Reversing the Resource Curse: Theory and Practice
An SPP–NRGI Course
April 13–24, 2015 l Budapest, Hungary
Participants’ Booklet i
Background ...... 2 The Course ...... 3 Course Methodology ...... 6 Course Schedule ...... 8 Program ...... 10 Logistical Information ...... 13 Accommodation ...... 14 Course Coordinators ...... 15 A Note on Hungary...... 16 Weekend Options in Budapest and
Surrounding Areas ...... 18 of Contents Table Readings ...... 21 Political Economy ...... 21 Path 1: Getting a Good Deal: Designing and Evaluating Fiscal Regimes ...... 22 Path 2: Distributing, Managing, and Spending Resource Revenues ...... 24 Biographies ...... 27 Course Instructors ...... 27 Course Participants ...... 36 Audit ...... 65 NRGI Staff ...... 66 SPP Staff ...... 67 Organizers ...... 69 The Natural Resource Governance Institute ...... 69 CEU School of Public Policy, Global Policy Academy ...... 69 Notes ...... 70
1 The effort to promote transparency and good governance in resource- rich countries has gained signifi cant momentum over the last decade and made substantial progress. At the same time, the degree to which this agenda fi nds more than rhetorical support from political elites is questionable. It is equally unclear whether civil society, the media, and parliaments in developing countries are suffi ciently well informed to take full advantage of transparency for more effective oversight. The persistent disconnect between the governance research community and practitioners also hinders innovation in specifi c contexts. Background The School of Public Policy at Central European University (SPP) and the Natural Resource Governance Institute (NRGI) have designed this two- week course to equip a pool of exceptional individuals from government, civil society, parliaments, media, international development agencies, and the private sector, as well as academics, researchers, and analysts, with the knowledge and tools necessary to help reverse the “resource curse.” Specifi cally, the course will examine the political economy of governance in resource-rich states and explore how it impacts domestic policy debates and practice. The course will also offer practical lessons for policy improvement, based on both best practices from around the globe and exchanges among participants.
Using the Natural Resource Charter and focusing on rigorous analysis and advanced techniques, the course is designed primarily for indivi- duals who already have a solid understanding of the subject matter but are seeking to enhance their knowledge and skills to play a more prominent role in developing, monitoring, and/or evaluating the mining and petroleum sectors in specifi c countries or globally.
2 Using the Natural Resource Charter as a framework, the course covers: Designing and evaluating fi scal regimes Distributing, managing, and spending resource revenues The political economy of policymaking in resource-rich states
All participants will attend sessions on the political economy of policymaking in resource-rich states that provide a basic overview of all policy issues. Thereafter, they will be asked to choose one of two paths: The Course Path 1: Getting a good deal: designing and evaluating fi scal regimes Path 2: Distributing, managing, and spending resource revenues.
Path 1: Getting a good deal: designing and evaluating fi scal regimes
A properly designed fi scal regime (i.e., the range of tax, royalty, and other revenue collection tools used by governments) can secure substantial resources that can be used to fund development. However, the challenges to good fi scal regime design can be formidable and the choice of a fi scal regime involves ifi cant trade-offs. There is no “one-size-fi ts-all” model. Understanding the trade-offs and effectively evaluating policy choices is therefore an essential skill.
There will be a session on designing fi scal regimes for all participants that explores the economic theory underpinning the most commonly used fi scal tools in a government’s arsenal. Course participants will gain a better understanding of the key features of these tools, their similarities and differences, and the loopholes and pitfalls (e.g., transfer pricing, thin capitalization, cost recovery rules) that can often undermine the proper application of these tools. Participants who choose Path 1 will be able to dive deeper into these issues and develop key practical and analytical skills. Their time will be evenly divided between classroom lecture and computer lab work. In guided workshop sessions, Path 1 participants will 3 learn to develop and use Excel-based models to evaluate and compare different fi scal regimes.
