Political Economy of Natural Resource Revenue Sharing in Indonesia

In this paper, we examine the asymmetric approaches to sharing natural resource revenues in Indonesia. We examine in Section 2, some of the potential theoretical arguments underlying the naturalresource- sharing In particular, it makes little sense to treat the tax and non-tax arrangements separately, especially in a country like Indonesia that has some advanced production sharing arrangements that are designed to maximize the overall “government take”, without adversely affecting the incentives for investment and efficient production. In principle, not just the tax and tax shares, but also transfer design are important in examining the flow of resources to different regions of the country former could be used to offset or negate the asymmetric sharing arrangements.