Category Archives: transparency

Making budgets more transparent in oil rich states

Posted on by
Reply

In the OBI working paper series that we have been posting about recently, Michael Ross of UCLA returns to the question of the resource curse (click here for his paper). He looks specifically at how a country’s mineral wealth affects the transparency of the government’s budget. He finds that the budget transparency of countries with oil and those with other mineral riches is not impacted on in the same way. Just like Wehner and de Renzio, his research suggests that the solution to the puzzle of what drives budget transparency in resource rich countries, lies in domestic factors.

The difference between oil and non-oil states

Much like Wehner and de Renzio, Ross finds that among democracies, a country’s mineral wealth does not have much effect on the transparency of the government budget. Among autocracies though, greater oil wealth correlates with less fiscal transparency. So oil wealth makes the budgets of undemocratic countries less transparent. But contrary to what one might have expected, Ross finds that non-fuel mineral wealth makes government budgets more transparent.

The paper also demonstrates that oil has an effect on budget transparency that goes above and beyond its more general effect on democratic accountability. So there appears to be a version of the resource curse aimed at budget transparency specifically.

Why, you might ask?

Its not EITI

Based on the available data, Ross does not find convincing evidence that the different levels of budget transparency in countries dependent on oil and those dependent on other kinds of mineral wealth, can be explained by membership in the Extractive Industries Transparency Initiative (EITI). He argues that if EITI pressures were responsible for the exceptional transparency of some mineral-producing autocracies, one would expect that most highly transparent mineral autocracies would be EITI members. However in Ross’s analysis, of the five authoritarian mineral producers that are relatively transparent (South Africa, Russia, Botswana, Namibia and Zambia) – only one (Zambia) is a member of EITI. In fact, the mineral-producing autocracies that are EITI members (Zambia and Kazakhstan) have lower OBI scores than the mineral-producing autocracies than are not members, although the differences are not statistically significant.

It’s not foreign investment either

Ross also doesn’t find evidence that the transparency anomaly can be explained by dependency on foreign investment. Oil rich countries derive much more revenue from their extractive industries than countries rich in other minerals derive from theirs. The argument would go that non-oil countries would be more transparent because they are more dependent on foreign investment. But Ross doesn’t find any link between foreign investment inflows and budget transparency.

The clue lies in who extracts

Unsurprisingly Ross concludes that learning more about the different levels of budget transparency in oil and mineral dependent countries should be a priority for future research. He finds a promising clue to this puzzle in the fact that in most autocracies the state manages oil extraction itself through national oil companies, making it easier to cloak revenue. The extraction of other minerals is more often managed by the private sector. This still doesn’t explain why the regular budgets of oil states would also be less transparent. But the lower revenue derived by non-oil states may make them more dependent on domestic revenue such as taxes and service charges. The research of Mick Moore on taxation and democracy suggests that dependence on the consent of citizens to pay tax may compel governments to be more transparent with the management of public resources.

What does all this mean?

One of the important implications of Ross’s findings for the policy and advocacy community is that domestic politics, and therefore national level advocacy, matter a great deal. Like Wehner and de Renzio, Ross finds that the way in which extractives are managed at country level is the key variable for their impact on budget transparency. In fact, it may matter more than the need to attract foreign investment, and more than international advocacy campaigns. Of course this does not make international advocacy for transparency irrelevant. It just means that international advocacy efforts should be based on a better understanding of domestic contexts, and have a complementary focus on country level advocacy.

A political path to budget transparency? Transparency, elections and political competition

Posted on by
2

In our previous post we reported on research showing that budget transparency reduces the cost of debt to governments. In another paper in the Open Budget Initiative working paper series, Joachin Wehner (London School of Economics) and Paolo de Renzio (International Budget Partnership) cite empirical research showing that budget transparency also reduces budget deficits and corruption. Given the persuasiveness of the case for budget transparency, it is surprising that more research hasn’t been done on its determinants. Wehner and De Renzio try to plug this gap by looking at the effects of free and fair elections and political competition on budget transparency. Overall, their findings suggest that these domestic political factors play a crucial role in determining the level of budget transparency. Continue reading →

The fruits of budget transparency: Cheaper Credit

Posted on by
1

The International Budget Partnership’s Open Budget Initiative has just published a series of working papers that explore the causes and consequences of budget transparency. Such research is important because it can show what the best ways are to promote greater budget transparency. It can also motivate governments to become more transparent by pointing out the rewards of budget transparency.

One of these papers provides convincing evidence that high levels of budget transparency can contribute to favorable credit ratings. But the links between budget transparency and credit ratings are sometimes not as straight forward as one might expect. Continue reading →

The era of accountability has arrived: Warren Krafchik’s speech at the Open Government Partnership in Brasilia

Posted on by
1

Warren Krafchik is a co-chair of the  Open Government Partnership (OGP) and director of the International Budget Partnership. This speech was delivered at the first annual meeting of the Open Government Partnership  in Brasilia on April 17, 2012

Welcome

Distinguished participants – I am honored to be here.

