tew (11.10.18) Planning & revenue management

1. Planning and Revenue Management
Energy Transparency Week
Kyiv, October 2018

2.  Established in 2008 as a joint Center of Columbia Law School and the
Earth Institute
 Mission of CCSI: To develop and disseminate practical approaches and
solutions to maximize the impact of international investment for
sustainable development.
 Foreign direct investment can contribute to sustainable development,
through the transfer of capital and technology, job creation, linkages
with local industries, infrastructure development and capacity building
 Extent to which these benefits actually accrue to host countries depends
heavily on the policies of the host country and the investors, and the
institutions available to find mutually satisfactory outcomes for both.
Columbia Center on Sustainable Investment
(CCSI)

3. Outline*
 Resource based development planning
 Resource sustainability and fiscal tools
 Transparency and accountability
 Experiences of sub-national redistribution systems
 Designing a sub-national redistribution system
 Applying findings to the case of Ukraine
* Many of the slides in this deck were originally developed by NRGI

4. Basic elements of resource-based
development planning
•Link plans and
budgets in short and
medium term
•Measure the results
of public investment
programs and the
impacts of EI
investments
•Anticipating
revenue flows and
expenditures over
medium and long
term
•Define the needs
and priorities for
public sector
investments over
the long, medium
and short term
Development
Plans
Financial
Modeling
Transparent
Budgeting
Tools
Monitoring
and
Evaluation
Systems
Vision
Coordination Mechanism

5. Long-term strategic planningStrategic Development Plan (2011-2030)
Main economic sectors need to feature in strategy

6. Concrete targets & timelines

7. Backed by $$
STAGE CHARACTERISTICS
· Development of
Macroeconomic/Fiscal
Framework
· Macroeconomic model that projects revenues and
expenditure in the medium term (multi-year)
· Development of Sectoral
Programs
· Agreement on sector objectives, outputs, and
activities
· Review and development of programs and sub-
programs
· Program cost estimation
· Development of Sectoral
Expenditure Frameworks
· Analysis of inter- and intra-sectoral trade-offs
· Consensus-building on strategic resource allocation
· Definition of Sector Resource
Allocations
· Setting medium term sector budget ceilings (cabinet
approval)
· Preparation of Sectoral Budgets · Medium term sectoral programs based on budget
ceilings
· Final Political Approval · Presentation of budget estimates to cabinet and
parliament for approval
Medium Term Expenditure Frameworks
Source: WB 2002

8. The SDG framework

9. Why using the SDG framework for
planning
Main characteristics of the 2030 Agenda:
Ambitious: address everyone “No one left behind”
Universal: Can be implemented in any country or region
Multi-dimensional: Incorporates social, economic, and
environmental issues, as well as good governance
Holistic: Goals are interconnected and cover all the most pressing
global challenges
Constantly revised and expanded: Linked to mayor international
agreements: Paris, New Urban Agenda, etc.
Inclusive: Calls for the cooperation of non-state actors, especially the
private sector and local governments
Measurable: Provides a set of indicators and targets that can be easily
adopted and adapted by any organization

10. Interaction of government strategies
National
Regional
Provincial
Municipal
Sector
plans
Health
Education
Infrastructure
Private sector
development
Timelines
20-30 years
5-8 years
3 years
1 year

11. Monitoring and evaluation

12.  Pre-existing governance constraints and development challenges
 Asymmetry of information
 Confidentiality
 Threat of the “resource curse”
 Volatility of revenues
 Resources are non-renewable
 Extractive projects can be treated as enclave sectors
 Resettlement and land rights disputes
 Potential environmental, social and health impacts, including
for global warming
 Historical records of human rights and environmental shortfalls
 Highly politicized at times
 Complex web of stakeholders with differing interests
Extractive Industries and Sustainable Development:
Special Challenges

13. Other considerations for Ukraine?
Source: IPCC 2018
Source: UAEITI

14. Outline
 Resource based development planning
 Resource sustainability and fiscal tools
 Transparency and accountability
 Experiences of sub-national redistribution systems
 Designing a sub-national redistribution system
 Applying findings to the case of Ukraine

15. Are large capital
inflows
Are volatile and
uncertain
Are “free money” that
are not directly tied to
citizens
Oil, gas and mineral
revenues:
Are finite
1
2
3
4
Results in specific challenges
Macroeconomic management: Why treat oil, gas and
mineral revenues differently?
Short
term
Dutch disease and ‘absorptive
capacity constraints’
Medium
term
Volatility
Longer
term
Exhaustibility
All Times Non-compliance with rules, lack of
public accountability, and wasteful
spending

