November 2002, Friends of the Earth
Are oil funds the panacea to the Paradox of Plenty? Will they ensure that oil revenues are transparently recorded and spent on poverty alleviation and social development priorities? Will the revenues make it to actual programs that deliver real benefits to poor people? Or will structural weaknesses in the oil funds, insufficient political will, and failure to genuinely include civil society in national development dialogues prevent oil funds from making any meaningful contributions to development? This briefing paper
takes a look at some of the recently established oil funds in developing countries, and asks whether these funds will be sufficient to ensure positive development outcomes, given flaws in their structure and difficulties implementing other revenue management
funds in more open political environments.
A look at the characteristics of oil funds in Chad, Azerbaijan, and Kazakhstan shows significant structural weaknesses in these funds. The international community appears overly optimistic about the likelihood of these funds to transparently receive and disburse revenues from natural resource extraction in a way that is relatively immune to political influence and directs resources to community development priorities.