Introduction

Last year, I was sitting next to a woman – let’s call her Lydia – on a bus ride through rural Uganda when, suddenly, she called out: “Look at that school. It has a new roof now because the community complained about the previous one.” Several miles later, she cried out again, “Now look at this bridge! The public contractors used an inferior cement mix.”

I asked her if she was from the office of public works. “No,” she said proudly, “I have been trained as a community budget monitor. It has changed my life. When I take the kids to school, I monitor. At my village clinic, I monitor. I’m always looking, asking questions, reporting problems. I make sure the government does not waste my money.”

Lydia’s role grew out of a partnership between government and civil society that tracks public money from the central government to local governments – and that has greatly reduced public corruption.

Ladies and gentlemen, we need more Lydias – all over the world. They have a better sense of what their villages need and how to deliver it than people in far-away capitals.

We need them not only to monitor public resources, but to help develop and execute solutions to poverty and inequality.

The era of accountability has arrived.

Over the past decade, we have seen a powerful global civil society movement for open government emerge, with citizens, independent organizations, and the media leading campaigns for public access to information, for natural resource revenue transparency, and for opening budget and aid decisions to public scrutiny.

These campaigns have often succeeded where civil society and champions in government work together. This kind of collaboration is the core of the Open Government Partnership vision.

Transparency and participation

Making OGP partnerships work will depend on public information and public participation – both of which can be boosted through technology.

Lydia couldn’t hold Uganda’s government accountable if the government did not make timely public information available and accessible.

But, that’s not enough. Greater access to information must come with participation opportunities so that citizens and civil society organizations can use it to improve accountability.

OGP countries have committed to working with civil society organizations on developing and implementing country action plans. These commitments must be fully realized, and we will hear about the progress so far over the next two days.  We can learn from:

  • Indonesia, which brought the major civil society federations into a forum as partners in developing the first action plan.
  •  Mexico, which is reaching widely into civil society by enabling multi-stakeholder negotiating forums for each commitment.

But, we must go further by integrating participation opportunities into the action plans themselves. For example,

  • In Brazil, a massive national consultation is planned to ignite a dialogue on transparency and accountability.
  • In the Philippines, action plans include citizen audits and participatory budgeting at the national level.
  • Tanzania’s plans enable citizens to give feedback on service delivery and other critical issues with a guaranteed response time from government.

Effective, meaningful participation can produce better policy choices and a more efficient implementation of those policies.

But, what is even more exciting:

Participation energizes citizens, turning them into vital actors in shaping their countries’ future. It knits them into the fabric of governance, and recognizes the important role that their knowledge and skills can play.

Lydia proudly told me that being a citizen monitor has, quote, “changed my life.” The more Lydias we can engage, the more they can help change the lives of their countries.

This won’t be easy

But, these benefits won’t be easy to achieve.

Governments generally do not have extensive experience in engaging citizens between elections.

Governments will not necessarily get their action plans right the first time, and they will need to admit and correct their mistakes.

CSOs will need to recalibrate their relationships with governments.

They have to become allies of government in this venture, while retaining the right to be independent and critical.

They will also face the challenge of reaching deeply into civil society, well beyond the organizations in this room.

The payoffs

So the challenges are great, but imagine what we can do if we succeed.

We have a critical decision to make. We can continue to conduct governance and development as we have for decades, or we can take a different path.

The issue is whether we continue to see ourselves as opposing actors, or we see development as a partnership – where success depends on the knowledge and capacity of all of us.

OGP is about this fundamentally new vision. Through it, we can create the victories and relationships that boost development and build a new approach to public policy and governance. (Our work can be the defining initiative of a generation.)

OGP already covers more than a quarter of the world’s population. Together, we can improve the lives of millions of people.

Let’s get to it.

Thank you.

Four civil society responses to South Africa’s 2012 budget

Posted on by
Reply

The Centre for Economic Governance and AIDS in Africa (CEGAA) points out that the overall share of health spending allocated to fighting HIV/AIDS is growing steadily. They ask therefore that the government should assess whether HIV and AIDS is crowding out other health expenditures, as this may affect the overall mobilisation and utilisation of funding for health in general. Click here to read their analysis of this issue.

In its response to budget 2012, Idasa argues that the government is banking on a global recovery and stronger growth in the medium term. They suggest that should South Africa not get the growth which this budget assumes, and if tax revenue recovery remains poor,South Africa will face a set of difficult choices in the next few years. Click here to read their response to the budget.

The Civil Society call for Budget Justice makes a case for a more progressive tax regime and greater government spending on public services, basic needs, public sector jobs, and climate change. Click here to read the rest of the call.

The International Budget Partnership comments on recent trends in government budget transparency. They argue that government could be rewarded with improved credit ratings, greater electoral support and improved service delivery  if it supplemented its macro level budget transparency with a greater responsiveness to specific requests for information. Click here to read more.

Postscript: After publishing this post, Derek Luyt at the Public Service Accountability Monitor pointed out to me that Sangonet actually published budget comments from 22 CSOs! Click here to see them all.