Exercises will start with a refresher on cash fl ow analysis and net present values and will progress to the development of sophisticated risk analysis techniques. Participants will learn how to use the models they have developed to inform policy analysis and decision-making through a mock negotiation exercise. Courses and exercises covered in Path 1
The Course will include licensing and allocation of rights and links to cost-benefi t analyses, institutional capacity, revenue management, and political economy considerations, providing participants with a nuanced and practical understanding of fi scal policy in resource-rich countries.
Path 2: Distributing, managing, and spending resource revenues
In resource-rich countries, oil, gas, and mineral revenues offer opportu- nities to accelerate economic development and reduce poverty. At the same time, their unpredictability, volatility, and size relative to the rest of the economy, as well as their fi nite nature, can create perverse incen- tives, complicating economic management and in some cases actually impeding development. Common challenges include over-dependence on a single source of revenue, over-borrowing, poor quality investment, destabilizing “boom-and-bust” cycles, redirection of funds to special interests, patronage, nepotism, and general mismanagement.
Participants in Path 2 will explore how to analyze these problems and overcome them. Sessions will examine the causes of weak development outcomes in resource-rich environments and elaborate on some avail- able tools to improve the distribution, management, and use of oil, gas, and mineral revenues. These tools include: rules describing revenue distribution to the national budget, special funds, sub-national jurisdic- tions, and state-owned companies; rules controlling the amount of re- source revenues that enter the domestic economy; public accountability mechanisms for revenue and expenditure management; and formulation 4 and implementation of national and sub-national development plans. Path 2 participants will also examine how national and local economies can benefi t from the presence of extractive companies through imple- mentation of “local content” policies.
Sessions will focus on practical policy options rather than academic research. They will prepare course participants to analyze revenue distribution and management systems and provide advice to policymakers
on specifi c saving and spending choices. The Course
The Political Economy of Policymaking in Resource-Rich States
All course participants will explore different political economy trajec- tories of domestic governance in resource-rich states. The main goal is to introduce analytical tools of political economy to enhance under- standing of the crucial impact of politics and power on policy outcomes. Participants will be exposed to case studies and interactive exercises and assess how political dynamics shape policy in countries relevant to their work. Along with identifying risks—such as the political inconve- nience of saving, or principal-agent problems associated with national oil companies—the course will suggest tools that actors can use to bet- ter understand their roles within the political landscape and mitigate obstacles to reform. Experts will also discuss the defi cits in good gov- ernance and transparency that pervade many resource-rich countries, explore their implications, and provide an update on global efforts (such as various transparency initiatives) to remedy the defi cits.
5 METHODOLOGY
The course uses the Natural Resource Charter as its primary intellectual framework. The charter is a set of economic principles for governments and societies on how to best manage the opportunities created by natural resources to promote development. It is not a blueprint for the policies and institutions countries must build, but instead provides the ingredients successful countries have used to build such institutions. www.naturalresourcecharter.org
Each part of the course will include interactive lectures, group discus- sions, and practical skill-building workshops or policy labs, as well as guest presentations by leading experts. The course includes the follow- ing components: General concepts (theory and prac ce) Course Methodology Compara ve analysis of current situa ons (globally) Case studies Policy labs to analyze case studies and develop prac cal analy cal skills Plenary discussions and conclusions Exercises in country- and mixed-teams A public panel organized at the Central European University
Participants also have the opportunity to sign up for one-on-one “clinics” in the evening with course experts to discuss the challenges they face in their countries and request advice.
