It's Often a Curse to Be Blessed With Commodities.

So we aren't the very first "greedy" one, even Norway had it at its time. But hopefully this to be our "last lesson". On following link i just read something interesting that most well managed countries in terms of natural resources had had their over spendings at their times. So relieved a bit but still hopefully, we will set up our sovereign wealth fund as soon as possible and and keep it apart from politics as distant as possible. http://www.bloombergview.com/articles/2015-08-25/it-s-often-a-curse-to-be-blessed-with-commodities It's Often a Curse to Be Blessed With Commodities. ... In Norway, which started producing oil in 1971, the initial instinct of the country’s Labor government was to spend the riches. By the time production peaked in the 1990s, though, political give and take and a couple of financial crises had led to a much more conservative approach of running big fiscal surpluses (Norway last ran a government deficit in 1993, according to the International Monetary Fund) and salting the extra money away in a sovereign wealth fund. Norway made early mistakes similar to those of other oil exporters; it just had a strong and flexible enough political system that it was able to learn from and reverse them. Nowadays the lessons of Indonesia and Norway are widely known. Lots of resource-rich countries and other jurisdictions put commodity earnings aside in sovereign wealth funds. But the temptation of a commodities boom is still hard to resist, especially when it’s the first time. Consider Ghana, which after more than a decade of strong economic growth found itself in need of an IMF bailout in April. The culprit was oil, which was discovered off the country’s coast in 2007 and began to be exported in late 2010. As Andrew Bauer and David Mihalyi of the Natural Resource Governance Institute explain: While it saved slightly less than $500 million in oil revenues in two sovereign wealth funds from 2012 to 2014, the government borrowed approximately $7 billion on international financial markets, at interest rates approximately 5 percent higher than the rate of return on sovereign wealth fund assets. The Ghanaian experience highlights the dangers of over-exuberance when new discoveries are made. In the same piece, Bauer and Mihalyi offer lists of resource-rich countries (and one Canadian province) that they deem to be either well prepared or poorly prepared for a commodity bust -- based on whether they’ve been saving money during good times and investing it appropriately. Well prepared: Bolivia, Brunei Darussalam, Chile, Libya, Norway, Peru, Qatar, Saudi Arabia, Timor-Leste, United Arab Emirates. Poorly prepared: Alberta, Republic of Congo, Equatorial Guinea, Iran, Malaysia, Mexico, Mongolia, South Sudan, Venezuela, Zambia. African countries are overrepresented on the poorly prepared list, and Persian Gulf countries on the well prepared one, but beyond that there’s not much of a pattern. Poor countries can get it right, affluent ones can get it wrong. ...