Transcript Framework for Assessing Oil Curse in Africa

Dimensions of the Oil Curse
A Framework for Assessing Africa’s
New Resource Producers
Dr. Robert Looney
Naval Postgraduate School
[email protected]
Oil Curse Overview
Several generalizations are possible concerning the oil or
resource curse
• Economic performance among those with oil, mineral or
agricultural resources
• Tends to be no better than among those without,
• And often worse
• Long run patterns suggest that more often than not when
fuels, ores and metals exports increase as a proportion of
merchandise exports, GDP growth declines
• This pattern is not inevitable, with many countries finding
oil/resources to be a blessing rather than a curse.
• A good analogy is the lottery winner.
• In the past many African countries have had many
symptoms of the oil curse – not inevitable that this
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phenomenon will characterize the future.
Patterns of Long-Run Growth
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Channels of the Oil Curse
•
At least four main channels through which the resource curse has
harmed an economy. The African countries under consideration
have, at one time or another, experienced each:
• Pro-cyclical fiscal and monetary policies
• Crowding out of manufacturing
• High volatility of commodity prices
•
• Deterioration of governance and supporting institutions
All or combinations of these factors can lead to:
• Unsustainable growth – bubble economy
• Wasteful public investment programs
• An over expansion of the public sector
• Destruction of the agricultural sector
• Lack of competitiveness outside the oil sector
• Underdevelopment of the private sector
• High levels of chronic unemployment
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Variants of the Oil Curse
• Main element separating the oil curse and oil blessing
countries is the relative level of governance
• Many aspects of the oil curse are captured in the Legatum
Institute’s Prosperity index which has eight dimensions
• Two of these dimensions separate the oil countries into three
separate environments:
• Economy
• Five year growth rate (2000)
• Confidence in financial institutions (% yes)
• Satisfaction with living standards (% yes)
• Governance
• Confidence in the government (% yes)
• Confidence in the judiciary (% yes)
• Government Effectiveness (World Bank)
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Ranking -- Legatum Governance (1 highest, 142 Lowest)
Diversity of Oil Economies
140
Venezuela
Iraq
Russia Iran
120
Nigeria
Azerbaijan
100
Angola
(Classic Oil Curse)
(Partial Oil Curse)
Indonesia
80
Chad
Sudan
Mexico
60
Saudi Arabia
UAE
40
Kuwait
20
(Oil Blessing)
0
0
20
40
60
80
100
120
140
Ranking -- Legatum Economy (1 highest, 142 lowest)
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Oil Economies: Patterns of Governance
Composite Governance (percentile)
55
50
45
40
35
30
25
20
Country/Grouping
Iraq
Partial Oil Curse
Oil Curse
Oil Blessing
15
10
5
0
1996
2000
2003
2005
2007
2009
2011
Source: World Bank, Worldwide Governance Indicators, 1996-2011
Total Governance: Voice and Accountability, Political Stability/Absence of Violence,
Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption
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Manufacturers Exports (% Total Merchandise Exports)
Oil Economies: Diversification
50
45
40
35
30
25
20
15
10
5
0
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Country/Grouping
Oil Curse
Partial Oil Curse
Oil Blessing
Iraq
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