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State Power and Natural Resources

State Power and Natural Resources. Stpehen D. Krasner Stanford University: Ulaanbaator Aug 2012. The Dilemma. Effective Governance Requires Stronger State More Controlled State. Frontpiece from Hobbes’s Leviathan All Powerful . Self Restrainted. The Standard Solutions. Democracy

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State Power and Natural Resources

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  1. State Power and Natural Resources Stpehen D. Krasner Stanford University: Ulaanbaator Aug 2012

  2. The Dilemma • Effective Governance Requires • Stronger State • More Controlled State

  3. Frontpiecefrom Hobbes’s Leviathan All Powerful Self Restrainted

  4. The Standard Solutions • Democracy • Accountability • Voting • Free Press • Civil Society • Checks and balances • The Benevolent Dictator • Ruler acts for the public good • Democracy > Benevolent Dictator

  5. International Solutions for better governance • Foreign Agreements Can Constrain and Empower • International Treaties: Weak • Must be enacted into national law • No enforcement • Example: Intl Human rights treaties • World Trade Organization: Stronger • International Rules • Third Party (WTO Panel) arbitration • National enforcement • Bilaterial Investment Treaties: Strongest • Third party arbitration and enforcement

  6. Resource Curse • Dutch disease • Inflation • Exchange rate appreciation • Massive Corruption • Volatile public revenue • Civil strife • Erosion or destruction of democracy

  7. Angola • Per capita income $9, 000. • Population in poverty 41% • Inflation 13 % • Life Expectancy 50

  8. Solutions • Revenue Transparency: EITI • Limited Value • Azerbaijan: Corruption Rank 143 • Nigeria Corruption Rank 143 • Mongolia: Corruption Rank 120 • Corruption moves to another stage • For Mongolia a good first step

  9. Direct Payments • Mongolia (Human Health Fund) • Alaska • Advantage • Takes money away from the state • Disadvantages • Inflation • Will not provide infrastructure and other public goods • May encourage dependency on the state

  10. Norway: National Control • Government Pension Fund of Norway $500 billion Established 1990 • Exclusive National Control Administered by Min of Finance and Central Bank Payout from the Fund tied to budget deficit Highly transparent • Requires VERY mature democracy • Will NOT work for Mongolia

  11. Papua New Guinea Social Development Fund (PNGSDF): Shared Control • Not for profit company estab in 2002 • Controls revenue from OK Tedi Mine • Registered in Singapore • Board of Directors: • 3 appointed by BHP mining company • 3 by PNG by PNG government • 1 Singapore resident appointed by Board • Decisions require 4 with at least 1 from PNG

  12. PNG Social Development Fund • PNGSDF owns 63% of OK TediMine • Manages $1 billion in assets • 2/3rds of funds to be spent after mine closes • Current expenditures $100m/year • 1/3 to western prov; 2/3rds to PNG

  13. Proposal:Mongolian Development Fund • Created by a Treaty between the GOM and the Asian Development Bank • Independent entity incorporated in Singapore • Board of Directors • 3 appointed by GOM • 3 appointed by Asian Development Bank • 1 resident of Singapore appointed by Board

  14. Mongolian Development Fund • 70 percent of mine revenues committed to Mongolian Welfare Fund • Escrow account in Singapore • All fund revenues used for infrastructure and social development • Specific projects determined by Mongolian law • Project oversight by the Mongolian Welfare Fund

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