Promoting diversification in resource-rich economies

With the sustained increase in commodity price boom post 2002, concerns for resource-rich developing countries being locked into a commodity-dependent cycle, with little to no diversification of their economies have emerged. This paper examines the relationship between the commodities and the industrial sectors that may exist because of fiscal, consumption and production linkages between the two sectors. In light of these linkages, the policy options are discussed that would ensure that resource-rich developing countries can promote industrial diversification, using the resource rents and other gains that come from their commodities sector. The paper draws heavily on research conducted under the Making the Most of Commodities Program, run jointly by the Open University (UK) and the University of Cape Town (South Africa) in 2009-2011.