Avoiding the Resource Curse Dilemma: The Discovery of Oil and Gas in Uganda

Since 2006, Uganda has made several oil and gas discoveries and the government hopes that the development of the sector will transform Uganda from a low-income into an upper middle-income country by 2040 and from a net importer to a net exporter of oil and its products with wider regional benefits. The oil and gas discoveries have led to high expectations for many institutions, communities, and individuals with reference to poverty-eradication development. Of particular concern for Uganda is that in Africa, countries dependent on oil and gas have tended to have weaker long-run growth, higher rates of poverty, and higher inequality than non-mineral-dependent economies at similar levels of income - a situation that amounts to a resource curse. The paper discusses the possibility of avoiding the resource curse dilemma following oil and natural gas discoveries in Uganda. It is argued that the resource curse is not an economic inevitability, but the result of the governance challenges surrounding effective policy implementation. One often neglected possibility is that resource windfalls will damage countries that are initially susceptible to rent-seeking or institutional erosion, while countries with strong institutions will ride out and prosper from resource booms. Di John, (2011) views poor economic performance in the context of oil abundance and booms as outcomes of institutional arrangements, and the way that mineral rents are used is a byproduct of the political struggles and the ruling class`s orientation at the time they are earned. Uganda stands to benefit from oil if the Government embraces transparency. Uganda can avoid the oil curse by improving information flow to concerned stakeholders, systematically combating corruption, as well as ensuring that growth is equitable, and that the oil and gas resources are used sustainably.