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Extractive Industries, Public Revenues and Distributional Equity

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. Public Revenues in the Local Arena.

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Extractive Industries, Public Revenues and Distributional Equity

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  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

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