In 30 of the 58 countries assessed by the Index, a portion of resource revenues is transferred to regional or local governments. These transfers are often large, subject to competing claims and managed by subnational governments that may lack adequate levels of capacity and accountability.
Led by a cohort of Latin American countries, 10 countries publish a detailed breakdown of transfers and follow the transfer rules established in legislation (see Figure 1). Peru’s regularly updated online reporting system of transfers to local governments is an example of good practice. Some countries among the top ten, however, have a mixed record. In Nigeria, the central government is obliged to report monthly allocations to state and local governments, but the same rules do not apply to subnational entities which receive the funds, nor do these rules prevent against frequent ad hoc transfers. In Iraq, the central government publishes data in its annual budgets about the share received by the regions, but the actual hydrocarbon law which would govern these allocations has not passed yet.
Twenty countries exhibit poor reporting practices on subnational transfers. Liberia, the Philippines and Mongolia publish no transfer data while reports from the other countries are unclear, incomplete or outdated. The majority of countries on this list have approved laws defining transfer mechanisms, and the transfer rules are published, but the government can change the amounts transferred without justification or approval by any oversight body.[i] In the DRC, the rules for transfers in the Mining Code and in the Constitution contradict each other, blurring the division of roles and responsibilities.
Seven countries perform poorly in this area, scoring below 40. In Equatorial Guinea, at the bottom of the ranking, the government pledged 10 percent of oil taxes to a Solidarity Fund for municipalities; however, there is no evidence of this practice, no reports are published, and most municipalities exist only on paper. Angola, Malaysia and Yemen do not publish any information on transfers or publish only aggregated figures of overall revenues allocated to subnational authorities. All of these countries, along with China, Iran and Papua New Guinea, lack legislation that set the rules for transfers.
[i] Ghana, Venezuela, Indonesia, Russia, the Philippines, Liberia, Mongolia, Botswana, South Sudan and the DRC have approved laws defining transfer mechanisms and rules are published. The exceptions are Algeria, which does not publish the transfer rules; Sierra Leone, which has several un-codified but public funds; and Kazakhstan, which has not approved a law on this issue (although it approves transfers in the annual budget). In Botswana, Indonesia and Kazakhstan, the amounts transferred are approved by an oversight body.