Mitigating the Resource Curse
At a recent book launch at the World Bank, renowned academic Michael Ross, Professor of Political Science, University of California (UCLA) released years of research on oil and its attending impact on developing countries' economies. In his book "The Oil Curse: How Wealth Shapes the Development of Nations", he suggests four key factors to be managed with a view to warding off the curse. Prof. Ross links the disequilibrium between absorptive capacity of developing economies and oil revenues as a major casual effect of the economic dysfunctions afflicting many developing economics experiencing huge influx of oil revenues.
At a recent book launch at the World Bank, renowned academic Michael Ross, Professor of Political Science, University of California (UCLA) released years of research on oil and its attending impact on developing countries' economies. In his book "The Oil Curse: How Wealth Shapes the Development of Nations", he suggests four key factors to be managed with a view to warding off the curse. Prof. Ross links the disequilibrium between absorptive capacity of developing economies and oil revenues as a major casual effect of the economic dysfunctions afflicting many developing economics experiencing huge influx of oil revenues.
He caters his thesis around four key factors for managing the scourge of the curse including the Size, Source, Stability and Secrecy. Prof. Ross determines "size" as being able to control to a manageable level drilling and sales of oil to the economy's absorptive capacity. Often, he says, countries have tended to opt for higher revenues than they are structurally positioned for. As a result, such situations have led to severe economic and social distortions including widespread corruption and underdevelopment.
He informed the audience that countries needed to manage exploitation in forms that protect sources of the resource and that they do their utmost not to unmindfully exhaust their potentials . Whether the source be deep sea or on land deposits, he states, countries ought to balance between current needs, environmental impact and the needs of future generations. This he maintains could help to mitigate the occurrence of the curse.
Understanding oil revenues dependencies and the resulting economic impact, most developing economies ought to diversify their economic focus and using oil inflows as a stimulus for diverse investments. Prof. Ross cautions that as a result of the expanding discovery of deposits especially in most parts of West and Central Africa. The global supply is likely to increase thereby impact positively on prices but that competitiveness as a result of increasing demands might lead to volatilities which if not managed properly might generate impairing economic imbalances. Overall he calls for openness and transparency in the exploitation, management and administration of oil driven revenues in furtherance of national development.
In consideration of the Professor's synthesis, and Liberia's new found oil wealth, expectations are at an all time high and with very little in place institutionally, there are apprehensions about the likely prospect of Liberia's ability to avoid the curse. In fact, the grounds are set. Global Witness continues to work with CSOs in providing the requisite pressures to bear while monitoring the current exploration environment with projections that will ward off the errors of Liberia’s oil rich partners around the world. As a first start, the government of Liberia ought to commence a structural review of the administration of the industry putting in place “checks and balances”. To this end that regulations are established that separate policy institutions from revenue management, and increasing public participation in every facet of the management process. By increasing transparency and improving Public access to information, much can be achieved. The hopes are that a more participatory process will address significant anomalies in the management ecology an enhance the impact of the Extractive Industry Transparency Initiative (EITI) process which relevance can be increased enormously.
The recent resignation by the Robert Sirleaf, son of the President and former Chairman of the National oil Company(NOCAL) Board of Directors have presented a renewed opportunity for the institution of critical reforms in the sector. Vital to that overall reform process is the management of Liberia's Social Development Fund (SDF) derived from upfront fees and revenues contributed by oil exploration companies. Managed cloudily by Mr. Sirleaf in terms of the administration and decision-making, there has been a lot of apprehensions tied to how the fund was used in the past. Hopes are that President Sirleaf would use the occasion of new start to establish a more transparent ad participatory structure that is responsive to the social development needs of the country.
In consideration of the Professor's synthesis, and Liberia's new found oil wealth, expectations are at an all time high and with very little in place institutionally, there are apprehensions about the likely prospect of Liberia's ability to avoid the curse. In fact, the grounds are set. Global Witness continues to work with CSOs in providing the requisite pressures to bear while monitoring the current exploration environment with projections that will ward off the errors of Liberia’s oil rich partners around the world. As a first start, the government of Liberia ought to commence a structural review of the administration of the industry putting in place “checks and balances”. To this end that regulations are established that separate policy institutions from revenue management, and increasing public participation in every facet of the management process. By increasing transparency and improving Public access to information, much can be achieved. The hopes are that a more participatory process will address significant anomalies in the management ecology an enhance the impact of the Extractive Industry Transparency Initiative (EITI) process which relevance can be increased enormously.
The recent resignation by the Robert Sirleaf, son of the President and former Chairman of the National oil Company(NOCAL) Board of Directors have presented a renewed opportunity for the institution of critical reforms in the sector. Vital to that overall reform process is the management of Liberia's Social Development Fund (SDF) derived from upfront fees and revenues contributed by oil exploration companies. Managed cloudily by Mr. Sirleaf in terms of the administration and decision-making, there has been a lot of apprehensions tied to how the fund was used in the past. Hopes are that President Sirleaf would use the occasion of new start to establish a more transparent ad participatory structure that is responsive to the social development needs of the country.
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