16. Dutch disease
Oil starts
flowing
‘Tradeable’ industries grow
less competitive and
decline
People and capital move from
other sectors to the oil sector
Value of domestic currency
rises and/or inflation rises
Inflow of
foreign
currency

17. Source: IMF (2011)
PIMI Index – Indicator of government absorptive capacity
Source: IMF, 2011

18. Policy options to address DD and absorptive
capacity constraints
 Sterilization: invest capital outside the country to reduce
pressures on the currency or prices
 Fiscal sterilization through SWFs
 Monetary sterilization through monetary policies
 Develop absorptive capacity through:
 Building-up government’s administrative capacity
 Addressing bottlenecks in the economy
 Investment in education or skills development or import them

19. Timor-Leste Case Study:
Largest budget increases in the world
89% 91%
84%
66%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2009 2010 2011 2012
Budget Actual Execution
Source: Min Finance TL

20. Absorptive capacity of economy
Source: Min Finance TL

22. Choices for managing a shortfall
 Cut spending
 Increase taxes
 Borrow (foreign or domestic?)
 Ask for IFI or bilateral aid
 Draw down on government savings

23. Ratcheting effect of volatility: Over-borrowing
(public sector)
-
20,00
40,00
60,00
80,00
100,00
120,00
140,00
160,00
180,00
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
%ofGNI
External Debt
Algeria
Nigeria
Egypt,
Arab Rep.
Oil boom
Fall in oil
prices
Debt relief and
restructuring

24. Volatility
Data: IMF

25. Terms of Trade shock + underdeveloped financial sector + pro-cyclical fiscal +
pro-cyclical monetary policy
Output volatility
Lower growth + poor investment
Summary: Costs of macroeconomic volatility

26. Budgetrevenueand
expenditure
5 years
Revenues
“Smoothed”
expenditures
Surplus
Deficit
Fiscal policy to address volatility

27. Policy options to promote fiscal sustainability and
intergenerational equity
 Invest for economic growth and diversification
 Expand the tax base
 Save in financial assets for future generations
 Pay down public debt

28. What is a fiscal rule?
Definition: A permanent
quantitative constraint on
government finances
How do they work?
 Constrain spending in good
years so the government can
spend more in bad years
 Stronger monitoring of
government budgeting since
there is a benchmark to measure
against

29. 0
200
400
600
800
1000
1200
1400
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
MillionUSD
Fiscal space
Government oil
income
Fiscal space under
bird-in-hand rule
Fiscal space under PIH
rule
Fiscal space under an
intermediate rule
Developing a fiscal rule: How much to save and spend?

30. The Evidence: Why enact a fiscal rule?
 Well designed rules are
associated with more
macroeconomic stability,
smaller deficits, and less
‘pro-cyclicality’ → more
investor confidence, better
public investment planning,
fewer debt crises and higher
economic growth

31. Sources: IMF; own projections
Variable More or less fiscal space
Large ‘absorptive capacity’
High potential ‘absorptive capacity’
‘Invest to invest’
Large domestic investment needs (high
social rate of return on investments) Earmark for specific
projects?
High public debt Earmark for debt
reduction?
Fast depletion
High expected rate of return on foreign
investments
Risk of environmental, economic or
social crisis
Theoretical determinants of the optimal fiscal space
Fiscal rules can be:
• Budget balance rule
• Price-based revenue rule
• Expenditure rule
• Debt rule
Long-term Fiscal Rules

32. Why create an extra-budgetary fund?
 Manage saved fiscal surpluses or stabilize the budget
 Secure source of funding for underfunded expenditure items
 Depoliticize certain allocations and prevent budget cuts (e.g.,
pensions)
 Circumvent poorly functioning budget institutions
Avoid public scrutiny and PFM systems

33. Good Governance of SWF
1. Set clear fund objectives
2. Establish fiscal rules
3. Establish investment rules
4. Clarify good institutional structure
5. Require extensive disclosure and audit
6. Establish strong independent oversight

34. Saving for future
generations
Stabilization
Sterilizing capital
inflows
Earmarking for
specific expenditures
Ring-fencing
resource revenues
What matters: clarity,
consistent operational
rules, adapted to the
needs of the economy
1. Fund objectives

35. Outline
 Resource based development planning
 Resource sustainability and fiscal tools
 Transparency and accountability
 Experiences of sub-national redistribution systems
 Designing a sub-national redistribution system
 Applying findings to the case of Ukraine