6 Course Methodology
7 Revenue Revenue scal rules fi Andrew Bauer Andrew Bauer management: management: group exercise macroeconomic frameworks and
& & & & (Parallel paths begin) exercise 2 exercise 3 Room 201 Room 004 modeling 2 modeling 1 blocks of tax blocks of tax Tax modeling Tax Tax modeling Tax Robert Conrad Robert Conrad Robert Conrad Robert Conrad Thomas Lassourd Thomas Lassourd Thomas Lassourd Thomas Lassourd Conceptual building Conceptual building regimes regimes : Distributing, managing & spending resource revenues structures exercise 1 Auditorium Course Schedule Tax modeling Tax Robert Conrad Robert Conrad Robert Conrad Designing and Robert Conrad evaluating fi scal evaluating fi ow in tax regimes Introduction to tax Examination of tax fl Understanding cash Path 2 Optional clinics with experts TIGY Room (except 16 April: Auditorium) challenges Auditorium Eric Parrado Eric Parrado scal regimes and spending management management Local natural Andrew Bauer Andrew Bauer macroeconomic resource revenue Managing natural Managing natural resource revenues opportunities and resource revenues resource revenues: resource revenues: Distributing natural Distributing, managing toolkit Cristina countries oversight, Auditorium management Andrew Bauer analysis tools Transparency, Transparency, Robert Templer Okey Ikeanyibe study: applying of resource-rich Interactive case natural resource Corduneanu-Huci accountability in Political economy economy analysis political economy political economy Introduction to the Applying the political
& & Overview corruption : Getting a good deal: designing & evaluating fi Auditorium Paul Collier Paul Collier Paul Collier Paul Collier, Paul Collier, Framing the Paul Collier among peers) Accountability, Accountability, challenges and John Shattuck (chair) & guests Daniel Kaufmann Daniel Kaufmann Daniel Kaufmann transparency and Analysis to action Welcome remarks Welcome informed citizens) (rules, institutions, challenges you face lab I: What are your (the decision chain) successes? (Sharing Policy levers for reform SPP public policy panel Path 1 Sunday, 12 AprilSunday, 13 April Monday, 14 April Tuesday, 15 April Wednesday, 16 April Thursday, 17 April Friday, Boat tour and welcome reception Arrival of participants All 13.30–15:15 17:30–19:00 19:30 11.00–12.45 15.30–17:15 9.00–10.45 Week One (12–17 April 2015) Week 8
cates: Closing: Leila Fitt & closing Analysis to Auditorium certifi action lab IV Pusa Nastase David Manley, David Manley, Action planning Evaluation and Friday, 24 April Friday, – action planning Wolfgang Reinicke Wolfgang Matteo Pelegrini &
April Cristina analysis economy countries Auditorium Robert Templer Introduction to (Free afternoon analysis tools to data sources for action planning) Corduneanu-Huci – preparation for participants’ own Applying political Political Economy Farewell dinner at Brody Studios levels rich settings Budgeting in Development infrastructure Local content and shared-use Andrew Bauer & Paolo de Renzio Paolo de Renzio strategies at the Perrine Toledano natural resource- local and national
Course Schedule David Manley & Leila Fitt Analysis to action lab III Contract Contract Contract & David Manley & David Manley Thomas Lassourd Thomas Lassourd Thomas Lassourd negotiation game negotiation game negotiation game exercise enterprise Distributing State-owned local content Andrew Bauer Andrew Bauer revenues and natural resource
& & Keith Myers Tuesday, 21 AprilTuesday, 22 April Wednesday, 23 Thursday, Analysis to action lab II David Manley & Leila Fitt State-owned enterprises exercise licensing enterprise petroleum Mineral and Optional clinics with experts State-owned
Keith Myers Keith Myers
Thomas Lassourd Thomas Lassourd No sessions on Sunday, 19 April and Monday, 20 April 20 Monday, and April 19 Sunday, on sessions No TIGY Room (except 16 April: Auditorium) exercise countries and other in natural mechanisms funds: group resource-rich Development Andrew Bauer Andrew Bauer Andrew Bauer wealth funds, extra-budgetary Extra-budgetary Monetary policy banks, sovereign
& & & Sandra Nichols Saturday, 18 April Saturday, (Parallel paths continue) (Parallel paths continue) Political economy exercise 4 and social Mitigating and accounting for Room 201 Room 004 Popper Room Room 004 Room 201 Room 004 tax regimes environmental and social costs Tax analysis Tax Environmental Robert Conrad Robert Conrad impact exercise Thomas Lassourd Thomas Lassourd Thomas Lassourd Analyzing risk in Sandra Nichols 15.30–17:15 13.30–15:15 17:30–19:00 19:30 11.00–12.45 9.00–10.45 Week Two (18–24 April 2015) Two Week 9 SUNDAY — 12 April
The course will be launched on Sunday evening, 12 April, with a dinner reception on Millenium I. boat. The reception will start at 7:30 pm. Program
VENUE: 1052 Budapest, Vigadó tér
The dock number is not known yet. Our staff will pick you up at the reception of your hotel: Regency 7:00 pm and Arcadia 7:10 pm.
