Enhancing Economic and Development Benefits of Natural Resource Wealth

RWI Fellowship at Stanford University: Assessing the Economic and Social Development Performance of Hydrocarbon Dependent States

With RWI support, Stanford University's Center on Democracy, Development, and the Rule of Law (CDDRL) has launched a research initiative to assess the performance of hydrocarbon dependent states in maximizing economic and social development through the generation and utilization of oil revenues. The continuation of the research will be led by an RWI-funded Fellow, with support from faculty and graduate students in the university's economics, law and political science departments.

The variables affecting development in resource-dependent states are numerous and inter-related. This initiative aims to disentangle those variables and tease out the most significant ones for targeted and more efficient policy intervention. The research will provide RWI with a more sophisticated framework for both its policy analysis and its technical assistance projects. By advancing the theoretical understanding of the so-called resource curse, RWI will elevate the extractive sector's investment in transparency and good governance, and also build its own voice and capacity as a platform for best practices and expert knowledge.

In addition to conducting the original research, CDDRL will share its expertise in governance challenges for oil states with people within and outside academia, through publications, conferences, academic teaching and activist training workshops.

As part of the RWI Fellowship, CDDRL will:

• Produce a book summarizing the theory, methodology and case study findings of this research project
• Publish surrounding papers that explore particular aspects in more detail
• Teach a related course at Stanford University
• Partner with RWI to build local NGO-capacity in this field

The current effort continues research launched in October 2005, with support from RWI, to assess the performance of oil-dependent producer states in turning oil wealth into widespread social and economic development, and to identify the key political challenges arising from dependency on volatile, high-rent sectors.

The project will also benefit from synergies between CDDRL's research focus and ongoing work by other scholars, including economist and scholar Paul Collier and Tony Venables, director of Oxcarre, whose RWI-funded research examines how to spend EI windfalls for maximum long-term development benefit.

Policy Guide on Spending EI Windfalls with Maximum Long-Term Development Benefit

In December 2007, RWI launched a partnership with renowned development economist and Africa scholar Professor Paul Collier, Director of the Centre for the Study of African Economies (CSAE), and Tony Venables, Director of the Oxford Centre for the Analysis of Resource Rich Economies (Oxcarre), to undertake case studies and write an applied policy manual for natural resource management and expenditures that maximizes the development impact of commodities windfalls. The emphasis of the work will be on the ‘downstream' or spending side of revenue management.

The project will attempt to bridge the gap between the academic and policy communities by creating a policy simulation tool and manual that go beyond simple economic prescriptions and attempt to confront both challenges to policy implementation and the important process of structuring incentives to achieve policy goals. This research project is a natural complement to the research fellowship at Stanford's Center on Democracy, Development, and the Rule of Law (CDDRL), and communication between the two groups will provide synergies.

• Country case studies directed more at an academic audience
• A policy manual targeted at economic policymakers
• An interactive simulation tool and website that can be accessed by scholars, policy-makers, activists and used to test various economic policy choices under different commodity price assumptions and timelines
• Conferences and meetings to disseminate and discuss the findings with scholars, policymakers and other stakeholders

Oxcarre will hold an academic conference with position papers that set out the state of knowledge and identify unresolved issues in the area. Collier and Venables will distill the main normative messages and produce a template for resource management. The ensuing country case studies will be structured around this template and will provide detailed analysis of how and why revenue management deviated from the ideal. The case studies will focus on one or several countries in each of sub-Saharan Africa, the Middle East North Africa (MENA) region, Central Asia, Latin America and South East Asia, drawing common lessons that can be used as a basis for best-practice policies.

The results and policy recommendations will be synthesized into a policy handbook, emphasizing practical considerations over more theoretical or idealized prescriptions. RWI anticipates that this policy manual will be a key component of our technical assistance program as our direct engagement with local policymakers continues to expand. A project website will offer the simulation tool, along with links to other related work.

At the end of the project RWI expects that both policymakers and donor agencies will have a deepened empirical understanding, and new intellectual resources to ground their decision-making and technical assistance programs in countries seeking to translate their natural resource wealth into long-term prosperity.