For example, Mongolia is using mining revenues to finance child cash benefits. Each Mongolian citizen will receive shares from the privatization of the Tavan Tolgoi coal mine in southern Mongolia. Yet the challenges are stark for Mongolia, which has only has 20 years of democracy. The nation ranks th out of nations in the Transparency International corruption perceptions.
One-third of Mongolia's 2. Corruption "is an enormous problem, but one of things we're hoping to do with our partnership with the London Stock Exchange is to make certain the listed companies have proper transparency and management," said Gorman of the Mongolian Stock Exchange. Giving direct payments to Libyans, Subramanian and Moss argue, is a way for a new government in Tripoli to foster closer economic ties with its citizens - through taxes.
Taxes create an incentive for the government to make broad improvements across the economy to increase government revenues. And, as the Tea Party phenomenon in the U. Two practical problems to giving away oil cash: Convincing leaders it's in their best interests, and the modalities of getting that cash to citizens.
Trying to talk leaders in resource-rich countries to give it away, however, is another matter. Both Moss and Subramanian have approached leaders in Ghana and Nigeria, respectively, to distribute it - both were rebuffed. Still, a new government in Libya could have a unique "constitutional moment" to allow its oil profits to flow directly to the populace, Subramanian said. Adds Moss: "When you have a moment of transition, there's a lot of uncertainty - that's a moment you can lock into a certain kind of path you may not find for another generation.
Share this on:. Small boats of Libyan rebels escort an oil tanker, laden with 73, tons of petrol, as it docks in the Benghazi harbor on August 5. Why was the population of Libya not able to get rid of Gadhafi by their own, as they did in Egypt and Tunisia? We talk a lot these days, and especially the last couple years, about the resource curse --Mongolian Prime Minister Sukhbaatar Batbold.
Most Popular. Fine art from an iPhone? The best Instagram photos from After the revolution, brigades and military councils then played a central role in organizing local elections — long before the central government managed to get its own act together. These local councils gained strength in the chaotic post-revolution environment by filling the power vacuum. Transferring a predictable percentage of revenues to local councils would strengthen their capacity, undermine popular support for separatist demands by opportunistic regional leaders, and nurture the grassroots accountability so essential for enduring democracies.
Although some of the local councils remain tied to local militias, the central government should cut a deal: share the wealth, in exchange for a monopoly on force. Initial oil payments should be made conditional on disbanding the local militia and handing over their arms. Revenue sharing should be based on four principles: derivation areas where oil production operations occur get a portion of the proceeds from their production operations , need, equity, and population.
Mexico likewise uses a resource revenue-sharing scheme, spreading most of oil revenues in the Mexican system relatively equally throughout all the states, with a small additional distribution to reward oil-producing municipalities.
In Libya, areas that produce and process oil should receive a share of the revenues generated by their local oil operations. Population and need should be considered to ensure that areas with more people, and more poverty, receive more resources. And all municipalities, regardless of income or oil operations, should receive a baseline distribution, in order to spread the wealth across the country.
For the majority of people, democracy means not only political voice at the ballot box, but also the opportunity to realize social and economic freedoms. Failure to fulfill these hopes can fuel disappointment and violent unrest.
Unemployment is high in Libya: Indeed, demands for more local employment in oil-producing towns helped fueled the protests in Cyrenaica, Fezzan, and Tripolitania.
Inequality is also entrenched. Putting oil profits directly into the pockets of citizens will reduce social and economic exclusion and demonstrate that democracy really can deliver material benefits. The Direct Hydrocarbon Tax funds a pension scheme that transfers oil profits annually to every Bolivian citizen over In place of direct resource dividends, governments often use regressive subsidies to redistribute resource rents.
Libya is no exception. Prior to the revolution, Qaddafi made heavy use of subsidies to placate the populace, and the situation has deteriorated since his ouster. Fuel subsidies are popular because they keep some basic living costs low, but they distort the economy, encourage the inefficient burning of precious fossil fuels, and benefit the rich far more than they benefit the poor.
Finally, Libya needs to act quickly to reign in corruption and strengthen financial management in the oil sector. Corruption is the most significant political issue facing Libya today, with militias using allegations of administrative and financial corruption, particularly in oil sales, to arrest opponents, notably abducting former Prime Minister Ali Zeidan, and rally public support.
The Transitional National Council kept no audit trail to verify the oil revenues reaching the Libyan Central Bank, and outrage over illegal oil exports sparked the strikes that shut down production facilities in Cyrenaica last year.
Fortunately, Libya does not need to reinvent the wheel to govern its oil wealth. It should move immediately to joining the Extractive Industries Transparency Initiative EITI , a global coalition of governments, companies, and civil society groups that work together to ensure transparency and accountability in the extractives sector. Transparency and public monitoring guards against government officials pilfering the public coffers. This is serious mistake. Liberia was likewise forced to confront the major challenge of natural resource governance in the wake of a civil war.
In , the Liberian government passed the Liberian Extractive Industries Transparency Initiative Act, requiring the disclosure of revenues, payments, and contracts from all government agencies and companies involved in natural resources.
Liberia has since been on the cutting-edge of extractive industry transparency. Libya should follow the example of Liberia and 23 other natural resource producing countries around the world and join the EITI. But they are indeed possible, as other countries rebuilding from the ashes of civil wars have demonstrated. If Libyan reformers focus their energies on these three key measures, their democratic transition will stand a fighting chance of success. From the White House to Turtle Bay, sanctions have never been more popular.
But why are they so hard to make work? Argument An expert's point of view on a current event. By Terra Lawson-Remer. July 9, , PM.
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