Moderated by Hassan Hakimian, University of London, the fifth session at the “Understanding and Avoiding the Oil Curse in the Arab World” Conference featured two presentations from Ibrahim Elbadawi (Economic Policy and Research Center – EPRC, Dubai Economic Council & Economic Research Forum – ERF) and Sambit Bhattacharyya (University of Sussex). The focus was on “Turning the Curse into a Blessing : The Role of Good Governance”.
Elbadawi presented the findings from his paper on “Resource Rents, Political Institutions and Economic Growth” which confirm that even though the resource curse has a short term positive effect, it has clear negative implications in the long run. More importantly, the curse is conditional on bad governance so that countries with high commitment to checks and balances and high inclusiveness (political democracy) use resource rents to grow or alternatively could escape the curse; and vice versa. This has important policy implications for the region: “Arab spring should not only bring democracy (…) but should also lay the foundations of a strong checks and balances system”.
From his side, Bhattacharyaa shared with the audience his research results on “Public Capital in Resource-Rich Economies: Is there a Curse?”. Given that poor countries typically have acute shortage of public capital (e.g. road network, railway lines, telecommunications network etc.), finance from resource depletion is an opportunity for financing much needed public capital. However, the reality is that resource rich countries systematically under-invest in public capital and therefore, all the wealth that comes out from the ground is not transformed into assets for the benefit of the citizens. Mineral and hydrocarbon resource rich countries suffer from the curse more relative to countries with agriculture and forestry. However, good institutions moderate the negative effect.