Business News of 2014-06-18

Measures needed to derive full benefit of oil production - Economist

A renowned international economist, Prof. Paul Collier, has advised Ghana not to be deceived that oil production will make the country rich.

He said on the contrary, oil production could make things worse for the nation if the appropriate measures were not taken to derive full benefit from the natural resource. “Oil is dangerous because it’s psychologically so glamorous. There is the tendency to say, ‘we are rich,’ and once you allow that to happen, you build yourself a nightmare,” he said at a round-table discussion in Accra last Monday.

Substantiating his point, Prof. Collier said seven years after Ghana had discovered oil and three years after production had begun, the country was still facing macro-economic challenges.

The round-table discussion was organised by the Institute of Economic Affairs (IEA), in collaboration with the Netherlands Institute of Multiparty Democracy and the Global Leaders Forum (GLF). It was on the topic: “Making Ghana’s natural resources count,” and formed part of an initiative by the IEA to engage key stakeholders in discussing critical issues of national concern.

A delegation from the GLF, including a former President of Botswana, Mr Ketumile Masire; a former President of Switzerland, Mr Kasper Villiger, and a former Zambian Minister of Finance, Dr Situmbeko Musokotwane, participated in the discussion. It was also attended by some members of the Parliamentary committees on Finance, Energy and Public Accounts.

Prof. Collier, who is also the co-Director of the Oxford Institute of Global Economic Development, cited Nigeria as an instance of how oil could deepen the woes of a country, contrary to the expectation of it making a nation become rich. He said in the 1970s/1980s, Nigeria rushed into making investments in the natural resource sector but that proved to be a complete disaster.

Prof. Collier said Nigeria suffered from the ‘Dutch disease’ because of its over-reliance on oil and failure to invest in the agricultural sector. He recommended Botswana to Ghana as a good example of how natural resources could be well-managed to catapult the country’s development.

He, however, noted that the development of Botswana was not merely because of its natural resource endowment, but due to good governance practices. Prof. Collier said Ghana had gotten the right laws in place but the problem had to do with the implementation of the laws.

He said the country’s inability to pass the Right to Information Bill after six years of it going to Parliament had not made room for transparency in the natural resources sector. He said if there was no mandatory contract disclosure in the natural resources industry, for instance, “how do you know what is in it?”.

Sharing the Botswana experience in natural resource management, Mr Masire said Botswana used to be a poor country and was like a “sinking ship.” He said just as everyone sacrificed to salvage a sinking ship, the unity of the people was made a priority in the quest to get out of the economic woods.

Mr Masire said through the development of a good tax regime for the natural resource sector, Botswana was able to get about 80 per cent revenue in corporate and other taxes from mining companies. For his part, Dr Musokotwane advised Ghana not to depend solely on natural resources for development because they offered very little.

Source: graphic.com
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