The historic accident of being located on top of vast oil reserves should have been a blessing during the 20th Century—yet for many countries it was a curse. Control of these valuable resources often gave rise to political instability, kleptocracy and even civil war, whilst the harm oil (and other mineral) exports can do to the rest of the country’s economy by driving up its exchange rate even has a name: Dutch Disease.
A few countries heavily dependent on oil exports have managed this challenge well. Norway, for example, has created a sovereign wealth fund to ensure that future generations get to benefit from the oil windfall.
But perhaps the most striking case of a government using the legacy of oil as a spring-board to build a sustainable economy for after the oil runs out is that of Dubai.
Starting in 1992, the city state within the United Arab Emirates consciously embarked on a transition from a trade-based but oil-reliant economy to one that is service- and tourism-oriented. As a result, it has become one of the fastest-growing cities in the world, with an annual GDP of more than $100bn. (Along the way, its oil revenues plunged, as expected, and it had to be bailed out by its rich neighbor, Abu Dhabi, in the aftermath of the 2008 financial crisis, which was not).
Dubai’s development policy included the construction of the world’s busiest airport by international traffic, the world’s tallest tower, the Burj Khalifa, and tallest hotel, largest shopping mall and biggest foundation. Until the COVID-19 pandemic, the city was on track to meet its long-term target of attracting an annual 20m tourists by 2020.