Escaping the Resource Curse

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Escaping the Resource Curse

• Managing Petroleum Revenues in
• Developing Countries
• 
  Charles McPherson
  
• Senior
  Adviser, Oil and Gas
  
• 
  World Bank
  
• OSI/Columbia
  University Workshop
  
• New York,
  February 26, 2004

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Three Challenges

• Revenue Collection
• Revenue Management
• Revenue Disbursement

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Revenue Collection

• Tax Structure
• Tax Administration
• Monitoring and Compliance

4
Tax Objectives

• Adequate Incentives
• Appropriate Levels of Government Take
• Early and Stable Revenues
• Cost Containment
• Administrative Simplicity

5
Tax Instruments

• Royalties
• Profits Taxes/Production Sharing
• Bonuses
• Cost Recovery Provisions
• Tax Packages
• State Participation

6
Tax Administration

• Clarity on Roles and Responsibilities
• Coordination
• Adequate Staffing and Appropriate Skills Mix
• Adequate Resources/Infrastructure

7
Monitoring and Compliance

• Corporate Audits
• Partner Audits
• Cost (Value for Money) Audits
• Tax Audits
• National Oil Company Audits

8
Revenue Management

• Management Objectives
• Management Instruments
• Country Experiences

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Revenue Management Objectives

• Stabilization
• Savings

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Revenue Management Instruments

• Unified Budgetary and Asset Management
• Special Petroleum Funds
• Hedging
• Fiscal Rules

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Country Experiences

• Norway
• Venezuela
• Azerbaijan
• Kazakhstan
• Nigeria

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Norways SPF

• Stabilization and savings objectives
• Fully integrated with the budget
• Clearly specified rules and procedures
• Professional management
• High degree of transparency and accountability
• Supportive context

13
Venezuelas MSF

• Stabilization fund
• Integration with the budget problematic
• Initially rigid rules quickly eroded
• Weak institutional capacity
• Opaque management
• Non-supportive country context

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Azerbaijans SOF

• Primarily savings fund
• Extra-budgetary
• Accountable and responsible to the President
• Professional management
• Good progress on transparency
• Work in Progress

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Kazakhstans National Fund

• Primarily stabilization fund
• Extra-budgetary
• Operates at Presidents discretion
• Limited professionalism
• Transparency diluted by Presidential control
• Work in Progress

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Nigerias Challenges

• Heavy oil dependency
• Volatile pro-cyclical budget
• Minimum needs of Government exceed revenue at
  32/barrel
  
• 50 of revenue is transferred to state and local
  government
  
• Significant current backlog of urgent physical
  and social infrastructure projects
  
• Weak institutional capacity
• Poor transparency/accountability record

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