Friday, July 13, 2007

Headless Heart Syndrome

Tyler Cowen's latest column in NYT;

Paul Collier, an economics professor at Oxford University, has a new and potentially powerful idea. In his recently published book, “The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It” (Oxford University Press), Professor Collier favors an international charter — some widely publicized guidelines that countries can voluntarily adopt — to give transparency in spending wealth from natural resources. A country would pledge to have formal audits of its revenues and their disposition. Imagine PricewaterhouseCoopers auditing the copper revenues of Zambia and issuing a public report...

The British government has already made one start toward a natural resources charter with its Extractive Industries Transparency Initiative, begun in 2002. The World Bank has supported this idea and we need only imagine further waves of publicity, more active involvement from the International Monetary Fund and stronger interest from aid organizations and other nongovernmental organizations.

Even more promising is that Nigeria, one of the most corrupt countries, enacted a revenue transparency provision into law, as of May 28. The new Nigerian law relies too heavily on the federal government to monitor revenues, thereby reminding us of the old adage about the fox and the henhouse. Nonetheless, state governors opposed the measure strongly, which is a sign it may prove to have teeth. Furthermore, Nigeria did allow an audit by a private company in 2006, and it allowed the significant discrepancies to be publicized. The country may or may not turn the corner, but there are pressures building for greater rule of law.

In general, transparency can improve governance. A World Bank working paper written in 1999 by Christos Kostopoulos, “Progress in Public Expenditure Management in Africa,” found that many African countries improved their management of public spending in the 1990s. Openness can, in fact, break the links among corruption, secrecy and lack of accountability. Professor Collier notes that in Uganda only 20 percent of the money from one educational program actually reached the schools. One Ugandan bureaucrat publicized the allocations to both the news media and to the schools, and eventually 90 percent of the money flowed to the schools.


I'm not sure whether it's anything new- i guess it's a bit too early to make a comment about the success of the EITI initiave. They need to broaden the definition of 'natural resources' to include sectors like fisheries, tourism etc.

On anti-corruption, there already exist a UN Convention.


Related;
WAR AND PEACE IN AFRICA - a video of lecture by Paul Collier
Review of Paul Collier's book by Martin Wolf and Niall Fergusson

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