Extractive Industries, Public Revenues and Distributional Equity
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Extractive Industries, Public Revenues and Distributional Equity
Peter VeitWorld Resources Institute
Sharing Experiences: Monitoring the Impact of Community Development Programs Linked to Extractive Industry
Washington, DC5 December 2006
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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
468 - 1707.21707.2 - 2216.12216.1 - 2639.22639.2 - 4040.84040.8 - 13777.3
727.9 - 2496.92496.9 - 3785.83785.8 - 4606.44606.4 - 5494.45494.4 - 13522.3
0.191 - 0.5660.566 - 0.6960.696 - 0.7660.766 - 0.8330.833 - 0.946
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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
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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
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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
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Policy and Monitoring Tool
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Poverty Rate vs. Total Transfers
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Average Incomes vs. Local Govt Transfers
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Self-Identity Poverty vs. Total Transfers
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Poverty Rate vs. Total Transfers
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Number of Poor vs. Equalization Grant
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Running Scenarios
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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
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THANK YOUFor more information:
http://www.wri.org/equity
http://funnelthemoney.org