1.
Escaping the Dutch Disease
Preventing a blessing from
turning into a curse in
Suriname
Marciano S. Li-A-Young
OTNV
www.ot-nv.com

2.
The Dutch Disease
Struck by the Dutch Disease;
Nigeria
Dutch Disease in the Caribbean;
Trinidad & Tobago
The great escape;
the Norway case
What’s next for Suriname
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"The gratification of wealth is not found in
mere possession or in lavish expenditure,
but in wise application."
(Miguel de Cervantes, 1605).
Putting it in today’s context, these famous words by Cervantes’ main character in his book Don
Quichot de la Mancha beautifully express an economic disaster many countries have faced, are
currently facing or will face, called the Dutch Disease. What causes this economic disaster, how
can it be avoided and how could it impact Suriname?
The term Dutch Disease was first used in 1977 in a
publication by the Economist magazine, in which
they analyzed the crisis that hit the Netherlands
within a decade after vast natural gas deposits
were found in Groningen and the North Sea.
While these deposits promised a golden future
for the Netherlands, it soon had a very
unexpected, negative effect on the economy.
Due to increased gas exports, the Dutch Guilder
(the currency the Netherlands had by that time)
increased in value.
This might seem positive for the economy, but it led to a situation where the export of non-oil
products became too expensive to effectively compete on the international market. Other
economic impacts of the increasing oil exports where laborers demanding higher wages and
many non-oil industries coming under pressure because of the increasing costs, and the
workforce shift to companies in the oil industry. This led to closure of local industries and an
increase of the unemployment rate. On top of it all, the then Dutch Government (den Uyl)
decided to spend large portions of the gains from this new industry to finance their socialistic
policies, creating a costly welfare system. When gas prices plummeted in the 1970s, this social
welfare policies caused an economic crisis which proved hard to recover from since stopping
this policy was no option for the government; for obvious political and social reasons.
Since then, the term Dutch Disease has been used to describe the economic impact of what
happened to many countries after the discovery of new riches, mostly natural resources. There
certainly is no lack of examples about how hard the disease struck in some countries at some
point including in Great Britain, Equatorial Guinea, Nigeria and Trinidad & Tobago, just to name a
few.
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4.
Struck by the Dutch Disease - Nigeria
Nigeria is one example of how the Dutch Disease has not yet led to the expected benefits for
the citizens of this African nation. Nigeria has been referred to as one of the fastest growing
economies in Africa and was even listed as one of the 10 fastest growing economies in the
world, due to their increasingly large oil exports. This however has not proven to be
beneficiary for large parts of their population, as at least 69% still lives below the poverty line.
As with many other examples of the Dutch Disease, the growing oil industry led to a shift of
the workforce with a decline in economic activities in other industries, causing a slow-down in
industrial production. The appreciation of the domestic currency made manufactured goods
more expensive and less competitive for both the local and international market. The de-
industrialization following this increased the country’s dependance on the resource sector
and prone to negative economic effects in case of plummeting prices of commodities in the
world (Laguda, 2019). Even though Nigeria has vast deposits of oil, this has not yet been a
blessing for the country and large parts of its population, like many would think it should.
Dutch Disease in the Caribbean – Trinidad & Tobago
The Caribbean region is no stranger to the Dutch Disease as well, as can be deducted from a
recent article just published by OILNOW, referring to Trinidad & Tobago’s prime minister’s
statement about how the country’s heavy reliance on revenues from the energy sector might
lead to a very grim economic situation if the country is unable to increase its production in the
oil and gas industry. Over the past decades the country has invested too little in
diversification of their economy and has neglected traditional sectors. The outlook for the
country is not very good at the moment, and even though Trinidad has been referred to as one
of the – if not the - wealthiest country in the Caribbean, this might not be the case the next
few years if thing don’t change drastically.
Poverty rates in different Nigerian states - Oxford University Domestic development 2022 - Central Bank of Trinidad & Tobago
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5.
The great escape;– the Norway case
Norway is one of the few countries in the world that was able to avoid the Dutch Disease apart
from a few strings of it. When oil was found in Norway, the country first took the path similar
to many others but was able to avoid being struck. So, what did Norway do and how can we
learn from them?
