Astana Keynote (English) (66kb)Astana Keynote (Russian) (268kb)Event Agenda (42kb)
By Kathryn Joyce
In three neighboring, post-Soviet countries, a new awareness of the resource curse is growing. Like other oil-rich countries, Azerbaijan, Kazakhstan and Russia have struggled with the paradox of abundant resource wealth combined with a plague of social ills including poverty, corruption and stunted development. They have worked to address corruption and poor revenue management through measures such as creating national oil funds or, in the case of Azerbaijan and Kazakhstan, joining the Extractive Industry Transparency Initiative (EITI), but they are now exploring ways to take the transparency movement a step further, and apply the same standard of openness that guides revenue oversight to the question of public spending.
In November the Revenue Watch Institute (RWI) and the Soros Foundation Kazakhstan gathered more than fifty leaders of government ministries, parliament and civil society organizations in Astana, Kazakhstan for an international conference entitled "Efficiency of Public Spending in Azerbaijan, Kazakhstan and Russia." The conference grew in part out of research by RWI Senior Economist Akram Esanov, and his findings that efficient distribution of resource revenues, particularly in the areas of health, education and social protection programs is as vital to development as transparent handling of revenues.
Anton Artemyev, Director of Kazakhstan Revenue Watch, says social spending—safety nets such as welfare or services for the impoverished—is "extremely relevant" in Azerbaijan, Kazakhstan and Russia, "as all three countries have been experiencing oil windfalls for almost a decade, but have obviously failed to fully convert impressive economic growth into sustainable socio-economic development."
It’s not the amount of public revenues that matters, nor the amount of public expenditures, Artemyev says, but the "responsible and efficient management of government resources, transparent and result-oriented expenditures. Unfortunately, many countries receiving huge windfalls from natural resources tend to increase government expenditure without being able to ensure their effectiveness." Though there are exceptions to this rule, Artemyev argues that most resource-dependant countries indulge in "excessive and unnecessary projects draining a lot of public money and an ever-increasing volume of highly inefficient expenditure." Experts at the conference, says Artemyev, agreed that among the key impediments to effective public spending are the lack of transparency and accountability, weak oversight capacities, government corruption and the general weakness of democratic institutions in these Eurasian nations.
The conference drew significant attention in the region. Kazakhstan's president Nursultan Nazarbayev took a personal interest in the discussions and requested copies of all presentations. Distinguished speakers included the Deputy Prime Minister of Kazakhstan, Yerbol T. Orynbayev, who spoke about the need to reform public spending and took questions from the attendees; Dennis de Tray, a former World Bank representative to Kazakhstan, and current advisor to Timor Leste, who delivered the keynote address, "When Money is Not the Issue: Lessons for Resource-Rich Countries from 25 Years of Development Experience"; and Simen Bjornerud, an economic advisor at the Ministry of Finance of Norway, who spoke at length about the successful Norwegian model for managing windfall revenues that many resource-rich countries hope to emulate. In addition to Esanov, RWI was represented by Director Karin Lissakers and Program Officer Morgan Mandeville.
The three countries covered by the conference have enjoyed booming resource revenues in recent years, with significant increases in governmental spending, including social spending. RWI’s Esanov says that post-Soviet countries often find their health, education and social protection infrastructure in disarray as ten to 15 years of political transition, and economic stagnation across the former Soviet Union during the early 1990s, left social programs deteriorated and below international standards. Rapid improvements are crucial to maintaining the "human capital" necessary for economic growth, that is, the well-being and capacity of a country's citizens. Unfortunately, economic analysis has shown that when spending is increased dramatically in a short time, efficiency usually suffers, because the increase has come before the creation of social institutions capable of channeling the new funding.
