I have read someone mentioning ‘Dutch Disease’ in one of the posts elsewhere in the PDF. Since this relates to oil & gas and which happens to be my field, I would like to share my thoughts on the subject of getting "Rich quickly through finding huge deposits of oil and/or mineral resources" with fellow members.
In July 1959 the Slochteren -1 well discovered a gas field in the Groningen province of Holland with 100 tcf ( approx 16-billion bbl oil equivalent) of natural gas reserves. The bonanza of the sharp increase in revenue started pouring in from 1963 onwards. However, instead of increasing the economic development, Netherland experienced a decline in competitiveness resulting in a drastic decline in the economic growth in the immediately following years.
The above gave birth to a new economic term called ‘Dutch Disease’ which refers to the economic paradox where a windfall of revenues adversely affects the performance of the other sectors of the economy.
There can be no better example than the three countries blessed with immense natural resources.
Indonesia: In addition to 22-billion bbl. (oil equivalent) in crude & natural gas reserves, the country has 15 billion tons of proven and probable reserves of copper reserves. Is the 8th largest producer of gold in the world? Indonesia also has a 4.2 billion tons of proven bituminous coal reserves, and an additional 12.9 billion tons in inferred reserves. Having the world’s third-largest rain forest, it also has a large timber industry.
Nigeria: In addition to the 37-billion crude oil & about 190 tcf natural gas reserves; Nigeria also has substantial mineral resources.
Venezuela: On top of having the world’s largest petroleum reserves (300-billion bbl.), Venezuela has the 8th largest in the world in mineral resources. It is the It is one of the leading exporters of bauxite, coal, gold & iron.
Compare these countries with Austria. With a population of about 9-million, GDP of $461-billion, Austria it is the 15th richest country of the world in terms of GDP capita. Main sources of income are Services sector (70.3%), Industry (28.4%) with agriculture at a mere 1.3% of the economy. Austria does have mineral resources such as lignite iron ore & Magnesite; however annual mineral production worth is about $32-billion versus the service sector which contributes nearly $250-billion to the GDP.
Some might say that Austria is an extreme example, but we also have Singapore with a population of less than 6-million but with a GDP of $550-bilion. The economic base of Singapore comprises of financial service, electronics, chemicals, petroleum refining, ship repair, food & beverages.
It because of the highly qualified and skilled manpower that small & relatively natural resource-poor countries like Singapore & Austria are economically so strong but the natural resources rich countries are in such bad shape. The above proves beyond doubt that real wealth of any nation is her “Human Resource” and that windfall revenue from natural resources; though always welcome; is no guarantee for long term economic wellbeing and occasionally can even turn out to be a ‘Curse’!.
What I am trying to emphasize is that while we hope for the best from offshore drilling, neither a large find is an occasion for jumping with joy nor a dry hole would be a reason for despair. In my humble opinion, the primary goal of any developing nation should be to improve quality & productivity of her manpower which cannot be achieved by the culture of fake degrees and political patronage prevalent in Pakistan of today.
