Natural Resource Revenue for Service Delivery: What is the experience of developing countries in translating major expansions in natural resource-related revenues into improved service delivery? What is the experience of countries with low levels of government effectiveness and poor control of corruption? Which countries are the success stories and what can we learn from their experience? Have development partners been able to support countries to manage the transition associated with a major expansion in resource extraction activity?
Key findings: There is very little literature which addresses the impact of natural resource revenues on the quality of service delivery per se. The evidence that does exist suggests large differences among natural resource dependent developing countries in terms of the effects of resource wealth on social expenditures. There is more consensus on those factors which hinder positive outcomes from natural resource revenue. Most commonly cited are limited capacity to rapidly scale up social investments, lack of information, rent-seeking and patronage.
The issue of decentralisation is often raised with reference to the distribution of natural resource related revenues. According to one study, countries in which natural resource revenues represent a large share of the budget seem to be more likely to have systems for the partial redistribution of revenues among all regions. However, little has been written about the development impacts of the use of these revenues at the local level.
The case of Botswana is widely cited as an example of responsible management of resource revenues. It is also where the link to improvements in infrastructure, human capital and basic service delivery is most apparent. In Botswana’s case key factors for success included cautious macro-economic policy, low volatility in the global price of the resource (diamonds), good governance and the control of rent-seeking, a broad consultative process, domestic ownership of the reform process, separation of state powers, social and political stability, and multiparty parliamentary democracy. Other successful (or partially successful) examples include Peru, Chile, Vietnam, and Indonesia.
Full response: http://www.gsdrc.org/docs/open/HD668.pdf