The publication of this book is important for three reasons. First, it gives detailed picture of the impact of oil and gas revenues on the economies of Azerbaijan and Central Asia. Then, it tries to discuss the validity of the different theoretical approach (Dutch Disease, Rent-Seeking Economies, etc.) to explain the problems of these oil or gas economies. And, least, it concentrates on precise issue which are very relevant in oil economies like fiscal decentralisation, microeconomic analysis of redistribution of oil revenues, local impact of the MNCs from the oil sector.
In the first part (Background), as an introduction, Gaël Raballand & Régis Genté present the main questions associated with the oil reserves of the Caspian Basin. They provide useful data on oil and gas production and consumption in the Caspian Basin. They insist on the fact that if the oil reserves of the Caspian are much smaller than those of the Middle-East, this region is nevertheless one of the two or three key oil-exporting regions. On the issue of oil management, they rightly insist on the fact that even if the policy of saving oil revenues is a good policy, “a non-spending policy is impossible for any government to implement in a context of endemic poverty.” This first part is completed by an article by Michael Lewin who rightly discusses and criticises the usual theories used to explain the relationship between oil revenue and economic performance. One interesting point he makes is that the causality between oil boom and slow growth may be due to a third factor correlated with low growth and the oil boom, which is debt overhang.
In Part 2 (Macroeconomic Links and Fiscal Decentralisation), one very interesting issue which is analysed is the question of the efficiency of fiscal decentralisation to lessen the difficulties usually associated with oil income management by the government. Nathalie Leschenko & Manuela Troschke in their article on “Fiscal Decentralisation in Centralised States: Central Asian Patterns,” show that fiscal decentralisation could be useful in this regard. Unfortunately, the authors show that due to a lack of administrative decentralisation, fiscal decentralisation remains merely formal.
In Part 3 (Microeconomic Analysis of Redistribution), an article on “Redistribution of Oil Revenue in Kazakhstan”, based on solid data (the national survey of the expenditure of 12, 000 households), shows that the benefits of oil have not been fairly redistributed across the country. In fact, the failure of the redistribution policy of the state is reflected in the fact that “unofficial redistribution seems to be the main transmission channel of redistribution of oil revenue.” In this part, another article (“Whither Oil Money? Redistribution of oil revenue in Azerbaijan”) offers a different conclusion. The Azerbaijani government seems to have been quite efficient in its redistribution policy. Taking account of what the IMF usually says of the Azerbaijani fiscal policy, this question should maybe further analysed . . .
Part 4 deals with Governance and Local Impact. The first article by Richard Auty defends the view that foreign investment in the hydrocarbon sector could be very beneficial for the host country. The idea is that these investments could help create an early reform zone and that would function as “catalyst for national economic reform.” One could be a bit sceptical about such a view. In oil economies, the experience of free trade zones has not usually been very positive. It is in fact very difficult to “isolate” these zones from all the deficiencies of the rest of the economy. Besides, the examples of success given in this article (Dubai in the United Arab Emirates) are very specific and would not be easily applied in other countries. And, as is very well demonstrated in the last article (“Tenguz Crude, a View from Below”), such a free zone could also lead to corrupt practices and labour discrimination when the state is weak and the civil society non existent.