Resource Serendipity: Critical Timing Discoveries (CTDs), resource endowment and the speed of economic transformation.

Steven Knight

Have you ever been on holiday to Dubai? Few who choose to flock to this major business and tourism hub draped in gold realise that this city was once a quaint little fishing village. It went by the name Dibei or Dabay or perhaps as the British referred to it in the 1820s Al Wasl meaning ‘The Connection.’ 

Before the Emirati oil boom in the 1960s, Dubai was known for pearl diving. In fact, there has been archaeological evidence of pearl diving in the Persian Gulf as far back as 7000 years ago. But the fate of the Emiratis serendipitously changed in 1958. Abu Dhabi hit black gold a few years prior to Dubai. It is what I like to call in geography a Critical Timing Discovery (CTD). A discovery that can transform the lives of more than just the top 1% of the country, and it did.

It took as little as 15-20 years to transform an impoverished nation into an up and coming economic powerhouse. What shouldn’t go unnoticed is the huge amount of shrewd strategic decisions made in the reinvestment into infrastructure and the diversification of industry in those early years after the CTD. This drew in huge volumes of foreign direct investment from TNCs that further stimulated the economy of the global city we see today. In essence, CTDs enable countries such as the UAE to skip or compress the traditional economic transition seen in the Clark Fisher Model.

Another more recent example of a country that experienced rapid economic transformation, via oil, is the recent transformation of the Guyana economy. Prior to 2015, Guyana was one of the poorest countries in South America with one of the lowest GDP per capita recorded in the western hemisphere, $5800. Its economy rested largely on agriculture, mainly sugarcane and rice alongside other primary industries such as mining exports such as bauxite, gold, and diamonds. This heavy reliance on mineral exports left the nation highly vulnerable to adverse weather events and global market price fluctuations. Not only this, but the country, which had struggled economically during the early part of the 20th century, also struggled immensely through the International Monetary Fund (IMF) and World Bank and their structural adjustment programs (SAPs) imposed on them in the late 1980s and 1990s placing them in harsh austerity measures.

All this changed in 2015, but this time, although it may look ‘serendipitous’ to the outsider, oil prospectors had been drilling for oil as early as 1916 in Guyana. ExxonMobil secured a license for the Stabroek Block, a massive 6.6-million-acre underwater territory about 120 miles off Guyana's coast. The gamble paid off with estimates of recoverable reserves beyond 11 billion barrels of oil equivalent. It was from this CTD that almost overnight, Guyana transformed from an obscure player into the world's most lucrative offshore energy frontier.  

The government of Guyana has since used an aggressive spending approach in an attempt at rapid modernisation through key infrastructure investments and diversification. This is exemplified in their $2 billion investment in their Gas-to-Energy project aimed to cut power costs in half including $100 million in electrical grid upgrades. They have also seen major trade investment in infrastructure, including the $260 million Demerara River Bridge and the $190 million Brazil-bound highway. Public services are another focus, seeing over $860 million in hospital expansions, as well as free university tuition, and investment in 40,000 affordable housing plots. To diversify its economy, the country is investing $540 million into regional agriculture and using its Lower Carbon Development Strategies (LCDS) 2030 framework to generate $750 million in forest carbon credits for coastal defense and indigenous community development. Guyana’s GDP per capita today stands at around $32,000, a significant increase in just 11 years. 

In summary, CTDs highlight resource endowment can be of the essence (of the moment). The geoeconomical equivalent of hitting the jackpot on the lottery. But serendipity alone does not guarantee long-term prosperity. A CTD is only as valuable as the window of opportunity it opens. Discovering a vast coal or oil deposit in the year 2150, when the global energy matrix has fundamentally shifted, will yield little value. But by then perhaps capitalism will have crumbled and money will mean very little with the rise of the AI revolution and the robot overseers? 

Steven Knight

Head of Geography

NLCS Jeju