MONDAY — 13 April
The course will formally begin at 9 am; please arrive at Nádor utca 9 at 8:45 am. We will accompany you to the Auditorium where the plenary sessions will be held.
Central European University Monument Building Nádor utca 9 H–1051 Budapest Tel: +36 1 327 3000
10 At 5:30 pm you are invited to attend a public panel in CEU’s Auditorium followed by a reception.
Falling Commodity Prices, Rising Tensions. Have Countries Learned from the Past to Navigate the Future?
WELCOMING REMARKS: John SHATTUCK, CEU President and Rector Program
PANELISTS: Sir Paul COLLIER Daniel KAUFMANN and guests
After more than a decade of historically high prices, the value of oil and other commodities has fallen dramatically over the past six months. De- veloping and emerging countries reliant on extractive resources are start- ing to feel the pressure. What countries have used the years of plenty to prepare for a future of paucity? How can governments and communities learn from their experience in past episodes of prices crashes? At this pivotal juncture, our panel will unpick the threads of a complicated eco- nomic narrative, examining the implications, repercussions, and lessons for resource-rich countries.
SPP-NRGI public panel on the resource curse, March 2013
11 THURSDAY — 23 April
You are invited to join us for a farewell reception and dinner starting at 7:30 pm. Program
VENUE: Brody Studios Vörösmarty utca 38 1064 Budapest Tel: (+36 1) 266 3707
From Regency Suites & Arcadia Hotels to Brody Studios
12 The course will take place at the Central European University (CEU).
Central European University Monument Building, Room 201 Nádor utca 9 H–1051 Budapest Tel: (+36 1) 327 3000
In the university buildings all fl oors are equipped with restrooms. Drink and food automats are located in the main lobbies and there is a cafe- teria on campus. Coffee breaks and lunches will be served in the same building where the sessions will be held. Smoking is strictly prohibited within fi ve meters of all building entrances.
A multi-faith quiet lounge and prayer room can be accessed on the main Logistical Information CEU campus where participants can unwind and meditate. A room is designated for participants with young children, for quiet time or nursing. The CEU Medical Center is open to participants with a valid medical insurance. There are two qualifi ed English-speaking doctors (male and female) who hold regular consultation hours.
We encourage you to bring your laptop, especially for Excel exercises. European plugs (220V) will be available at CEU.
Wifi is available on campus. Network name: CEU Guest Password: Budapest 1991
13 When you check in at your hotel, you will be given a welcome bag con- taining this booklet as well as other relevant materials.
ACCOMMODATION Regency Suites Hotel Arcadia Hotel Madách Imre tér 2 Madách Imre tér 3 1075 Budapest 1075 Budapest Tel: (+36 1) 801 6300 Tel: (+36 1) 796 2071 Logistical Information
From Regency/Arcadia to CEU
14 COURSE COORDINATORS
Dumitrita HOLDIS Mobile: +36 20 533 6708 Email: [email protected]
Livia MARSCHALL Mobile: +36 30 629 1807 Email: [email protected] Logistical Information
15 A NOTE ON HUNGARY
Capital city: Budapest
Population: ~ 9.9 million
Population of Budapest ~ 1.7 million (city) ~ 3.3 million (including periphery)
Language: Hungarian
Religion 54.5% Catholic, 19.5% Protestant, 0.2% other Christians, 0.1% orthodox Christian, 0.1% Judaism, 0.1% other.
Electric plug details: European plug with two circular metal pins
Country Dialing Code
Logistical Information Hungary: 0036 or +36 (00361 or +361 – for Budapest) To dial Hungarian numbers from Hungary you can dial: 06 + 1 xxx xxxx (Budapest), or for cellular phone: 06 + 2/3/7 + 0 + xxx xxxx.
