18
2 The Study Context
reported (Devold, 2013). These are the economic impacts on countries as a whole.
I now turn to the impacts the O&G industry may generate in the economy of host
countries.
2.2.2 The Socio-Economic Impacts of O&G Activities
Alongside the direct impacts O&G activities may have on host communities, the
O&G industry may also impact on a country’s economy and therefore, more directly
on its community members. Authors such as Cash (2012), Pegg (2006) and Ross
(1999) argue that O&G investments in resource-rich countries lead to economic
paradoxes that hinder local economies and stimulate corruption at government level
(Cash, 2012; Pegg, 2006; Ross, 1999). In what follows, I outline some of the major
economic paradoxes and their impacts on host societies.
Ross (1999) suggests that extractive activities generate a form of ‘enclave
economy’. This happens when heavy flows of foreign capital spurred by petroleum
exports and activities increase the revenue concentration in O&G and associated
industries, creating an income distribution unbalance with other niches of a country’s
economy. The lack of redistribution of income to other segments of the economy
hinders the development of domestic producers, which widens the nation’s revenue
inequality and levels of unemployment (Ross, 1999).
Ackah-Baidoo (2012) argues that enclaves in the economy are inclined to emerge
in countries where governments are already extremely corrupt and repressive. This is
because many authoritarian regimes use the oil income to stay in power and, in order
to depoliticise civil institutions that might claim political rights, policymakers “systematically marginalise” (Ackah-Baidoo, 2012, p. 153) the population by neglecting
programmes that will promote economic and social development. The development
of an ‘enclave economy’ in oil-rich economies is aggravated by the lack of national
legislation that assures a fair distribution of the revenue generated by the O&G
activities.
Ackah-Baidoo (2012) highlights Angola as a country that has suffered from the
development of an ‘enclave economy’. The Angolan economy is reliant on oil exports
that represent 90% of the country’s export revenues and 80% of the government’s
revenue (Le Billon, 2001). In 2000, the Angolan production of oil surpassed 780,000
barrels per day and generated about US$5 billion in gross revenue. In contrast to such
wealth, in 2001 more than 69% of people in both rural and urban areas lived on less
than one US dollar per day (Le Billon, 2001).
The disparity between Angola in oil export revenue and the extreme poverty
faced by the majority of its population is due to the oil sector’s ‘enclave economy’.
According to Le Billon (2001), an enclave emerges because the international O&G
companies’ income is either repatriated or reinvested within the O&G community, as
was the case in Angola. As a result, the small amount of oil revenue that the Angolan
government use for public expenditure is not sufficient to alleviate the population’s
deep poverty and high levels of unemployment (Le Billon, 2001).
2 The Study Context
reported (Devold, 2013). These are the economic impacts on countries as a whole.
I now turn to the impacts the O&G industry may generate in the economy of host
countries.
2.2.2 The Socio-Economic Impacts of O&G Activities
Alongside the direct impacts O&G activities may have on host communities, the
O&G industry may also impact on a country’s economy and therefore, more directly
on its community members. Authors such as Cash (2012), Pegg (2006) and Ross
(1999) argue that O&G investments in resource-rich countries lead to economic
paradoxes that hinder local economies and stimulate corruption at government level
(Cash, 2012; Pegg, 2006; Ross, 1999). In what follows, I outline some of the major
economic paradoxes and their impacts on host societies.
Ross (1999) suggests that extractive activities generate a form of ‘enclave
economy’. This happens when heavy flows of foreign capital spurred by petroleum
exports and activities increase the revenue concentration in O&G and associated
industries, creating an income distribution unbalance with other niches of a country’s
economy. The lack of redistribution of income to other segments of the economy
hinders the development of domestic producers, which widens the nation’s revenue
inequality and levels of unemployment (Ross, 1999).
Ackah-Baidoo (2012) argues that enclaves in the economy are inclined to emerge
in countries where governments are already extremely corrupt and repressive. This is
because many authoritarian regimes use the oil income to stay in power and, in order
to depoliticise civil institutions that might claim political rights, policymakers “systematically marginalise” (Ackah-Baidoo, 2012, p. 153) the population by neglecting
programmes that will promote economic and social development. The development
of an ‘enclave economy’ in oil-rich economies is aggravated by the lack of national
legislation that assures a fair distribution of the revenue generated by the O&G
activities.
Ackah-Baidoo (2012) highlights Angola as a country that has suffered from the
development of an ‘enclave economy’. The Angolan economy is reliant on oil exports
that represent 90% of the country’s export revenues and 80% of the government’s
revenue (Le Billon, 2001). In 2000, the Angolan production of oil surpassed 780,000
barrels per day and generated about US$5 billion in gross revenue. In contrast to such
wealth, in 2001 more than 69% of people in both rural and urban areas lived on less
than one US dollar per day (Le Billon, 2001).
The disparity between Angola in oil export revenue and the extreme poverty
faced by the majority of its population is due to the oil sector’s ‘enclave economy’.
According to Le Billon (2001), an enclave emerges because the international O&G
companies’ income is either repatriated or reinvested within the O&G community, as
was the case in Angola. As a result, the small amount of oil revenue that the Angolan
government use for public expenditure is not sufficient to alleviate the population’s
deep poverty and high levels of unemployment (Le Billon, 2001).