One of the first things to mention is that in a very early-stage parliament started to discuss the
impact of the oil industry on their economy and came up with some policies that proved to be
very effective in avoiding a full-blown Dutch Disease. Seeing what happened in other parts of
the world, a centralized wage formation system was put into place to prevent uncontrolled
growth of wages. By doing so they ensured that there were no big discrepancies between
wages in the oil and the non-oil industries. This policy was successfully implemented because
all parties in the labor market were willing to consider aggregate interest instead of only the
interest of just those they represent.
Because this fund is kept in foreign currencies it hasn’t led to appreciation of the
Norwegian currency and the negative economic impact that comes with it. This fund
now has over US$ 1.19 trillion in assets and is worth around US$ 250.000 per
Norwegian citizen. The fund owns shares in more than 9.0000 companies all over the
world. Since the inception of this fund, among the different policies they introduced,
the one that might be among the best was the increase of spending in education,
research and development of local (oil)expertise, and the establishment of Centers of
Excellence. One lesson we can definitely learn from the Norwegian story is that once
you have all stakeholders aligned the results are so much better for the country and its
inhabitants.
"The establishment of the Petroleum fund
abroad was another smart idea that helped the
country to effectively shield their economy."
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6.
What’s next for Suriname
In its development plan 2022-2026 the Government of Suriname addresses the upcoming oil and
gas industry and the local content development which will play an integral role in the next few
years. Little is said about economic policies which will be developed and implemented to ensure
that unwanted impact will be mitigated. For now, the focus seems to be more on policies on the
operational level and less on the strategic. The lack of such could indicate that the government is
yet to do more research on the matter to fully understand how Suriname can truly benefit from
the upcoming oil & gas boom and to prevent this blessing from turning into a curse for our nation.
The fact that parties in the government think that “selling” an oil well to use the gains for
consumptive and social purposes show that there still is a lack of knowledge and insights in how
to create a sustainable strategy for our country. This shows a big urgency for the government to
invest in capacity building, especially for those in government and parliament.
The idea of using gains from the oil & gas industry to fund social
programs will be the beginning of a path to economic disaster
and should be avoided at all costs.
If we want the Surinamese oil deposits to be a blessing instead of becoming a curse, we should
extensively study what went wrong in so many countries and how success stories such as Norway
can apply to us. Guyana’s strategy of economic diversification, with large investments in
agriculture and other traditional industries is also one of the strategies we should put in place for
Suriname. The first step, however, for the government is to start national discussions with all
relevant parties to share best practices, create alignment and accountability throughout all
sectors and assume a stronger role in the development of the oil and gas industry in Suriname.
One thing everyone will need to agree on is that gains from the oil and gas industry should be
used to establish a sovereign wealth fund, using only the interest income to invest in the
country’s socioeconomical development.
Marciano Li-A-Young is a Managing Partner at OTNV, a leading
local consulting firm located in Suriname and operating in the
Caribbean. From 2019-2021 he has played a major role in
providing local workers to the Noble Sam Croft offshore oil rig
in partnership with the Trinidad based Kenscott Ltd. Since then,
he has extensively worked on expanding his knowledge and
insights of this industry in order to assist clients in their local
content development around the upcoming Oil & Gas industry
in Suriname. As a consultant, trainer and coach he has led
organizational transformation with many clients and has
conducted training programs and keynotes in over 20 countries
on the subjects of leadership development, organizational
transformation and accountability. Marciano is a graduate from
the Arthur Lok Jack Global School of Business from the
University of West Indies, St. Augustine Campus, Trinidad &
Tobago, and currently pursuing his second Master degree, a
MBA in Oil & Gas Management.
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Reference
2006. "Natural Resources, Taxation, and Regulation: Unusual Perspectives on a
Classic Topic." The American Journal of Economics and Sociology 65 (3): 605-640.
Laguda, Halimat Atinuke. 2019. "The Impact of Dutch Disease: The Case of Nigeria."
Master thesis.
Dey, Shikema. 2022. OilNow. September 14. https://oilnow.gy/.
2022. "Norwegian Petroleum Directorate." Resource Report, Stavanger.
2019. "Norges Bank Investment Management." About the fund. February 27.
https://www.nbim.no/en/the-fund/about-the-fund/.

8.
OTNV Whitepaper series
Theme: Oil & Gas
www.ot-nv.com
September, 2022