

How oil did not corrupt Norway - moeffju
http://www.ft.com/cms/s/2/99680a04-92a0-11de-b63b-00144feabdc0.html#

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jakarta
Plenty of countries are natural resource rich and do not run into major
issues.

Canada, the US, Australia, and yes - Norway, all come to mind. Usually, the
factor that enables a country to resist corruption from natural resources
comes from having a proper governance system already in place.

Even something that many perceive as trivial, like tax collection, is
essential. Because what often happens is, a nation will not collect taxes and
instead say they will let the riches from natural resources trickle down to
the citizenry. This enables dictatorships/political elites to remain
entrenched at their expense.

You also need government agencies in place to make sure that surveys are being
conducted properly so that the auction process can be optimized.

I remember a story about an African nation that needed to auction off mining
rights. Their data was well over 100 years old, whereas some MNC mining
companies had state of the art testing, as a result there was asymmetrical
information that worked against their government.

One way to circumvent that lack of information is to auction permits in a
rolling manner. So you auction off the ability to only mine in one small area.
Then, if there is a discovery, you can raise initial prices for future permits
in the surrounding area.

~~~
curtis
_Plenty of countries are natural resource rich and do not run into major
issues._

That's certainly true. I think most of those countries are countries that have
healthy economies independent of natural resource exploitation. This is
certainly true of your examples, even, to some extent Norway (about a quarter
of Norway's GDP comes from the petroleum industry according to Wikipedia).
This is not to discount the importance of proper governance, as you say.
However, I think there's a case to be made that part of the reason that many
nations rich in natural resources have problems is because their extractive
industries account for such a huge proportion of their economies.

~~~
jakarta
Yes, finding having a boom in natural resources does have the effect of
crowding out other industries. I agree with you. That's "Dutch Disease" and
you can find it in many well governed resource rich nations.

The poster above brings up Alberta, you bring up Norway.

But Dutch Disease is just one detrimental 'symptom' of the resource curse.

Some of the more adverse symptoms are increased levels of conflict and
corruption and those are precisely the fears you need to have when looking at
Afghanistan's potential mineral wealth because there is a lack of proper
governance in place.

Now going back to your example, Norway -- and Alberta too. It is precisely
because of their governance systems that they can harness natural resource
wealth at more optimal levels than nations with the curse.

Norway for example has one of the largest sovereign wealth funds in the world.
That provides a mechanism for reinvesting the natural resource wealth into
other industries. I am no experts on SWFs, but from my reading, Norway's SWF
has a pretty good reputation.

To contrast that, look at some of the resource rich conflict nations in
Africa. They don't have formal laws and organizations to structure transparent
SWFs, they have swiss bank accounts that they use to raid government revenues
and sometimes fund militias.

So it is good governance that helps minimize the friction caused by new found
natural resource wealth and redistribute it in an optimal manner.

~~~
curtis
I pretty much agree with you. In the case of Afghanistan, though, I'd have to
say that poor governance is already a serious problem, and in fact it could
hardly get worse. The U.S. would like to improve this situation (as long as
we've got troops in the country, anyway), but I've yet to see any evidence
that we know how.

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roschdal
Although there is very little corruption in Norway, we certainly have some
issues as a result of the oil and gas resources. There is a lot of concern
that Norway's economy has "Dutch disease" -
<http://en.wikipedia.org/wiki/Dutch_disease>

Norway is also politically more socialist than the US. This is one area where
I admire the US more, because the US has more opportunities for innovation,
tech startups and in general a more agile and productive economy outside of
the oil industry.

PS: I'm Norwagian...

~~~
gahahaha
I'm not so sure you should admire the US so much. There is certainly an
entrepreneurial spirit there, but income mobility is much higher in
Scandinavia. Better chance of becoming rich if your parents are poor.

Also, Norway is usually at the bottom of the Nordic countries in corruption
rankings. Usually this is attributed to the oil sector.

Dutch disease might be a problem, but /I/ think it will be quite mild, because
we are so aware of the possibility. Salary increases have not been totally out
of proportion this year, unless you start thinking about the countries around
us with actually sinking salaries....

/also Norwegian

~~~
gorm
It's important to look on social mobility vs financial mobility. Even though
you have high income mobility in a rich country like Norway there is still
poor social mobility.

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moeffju
Reposted from 288 days ago (<http://news.ycombinator.com/item?id=794116>)
because I found it relevant to the just discovered mineral deposits in
Afghanistan.

~~~
locopati
Except that the mineral deposits weren't 'just discovered'
[http://www.wired.com/dangerroom/2010/06/no-the-military-
didn...](http://www.wired.com/dangerroom/2010/06/no-the-military-didnt-just-
discover-an-afghan-mineral-motherlode/)

Considering the US position in Afghanistan, this seems like a strategic plant
on behalf of the Pentagon/govt to justify our continued deployment there. The
NYT has certainly played a willing role in the past (google Judith Miller and
Iraq).

~~~
moeffju
Thanks for the link. My first reaction was similar, followed by "Who will
profit", and I see the Wired article poses pretty much the same questions.

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kozmic
I've never heard this story before. Didn't expect to get a history lesson on
Hacker News about my country :) Thanks.

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tjmaxal
Sounds like Farouk found the perfect job for him. What an amazing and
empowering thing to do. Being successful is often the reward for finding the
perfect match like this.

~~~
sliverstorm
Yeah, talk about right place right time!

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michael_dorfman
A great article, but I think it's pretty easy to delineate enough major
differences between pre-oil Norway and current-day Afghanistan to render the
comparison moot.

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rikthevik
If the Norwegians feel guilty about having too much money, they are welcome to
buy a round for their friends in Denmark.

~~~
ZenzerNet
We do, gladly - det er dejlig å være norsk i danmark!! :)

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vl
It's indeed an interesting article, but I failed to understand what Norwegians
managed to do differently than other states to achieve success. It seems
article doesn't go into much detail about it.

~~~
bl4k
First step was to have their own state owned oil company that would take part
in exploration and drilling, rather than allowing foreign companies to take
control in hope of 'trickle down effects'

Step two was to introduce a regulating body with strict policies (the policies
were written by the subject of the article). The policies included extraction
rates, technology standards, environmental standards etc.

Third step was that the regulating body treated the government owned oil
company just like any other when it came to tenders or exploration licenses -
which minimizes corruption in government (or just shift corruption to this
regulating body, really - but I guess they have some form of parliamentary
oversight).

Further step was that all profits from exploration and drilling went into a
sovereign wealth fund which would divest the wealth of the nation into foreign
markets - smoothing out economic cycles domestically and providing a future
fund.

All of these policies together contributed to a system that has less of a
corrupting effect on both the local government and local economy. It is a best
case example of how to maximize the overall benefit from resource wealth that
would usually only benefit a selected few people or just a select sector.

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patrocles
lol. Uncorrupted? What happens when their oil runs out in 10-20 years?

~~~
henrikschroder
They'll stop pumping money into the national oil fund, a bunch of people in
the Norwegian oil industry will have to look for new jobs, and the cost of
living will probably slowly trickle down to the same level as the neighbouring
countries.

The oil industry contributes a large part of the GDP of Norway, but it's not a
large employer.

