This paper discusses the contribution that oil funds can make to the policy
challenges facing resource-rich countries. To set the stage, it reviews the potential
role of such funds in the broader context of macroeconomic and energy policies –
taking into account uncertainty about oil prices, the impact of institutional costs,
and problems of organisational design. The paper then highlights the critical role of
governance issues in three respects: defining transparently the goals of each fund;
communicating these goals to build a constituency of public support; and ensuring
the efficient and transparent management of the fund on an ongoing basis. Two
recent cases in the Caspian Sea region are then discussed: Azerbaijan and
Kazakhstan. In both instances, the paper highlights issues of coordination and
efficiency in the investment policies of the funds. While there are attempts to
monitor their transparency through public awareness and websites, the author
believes that this in itself is no substitute for a comprehensive governance strategy.
Moreover, improved transparency can help inform the debate about strategic issues
concerning the goals for such funds, and their contribution to the country’s
development strategy