Sharing Natural Resource Revenue (NRR) Subnational Governments

Transcription

1 Sharing Natural Resource Revenue (NRR) with Subnational Governments Adrienne Cheasty Western Hemisphere Department* International Monetary Fund March 7, 2013 *Based on study done in FAD

2 The Dilemma How much NRR to leave with producer regions? Enough to avoid secession But not so much that income disparities between NRR regions and the rest of the country become too great regional dutch disease depopulation of uncompetitive regions Difficulties in maintaining uniform national standards in services social unrest in impoverished areas 2

3 NRR a poor subnational revenue source Down-side of sharing NRR with subnational governments (SNGs) Volatility of NRR => poorly suited to paying for basic services Concentration of NRR => the smaller the SNG receiving NRR, the more difficult to spend effectively Absorption capacity constraints Human capacity constraints Economies of scale in profitable projects => Could avoid many problems if central govt keeps NRR in exchange for more stable SNG funding sources 3

4 But sharing NRR with SNGs is justified Costs of NRW exploitation are high Earnings from NRW: Rent to cover Redistribution Exhaustibility/ Future Generations Volatility -- uncertainty about income -- instability in macro variables Environmental costs (local and national) National govt services Provincial govt services Capital Labor 4

5 Costing NRW exploitation Costs vary: easy to attribute e.g., use of land evident but harder to cost e.g., degradation of transport infrastructure contestable e.g., air pollution in neighboring regions Work-in-progress => More research needed! 5

6 Political Economy of Costing Efforts to base NRR-sharing on costing can enhance legitimacy Especially if costs are defined comprehensively Neighboring regions Transport infrastructure/ports Environment BUT, costing is not an exact science No single correct method for costing NRW extraction => Surely more important that the costing is reasonable and politically acceptable, than 100% scientific 6

7 Getting the balance right (1) Some trend toward inclusion of broader affected areas and more costs Bolivia: Non-producing departments now receive 31% IDH Colombia: Since 2011, 40% NRR to two funds, distributed to all SNGs; SNGs which produce or transport NR via rivers/sea ports are eligible to use rest of NRR (in other funds) Brazil: Royalties now distributed not only to on-shore producing SNGs, but also to SNGs facing offshore oil fields and SNGs with ports 7

8 Getting the balance right (2) Taxation to rebalance => Ownership of NRW is not the final determinant of NRR allocation since the central government has the power to tax it back. Some evidence of recentralization Bolivia introduced IDH, a centrally-administered royalty on top of the existing provincial royalty (IDH is shared between CG and SNGs; SNG share partly pooled) Argentina provinces own NRW, but the federal govt levies export taxes since 2002 Colombia increased royalties in 2011 and pooled them in centrally-administered funds 8

9 Getting the balance right (3) Pool the NRR of SNGs => Ensure the pool remains clearly a SNG resource Given SNG capacity constraints, pooling would help use NRR more effectively: By financing larger investments/projects By an access arrangement which (naturally or by design) offsets volatility By monitoring and oversight to safeguard the property rights of the pooling SNGs By a higher rate of return to unspent resources Examples: Bolivia (pensions), Colombia (pensions, technology, saving and stabilization) 9

10 Getting the balance right (4) Offset the impact of NRR allocation through a general equalization scheme Based on fiscal capacity or (also) on e.g., basic needs criteria technically more demanding introduces arbitrariness reasonableness/political acceptability more important than science! Careful that it s affordable (not like Canada compensating for Alberta after first oil shock in 1970s when even Ontario became eligible for equalization transfers; now Alberta is excluded from the equalization base) 10

11 Read Chapter 10 by Giorgio Brosio and Juan Pablo Jim nez Taller sobre la descentralización CEPAL, Santiago de Chile 7 marzo 2013