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