The united Arab Emirates (UAE) is often cited as an example of how an oil-rich nation can successfully leverage its natural resources to drive socio-economic development and create a diversified, resilient economy that can rebound repeatedly.
A few decades ago, the UAE was a relatively underdeveloped region with limited resources, relying heavily on its oil reserves to fuel its growth.
That was before shrewd strategic planning and reinvestment transformed it into a global trade, tourism and finance hub.
As Namibia begins its journey as an emerging oil producer, the UAE's experience offers invaluable lessons, particularly in avoiding the resource curse plaguing other oil-rich African nations such as Nigeria and Angola.
Diversification and reinvestment
The UAE's transformation began with a strategic decision to diversify its economy beyond oil.
This was particularly evident in Dubai, which successfully reduced its dependence on oil to less than 1% of its GDP: An approach that took it from a fishing village to a futuristic metropolis.
This was achieved by reinvesting oil revenue in other key sectors such as real estate, tourism, education and healthcare, which has benefited all residents in the area.
Namibia would do well not to rely too heavily on its oil reserves alone as the world moves towards zero-net emissions.
The key is to maximise this new oil economy to drive growth in other sectors to carry it beyond the finite capacity of its reserves.
A critical aspect of the UAE's success was its focus on building world-class infrastructure and creating a business-friendly environment.
The government invested heavily in transportation networks, telecommunication systems and modern cities, making the country an attractive destination for global businesses and tourists.
This boosted non-oil sectors and created a more balanced and sustainable economy that could withstand fluctuations in international oil prices.
In addition to economic diversification, the UAE established the Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund designed to manage and grow the country's oil revenue.
ADIA invests in a diversified portfolio of global assets, ensuring that its oil wealth is preserved and used to benefit future generations.
This long-term approach has been crucial in maintaining economic stability and ensuring that the benefits of oil wealth are not squandered but invested for the benefit of all citizens.
OPPORTUNITIES AND CHALLENGES
Namibia's recent oil discoveries in the Orange Basin present both opportunities and challenges.
The discoveries have generated optimism about the country's economic future.
The potential for oil to transform Namibia's economy offers opportunities for job creation, infrastructure development and poverty reduction.
However, it comes with significant challenges that must be carefully managed to avoid the dreaded 'resource curse' - a phenomenon where countries rich in natural resources experience adverse economic outcomes because of poor governance and over-reliance on a single resource.
This can lead to economic instability, social unrest and a failure to translate resource wealth into broader economic and social development.
Nigeria and Angola serve as cautionary tales in this regard.
Both countries have abundant oil reserves yet have struggled with corruption, mismanagement and economic instability.
Unlike the UAE, their challenges have led to social unrest and a failure to translate oil wealth into broader economic and social development.
To avoid these pitfalls, Namibia can learn from countries such as the UAE and Norway by prioritising economic diversification from the outset.
This means investing oil revenue in sectors that provide long-term benefits - such as education, tourism and infrastructure development.
This can help create a more balanced economy that is less vulnerable to the volatility of global oil markets.
FUNDING THE FUTURE
Namibia has already taken steps aimed at responsibly managing its oil wealth by establishing the Welwitschia Fund, a sovereign wealth fund similar to the ADIA.
The Welwitschia Fund aims to secure the nation's long-term economic stability by reinvesting oil revenue in critical areas that will benefit future generations.
Good governance will be paramount in determining whether Namibia's oil becomes a blessing or a curse.
Transparency, strong institutions and effective policy implementation are essential to ensure that oil wealth is used for the public good rather than becoming a source of corruption and inequality.
By prioritising these principles, Namibia can reassure its citizens and stakeholders that its oil wealth will be in safe and responsible hands.
The UAE's success is partly attributed to its strong governance framework, which has ensured that its oil revenue is managed responsibly and transparently.
It has implemented policies that encourage local content and workforce development, ensuring that its oil benefits are widely distributed across society.
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Namibia can adopt similar governance practices to ensure its oil wealth is used to promote inclusive development.
This includes strengthening institutions, enforcing anti-corruption measures, and committing to reinvesting its oil revenue to the benefit of all Namibians not just a select few.
Critical juncture
Namibia is at a critical juncture.
Our oil discoveries offer the potential to transform the country's economy, but must be carefully managed to avoid the resource curse.
By learning from the UAE's successes, Namibia can chart a path that maximises the benefits of its oil wealth while minimising the risks of betting it all on a single resource.
The key to success will ultimately be a long-term, strategic approach that prioritises economic diversification, responsible management of oil revenue, and strong governance.
In this way, Namibia can use its oil discoveries as a catalyst for sustainable and inclusive development, ensuring that the wealth generated today will benefit future generations.
- Paulo Coelho is a serial entrepreneur and the current manager for marketing, communications and public relations at the National Oil Company