36. What should be made transparent?
Revenue
Collection &
Management
Exploration &
Extraction
Company
Disclosure
Contracts
Awarding
Licenses

37.  Why important?
 Helps understand what companies are paying and how much govt’s are receiving
 Project-level revenue data: what should be made transparent?
 Actual payments by companies
 Revenues received by governments
 Fiscal aspects: Taxes, Production Entitlements, Royalties, Dividends, Bonuses,
License fees, etc.
 Where can information be accessed?
 Publicly available sources w/in country such as MoF, Central Bank, etc.
 EITI reports
 National disclosure laws, e.g. EU Directives
Revenue collection

38.  Why important?
 How revenues are managed in budget and allocated to budget, SOCs, NRFs, etc.
 State Owned Companies (SOCs)
 Play big role in revenue collection and allocation
 Often lack transparency: operations/corporate structure, investments, sale
information (prices, volumes, etc.).
 Often have extra-budgetary autonomy, engage in “quasi-fiscal” activities.
 Less oversight and accountability
 Natural Resource Funds (NRFs)
 Revenues often invested in foreign financial assets.
 Big funds with huge impact on macro-economic stability and long-term
development
 Often managed outside of ordinary budget processes. Unclear how revenues
invested & overseen
 Sub-national distribution & information at the sub-national level
Revenue management

39. Citizen Guides

40. A note on “free money”
 Since oil and mineral revenues are “free money” for
politicians and they reinforce authoritarianism, popular
oversight may be less effective than in non-resource-rich
states
 Other types of compliance mechanisms become
particularly important, such as:
 Legislated operational rules
 Effective management structure within ministry/agency
 Internal audit
 Independent external formal oversight
 Consensus building

41. External oversight: Parliament, judiciary, external
auditor and auditor-general
 Meetings with parliament
 Alberta (Canada)
 Ghana
 Mongolia
 Judiciary
 Timor-Leste
 External auditor
 Alaska (USA)
 Chile
 Norway
 Auditor-General
 Botswana
 Trinidad & Tobago

42. Outline
 Resource based development planning
 Resource sustainability and fiscal tools
 Transparency and accountability
 Experiences of sub-national redistribution systems
 Designing a sub-national redistribution system
 Applying findings to the case of Ukraine

43. Discussion Questions
 Are local governments entitled to
a portion of oil, gas or mineral
revenues? Why or why not?
 What factors should determine
how much resource revenue a
local government receives?

44. Reasons for sub-national redistribution
1. Recognize local claims:
 Particularly in cases where the same ethnic group occupied the land
before the contemporary state was established
 Codified in the constitution: Argentina, Colombia, Malaysia
2. Compensate for negative impacts:
 Environmental externalities, loss of livelihood, cost of living
increases, increase pressure on public services due to immigration
 E.g. Ecuador, California
3. Promote economic development in poor regions
 Where resource rich regions are poorer - E.g. Kazakhstan, Indonesia.
 Transfers to poorest regions regardless if they are producing - E.g.
Mongolia, Bolivia.
4. Mitigate violent conflict
 Resources often concentrated in one region and source of conflict –
sharing revenues can encourage dialogue
 E.g. Bolivia, Iraq, Kazakhstan, Mongolia, Nigeria, PNG

45. Benefit sharing in extractive industries
Source: NRGI & UNDP 2016

46. Diverse systems
 Deconcentration:
National govt. appoints
sub-national positions
 National govt. decides
how revenues are spent
 Decentralization: Sub-
national positions are
elected
 More common to also
collect resource revenues
Source: NRGI 2015

47. How do countries treat resource revenues?
Source: NRGI & UNDP 2016
E.g. Algeria, Chile, Myanmar, Norway
Most countries (E.g. Canada, Angola, Ghana) E.g. Ecuador, Mongolia, Uganda

48. How much is transferred?
 Centralized systems
tend to transfer less to
the sub-national level
 E.g. Algeria,
Ghana
 Fiscally decentralized
systems transfer more
 E.g. Bolivia,
Indonesia, Peru
 Federal states tend to
also collect more
revenues
 E.g. Australia,
Canada, US
Source: NRGI & UNDP 2016

49. Derivation based system:
Indonesia
Petroleum Revenue
Central Government
Treasury
Revenue Sharing for Local
Governments (15.5% of o.r.)
Central Government
(84.5% of oil revenue)
Producing
District (6%
+ 0.2% to
education
budget)
Province
(3% + 0.1%
to
education
budget)
Other
Districts in
the same
Province
(6% + 0.2%
to
education
budget)
Central
Government
Budget
District Treasury
Source: Revenue Watch
How to determine who is ‘affected’?

