Paper short abstract:

This paper analyses the effect of expectations and politics on institutional capacity. Following major gas discoveries Tanzania engaged in reforms aimed at preventing a resource curse. However, the concurrent politization of the sector reduced capacity and slowed down the development of the sector.

Paper long abstract:

Based on in-depth empirical research into the development of Tanzania's petroleum sector this paper analyses the effect of expectations and domestic politics related to a natural gas resource boom on institutional capacity. In the petroleum literature an emerging body of literature points to the role of expectations of resource booms in shaping policy decisions. This has led to diagnoses of the 'resource curse without natural resources' and the 'pre-source curse' in 'new oil' countries, pointing to the detrimental effect of rising expectations on macroeconomic management, governance and corruption, and political stability. Less is known about their effect on capacity. Drawing on a political settlement approach the paper aims at unpacking the reform process in mainland Tanzania in the wake of major gas discoveries. The paper suggests that it is domestic politics more than expectations per se that is the major factor influencing capacity. Informed by international best practice, the country engaged in major legal and institutional reforms aimed at preventing the emergence of a resource curse. This led to the establishment of a number of new institutions that should improve transparency and accountability. However, at the same time the sector was increasingly politisised and this undermined the trust in leaders and existing petroleum institutions and reduced their autonomy and capacity. This impeded the national oil company, TPDC's, development into a pocket of efficiency and slowed down the development of the country's petroleum sector.