Natural resources

Definition

Natural resources are materials or substances that occur in nature and can be exploited for economic gain, including minerals, forests, water, and fossil fuels. These resources are vital for economic development and sustainability as they provide the raw materials needed for production, energy, and consumption. The management and exploitation of natural resources can significantly influence foreign direct investment and the operations of multinational corporations.

5 Must Know Facts For Your Next Test

1. Natural resources can be categorized into renewable and non-renewable resources, impacting how they are managed and utilized by businesses.
2. The availability of natural resources in a country can attract foreign direct investment, as companies seek to secure access to essential materials for production.
3. Multinational corporations often engage in resource extraction in developing countries, which can lead to economic growth but also raises concerns about environmental degradation and social impacts.
4. Sustainable management of natural resources is crucial to prevent depletion and ensure long-term availability for future generations.
5. Governments may implement regulations and policies to control the exploitation of natural resources to balance economic benefits with environmental protection.

Review Questions

• How do natural resources influence foreign direct investment decisions made by multinational corporations?
  • Natural resources play a critical role in attracting foreign direct investment as companies look for locations rich in essential materials needed for production. Access to abundant natural resources can reduce operational costs and improve profitability for multinational corporations. Additionally, the strategic acquisition of these resources can enhance a company's competitive advantage in the global market.
• Discuss the challenges associated with managing natural resources sustainably in developing countries.
  • Managing natural resources sustainably in developing countries presents various challenges, including balancing economic growth with environmental conservation. Often, these countries face pressures from multinational corporations seeking to exploit resources quickly for profit, leading to potential environmental degradation. Furthermore, inadequate regulatory frameworks and governance can result in mismanagement and conflict over resource allocation, affecting local communities and ecosystems.
• Evaluate the impact of natural resource wealth on economic development and political stability in resource-rich countries.
  • Natural resource wealth can significantly impact economic development and political stability in resource-rich countries. While it can provide substantial revenue streams for governments and boost GDP growth, it may also lead to the resource curse where dependence on a single sector stifles diversification. This over-reliance can create political instability due to corruption, inequality, and conflict over resource control. Effective governance and strategic resource management are essential to harnessing this wealth for sustainable development.

Related terms

Sustainable Development: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs, often focusing on the responsible use of natural resources.

Resource Curse: A paradox where countries with an abundance of natural resources often experience less economic growth and worse development outcomes than countries with fewer natural resources.

Renewable Resources: Resources that can be replenished naturally over time, such as solar energy, wind energy, and biomass, contrasting with non-renewable resources like fossil fuels.