50. How to avoid inequality?
Derivation based system: Peru
Source: Aresti 2016
CR= Canon Minero & Royalties
GT = Government transfers (non-resource)

51. Indicator based system: Mongolia
Redistribution formula
(equal weighting):
1. Local development
index (65 indicators)
2. Population
3. Geographic
characteristics
(density, remoteness)
4. Tax generating
capacity
Source: NRGI & UNDP 2016

52. To whom is money transferred?
 Producing regions: E.g. Philippines, Uganda
 Adjacent to producing regions: E.g. Brazil, Indonesia
 Due to environmental impacts
 Due to migration
 Private or communal/customary landowners: E.g.
Ghana, PNG, USA
 Quasi- or fully independent subnational institutions:
E.g. Niger Delta, Kyrgyzstan

53. Earmarking of revenues
 By expenditure items, sectors or agency:
 E.g. Bolivia, Brazil, Colombia, Papua New Guinea and Peru
 Bolivia: 70% on health insurance, 30% on pensions
 PNG: 30% must be saved for future generations; 30% on health,
education and social payments, & rest can be cash.
 Colombia: 100% of royalties spent in ‘high priority projects’
 Conditional grants:
 E.g. Venezuela can invest in registered projects (conservation to
maintenance, improvements, infrastructure, health and education
 Performance-based grants:
 Received if attain targets (e.g. school attendance), but in conflict
with derivation system
 Require project approval prior spending (e.g. Peru)

54. Ill-designed systems can exacerbate problems
 Potential for resource curse at the local level:
 Evidence from Brazil, Colombia & Peru suggests that regions which
were allocated significant resource revenues did not perform better
than those that did not in terms of economic growth, health,
education and housing outcomes.
 Increase in conflicts:
 Evidence from Peru suggests that violent conflicts increased during
the latest resource boom in order for local leaders to receive
jurisdiction over mine sites and thereby receive more transfers.
 Once a redistribution system is setup and significant revenues flow,
interests get entrenched and it becomes more difficult to change the
system

55. Is the problem redistribution and/or social
accountability?
Social accountability based on 3 key principles:
 Transparency: Availability and accessibility of information
regarding rules, regulations and decisions
 Accountability: Actors in power take responsibility for their
actions
 Participation: Of citizens in the decision making beyond
voting’
 Rigorous
 High quality
 Gender sensitive
 Have an impact on outcomes

56. Social accountability in revenue management
and allocation
Problem: Limited uptake by local community voices in determining local
budget allocations
Solutions: Build capacity of local governments to engage citizens,
promote participatory budgeting, create outreach activities to communities
Madagascar example: Larger fiscal transfers were allocated to
communities in the push to increase decentralisation in the 2000’s.
Participatory budgeting was prioritized:
1. Establishment of project monitoring committees for elected
community members to closely monitor the timelines and quality of
work undertaken by the local government
2. Disclosure of budget information through information boards outside
of city hall
3. Hosting of Accountability Meetings, forums where community
members could express grievances and the mayor could respond to
them. Source: World Bank (2016)

57.  Problem: Lack of consensus on what “sustainable
development” means
 Solutions: Open consultations with various actors in
the community, use participatory decision making,
promote a multi-stakeholder approach
 Madagascar example: In the community of Anosy
government, communities, civil society and private
companies came together to determine what
sustainable development means.
Social accountability to help build consensus on
earmarking revenues
Source: World Bank (2016)

58. Outline
 Resource based development planning
 Resource sustainability and fiscal tools
 Transparency and accountability
 Experiences of sub-national redistribution systems
 Designing a sub-national redistribution system
 Applying findings to the case of Ukraine

59. Determining vertical distribution
 Administrative capacity to to collect and manage revenues
 Some taxes easier to manage than others (e.g. license fee vs.
incomes tax)
 Willingness of central government to distribute revenues
 Size of administrative unit to absorb windfalls
 Align to responsibilities to ensure efficient spending
 Whom is responsible for health, education, infrastructure
spending?

