I think its pretty obvious that one of Libya's biggest challenges with their oil money is going to be corruption. The Sovereign Wealth Fund works well at limiting corruption by drastically reducing the amount of money available, but ONLY if the level of corruption was low to begin with, and a high level of transparency maintained.
On a hunch, I have a feeling that Libya does not have suitable conditions. However which way they decide to spend the money, I predict that large amounts will not be used as 'intended'. The difficulty of keeping corruption at a low level, even for such a 'benevolent' task of rebuilding a country should be clear from how badly Iraqi reconstruction went. Why worry about rebuilding the rest of your country when you can get a cut of money from a source NOT LINKED to the well being of your country.
I have a feeling that the Iraqi situation (the US flying in pallets of cash to pay off Iraqis in support of an occupation aimed at outsider political objectives) is different from the Libyan one (not occupied at all).
That only works in some locales. I know some states in the US require that the winners names are disclosed for marketing purposes. Other places may allow anonymity.
Yes, but as someone else said, this article is behind a paywall. Which is too bad, I think, as I think the article that was posted was only scratching the surface.
There are several things I was wondering after reading this article:
- what are the structural differences between Libya and Norway that would make Libya succumb more easily to the temptation of oil? I suppose Libya is in a direr situation than Norway, but is that all?
- exactly, what are the cons of investing some money from the oil in infrastructure of education?
Education is only useful up to a point. A PHD in Aerospace Engineering sounds great, but even in the US there is little demand for such people so they often waste most of that education. The worse the economy / infrastructure / social infrastructure the lower the benefit from high levels of education.
PS: It's been suggested that a balance of subsidizing government services and giving everyone an equal rebate like Alaska may be the best overall approach. However, doing so in a corrupt society often simply breeds government waste so a pure refund is probably the best long term option.
Well, that is true if you are talking about higher education, but people still need to learn some basic skills (writing, reading, counting, etc.). Learning English is often useful as well (note that before replying to your comment, I expected Libya to have a low rate of alphabetization, but it turns out their alphabetization rate is rather high (source: http://en.wikipedia.org/wiki/Libya#Education)).
On top of that, they probably need some skills in the fields of medicine, or petrol engineering.
They have the trade off between paying for that with oil money directly now, or being able to continue to pay for less of it, but being able to continue "forever" by investing the oil money, while the principal grows rapidly as long as their oil revenue keeps coming.
It's the age-old tradeoff between saving vs. immediate gratification.
And I know the article is old, but
- It's interesting (it's what matters, right ?)
- It wasn't "news" in 2011 when it was posted either
- The title of the hacker news submission is exactly the title of this article. So I think the OP wanted to point to this.
Yeah, I deliberately took the title as the headline from the FT article. The planet money podcast and the FT article have somewhat different content, but both are well worth consuming. The FT article goes into more depth on the story.
The reason I found it worth posting was because Norway set up specific rules that most other countries don't consider when they find oil (heavy taxation on the oil industry so that the oil profits benefit the whole country, only invest the interest not the principal, don't drill all the oil at once, get a higher percentage out of the ground than elsewhere, agree not to use oil as a political tool around elections). It's important to note that strong institutions like a stable political system, and strong, independent judiciary are needed for these rules for even be considered, let alone enforced.
It's also interesting to note that at a time when so many sovereign balance sheets are weighed down by misguided bank bailouts, Norway has managed to build up a sovereign wealth fund such that for each it's citizens it has a positive $100,000 value.
I have to say I honestly don't care if something is "news" as much as I care that it's novel to me and interesting. You hand me an article written fifty years ago that I haven't seen and is still interesting and I'd upvote it on HN.
It is one thing to save or reinvest all the money coming from your oil when you're already a developed nation, and your population has other means to sustain itself. That's not true for Lybia.
That's true. But while Libya isn't in a great spot, it is nowhere near being one of the poorest countries, and its inflation adjusted GDP per capita in 2009 was about 50% of where Norway was when oil was discovered. That's about 4 times as high as Egypt in 2009, and higher than some European countries like Estonia.
Presumably the civil war might have set them back somewhat, but they're still in a position where it at least ought to be possible to start building a long term revenue stream from this.
On a hunch, I have a feeling that Libya does not have suitable conditions. However which way they decide to spend the money, I predict that large amounts will not be used as 'intended'. The difficulty of keeping corruption at a low level, even for such a 'benevolent' task of rebuilding a country should be clear from how badly Iraqi reconstruction went. Why worry about rebuilding the rest of your country when you can get a cut of money from a source NOT LINKED to the well being of your country.