Weather overview April is characterized by abundant sunshine and temperatures start to rise markedly. The weather is often very agreeable during the day and cool at night. There is occasional rainfall at this time of year. The average maximum temperature is 17°C and the average mini- mum temperature is 6°C.
Money The Hungarian currency is Forint (HUF). 1 EUR = 300 HUF, 1 USD = 275 HUF You usually CANNOT pay in Euro or US dollars. You can change money at the airport or train stations, but change as little as possible there since exchange rates at this point are bad. It is preferable to instead use one of the many ATMs or cash points across the city. 16 Public transport Budapest has an excellent public transit system consisting of subways, buses, trolleys, trams, and electric commuter trains called HÉV. Tickets are available at all Metro stations from automated machines, and most stations also have cashiers at ticket windows. As the machines aren’t always reliable, you are best off buying tickets directly from the cashier. Tickets can also be bought at some newsstands, tram stops, and on some buses, but to be safe you are probably better off purchasing them at the Metro station and keeping a supply with you. Tickets can be bought individually, discounted in books of 10, or in the form of daily, weekly, or monthly passes. You need to validate your ticket before starting your trip on the Metro or immediately upon boarding a bus, tram, trolley, or commuter train. Insert the ticket into the machines at Metro station entrances and in the red or yellow boxes on trams, buses, and trolleys. The yellow boxes automatically stamp the ticket, but you must pull the black
lever on the red boxes towards the ticket to punch it. Logistical Information Tickets are valid for 60 minutes after they have been stamped or for 90 minutes on the night service. Passes and tickets are checked by inspectors at random and you will be fi ned HUF 6,000 on the spot if you cannot produce your pass or validated ticket. If fi ned, get a receipt, as foreigners can be overcharged. Public transportation runs from 4:30 am through 11 pm and is both regular and frequent. Night trams and buses run on an abbreviated schedule. Schedules are posted at all stops and detailed system maps are posted in all Metro stations.
Emergency Numbers Any kind of emergency: 112 Police: 107 Ambulance: 104 Fire-fi ghters: 105
17 WEEKEND OPTIONS IN BUDAPEST AND SURROUNDING AREAS
We are happy to offer you information and logistical assistance for your plans on Sunday and Monday (19 and 20 April). Below you will fi nd our suggestions. Please do not hesitate to ask the course staff for more information or assistance to purchase tickets.
Budapest Spas Among the most popular attractions of Budapest are its thermal baths, now renowned throughout the world. Its unique facilities were fully rec- ognized by Roman legionaries over 2000 years ago. Most of the baths open today were established by the Turks, examples of which (the Rudas and the Kiraly Baths) are still in operation after fi ve hundred years. The Szechenyi Thermal Baths (picture below), built at the beginning of the
Logistical Information 20th century and the fi rst healing baths in Pest, is the biggest bathing complex in Europe. It is also very reminiscent of the Roman, Greek, and Eastern styles of bathing.
18 Szentendre Szentendre is a riverside town in the county of Pest near Budapest. It is known for its museums (most notably the Open-Air Ethnographic Museum), galleries, and artists. Due to its historic architecture and easy rail and river access, it has become a popular destination for tourists staying in Budapest. There are many facilities, including souvenir shops and restaurants, catering to these visitors. Logistical Information
19 Vienna Vienna is the capital of the Republic of Austria. It is the largest city in Austria with its population of almost 2 million, as well as its cultural, economic, and political center. As the former home of the Habsburg court and its empires, the city still has the trappings of the imperial capital it once was. The historic city center is inscribed on the UNESCO World Heritage List. If you are interested in spending Sunday and/or Monday in Vienna, touring museums, cafes or visiting imperial palaces we can facilitate the purchase of train tickets from Budapest which in- clude public transportation in Vienna. The ticket costs 33 Euro (9,800 HUF), + optional seat reservation 6 Euro (HUF 1,770). The train ride takes 2 hours and 45 minutes one way. You will have to take your pass- port with you. Logistical Information
20 POLITICAL ECONOMY
Required Reading Banerjee, A. & Dufl o E. (2011), Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, New York: Public Affairs, pp. 235–267.