Extractive Industries, Public Revenues and Distributional Equity

1
Extractive Industries, Public Revenues and
Distributional Equity

• Peter Veit
• World Resources Institute
• Sharing Experiences Monitoring the Impact of
  Community
• Development Programs Linked to Extractive
  Industry
• Washington, DC
• 5 December 2006

2
Public Revenues in the Local Arena

• Little meaningful fiscal decentralization in
  Africa
• Weak tax base in the rural regions limited local
  govt capacity to collect revenues
• Central govt investments in rural regions thru
  line/sectoral ministries
• Many local govts dependent on central govt
  transfers to fund budgets

3
Distribution of Public Revenues

• Inter-governmental transfers are powerful
  instruments for meeting national/public interests
• Ideally, structuring transfer systems that meet
  multiple goals, but, in reality, meeting one goal
  may contradict another
• Hierarchy of goals? More appropriate to focus on
  inter-relations, entry points and sequencing

4
Common National Goals/Public Interests

• National Development Extractive resources are
  commonly national/public goods. How should
  revenues be allocated to promote national
  development?
• Poverty Reduction/Equity Transfers that target
  the poor and promote inter-jurisdictional equity
• Security/Resolve Conflicts Favor extraction
  site to offset extraction costs and perhaps
  recognize entitlements

5
What Do We Know?

• Goal 1. National Development
• Once in central govt coffers, EI revenues are
  difficult to follow
• Transfers often constitute a small percentage of
  national budget
• Allocation criteria tend to focus on population,
  area, infrastructure and recurring costs
• Goal 2. Poverty Reduction/Social Equity
• Allocation criteria rarely include a poverty
  indicator or the indicator does not effectively
  target the poor
• Few equalization grants or they are
  significantly under-funded
• Goal 3. Security/Resolve Conflicts
• Allocation criteria rarely recognize revenue
  sources/EI locales
• Few derivations to extraction sites

6
Policy and Monitoring Tool
7
Poverty Rate vs. Total Transfers
8
Average Incomes vs. Local Govt Transfers
9
Self-Identity Poverty vs. Total Transfers
10
Poverty Rate vs. Total Transfers
11
Number of Poor vs. Equalization Grant
12
Running Scenarios
13
Developing Principles of Fairness

• Natural attributes amount of resource/level of
  production within a region
• Prior or existing use of the resource
• Social and economic needs of the population
• Alternative resources and comparative costs to
  serve those needs
• Avoidance of damage to affected regions

14
THANK YOU

• For more information
• http//www.wri.org/equity
• http//funnelthemoney.org