International Policy Conference on Competitiveness & Diversification: Strategic Challenges in a Petroleum-rich Economy Accra, Ghana 14-15 March 2011
One of the most daunting challenges confronting a Petroleum (or natural resource-rich) developing country in this period of commodities boom is the task of avoiding the Dutch disease while remaining competitive and simultaneously diversifying the economy. The task is even more onerous in an environment of fragile political and social systems, exhibiting widespread capacity weaknesses, and deep-seated corruption. The policy prescriptions often designed to take on this challenge are mainly technical in nature and very rarely give sufficient emphasis to the social and political environment within which they operate. For fragile economies where political and economic governance are usually under stress, bold and innovative measures are needed for the symptoms of the disease to be kept under control. When the roots of the disease are to be found in revenues from offshore oil, the impact and severity of the disease are likely to be even more pervasive, going beyond economic effects to exacerbating political and social tensions prevalent in the fragile environments. Furthermore, as with all diseases, prevention is better than cure. Hence the “cure” is to put in place such provisions before the onset of the disease.
The paper will analyse key features of governance and economic management in fragile states that are likely to aggravate the symptoms of Dutch disease, and at the same time render application of solutions difficult. Against this background, a number of possible policy measures to ameliorate the effects of the disease will be identified.
Dealing with the Dutch Disease in a Fragile Political Economy Environment