Page 96 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 1, 2014, pp. 80-98

There are two main counter measures against Dutch Disease. First and easier is sterilization

of extra incomes from the boom in resource sector. This means creation of special found for

collecting extra incomes and not letting these incomes to inflow in local economic. Examples are

Stabilization Found of Russian Federation and State Oil Fund of Azerbaijan. From one side, this

measure allows not to worsen economic development of the country by the appreciation of local

currency. But from another side sterilization of extra incomes leads to conservation of “current

situation” with economics development. So, if the country was not well-developed before the

resource boom – there is a threat of remaining in the same conditions during and after the resource

boom. Another problem is that in relatively poor countries any extra incomes sterilization will be

under pressure of social issue insisting on spending incomes on improving today’s well-being.

Therefore such measure as sterilization can be more safely employed by relatively well developed

counties that have low social issues pressure on government policy.

The second counter measure against Dutch Disease is effective utilization of extra incomes

from natural resource sector in order to improve the manufacturing. This can be investment into

improving the competitive advantages of existing manufacturing industries or developing a new

ones as well as investment in education, science, research & development. Examples of such

successful policies are Chile and Indonesia. This way is much more complicated due to high

requirements to finance and strategic management as well as to strict corruption control.

Nevertheless, if the government wants to contribute towards future perspectives of the national

economics and improve the situation in a long term, it should work in the direction of effective

utilization of extra incomes from natural resources inside the country, no matter what efforts it

should take to develop necessary management mechanisms.

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