Abstract
Natural resources depletion should be offset by manufactured and human capital increase. But there are still wide discrepancies between countries, particularly between North African and Gulf hydrocarbons exporters. Pricing resources below their “social cost” often lead to inefficient consumption, even if this under-pricing contributed to industrial and private sector development. The application of the theoretical framework to two major hydrocarbon exporting countries of the region, Saudi Arabia and Qatar, turns that Saudi Arabia has been building wealth more rapidly than Qatar, a high income country. The two countries seem to be improving the way they manage their economies and their resources.
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Notes
- 1.
In Arrow’s sense, Institutions include “the legal structure, formal and informal markets, various agencies of government, interpersonal networks, and the rules and norms that guide their behavior”.
- 2.
The concept of sustainability is a complex one, but it became widely used after the publication of the Brundtland Commission report (the World Commission on Environment and Development) in 1987. Sustainable development was defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.
- 3.
See Olson, Power and Prosperity and the Rise and Decline of Nations.
- 4.
Olson argues that economies with many participants can create the “free rider” problem: individuals have an incentive not to participate but to benefit from the collective actions of others.
- 5.
Olson applies the same rationale to democracies and concludes that democracies tend to decline over time as particular interests, as opposed to the majority—which will have a stronger focus on growth—would have time to organize themselves.
- 6.
Algeria’s population is estimated at 39 million inhabitants, Libya’s population is around 6 million inhabitants (2013). Both are OPEC countries, and oil and gas producers and exporters.
- 7.
The UNDP uses today more than 150 composite indices to measure countries’ performance, up from less than 25 before 1985. These indices cover a diverse set of issues including competitiveness, governance, social aspects, human rights, environment and security.
- 8.
More sophisticated calculations include the knowledge base of the society, and sometimes the institutions as assets.
- 9.
The Dutch Disease, the Curse of Oil, the Paradox of Plenty, among other concepts, have all been extensively analyzed since the 1950s. The expression Dutch Disease was mentioned for the first time in 1977 in “The Economist”, in relation with the debate following oil discoveries in the UK. This syndrome refers to the disappointing economic performance of the Netherlands following the development of the Groningue gas field. Empirical research on low economic performance of resource holding countries really took off in the 1990s.
- 10.
The US share of reserves subject to the regulations was reduced from more than 65% to only 17% of the total as a result of globalization.
- 11.
For more details on the limits of oil and gas reserves reporting, see CERA’s special report of April 2005 “In search of reasonable certainty”.
- 12.
As referred to in the first chapter, education and employment are becoming high on Arab countries’ agenda, as they recognize the vulnerability of their economies because of the region’s poor track record on education, training and human development. “The Arab world’s track record on education, particularly girls’ education, is discouraging. Sixty-five million adult Arabs are illiterate and two-thirds of them are women. More than 10 million Arab children between the ages of 6 and 15 are still not enrolled in any schooling, and on current trends this number will increase by 40% over the next decade. This is a monumental waste of human capacity.” H.H. Sheikh Mohammed bin Rashid al Maktoum, Education vs. Extremism, the Wall Street Journal, June 3 2009.
- 13.
Fuel supply agreements for industrials are generally highly confidential. In the region a few fell in the public domain, and they are also around $1 per MMBtu in the case of gas, sometimes with escalation formulas.
- 14.
In early 2008, the Egyptian cabinet adopted a new maximum price of US$3.95 per MMBtu for the gas produced in five different concessions in the Mediterranean Sea (the BG-operated Rosetta and West Delta Deep Marine (WDDM) concessions, RWE’s North Idku, and Eni’s and Hess’s North Bardawil and West Mediterranean Block 1 concessions). It represented a sharp rise from the previous maximum price of US$2.65 per MMBtu, but is in line with the 2007’s bilateral deal between the Egyptian government and BP, giving the company a US$4.5 per MMBtu price for its gas to compensate for high exploration and development costs in recently discovered fields.
- 15.
See Marcel, Oil titans.
- 16.
The cost of the Saudi marginal barrel of oil is estimated at around $20 per barrel (source CERA). New gas production cost (sour gas in Abu Dhabi for instance) is in the area of $5 per MMbtu.
- 17.
Source: OPEC annual Statistical Bulletin. Qatar came second in the world after Liechtenstein, straddled by Austria, Germany and Switzerland.
- 18.
Saudi Arabia’s population was around 24 million in 2008, while Qatar accounted about 1.64 million inhabitants. The former extends over an area of more than 2,240,000 km2, whereas Qatar registers 11,400 km2.
- 19.
The oil price assumption in the budget is $37 per barrel.
- 20.
Cordesman (2003) writes: “Fortunately, most informed Saudis—including the Crown Prince and the vast majority of senior princes, technocrats and businessmen—understand that Saudi Arabia must make major structural economic reforms. These “modernists” are as Islamic as every other element of Saudi society, but they are supported by most well-educated Saudis and a generational shift in favor of reform. They realize that Saudi Arabia must cap or reduce its funding of social services and must focus on a pattern of economic development that will ensure that all national groups receive a share of the nation’s oil wealth. They recognize that reform must take place within a safety net that defuses or reduces social protest. At the same time, they understand that oil wealth is as relative as any form of wealth and that it is steadily declining in terms of per capita income. They see the need to diversify and privatize the economy and to create a competitive economic environment dependent on Saudi labor”.
- 21.
“Saudi Arabia is using its overseas assets to finance domestic requirements specified in its budget for this year … in other words, the kingdom is channeling part of those funds into domestic development because it apparently does not want to borrow at this stage,” Malick Yunus, senior economist at the National Commercial Bank, July 2009.
- 22.
Source: Central Bank and SAMBA.
- 23.
As of mid-2009, QIA was set to buy 10–20% of the capital of listed banks ($5.3 billion), in parallel to a $1.8 billion plan to buy banks’ investment portfolios and a $4 billion plan to acquire banks’ real estate assets.
- 24.
11,400 km2, 1.64 million inhabitants (Official figures for mid-2009 report 1.64 million inhabitants, including expatriates, double of 2004).
- 25.
Inflation reached 11.8% in 2006, 13.8 in 2007 and 15% in 2008, according to the IMF.
- 26.
The MEED projects tracker estimates that the value of projects under construction and in the planning stages in 2009 stands at $200 billion.
- 27.
Source: IMF, National Bank of Kuwait, Standard Chartered.
- 28.
In this respect, the objectives of the Strategy emphasize concepts like “the maximization of value addition from raw and intermediate materials, the diversification of income resources, the increase of manufacturing industries’ contribution to GNP, the industrial awareness for a sustainable industrial development and self-reliance, the scientific and technological developments and the protection of global environment”.
- 29.
Ras Abu Fontas A & B, Ras Abu Abboud, and three satellite stations: al Wajbah, Saliyah, and Doha South. This asset allocation reminds of another similar move in Abu Dhabi with TAQA (which has gradually invested in international assets).
- 30.
Electricity was free for Qataris up to a monthly ceiling. Expatriates paid between $0.021 per kWh and $0.027 per kWh and commercial customers up to $0.037 per kWh.
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Cordesman A (2003) Saudi Arabia enters the twenty first century. Praeger Publishers, Westport
World Bank (2006) Where is the wealth of the nations? The World Bank, Washington
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Benali, L. (2019). Prospects and Future of Reforms: Resources Monetization. In: Electricity-sector Reforms in the MENA Region. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Cham. https://doi.org/10.1007/978-3-319-96268-9_10
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