As most Gulf residents know, natural resource wealth can be both a blessing and a curse. States such as Saudi Arabia, Kuwait and Abu Dhabi have been transformed by the massive oil revenues they have reaped over the past 50 years. Small port towns have been transformed into sprawling metropolises, and local trading families have become stakeholders in multi-billion-dollar corporations.

In Saudi Arabia in particular, industrialisation has created world-class companies such as Saudi Basic Industries Corporation (Sabic).

But the pace of development has often masked significant weaknesses. Without hydrocarbons output, most countries would have almost no gross domestic product, and without government employment, many would be without a job. In Kuwait, for example, more than 70 per cent of the local adult population is employed by the state.

As Iraq makes plans to develop its energy sector, the government, up for re-election in March, would do well to study its neighbours for tips on what not to do, as much as what to do.

International and national oil companies have pledged to boost the country’s oil production by 4.7 million barrels a day (b/d) by 2015, from the current levels of about 2.3 million b/d. Baghdad wants to produce 12 million b/d by 2020, potentially boosting oil income by more than 400 per cent.

The government must be sure that its new-found wealth is spread equally around the country and ploughed into vital infrastructure projects such as power generation, new roads, hospitals and industrial development. It must also act decisively to improve the lives of its population of 31 million people through social initiatives and improved education services.

At the same time, the government must work to make sure that in 20 years’ time the country’s economy can stand independently of its huge oil wealth. Iraq has a huge and unique potential; the coming year or two will do much to decide whether it is wasted or not.

CAPTION – Huge potential: The ball is in Baghdad’s court