Energy issues and challenges in emerging economies.(Introduction to the Symposium)(Essay)

The management of oil and gas revenues, which are volatile, unpredictable, and ultimately exhaustible, offers important opportunities, but can also greatly complicate economic policy making. In his introduction to the economic theory of the supply of oil, Banks emphasised that 'the world of oil market is drastically different today to what it was 25 years ago' (Banks, 2004, p. 32). Without doubt these changes raise new challenges and new research questions for economics, among them the effect of corruption in resource-rich economies, the problem of diversification of the economies away from the oil and gas dominance, and also their vulnerability to fluctuations in the world oil prices. The current symposium aims to bring into the discussion these challenges and to identify possible implications for economic policy making.

In the first paper of the symposium Yelena Kalyuzhnova, Ali M. Kutan, and Taner Yigit argue that allowing businesses to act more efficiently by easing regulations is a useful step in reducing corruption, which ultimately will lead to establishing a better political regime and will make an impact on a corruption ranking. The authors discovered some important linkages between the resource-abundance proxies and socio-economic variables, proving some methodological insight into modelling corruption and growth in resource-rich countries with applications to different investment and ownership settings. Through econometric analysis the authors came to the following finding that corruption is not only a threat for economic growth but also a great threat to the economic development and standard of living over time in energy resource-rich countries.

The latter is not the only problem that governments in resource-rich economies are facing to date. The problem of diversification is increasingly becoming a policy agenda for the governments of these countries. 'The rationale here is two-fold: a more diversified economic structure is desirable because it will secure the economic stability of the country and its economic growth. In addition it will reduce corruption and rent seeking behavior which is directed towards the resource sector, providing a more complex structure of the economic functioning of the country as well as more opportunities for the population to engage in business' (Kalyuzhnova, 2008).

The second paper in the symposium is devoted to this problem. In this, Richard Pomfret exploits the possibilities of using energy resources in the process of diversification based on the Kazakhstani experience. Since the end of the 1990s Kazakhstan has had one of the fastest growing economies in the world. Economic growth has been driven by high oil prices, new oilfield discoveries, and improved pipeline access to the world markets. The government has made it an important objective to diversify the country's economic base with the goal of becoming one of the 50 most competitive economies in the world.

Richard Pomfret focuses on public policy towards agriculture. Prior to independence in 1991, agriculture was a major sector in the Kazakhstani economy, and Kazakhstan was a substantial grain exporter. Support for producers shifted from being highly positive in the late Soviet era to being negative after independence, mainly as a result of neglect rather than positive policy choices. The paper presents detailed producer support estimates for Kazakhstan's farm sector. The average shift has been substantial, especially for livestock farmers. Quantification of price distortions supports the Kazakhstani government's claim that it has used its energy resources with the purpose of promotion of the agricultural sector.

To help moderate the impact of oil revenues on the business cycle and also to contain the effects of Dutch disease--as well as saving for future generations--many oil-producing countries are setting up oil funds and other such investment vehicles. Countries with large mineral resources can benefit from appropriate investment for the future and the government has an important role to play in this regard. At the same time, the economic performance of many oil exporters has been disappointing, even to the extent of prompting some observers to ask whether oil is a blessing or a curse (Auty and Mikesell, 1998; Auty, 2006; Gylfason, 2001; Kalyuzhnova and Kaser, 2006; Sachs and Warner, ...