Economic Diversification for a Sustainable Economy. Importance of Economic Diversification. Economic Diversification for Economic Sustainability
Economic Diversification for a Sustainable Economy
Economic diversification is a process whereby conscious efforts are made to explore, harness and promote other economic resources (other than the ones generating the existing revenue) of a country with the aim of generating multiple streams of income as revenue for running an economy. It is not enough for a country to be endowed with resources whether natural resources, mineral resources, human resources or capital resources but conscious efforts must be put in place to ensure that every country attains economic sustainability by embracing economic diversification. For a country to be sustainable economically through economic diversification, there should be formulation of sound economic policies by government. It is the responsibility of every responsible government to attain a sustainable economy by planning and implementing good economic policies that will attract local and international investors for virtually all sectors.
Economic diversification ensures economic sustainability hence there must be a level playing ground for existing and potential investors through good economic policies that will keep or attract investors. No investor will be willing to invest in an economy that lacks good economic policies. Good economic policies stimulates economic growth and economic development which give rise to a sustainable economy. Besides, good economic policies are policies that are both beneficial to investors and the country they invest in or want to invest in.
The role of economic diversification for a sustainable economy cannot be overemphasized. Any diversified economy ensures a stable and thriving economy. This is because every country is endowed with one or more natural resources and mineral resources for economic sustainability when explored, harnessed and the proceeds of such resources being judiciously managed and used for economic planning and economic development. It is imperative to be abreast that a diversified economy is an insured economy against prevailing or future economic recession. Over the years and years to come, it is a fact that the only thing that is constant is change, which can be positive or negative. There is a relationship between change and economy. A positive economic change is one that is favourable and leads to economic boom and ensures economic growth and economic development which when well managed can guarantee a sustainable economy. However, a negative economic change is unfavourable which leads to economic woes which can trigger unemployment, inflation, poverty, social vices and what have you. A sustainable economy is an economy that is diversified against unforeseeable economic challenges.
Importance of Economic Diversification
Economic diversification is very important. Some of the ways in which economic diversification is important are as follows.
- Economic diversification encourages economic growth: It is on record that an economy that is being diversified is bound to experience economic growth since investors are always on the watch for investment opportunities so long it will be favourable for their investment portfolio. This is particularly important to serial entrepreneurs. Apart from existing investors, new investors are also ignited to invest if they are convinced (as a result of intense research) that their investment in the sector being diversified to will yield good return on investment (ROI).
- Economic diversification encourages economic development: Economic diversification encourages economic development because an already growing economy needs to be improved upon for economic consolidation. This is why economic growth precedes economic development.
- Economic diversification encourages economic sustainability: The diversification of an economy encourages the attainment of economic sustainability by building upon existing economic development that result from economic growth. A sustainable economy is a stable economy that can stand the test of times during economic recession.
- Economic diversification encourages wealth creation: It is without doubt that economic diversification leads to wealth creation. Wealth creation is beneficial to individuals, investors and the government that put up sound economic policies that keep and attract indirect and direct investment opportunities.
- Economic diversification encourages job creation: A diversified economy always lead to job creation for the unemployed and underemployed. Unemployment is a major challenge especially for developing countries and undeveloped countries. Hence, one way to tackle unemployment is to encourage economic diversification which while creating wealth will on the other hand create jobs.
- Economic diversification discourages and reduces social vices: Economic diversification can help discourage and reduce social vices. There is a relationship between unemployment and social vices. It is rare for someone gainfully employed to engage in social vices such as armed robbery, prostitution, human trafficking, to mention but a few. So when an economy is diversified there is wealth creation and job creation to absolve the unemployed thereby discouraging and reducing unemployment.
- Economic diversification helps reduce poverty: Economic diversification reduces poverty because it leads to wealth creation and job creation. This is because the poor will be able to work which can help them have access to some of the basic human needs like food, shelter and clothing. Also, they will be able to save some money and even invest thereby creating wealth and jobs for themselves and others on the long run.
- Economic diversification encourages prosperous and peaceful coexistence: Economic diversification can encourage prosperous and peaceful coexistence since there will be wealth creation, job creation, poverty reduction, drastic reduction of social vices and what have you.
- Economic diversification can make a country keep and attract investors: Good economic policies aimed at economic diversification help keep and attract investors which help create wealth as well as jobs to reduce unemployment, poverty and social vices.
- Economic diversification can stimulate nonperforming sectors: Economic diversification can help stimulate non performing sectors of an economy thereby providing multiple streams of revenue to run and sustain an economy.
- Economic diversification makes a country to earn international recognition and respect among comity of nations: Economic diversification can earn a country international recognition as well as international respect from other countries thus making such a nation attract investors so long there are investment opportunities.
- Economic diversification can help checkmate emergence of militancy and terrorism: A country that embraces economic diversification will to a large extent checkmate the emergence of militancy and terrorism. This is because if other sectors of an economy are being exploited and harnessed there will be no room for complaints and grievances from those whose resources contributes largely to the revenue of a country while their environment are being subjected to environmental degradation and negligence as can be seen from Niger Delta of Nigeria. You don’t expect those being marginalized in terms of infrastructural development to be happy when the proceeds of their resources are being used to develop other areas with little or no development in their own areas. To avoid emergence of militancy and terrorism economic diversification should be given rapt attention so that every area can be encouraged to contribute their own quota to the revenue with adequate resource control management.
Contextually, some sectors that can be used in diversifying an economy to attain economic sustainability are agriculture, oil and gas, petrochemical, mining / mineral, gemstone, metal, alloy, power and energy.
In summary, economic diversification more or less provides insurance against economic uncertainties. It encourages economic growth, economic development and economic sustainability. All these leads to a robust economy in terms of wealth creation, job creation, poverty reduction, social vices reduction, prosperous and peaceful coexistence, keeping and attracting investors, earning international recognition and respect, stimulation of nonperforming economic sectors, checkmating emergence of militancy and terrorism and what have you. Economic diversification for a sustainable economy can be attained via agriculture, oil and gas, petrochemical, mining / mineral, gemstone, metal, alloys, power and energy with emphasis on agriculture trade and investment in agriculture, oil and gas trade and investment in oil and gas , petrochemical trade and investment in petrochemicals, mineral trade and investment in minerals / mining, gemstone trade and investment in gemstones, metal trade and investment in metals, alloy trade and investment in alloys, power and energy trade and investment in power and energy.
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You can also read:
1. Natural Resources Or Mineral Resources Of Countries
2. Why Oil-Producing Countries Should Diversify Their Economy From Being Overdependent On Oil For Revenue
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