Economic Diversification Through Entrepreneurship in Gabon: Why Has it Proven so Difficult?

Abstract

The literature on economic development explains the poor development of resource-rich economies by the weaknesses of their institutions. Particularly, in Sub-Saharan African countries, an abundance of scholarly research and IFIs reports support this claim. However, this claim is too simplistic and limited for two reasons. On the one hand, it does not often include the endogenous factors specific to each country in their analysis. On the other hand, these studies tend to look like they advocate for one universal model of institutions duplication of the Anglo-Americano institutional model. This research is an assessment and critical discussion about the economic diversification policy in Gabon. It undertakes a multidisciplinary approach to analyze and understand the economic diversification struggle in Gabon. Since the early 1970s, the country's economy relies essentially on the oil industry, contributing to more than half of the country's incomes, completed by other commodities such as manganese and forestry. Overall, oil and commodities constitute 80 percent of the country's exports but essentially in raw material forms. The problem with commodities is that these resources are volatile and expose the economies to the volatility of the international market prices. In the late 1980s, Gabon launched a diversification policy to reduce the dependency of its economy on oil production after a shortfall of oil in 1987 and the economic crisis that follows. More recently, another diversification policy was launched in 2010 with the same objective. The diversification policies in Gabon aim to develop private sector activities through entrepreneurship, and the government believes that it will contribute to the diversification. However, this strategy has been unsatisfactory, and Gabon's economy is still dependent on oil and commodity revenues. The poor attractivity of Gabon's market with a poor business environment reduces the country's potential to, on the one hand, attire more FDIs and, on the other hand, encourage entrepreneurship and the development of local SMEs. This research argues that the economic diversification policies in Gabon have been weakly implemented and often poorly designed, so they fail to reach the objectives they were set for, and challenges remain in entrepreneurship development. Although there is no sufficient evidence that entrepreneurship can contribute to economic diversification, strategies to diversify the economy suffer from deficits in coordination. Lack of coordination between different government agencies and among various programs affected the adequacy and implementation of reforms. The initiated reforms lack prioritization, sequencing, and alignment with budget constraints. Therefore, targeted sectors continue to suffer from low budget allocation, and even when they secure financing, the allocated budget lines are often not executed.