Why Gabon is trying to diversify from oil

With just 1.8 Million people, the oil rich Gabon in west-central Africa, is among Africa’s least densely populated countries, yet 60 Kms southeast from the capital, Libreville, …

..near a town called Mouila, in the middle of a dense forest you can spot orderly rows of palms, separated by roads of red earth. With a processing factory in the middle of this expanse of green.

province de l’Estuaire, 60 kilomètres au sud-est de Libreville), actuellement opérationnelle. Cette pépinière compte déjà près d’1 million de graines et plus de 87 000 plants mis en terre et irrigués. Elle emploie entre 150 et 200 personnes ;

This is Africa’s newest palm-oil plantation. Built by Olam, a vast Singapore-based agricultural trading house, it should eventually cover 50,000 hectares (120,000 acres) and employ some 15,000 workers. It is the main evidence of President Ali Bongo Ondimba’s plan to reduce Gabon’s dependence on the other sort of oil—which in 2014 made up four-fifths of the country’s export revenues. Mr Bongo (pictured), who faces an election at the end of this month, seems determined to make his country diversify. Yet it is harder than he lets on. Gabon shows how oil can twist the fate of a nation—and how difficult moving away from the black stuff is.

Arab countries: The non-oil private sector remains relatively small and, consequently, has been only a limited source of growth and employment. While some countries have made more headway than others in diversifying their economies, the energy sector, typically highly capital intensive, remains dominant in many economies. However, it creates few jobs directly, while oil revenue is often used to finance an oversized public sector. Still, the employment situation varies greatly across countries: some GCC economies rely on foreign labor to fill private-sector jobs while other Arab oil exporters need to meet the needs of a fast-growing domestic labor force.

Because oil is an exhaustible resource, new sectors need to be developed so they can take over as the oil and gas industry dwindles. While some countries have ample reserves, hydrocarbon resources in a number of Arab countries could be depleted in the foreseeable future. However, even non-oil activities in many oil-exporting Arab countries are to some extent dependent on funding from oil revenues. The challenge therefore is to grow truly self-sufficient non-oil sectors that will provide a sustainable source of growth and employment even when oil resources are depleted. Moreover, even countries with large proven reserves need to save a larger share of their current oil income to promote greater intergenerational equity.

Over-reliance on oil also exacerbates macroeconomic volatility. When oil prices drop, as is presently the case, the related decline in fiscal revenue often requires cuts in public spending, which dampen growth in the non-oil sector and strain the sustainability of public employment.




Oil-exporting Arab countries face three-pronged challenges: job-creation, macroeconomic volatility from oil prices and the depletion of oil resources. The oil sector generates few jobs directly and the government sector tends to be the largest employer and offers better compensation than the private sector. Over-reliance on oil exposes revenue and output to fluctuations in oil prices, exacerbating macroeconomic volatility. Oil is also an exhaustible resource and countries need to develop adequate non-oil sectors before their oil reserves are depleted.

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