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Wasting Assets

Natural Resources in the National Income Accounts

Using Indonesia's timber, petroleum, and soils as examples, this report tests and applies a methodology for integrating natural resource depletion into a revised national accounting system that can more accurately reflect economic reality.

Executive Summary

Under current national income accounting practices, assets such as buildings and equipment are valued as productive assets and depreciated over time; natural resource assets are not. This asymmetry is the way national assets are treated sends misleading signals to policymakers. It suggests that rapid rates of economic growth can be achieved and sustained by exploring the resource base, resulting in illusory gains in current income and permanent losses in wealth.

The first step toward integrating natural resources into the national income accounts is to assign values to these resources and the services they provide. Using Indonesia's timber, petroleum, and soils as examples, this report tests and applies a new methodology for integrating natural resource depletion into a revised national accounting system that can more accurately reflect economic reality.

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