60. Determining horizontal distribution
Source: NRGI & UNDP 2016

61. Horizontal vs. vertical distribution
Vertical
 Simpler to explain
 Easier to calculate
 Beneficial for producing regions
 Prone to boom-bust cycles
 Not linked to needs or
responsibilities
 Can increase inequality
 May lead to conflicts due to
definition challenge
Horizontal
 Address poverty & negative
impacts of extraction
 Data more difficult to obtain and
subject to manipulation
 Can depoliticize revenue sharing
 Complexity can make them non-
transparent

62. Determining what revenues to share
 Royalty and property taxes
more common to be shared
than profit taxes and
dividends
 Profit taxes more difficult
to calculate and trace back
to individual projects
 Profit taxes more volatile
 Profit taxes back-loaded
 Off-shore vs. on-shore
projects
 Less common to share off-
shore projects:
 Fewer direct negative
impacts
 Less susceptible for
conflict
forgoing or reducing another tax that provided funds for the administration of the national
health plan, doctors might view it very negatively.
The types of taxes that governments typically impose on mines are listed in Table
1 along with an indication as to whether that type of tax is amenable to being assessed at
the national, provincial or local level. This determination is strictly subjective and in
assessing the fit in any specific country, the resulting determination might vary
considerably depending on factors such as the size and sophistication of various sub-
levels of government. A brief rationale for the author's subjective determination is
provided in the text following the table.
Table 1. Fiscal Methods and Their Amenability to Fiscal Decentralization
Y - Yes, well suited; P - possibly suited; N - not a good fit
Tax type National
Govt
Provincial
Govt
Local
Govt
Income or profits based tax Y P N
Import duty Y N N
Export duty Y N N
Royalty (profit based type) Y P N
Royalty (ad valorem type) Y Y P
Royalty tax (unit type) Y Y Y
Royalty tax collected nationally and % distributed Y Y Y
Licensing fees Y Y Y
Surface rental or land use fees Y Y Y
Withholding taxes on loan interest, dividends, services Y N N
VAT on goods and services Y P N
Sales & excise tax Y P P
Stamp duty Y Y Y
Property tax (on book or assessed value) Y Y Y
Payroll based taxes Y P N
Surtaxes Y Y Y
User fees Y Y Y
4.1 Income or profits based tax
In most nations, this is the major form of tax used to generate revenue for the
national government. In setting up an income based tax system two elements are
involved: setting the tax rate, and setting the rules for determining the taxable income
Source: Otto (2001)
Amenability of taxes to decentralization

63. Determining recipients
 Allocation at a higher sub-national level may reduce
potential for conflict:
 More likely to cover all affected communities
 Reduces the potential number of boundary issues
 Recipients should be determined based on:
 The objective of redistribution: Whom is responsible for
service delivery or environmental mitigation?
 Capacity to manage resources: generally, the lower the
level of administration, the lower the capacity
 At the lower level could consider community development
funds, but such system comes with its own challenges (more
on this topic later)

64. Address revenue volatility & dependence
 Save in boom years (Abu
Dhabi, Alabama, Alberta,
Northwest Territories,
Wyoming, Bojonegoro)
 Allow for sub-national
borrowing (Bolivia,
Nigeria, Peru)
 Central Govt. smoothes
transfers (Canada)
 Indicator-based formula
that is counter-cyclical
 Fiscal rules
 Reduce resource
dependence
 Earmark to invest in
infrastructure, human
capital & diversification
Source: NRGI 2016

65. Mandate transparency
 Required to improve spending efficiency and reduce the risk
of corruption
 Derivation-based system: Project-by-project and by payment
type information + formula
 Indicator-based system: Data depends on the formula upon
which allocation is made
 EITI standard requires members to disclose sub-national
transfers
Source: NRGI & UNDP 2016

66. Setup oversight mechanisms
 Separate accounts can hinder monitoring
 Government mechanisms that regular reviews the system &
its effectiveness (Canada, Nigeria, Indonesia)
 In Canada national and provincial ministers meet every 5 years
 Formal independent mechanisms (Australia, India)
 In Australia the independent Commonwealth Grants
Commission calculates the horizontal redistributions and
makes recommendations and submits recommendations to the
Ministry of Finance
 Composition: Presidential nominees, Ministry of Finance,
Regional first ministers or treasurers, Experts

67. Support long term planning & investing

68. Outline
 Resource based development planning
 Resource sustainability and fiscal tools
 Transparency and accountability
 Experiences of sub-national redistribution systems
 Designing a sub-national redistribution system
 Applying findings to the case of Ukraine

69. Group exercise
1. National revenue
management system
 Problems with current system?
 Why/why not treat extractive
revenues differently?
 Potential for Dutch Disease?
 Creation of fiscal rules and/or
separate fund(s)? Why?
 How should state owned
companies be treated?
 Earmark expenditures?
2. Sub-national revenue
redistribution system
 Problems with current system?
 Why/why not redistribute
extractive revenues?
 Objectives of redistribution?
 Criteria on how to redistribute?
 Oversight mechanisms?
 Does your proposal address the
current problems?
You are the trusted advisors to the president on extractive industry issues and need to
present your proposed revenue management and redistribution system to a skeptical
cabinet. You can use the below questions as guidance to your arguments.

