Few policy analysts or politicians believe that there should be no natural resource revenue sharing. The question is, "how large a share?" The objective in this paper is to evaluate the system of sharing natural resource revenue in Indonesia against the criteria that are most often discussed in international forums. The paper has three parts. First, we examine the importance of the issue and try and place the practice in Indonesia in some comparative perspective. Second, we argue the case for and against decentralization of revenues raised from natural resources and consider the constraints to such a decentralization policy. Third, we examine the reform options in terms of the specific fiscal instruments that might be used. This research is exploratory and does not delve into the detail of the complicated system of mineral taxation and of the present system of natural resource revenue sharing in Indonesia.
Working Paper Number 02-14.