Helping Local Leaders and Communities Manage Resource Revenues

In 2008, Revenue Watch launched a groundbreaking project on three continents, designed to develop government policy expertise and civil society capacity at the local level.

The struggle against the resource curse is moving downstream, as governments in resource-rich countries decentralize and pass windfalls, and related budgeting authority to sub-national authorities. Producing regions often receive especially large shares of this wealth, but many regional and local officials lack the experience or the capacity to manage the sudden influx of vast sums of money.

Resource-producing regions bear the brunt of negative impacts from extractive activity and are often the least-developed areas of a country. After years of rising commodity prices, these regions have the opportunity to reap the benefits of their extractive activity and to convert the wealth in the ground to long-term development.

This opportunity will only be realized if sub-national governments have the tools to make good use of their windfalls. Revenues from the extractive industries are highly volatile—often rising and falling dramatically year to year—and can sometimes overwhelm other industries.  Without careful management, increased extractive revenues can actually worsen the circumstances in states and provinces by undermining other economic sectors, reducing government's accountability to citizens, and increasing corruption and conflict.

The Niger Delta provides one of the world's most compelling examples of this phenomenon.  State and local governments have received more than $20 billion over the past decade, and yet leaders have failed to meet the most basic community needs while instability, poverty and corruption have flourished.  While national governments receive some international support in confronting these challenges, sub-national governments are often neglected by traditional assistance providers and remain vulnerable to mismanagement and waste of their resource windfalls.

With support from the Bill and Melinda Gates Foundation, the Revenue Watch Institute and the Local Government and Public Service Initiative (LGI) are working in producing communities to combat the paradox of plenty at the sub-national level.

Because measurement and evaluation can too often become "day-two" efforts in major initiatives, Revenue Watch has already begun working to record the performance and capacity improvements of our local partners at every stage of this effort. Over the past two months, members of RWI's capacity building and research teams, and colleagues from LGI, have traveled to all four pilot locations to develop locally relevant indicators for measurement over the entire lifespan of the project. At the end of these three-year pilots RWI will publish case studies based on the monitoring and impact assessment findings and will also produce a best practice guide for sub-national extractive revenue management.

These pilots, meant to build RWI in-house knowledge and expertise on successful models of intervention and skill-building at the local level that can be disseminated, are making early progress. In Indonesia, with local partner Pattiro, the work will be centered on the new oil sector in Cepu, on the island of Java. Pattiro hosted multi-stakeholder workshops in Blora and Bojonegoro to begin conversations about social and economic development planning at the local level. In Nigeria, we are working closely with the government of Bayelsa State in the oil-rich delta region, and with local officials and civil society groups forming a multi-stakeholder group to monitor budgets and expenditures, and RWI hired a local coordinator to manage local implementation. We have teamed up with Grupo Propuesta Ciudadana and Remurpe in Peru to promote transparency support investment planning and fund management at various levels of government, and were able to see these partners' work firsthand during site visits in Peru this fall.

Ghana is the newest addition to this sub-national effort; RWI and our partners will work to answer the growing demand for better use of the funds in the nation's resource-rich regions. Ghana is unique among countries implementing the Extractive Industries Transparency Initiative for its decision to capture information about transfers at the sub-national level. September also brought the first scoping trip to Ghana for sub-national work, and we expect this project to begin there in earnest during early 2009.

Improved revenue management by regional and local governments and oversight by civil society, parliaments, and local media will help local communities turn their oil, gas, and minerals into sustainable development and growth.

LEARN MORE

• Local Governance and Public Service Initiative and Its Mission