Subnational: Harnessing Oil, Gas and Minerals for Local Development

To advance local economic and social development in resource-rich areas, RWI works with local and national governments, civil society, journalists and companies. RWI and its partners promote transparent and responsible planning, financial management and spending.

BACKGROUND

National governments are distributing a larger share of the revenues from oil, gas and minerals to state and local governments and, with it, greater responsibility to provide basic public services. These revenues, however, are not always transferred in a transparent manner or on a regular schedule, and the capacity of state and local governments to manage the funds is often low. Subnational governments also face a range of other issues created by extraction of natural resources, including land allocation, pollution, changes in the local economy, demands for services, and guarantees of security and human rights.

LOCAL NEEDS

When state or local governments with limited staff, skills or experience receive large infusions of money, the risks of mismanagement go up—especially if the new revenues are one-time windfalls or if they arrive irregularly or in unpredictable amounts. New revenues from oil, gas and minerals can also undermine other parts of the economy, reduce the accountability of subnational governments, and increase conflict over resources. Local decision makers would benefit from expert guidance on these issues.

ASSISTANCE STRATEGIES

RWI's subnational assistance addresses the local challenges of oil, gas and minerals through research, funding and technical assistance to local and national governments, civil society, journalists and companies. RWI supports public consultation and participation in decisions about the use of finite resources. Public involvement is crucial to promoting accountability, sound financial management and sustainable economic development.

Better planning, budgeting and monitoring processes can help subnational governments and citizens maximize the benefits of oil, gas and minerals and also mitigate the risks. These processes determine the allocation and spending of revenues, which over the long term determine the path of economic development.

RWI has subnational projects in Peru, Ghana, Nigeria and Indonesia, and plans to expand its assistance to resource-rich areas in the Democratic Republic of the Congo, Mongolia, Kazakhstan and the Philippines.

RWI focuses on these key issues:

  • Active and informed citizen participation. RWI believes in the strength of multi-stakeholder work, bringing together government, companies and citizens in planning, budgeting and monitoring. Active citizen engagement is necessary for setting shared priorities and maintaining trust in government. High levels of transparency, public education and citizen participation also help reduce the risks of corruption that revenue spikes can bring.

    In Indonesia, RWI in cooperation with the Open Society Foundations Local Government and Public Service Reform Initiative worked with local partners to form multi-stakeholder groups to
    oversee planning in the Blora and Bojonegoro districts. In Peru, more than 600 citizens in the region of Arequipa participated in drafting the regional development plan, thereby bolstering
    the plan's standing. A technical committee there, including eminent doctors, teachers, lawyers and other professionals, monitors progress toward the plan's objectives.
  • Transparency and accountability for revenue transfers and use. RWI works with government, civil society and companies to develop transparency laws and mechanisms.

    In Indonesia, RWI's engagement with civil society, government and the private sector led to groundbreaking local transparency laws governing public accountability of oil and gas revenues. In Nigeria, the RWI-funded Bayelsa Expenditure and Income Transparency Initiative (BEITI) developed a multistakeholder platform to track state revenues, transfers and expenditures. BEITI is a potential model for moving from national to subnational implementation of the Extractive Industries Transparency Initiative.
  • Integrating companies into public planning. Company representatives should be regarded as sources of information for estimating revenues, as well as for forecasting social, environmental and economic challenges. Companies may also make payments directly to local governments or provide services. Involving companies in planning processes helps align corporate social responsibility investments with public plans.

    In Nigeria, BEITI membership includes companies committed to disclosing payments they make to the state government.
  • Revenue mapping and forecasting. RWI works with partners to help them understand revenue flows between companies, central governments, subnational governments and other institutions
    such as traditional councils.

    In Ghana, RWI's work led to traditional chiefs agreeing to publish the audit of their accounts. In Peru, assistance from RWI helped the Arequipa and Piura regional governments develop a tool to forecast oil, gas and mineral revenue transfers and formulate their annual budgets based on these estimates.
  • Local involvement in the supply of goods, services and workers to companies. RWI is researching how best to increase employment of local workers and the use of local goods and services by oil or mining companies without creating dependence on those industries.
  • Smoothing expenditures and generating sustainable returns. Few subnational governments have legal authority to establish stabilization or savings funds. RWI is researching possible tools for local revenue management.
  • National regulations for improved state and local government action. RWI works with partners to improve the national policy environments in which state and local governments must operate. In Peru RWI supports efforts to change policies restricting the use of revenues by subnational governments.
  • Working with indigenous communities. RWI has completed a research project on management of oil, gas and minerals in native communities in the United States, and is beginning work in the Philippines and Indonesia on revenue management by indigenous communities.

FUTURE WORK

We partner with diverse institutions. RWI partners with international, national and local civil society organizations, as well as government bodies. RWI actively encourages approaches that bring together diverse groups to develop shared understanding and trust.

We combine technical and financial support. In addition to offering training, technical assistance and capacity building, RWI provide grants to national and local organizations for projects on subnational governance and the oil and mining industries.

We lead cutting-edge research and are committed to capturing and sharing lessons. RWI conducts and funds research in the area of subnational governance. RWI and its partners are developing
training modules, policy briefings and guides for local governments, companies and civil society organizations. We undertake rigorous monitoring and evaluation of our subnational projects to determine and share methods, impacts and lessons with practitioners and policymakers.

We invest in our partners. RWI focuses on building the knowledge and skills of our partners, as we also learn from them. We work to empower local partners to work independently to ensure the sustainability of their work.

RWI is eager to work with others interested in these issues and develop recommendations and tools for policymakers and practitioners.

Project Donor and Lead Partner

Open Society Foundations Local Government and Public Service Reform Initiative (LGI)

Our Partners in Subnational Assistance

  • Centre for Regional Information and Studies (PATTIRO), Indonesia
  • Grupo Propuesta Ciudadana (GPC), Peru
  • Red de Municipalidades Urbana y Rurales del Peru (REMURPE), Peru
  • Institute of Local Government Studies (ILGS), Ghana
  • Integrated Social Development Centre (ISODEC), Ghana
  • Niger Delta Citizens and Budget Platform (NDCBP), Nigeria
  • Bayelsa State Government, Nigeria

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