed. One obvious solution is to slow the development of the project to give the host country time to develop the institutional capacity to manage the potential for an attack of resource curse. However, investing companies argue very strongly against this on the grounds that delaying the cash flows reduces the net present value of the project. This chapter argues that by using option theory, delaying the development of the natural resource can potentially increase the value of the project.
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