The UAE, Qatar and Bahrain have been ranked as some of the top countries in the world in effectively managing their energy resources. The three countries have made great strides in developing institutions and governance, capturing value through local content development, and transforming value into long-term development, according to a report entitled ‘Reverse the Curse: Maximising the potential of resource driven economies’, by research firm McKinsey & Company.
According to the report, rising resource prices and expanded production have raised the number of countries where the resource sector represents a major share of the economy, from 58 in 1995 to 81 in 2011. That number will rise: to meet soaring demand for resources and replace rapidly depleting supply, the world should invest a total of up to $17 trillion in oil and gas and in minerals by 2030, double the historical rate. In 20 years, almost half of the world’s countries could depend on their resource endowments for growth.
To date, resource-driven countries have tended to underperform those without significant resources: almost 80% of the former have a per-capita income below the global average. Since 1995, more than half of these countries have failed to match the average growth rate of all countries. Only one-third have maintained growth beyond the resource boom. Recent McKinsey research lays out a new model that could help countries capture the coming resource windfall.
Resource-driven countries in the low- and lower-middle-income brackets could capture $1.2 trillion to $3 trillion of the $11 trillion to $17 trillion cumulative global investment in resources to 2030. At the high end of this range, these countries would net almost $170 billion a year, more than three times their development-aid flows in 2011. There is some potential to lift almost half of the world’s poor out of poverty. That would be more than the number of people who left the ranks of the poor as a result of China’s rapid economic development over the past 20 years.
To capture that investment, these economies should reframe their economic strategies around three key imperatives: effectively developing their resource sector, capturing value from it, and transforming that value into long-term prosperity. The research explores best practices on six fronts: building the resource sector’s institutions and governance, developing infrastructure, ensuring robust fiscal policy and competitiveness, supporting local content, deciding how to spend resource windfalls wisely, and transforming resource wealth into broader economic development.
