Oil boom can affect industry and agriculture (pg 38)

AS Ghanaians anxiously look forward to the huge impact that the country’s emerging oil industry will have on the national economy, an economist has cautioned that it can also adversely affect the manufacturing and agricultural sectors.
According to Dr Robert Osei, a Research Fellow at the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, the oil industry will also lead to a drift in labour from other sectors of the economy, in search of non-existing jobs in the industry.
He expressed the hope that Ghana would not suffer from the ‘Dutch Disease’, a situation where high revenue generated by the oil and gas industry led to a decline in the competitiveness of non-booming tradeable sectors, as well as a decline in the overall growth of the economy.
Dr Osei made the remark at a public lecture organised by ISSER and sponsored by the Friedrich Ebert Stiftung (FES) on the theme: “The macroeconomics of managing an oil boom: Global lessons indicated”.
He said the nature and extent of the fiscal impact of the oil boom depended on what a country did with the increased revenue from the oil industry.
Dr Osei said studies that compared resource-rich and resource-poor countries had revealed that the greater the proportion of Gross Domestic Product (GDP) or government revenue from natural resources, the slower the rate of economic growth.
According to him, factors that contributed to such lower pace of growth included: “Mismanagement in the midst of plenty”, inadequate strict fiscal transparency and good budget practices.
“A country gains increased policy space but how this freedom is used determines whether the country would benefit from the resource boom”, he stressed.
Dr Osei said the fiscal implications of the booming oil industry were such that proper fiscal management was needed to avoid situations where an oil boom translated into adverse macroeconomics outcomes.
He called for the sustenance of stability and savings funds that would ensure that the revenue overflow was well-managed in order to benefit generations yet unborn.
Sharing the experiences of other oil-rich countries in the world, he said Canada remained a good example of an oil-producing country with good fiscal management, while Norway created an avenue where petroleum wealth was spread over a number of generations.
He, however, said Sudan had not had it rosy as the oil revenue had posed challenges to the macro management of the Sudanese economy in addition to political instability.
“Resources need not be a curse for Ghana. It could be a blessing if they are managed in an efficient and transparent way”, he indicated.
Dr Osei said a critical issue for Ghana was to use the oil revenue to promote a diversified economy in which the benefits of oil production would be spread across the entire country.
The Head of the Economics Department of the University of Ghana, Dr Augustine Fritz Gockel, who chaired the function, said lessons from other oil-rich countries, whether positive or negative, should be a guide to the nation on how to manage a successful oil and gas economy.
He appealed to the media to lead the accountability and transparency crusade as the industry took off to ensure that the industry became beneficial to all.

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