Internati onal Policy Conference Proceedings Competi ti veness and Diversifi cati on: Strategic Challenges in a Petroleum-Rich Economy 14-15th March 2011, Accra, Ghana Disclaimer: This document has been produced without formal United Nations editing. The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Designations such as “developed”, “industrialized” and “developing” are intended for statistical conveni- ence and do not necessarily express a judgment about the stage reached by a particular country or area in the development process. Mention of firm names or commercial products does not constitute an endorsement by UNIDO. The opinions, statistical data and estimates contained in signed articles are the responsibility of the author(s) and should not necessarily be considered as reflecting the views or bearing the endorsement of UNIDO. Although great care has been taken to maintain the accuracy of information herein, neither UNIDO nor its Member States assume any responsibility for consequences which may arise from the use of the material. International Policy Conference Proceedings Competitiveness and Diversification: Strategic Challenges in a Petroleum-Rich Economy 14-15th March 2011, Accra, Ghana Contents Preface ............................................................................................................... i Kandeh K. Yumkella, Director-General , United Nations Industrial Development Organization Foreword... ........................................................................................................ ii Hon. Minister of Trade and Industry, Republic of Ghana Acknowledgements .......................................................................................... iii Opening Statement .......................................................................................... iv H.E. The President of the Republic of Ghana Presented by the Hon. Min. Ms. Hanna Tetteh, Minister of Trade and Industry Welcome Address ..............................................................................................vi Hon. Min. Ms. Hanna Tetteh, Minister of Trade and Industry Presented by the Hon. Deputy Minister of Trade and Industry, Dr. J. S. Annan Opening Statement .........................................................................................viii Kandeh K. Yumkella, Director-General , United Nations Industrial Development Organization 1. Introduction .................................................................................................. 1 2. Resources and economic growth: Is Africa (Ghana) different?.........................7 Thorvaldur Gylfason, University of Iceland, Reykjavic, Iceland 3. Dealing with the Dutch disease in a fragile political economy environment... .......17 Herbert P Mcleod, Adviser to the national Government of Sierra Leone 4. If diversification is good, why don’t countries diversify more? The political economy of diversification in resource-rich countries......................................23 Arne Wiig, Chr. Michelsen Institute (CMI), Bergen, Norway Ivar Kolstad, Chr. Michelsen Institute (CMI), Bergen, Norway 5. Revenue management, corruption challenges and redistribution... .............. 31 Inge Amundsen, Chr. Michelsen Institute, Bergen, Norway International Policy Conference Proceedings 6. Strategic dispute dynamics and resolution: Government, business and non-state actor interfaces ................................................................................................ 41 Peter Jenkins, Alternative Dispute Resolution Group (ADRg) Bristol, UK and Geneva Centre for Security Policy, Geneva, Switzerland 7. Negotiating skills for conflict resolution... .................................................... 47 Sir Stewart Eldon, Alternative Dispute Resolution Group (ADRg), Bristol, UK 8. Strategic resources and their management: The oil find in Ghana ................ 55 Joseph Asamoah, EnerWise Africa, Pretoria, South Africa 9. How empowering Ghanaians can help Ghana avoid an oily mess ................ 61 Susan Ariel Aaronson, George Washington University, Washington, D.C., USA 10. Promoting legal mineral trade in Africa: New policy approaches ................ 67 Marie Lintzer, Resource Consulting Services Ltd., London, UK Harrison Mitchell, Resource Consulting Services Ltd., London, UK Nicholas Garrett, Resource Consulting Services Ltd., London, UK 11. The economics of mineral ownership rights, negotiations and legal issues..........75 Frederick T. Cawood, School of Mining Engineering at Wits University, Johannesburg, South Africa 12. Managing natural resources for human development in low-income coun- tries ......................................................................................................... 83 Pedro Conceição, Strategic Advisory Unit of the Regional Bureau for Africa at UNDP, New York, USA Ricardo Fuentes, Strategic Advisory Unit of the Regional Bureau for Africa at UNDP, New York, USA Sebastian Levine, Strategic Advisory Unit of the Regional Bureau for Africa at UNDP, New York, USA 13. National Systems of Innovation (NSI):Measurement and implications for science technology and innovation policy in Ghana...................................93 Ritin Koria, UNIDO, Vienna, Austria Sabine Köszegi, Vienna University of Technology, Vienna, Austria Competitiveness and Diversification: Strategic Challenges in a Petroleum-Rich Economy Preface by Kandeh K. Yumkella Director-General United Nations Industrial Development Organization The International Policy Conference on “Competitiveness development, particularly those that occur in resource-rich & Diversification: Strategic Challenges in a Petroleum-Rich countries, found expression in the International Policy Confer- Economy” organized by the United Nations Industrial Devel- ence. As emerging economies such as Ghana look for com- opment Organization (UNIDO) and the Ghana Ministry of petitive policy postures that will enable them to escape the Trade and Industry, held in Accra, Ghana, on 14–15 March paradox of plenty by diversifying their economic structures, 2011, addressed the following thematic areas of the well- the Conference brought together leading experts to discuss known phenomenon of the paradox of plenty, the resource the multifarious nature of the problem and possible solutions curse and, more formally, the ‘Dutch disease’: Governance, with government policymakers from Ghana. competitiveness and diversification; competitively avoiding the ‘Dutch disease’; diversifying investment in industry; stra- The collection of chapters in this volume represents the tegic disputes, dynamics and resolution; extractive industries, best of international policy analysis and research on the transparency and public interest; minerals and negotiation; enabling conditions; and the role of the National System of ‘Dutch disease’ with serious attention to the evidence-based Innovation. approach to economic policymaking. The economic as well as the political economic and institutional explanations for The service of the international community—through UNIDO the paradox are presented in terms of the challenges and as one of the specialized agencies of the United Nations— the need to enhance dynamic competitiveness and increase to provide global fora for addressing the policy issues and the rate of diversification and specialization in the national industrial economics that emerge from the challenges of economy facing the challenges of a resource boom. i International Policy Conference Proceedings Foreword by Hanna S. Tetteh Hon. Minister of Trade and Industry Republic of Ghana There is an increasingly poignant focus on resources—natural Economic history shows that the discovery of hydrocarbon and raw materials—and their relation to the economic devel- resources in a country does not lead automatically to pros- opment of developing countries in the light of the growth perity and welfare. On the contrary, many oil-rich economies patterns of emerging markets. The major concern regarding face difficulties translating resource revenues into sustainable resources and development revolves around the issue of rich economic growth with commensurate equity across society abundance and emiserating conditions of unbalanced and and manufacturing value-added in economic activities. The inequitable growth. The general paradox that resource-rich Conference addressed the paradox of plenty, the resource countries in Africa should be the ones which appear to be curse and more formally, the ‘Dutch disease’ in the eight the farthest away from the frontiers of modern economic thematic topics of: development needs to be a focus of empirical, practitioner and theoretical policy research and economic analysis. Among • Governance, competitiveness and diversification the resources that are challenging in their management for • Competitively avoiding the ‘Dutch disease’ the greater economic good, hydrocarbons seem to be the • Diversifying investment in industry most difficult to manage well in fiscal, economic and indus- • Strategic disputes, dynamics and resolution trial policy terms over the long run. This paradox of plenty, • Extractive industries, transparency