Revenue Watch Warns Developing Economies, "Don't Depend on Oil Alone"

Professor Joseph Stiglitz and Expert Panel Join Announcement of Post-Crisis Recommendations for Resource Rich Countries

FOR IMMEDIATE RELEASE

	Panelists from left: Sarah Pray, Chris Canavan, Dino Mahtani (Moderator), Joseph Stiglitz, Antoine Heuty. Photo by Donna Padowitz.

NEW YORK—To manage the ravages of the global downturn, nations rich in oil and minerals must diversify their economies and create stronger policies that protect revenues from volatility in commodity and credit markets, according to a new series of recommendations released yesterday by the Revenue Watch Institute.

At an expert panel at Columbia University, Nobel laureate Professor Joseph Stiglitz joined economist Chris Canavan and Revenue Watch authors to announce the new set of policy prescriptions: "Boom, Bust and Better Policy: Crisis Lessons for Resource Rich Countries," based on months of original research on economic conditions, transparency and governance in more than 80 resource rich countries.

Professor Stiglitz highlighted weaknesses in the tools most often used to offset risk in resource-dependent economies. Faced with limited options for insuring themselves against volatility, he said, countries turn to "self-insurance" in the form of reserve funds. "But the recent financial crisis demonstrated how markets did a fantastically bad job of managing risk and allocating capital," said Stiglitz, who is also writing the introduction to the Revenue Watch series. "As long as countries' savings are tied to the health of the same badly-managed markets, we need to rethink the problem of volatility."

Antoine Heuty, deputy director of Revenue Watch, said a narrow focus on macroeconomic stability has proven inadequate to support development in resource-dependent countries. "A much bigger emphasis is needed on solutions that enable economic diversification through financial and trade policies," said Heuty, who authored one of the papers. "These policies can succeed when countries work in a transparent manner to align the interests of companies with the interests of governments and citizens in decisions about savings funds, or extractive contracts."

The global economic downturn and the subsequent drop in commodity prices hit resource rich countries especially hard. With the recommendations in "Boom, Bust and Better Policy" Revenue Watch seeks to guide policy-makers and advocates in the current climate and in future volatility.

The following are selected recommendations from this new Revenue Watch series. To learn more and download the first three papers, please go to: www.revenuewatch.org/boombustpolicy.

• Stability does not guarantee sustainability. Protections against volatility support long-term growth, but resource rich countries should not seek stability at the expense of investment in sustainable development.
• Create policies that enable economic diversification. Governments must create an enabling environment for economic diversification to reduce vulnerability to shocks.
• Good governance protects the national economy from global crises. Countries that are integrated into global markets need improved oversight and transparency to secure themselves from external shocks.

• The crisis has provided a major opportunity to advocate new international accounting standards and industry transparency rules.
  Activists should join the global campaign for accounting rules and laws for better disclosure of extractive industry payments.

• Act fast, but plan ahead. Align short-term recovery measures with long-term development strategies and improved regulations to avoid the worst effects of future downturns.
• Manage non-resource wealth effectively. Resource-dependent governments need to maintain fiscal balance in non-resource sectors. Countries will achieve greater independence from resource revenues if they set specific targets and timelines for the reduction of non-resource deficits.

Forthcoming Revenue Watch papers will scrutinize legal frameworks between countries and governments, and assess the operation and priorities of the petroleum industry during the crisis.

CONTACT:
Jed Miller, +1 917 257-0670, jmiller@revenuewatch.org

LEARN MORE

• Revenue Watch Institute Launches "Boom, Bust" Policy Analyses with Nobel Laureate Joseph Stiglitz
• Advocacy Knocks: Transparency Reform Opportunities 
  Post-Financial Crisis (pdf)
• Broken Boom: The Impact of the Economic Downturn on 
  Resource-dependent Countries  (pdf)
• Fool’s Gold: Assessing the Performance of Alternative 
  Fiscal Instruments During the Commodities Boom and the 
  Global Crisis  (pdf)