Posted by Andrew Bauer and Sofi Halling
In nearly every country, subnational governments receive public funds, either through direct tax collection or intergovernmental transfers. But in more than 30 countries—from Bolivia to Canada to DRC to Indonesia—policymakers have chosen to create a special revenue sharing system to distribute non-renewable natural resource revenues (see map below). A recently published report by the Natural Resource Governance Institute (NRGI) and the United Nations Development Programme (UNDP) examines this important topic (NRGI link to report; UNDP link to report).
In most of these countries, oil-, gas- or mineral-producing regions receive a percentage share of the production value extracted from their territory. In a subset of these countries—including Ecuador, Mongolia and Uganda—resource revenues are pooled separately from other fiscal revenues and distributed according to a unique formula that includes, for example, poverty and population indicators. Every year, hundreds of billions of dollars are distributed through these systems.