Natural Resources and Violent Conflict - WaterWiki.net

who gets the money? 53Large and nontransparent off-budget flows are tempting targets forembezzlement. Given the high correlation between resource wealth andinternal violence (chapter 1), it is not surprising that another major destinationof off-budget resource flows is the military. Moreover, offbudgetfunds may be used to finance developmental or prestige projectsof questionable economic or social value that may not be expected tostand up to the relatively greater scrutiny of the central budget process.Trust Funds. Foreign banks sometimes set up off-budget trustfunds to help repay loans using future oil or other commodity revenuesas collateral. Reportedly, a significant portion of the money from oilsales by the Angolan state oil company, Sonangol, goes directly intothese trusts without passing through the central budget. The banks,understandably, have demanded such arrangements as security fortheir loans. However, the government provides little public informationabout the flows through such funds. Since such a large portion ofAngola’s annual income apparently passes through them, Global Witnesshas called on banks to publish details so that there can be someoutside scrutiny of the amounts involved (Global Witness 2002).Resource Stabilization and Savings Funds. A number of resourcerichcountries have created special funds to receive a portion of naturalresource windfalls. Such funds usually are intended to promote macroeconomicstability or to save part of the windfall for the future. Mostfunds have been set up for oil, but at least one has been related tominerals—Chile’s copper fund—and a number of relatively minor fundshave been related to agriculture, such as Colombia’s coffee fund.In general, resource funds have received mixed reviews on macroeconomicgrounds and in terms of promoting transparency. For example,according to Davis and others (2001a),Governance, transparency, and accountability may well be underminedby an oil fund. By their very nature, oil funds are usually outside existingbudget systems and are often accountable to only a few politicalappointees. This makes such funds especially susceptible to abuse and politicalinterference. Reporting and auditing requirements for the funds areoften loose, and their lack of integration with the budget makes it moredifficult for both Parliament and the public to monitor the use of publicresources as a whole.Many funds claim to take the Norwegian State Petroleum Fund asan example, while ignoring the important fact that the fund functionsas a government account under the control of the Ministry of Finance.Davis and others (2001a) attribute the success of the State Petroleum