Are They Predisposed to the Resources Curse? Oil in Somalia

Abstract

In many developing countries, natural resources such as oil and gas have had negative impact on economic development. There is a myriad of literature on “the resource curse” which shows an austere relationship: countries endowed with huge deposits of oil and gas usually experience lower economic growth than countries that do not have these resources. As a modern ‘frontier region’ Somalia is one of the most promising countries blessed with oil and gas in the Eastern part of Africa. However, it is faced with political upheavals, weak state structures, physical insecurity, and property rights full of ambiguities; this makes it a challenge to exploit the country of its hydrocarbons. In addition to the present tense conditions within the region, the question that lingers, is whether or not Somalia is set to struggle with the common effect of the ‘resource curse’ and paradox of plenty disorder? Somalia was selected because it provides an ideal laboratory to ascertain if she is predisposed to the ‘resources curse’ disease. To this end, the study examines and also outlines the primary themes that guide the work using the case of Somalia as an addition to the body of empirical knowledge. The study recommends that new governance structures should be built, existing ones should be built, local content and local participation should be enhanced and the security and judicial agencies should be supported. Keywords: Somalia; Resource Curse; Resource Rents; Oil; Governance. JEL Classifications: L71; L72; O13