Resource Economics and Fiscal Regime Principles

This chapter profiles key concepts and challenges in government design and negotiation of extractive sector fiscal regimes, as well as investor economics. A fundamental objective of a fiscal regime from the perspective of government is to maximize economic returns to the state from its resource endowment, and includes considerations such as high and low tax burdens. Other considerations and challenges include: the timing of fiscal regime features (such as signature bonuses versus royalties); the apportioning of risk; and varying contexts of policies, endowments, et al. among regions. Risks to the private sector include: the failure of an exploration to identify commercial deposits; commodity price changes rendering projects unprofitable; and policy change.

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