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Norway Has Advice For Libya

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Norway Has Advice For Libya


Norway Has Advice For Libya

Norway Has Advice For Libya

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">

An oil platform in the Norwegian sea. Marcel Mochet/AFP/Getty Images hide caption

toggle caption Marcel Mochet/AFP/Getty Images

With their current leader, Moammar Gadhafi, on the run, Libya needs to start thinking about its next big challenge — what to do with the massive amount of wealth they as a country possess in oil. It sounds strange to worry about a huge influx of money, but almost all countries that find oil suffer from the natural resource curse.

There is, however, one notable exception — Norway.

An Iraqi geologist named Farouk al-Kasim advised Norway on how to organize its oil industry, and he is credited with helping it escape the resource curse.

Today on the podcast, he tells us how he did it.

al-Kasim says it starts with "fantastic self-restraint."

I advocated that we should be very restrictive in how many [operating] license blocks we allocate per year.

Not surprisingly the oil industry hated this idea, they wanted to go full speed ahead with drilling, but luckily for the country, the Norwegian politicians sided with al-Kasim.

As a result of that throughout the 70's, no more than 3,4 blocks were allocated every year.

Perhaps, even more amazing is what the Norwegians decided to do with the money they made off the oil. Initially, they decided that the citizens of Norway wouldn't see any of it. They choose not to spend it on schools, roads or sports stadiums. Instead, in the beginning, they reinvested almost all the money they got back into the developing the oil industry — into drilling new wells, doing new explorations and developing new technologies.

Today all that money is in a savings fund called the Government Pension Fund Global, and the Norwegian government only gets to spend the interest that fund makes. The size of the fund right now is about $547 billion dollars.

So what does that mean for Libya? Can they repeat the so called "Norwegian miracle?" al-Kasim is skeptical. He doesn't think what worked in Norway can be applied anywhere else. Still he does have some advice for the country—

For god's sake don't go very quickly about it. And then you have time to think in terms of institutions, legislation, transparency. Build up defenses against the oil curse as you go along. Take it slowly, make sure you don't create a bonanza that drowns all common sense.

H/T: Martin Sandbu. Sandbu's fantastic article about Norway and al-Kasim gave us the idea for this podcast.

Subscribe to the podcast. Music: Josh Ritter's "The Curse." Find us: Twitter/ Facebook.

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