informed citizenry, accountable government and effective.pdfVIP

Combating the Resource Curse Issue Paper Leyla Karimli June, 2006 INFORMED CITIZENRY, ACCOUNTABLE GOVERNMENT AND EFFECTIVE MANAGEMENT OF OIL RESOURCES Poverty is an outcome of the accountability and responsiveness of state institutions Attacking Poverty, World Development Report, 2001 Azerbaijan is facing the danger of reduced economic growth, increased inequality, decreased child welfare, and greater vulnerability to economic and political shocks. All these are symptoms of a disease depicted within the “resource curse” paradigm1. Despite the gloomy picture described by scholars, the “resource curse” is avoidable2 if complex set of actions is taken by the government. The forthcoming policy study will address only one of variables to be employed under the struggle against “resource curse”, i.e. improved transparency and accountability in use of oil resources. This issue paper (i) describes symptoms of resource curse in Azerbaijan, (ii) examines steps already undertaken to enhance accountability and transparency in use of the country’s oil resources, and (iii) briefly outlines main hypothesis to be examined in the forthcoming policy study. Resource curse in Azerbaijan3 Azerbaijan’s economy becomes increasingly dependent on oil, as illustrated through the “resource dependence indicators”. About 74% of FDI (foreign direct investment) is concentrated in the oil and gas sector4 . Hydrocarbon sector brings half of the tax revenue, with one third of budget revenue coming from the State Oil Company of A