Resource Curse; aggregate productivity of a country is skewed towards a singular or few natural resources to the extent that the economy becomes solely dependent on revenues from the resource(s).
Countries claimed to have escaped the resource curse:
Trinidad & Tobago
Dutch Disease; the shrinking of non-resource export sectors in terms of labour hours and/or export receipts due to emergence of natural resource exports (in this case oil) e.g. decline of manufacturing and agricultural sector exports with the founding of crude oil in Nigeria.
Oil revenue is channelled through the government, which runs a parliamentary system. To access oil revenue, there needs to be negotiations with the government. The well-functioning legal system, media scrutiny and strong social norms all served to deter rent-seeking and corruption.
“Driven by windfall oil revenues combined with prudent fiscal management”, Norway ranks 3rd in global competiveness.
Norway maintained a variegated productive capacity by using price subsidies transfers and tariffs to shield and support domestic industries like fishing.
Fishing; exports of stock fish as far back as 12th century, seafood and aquaculture exports continue to gorw. Norwegian aquacuturists are actually selling their expertise to other counties such as Chile that specialize in fish farming.
Shipping; the country already possessed an international maritime industry, and industrial actors within the fields of fabrication and construction.
Timber logging; timber bulp and paper industry exported newsprint. With internet replacing print media, the mills were reinvented into using industry standard technology. As one of the world’s most advanced biorefineries, Borregard mills turns into a variety of products: cellulose, lignosuphonates, vanillin, ethanol, and generates 200GWh of bioenergy.
Norwegian government owns 37% in the Oslo stock market, with shares in Statoil the national oil company, Telenor the country’s biggest telephone operator, Norsk Hydro its biggest aluminium producers, Yara its biggest fertilizer makers, DnBNor its biggest bank, Statkraft a power-generator (if listed would be the third biggest company on the stock market). All of this is made possible through oil.
Note that Statoil and Hrdro merged in 2007. The government however reduced the state’s share to 62.5% balancing state control and global competiveness.
Source: The Economist Article – Norway: The rich cousin
SWF of Norway is owned by the finance ministry and managed by the central bank (Norges Bank), it is now worth $750bn (2013). The fund has 63.4% of its money in equities, 35.7% in fixed income investments, and 1% in real estate.
Recent developments in pursuit of more attractive returns on capital (than bonds) have seen proposal for increase in the real estate share to 5% more investments in green technology and emerging markets.
Norway shields its economy by practicing fiscal prudence through limiting exploitation of Pension Funds to 4% annually thereby avoiding hyperinflation and stunting of traditional industries.
Sources: Wall Street Journal Article – Norway Oil Minister Proposes carving Out Real-Estate Fund from $750bn Oil Fund.
Norway’s GDP trend started on relatively steady acceleration four years after oil production started in 1971. It passed Sweden eight years after in 1979 and Denmark in 1985. Norway maintained a higher pace after 1988. Ten years later, Norway had 2nd largest GDP in the word.
The RIC has been hailed as one of the most technologically advanced identity cards in the world. Not only will it give Brazilians unique, multipurpose identity number based on their fingerprints, it also includes a photo, a signature and a chip with a biometric and biographical details. “This card uses the best technology in the world, adapted to the necessities of Brazil”, says Celio Ribeiro, President of ABRID, the country’s Association of Digital Identification Technology Companies.
(FC) FGTS is the Fundo de garantia por Tempo de Servico which is the Employee Indemnity Guarantee Fund and an employee compulsory fund. All companies are obligated to deposit the FGTS contribution into their employers account by the 7th day of the month. The tax corresponds to an 8% rate on top of the gross salary.
The Contribution of FGTS is mandatory even in cases of contract interruption and the law requires the following:
Illness assistance/aid for a maximum of 15 days.
During any period of absence due to workplace accidents
In recent years, the ethanol program has become even more important. Demand for ethanol surged due to increase in oil prices, but also due to technical developments in the automobile industry, which allows drivers to use either gasoline or ethanol in locally manufactured cars. Additionally, concerns about climate change are offering the opportunity for exports of ethanol and Brazilian ethanol technology to international markets, Brazil is the second largest producer of ethanol in the world, just behind USA.
Non-commodity Sovereign Wealth Funds are typically financed by an excess of foreign currency reserves from current account surpluses. Non commodity funds totalled $2 trillion in 2012, which is three times the total three years earlier.
Currently, the majority of funds are financd by commodities, but non-commodity funds may reach beyond 50% of the total by 2015.
Brazil’s Sovereign Wealth Fund ($5.2bn) is invested overseas, used to finance strategic local development, reduce effects of economic cycles and create public savings.
Recent discoveries show that Brazil’s oil reserves are significantly larger than the believed 16 billion barrels. Some have argued recent pre-salt discoveries hold about 33 billion barrels, if this proves to be true, it would alter the country’s standing in terms of global crude oil reserves.
The United Arab Emirates is a federation of seven emirates (Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah and Umm al Qaiwain) that gained its independence in 1971. Since then it has grown from a desert to one of the most important economic centers. Although each state maintains a large degree of independence, it runs a federation with specified powers delegated to the UAE federal supreme council comprising rulers of each emirate and a council of ministers.
Dubai’s tourism vision seeks to draw 20 million visitors per year and Dh300 billion ($82 billion) in annual revenues by 2020.
Shaikh Mohammed said the UAE has positioned itself among the most popular tourist destinations on the planet as it presses ahead by launching ambitious developmental initiatives and high quality projects. He said was confident that the Department of Tourism and Commerce Marketing (DTCM) is capable of achieving Dubai’s new Tourism Vision for 2020, given its recent press release that shows Dubai enjoying its busiest first half year (2013) with a track record of 5.5 million visitors so far.
Investments in projects such as Khalifa Industrial Zone Abu Dhabi (KIZAD) continue to provide the UAE with insurance against oil price decline and global economic stagnation (EIA). KIZAD whose vision is “to bring the industrial zone of tomorrow to life, creating prosperity and a lasting legacy for future generations of Abu Dhabi.”
With it enormous size and strategically planned approach, KIZAD is set to become a hub for manufacturing, logistics and trade, across a number of sectors.