70. Budget contribution of extractive industries
EITI Report of Ukraine 2016
Table 5-31: Revenues of the Consolidated budget and Pension Fund from extractive industries of
Ukraine in 2016
Extractive industry
Payments from
extractive industries,
mln UAH
Share in total revenues
of the Consolidated
budget and Pension
Fund, %140
Mining of coal 8,188.11 0.9%
Extraction of crude oil and natural gas 81,280.03 9.1%
Mining of iron ores 5,920.18 0.7%
Mining of titanium ores 882.46 0.1%
Mining of manganeseores 398.22 0.04%
Transportation of oil and natural gas 8,294.47 0.9%
Total 104,963.46 11.8%
5.9.1.4 Contribution to capital investments
Capital investments in the Ukrainian mining industry in 2016 amounted to UAH 22.5 bln141, or
6.3%of total capital investment in Ukraine. The main share (42.9%) of this amount was directedSource: EITI 2016

71. Future revenues from extractives?
Source: EITI 2016
produce
40%
strand
60%
Gas
Source: CCSI equitable
stranding model estimates
Strand
98%
Produce
2%
Coal
RESERVES IN LINE WITH PARIS
AGREEMENT

72. Debt sustainability analysis
 Public and external debt
at around 85 and 130
percent of GDP,
respectively, remain very
high for an emerging
market economy.
 The external Debt
Sustainability Analysis
(DSA) continues pointing
to significant solvency
concerns as external debt
stood at 129 percent of
GDP in 2016, with the
historical scenario
showing unsustainable
dynamics.
Source: IMF Article IV (2017)

73. Revenue by region
Source: EITI 2016

74. Average salary by region (2013)
Source of data: State Statistics Service of Ukraine

75. Transportation routes
Ukrtransgaz PJSC being the operator of the trunk gas pipeline system, transported natural gas
to the EU, the Balkan countries and Turkey in 2016. The inflow and outflow of natural gas
through the individual border gas measuring stations in 2016 is presented below (Figure 5-29).
Figure 5-29:Inflowsandoutflowsof natural gasthroughtheindividual border gasmeasuring stations
Include pipeline tariffs in redistribution
mechanism?
Source: EITI 2016

76. Comparing budgets
Source:budgets.icps.com.ua (2016 data)
Kovolivka: ₴8 200 000
DTEK Naftogaz (first 8 months 2018):
₴ 61 500 000 ≈ ₴ 92 250 000 (year)
1% (₴18 450 000) = 225% of budget
Budgets Payments
2% (₴36 900 000) = 21%of budget
2% (₴36 900 000) = 5%of budget

77. Key takeaways

78. Planning and revenue management
 Define long-term development objectives and the role
that extractive industries can and should play to
achieve these
 Good management of extractive industry resources is a means
to an end, not an end in itself
 Required decarbonization of the world economy likely to
fundamentally shift demand of extractive industries
 Ensure that revenues from the extractive industry sector
do not destabilize the economy in the short/medium
term
 Transparency and inclusive consensus building is key

79. Sub-national redistribution system
 No ‘best practice’ or ‘on-size fits all'
 Fiscal transfers should be linked to expenditure
responsibilities
 To reduce conflict and ensure stability, any specific
allocation regime for oil, gas or mineral revenues
should serve one or several nationally-agreed objectives
 Transparency and inclusive consensus building is key
 Choosing between government and separate fund
structures depends on objectives and existing system

80. Consensus building
1. Transform political debate into a technical discussion
 Explain trade-offs
 Discuss objectives
2. Share knowledge
 Only if stakeholders are well-informed can consensus be
reached
 Secrecy leads to mistrust
3. Identify stakeholders
 Central, provincial, municipal government; impacted
communities; civil society; companies;
4. Once agree on revenue management and/or sharing
formula, codify it in legislation

81. Thank you!
nmaenn@law.columbia.edu
@nmaennling