Revenue Watch convened the meeting to explore ways to improve this efficiency. Esanov's related report compared measures of efficiency between simple cost-benefit analyses and more comprehensive gauges of systemic, or institutional, efficiency, which evaluate the effects that public spending can have on society. (For example, measures that look beyond the comparative costs of new schools in two provinces to study how both building the school and training its teachers will impact the lives of its students.) "Spending and building is the easy part," says Esanov. “Improving outcomes is a different issue.” Countries such as Kazakhstan, Azerbaijan and Russia, which have been prone to corruption, pose a particular challenge. "The state spends on big, massive projects, white elephant projects," Esanov says, "partly because in construction, there's no easy, efficient way to control money. So in ten to 15 years—if they're lucky—they'll have big constructions, big buildings. If they're unlucky, they'll have half-built buildings."
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Akorda Palace, Kazakhstan's presidential residence in Astana
photo: brkwbrg / Flickr |
Dennis de Tray summarized the dilemma in his keynote address: "Unfortunately, building health and education systems is not like building Astana," he said, referencing Kazakhstan's new, modernist capital, constructed in 1997 with the hopes of both centralizing the capital and drawing foreign investment. "We are all here today," said de Tray, "because we want to find ways of closing the gap between our ability to build physical infrastructure, and our ability to create the institutions states need to function, and the people economies need to prosper." Without functioning institutions that can help implement development policies, he continued, those policies end up as "nothing but paper."
Not only can windfall profits become "white elephants" that do little to advance development, they can also contribute to a culture of government corruption and inefficiency. "Resource revenues can have the effect of 'softening' budgetary constraints, allowing politicians to avoid complicated reforms and making effectiveness and efficiency less pressing concerns," says Samuel Greene, scholar-in-residence at the Carnegie Endowment for International Peace/Moscow Center. "That is probably the case in all three countries. But resource revenues and the incentives they create for the elite are digested differently in different social and political contexts, and it is remarkable that, despite the fact that all three countries are relatively authoritarian in their governance, elites in some countries are significantly more attuned to issues of effectiveness than in others."
Greene says the conference revealed the diverse approaches of the three countries, which until recently were part of a single institutional and political structure, to building governance, efficiency, accountability and civic engagement. For example, the attendance and participation of Kazakhstan's Deputy Prime Minister Orynbayev showed a level of government engagement very different than what Greene would expect from Russia. This involvement by Kazakh leaders also caught the attention of Russian researchers at the conference, who expressed astonishment at the openness between civil society and government in Kazakhstan.
"It has been one of the problems of post-Soviet politics that ruling elites have sought to disengage from their publics, cutting the number of public 'conversations' drastically and, as a result, leaving less and less space for civil society to have an impact," says Greene. "Public spending is an important area where states and citizens still come into contact, however, and it is an opportunity on which civil society can and should capitalize."
In this way, the conference's value extended beyond its content to its larger significance as a sign of the transparency movement's success in helping civil society groups broaden their advocacy from revenues to spending. Civil society involvement in efforts such as the EITI not only provides what Esanov calls "possibly the best cure against corruption," but also invaluable experience with oversight and direct collaboration between CSOs and government. The resulting increased capacity of CSOs—to build foundations, organize conferences and establish contact with the government—often enables them to extend their work into other areas of government activity that require scrutiny and greater transparency. And if governments shift corruption and graft to the expenditure level, CSOs are more able to shift their own attention to spending and demand accountability.
There are even broader benefits to civil society's increasing experience in transparency advocacy and in simply joining civil society, government and industry together in common cause, and they were on display in the fact and success of the Astana conference. The biggest boon Esanov sees to the transparency movement and the multi-stakeholder groups that it has created is the uniting of government and civil society in a consolidated effort. These established collaborations between civil society and government then lend themselves more easily to future projects, allowing groups that first came together in basic efforts such as the EITI to naturally begin focusing on other areas of accountability. "When the civil society groups meet every six months to discuss the EITI," Esanov says, "they begin to look at other issues, because the groups are already in place. It's what's happening in Azerbaijan, that now they're paying more and more attention on the spending side."
"Transparency and efficiency of revenue management go hand in hand," says RWI Director Karin Lissakers, "enabling countries to effectively harness resource wealth so that significant development of infrastructure and human capital can take place."
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