Overarching Issues

March 25, 2013

Precept 2 states that successful natural resource management requires government accountability to an informed public. Transparency in such a process is a crucial first step. The Extractive Industry Transparency Initiative (EITI) is a mechanism through which such transparency can be fostered in natural resource revenues. Thus, it supports the principles of Precept two and is a key instrument for implementation.

The report by the World Bank provides a review of the early successes and challenges of EITI-implementation. The EITI is a global standard with the objective of promoting transparency in natural resource revenue flows, particularly between government and extractive companies. Once such company audits are made publicly available, stakeholders can hold the government to account. Such third party oversight is an important element for Precept two. In the report’s review of EITI implementing countries a number of overarching lessons and themes emerge. These include:

      - The countries that had the greatest success in EITI implementation were also those countries that had consistent and dedicated high level political leadership.

       - Civil society ought to participate and engage, not merely act as observers.

       - Sharing knowledge among other EITI implementing countries, especially regionally, can prove very fruitful.

       - Whilst EITI is a voluntary initiative, legislative backing can help to create greater certainty for all stakeholders.

 Access the report here.

March 25, 2013

Precept 2 states that successful natural resource management requires government accountability to an informed public. In turn, an informed public requires greater transparency in the governance of natural resources. In the implementation of the Precept principles, third party oversight is found to be a useful instrument to achieving transparency. The Publish What You Pay (PWYP) coalition seeks to provide precisely that: third party oversight of resource revenue streams. The report by van Oranje and Parham provides an insight to some of the successes and challenges faced by PWYP in its initiatives since launching.

The report reflects upon the growth of the PWYP coalition since its beginning. In doing so it addresses the origins and structure, analyzes how PWYP operated internationally and examines the effectiveness of its advocacy and policy endeavors. Thus, the report acts as a practical tool for elucidating some of the lessons on how PWYP was able to achieve its success and overcome challenges. Factors contributing to its success include:

      - The simplicity of the underlying message: “citizens of countries that are rich in natural resources should not be poor” (p. 16). Clarity of objectives has allowed PWYP to get the issue on political and business agendas.

      - The organizational structure enables PWYP to deliver concrete results yet generation broad ownership.

      - Formal procedures managing strategic planning and advocacy have only been introduced when required thus it has been able to operate with minimal bureaucracy.

Two main challenges that remain however are overcoming entrenched interests in the continued lack of transparency from governments and companies and the need to continue transferring ownership to local groups whilst collaborating at an international level. 

Access the report here.

March 25, 2013

Precept 2 states that successful natural resource management requires government accountability to an informed public. In turn, an informed public requires greater transparency in the natural resource sector. The paper by Truman reviews the international initiatives aimed at ensuring transparency in savings, stabilization and investment funds.

Truman considers the policy challenges that are faced by Sovereign Wealth Funds (SWF) and the critique to which they were and still are subject. In dealing with these challenges, improving transparency and accountability is perceived to be of paramount importance. Hence the Santiago Principles were developed, allowing an assessment of SWF according to a set of standards. Truman compares the rating of 44 SWF according to the Santiago Principles to his own SWF Scoreboard. The paper finds that the Santiago Principles are a good first step for improved transparency and accountability, although not as comprehensive as the SWF Scorecard. Asian SWFs are also considered separately due to their number and size. It is found that these create more anxiety in host countries and as a result are to be held to a higher standard of accountability and transparency; in turn this suggests Asian SWFs ought to promote increased compliance with SWF standards.

 

Access this article here.

March 25, 2013

Precept 2 states that successful natural resource management requires government accountability to an informed public. Transparency is therefore of crucial importance. The report by Revenue Watch Institute (RWI) provides support for contracts between governments and mining companies to be made transparent.

The case is made by RWI that contract transparency is critical for improved resource management and contract stability as well as a precondition for the even distribution of benefits from the extractive sector. Transparency in contracts provides a strong incentive for government not to make bad deals due to incompetence or corruption and strengthens their bargaining position. For citizens it allows a better understanding of the nature of the agreements and the information to hold government to account. In turn, companies benefit from greater confidence in the stability of contracts.

However, there is often resistance to contract transparency from mining companies, citing the importance of commercially sensitive information. This is paradoxically combined with a practice of often sharing contracts among competitors in large contracts and relatively unrestricted internal dissemination. Resistance is also found in government as secrecy also hides mismanagement, incompetence and corruption. However, it does so only from the public and not the resource industry which gets to know the practices of government. 

 

Access the report here.

March 25, 2013

Precept 2 states that successful natural resource management requires government accountability to an informed public. Transparency is a crucial first step. Civil society has a key role to play in using information made public for monitoring government revenue from natural resources.

 The report examines how best practices in budget work can be applied to monitoring government revenue from extractive industries. It is found that there is a large degree of overlap in the two areas and collaboration can be beneficial for both. In supporting such collaboration the report identifies a number of factors which determine the success of budget and revenue work. These include:

    - Analysis through demanding access to information and developing other sources of information.

    - Building and maintaining advocacy coalitions provides added political support and allows technical aspects of budget work to be linked with grassroots participation.

     - Effective media work allows groups to raise public awareness, influence politicians and retain some degree of control over government monopoly on information.

      - Dealing with public officials by engaging and pushing them towards civil society’s agenda.

 Access the report here.

March 25, 2013

Precept 2 states that successful natural resource management requires government accountability to an informed public. In turn, an informed public requires greater transparency in the natural resource sector. The chapter by Karl provides support for the importance of transparency as a first step in overcoming the resource curse.

Karl begins with the premise that the resource curse is essentially a political not an economic problem, therefore also requiring a political solution. Addressing this problem requires a ‘big push’ with the objective of establishing a ‘fiscal social contract’ between state and society through transparency. Without an incentive to impose direct taxation, oil-states are not required to enter into a revenue bargain with their citizens and therefore face reduced pressure for accountability and transparency. The author identifies three types of ‘stateness’ deficits, which remove any form of fiscal accountability:

     - Information deficit as a result of an absent tax bureaucracy and the general opacity of the industry.

     - Monitoring deficit originating from not having a revenue incentive to comply with or develop regulations for economic producers.

     - Participation deficit particularly due to a lack of connection between state and its subjects.

Sequence is highly important in combating the resource curse. Addressing the information deficit through improved transparency is a first step, which sets the framework for improved monitoring, whilst both monitoring and information create incentives for the participation of those adversely affected by petroleum exploitation (p. 278).

Access the article here.

June 20, 2012

Precept 2 states that successful natural resource management requires government accountability to an informed public. In turn, an informed public requires greater transparency in the natural resource sector. One major benefit is that development agencies, commercial lenders and credit agencies have an interest in transparency, leading to improved access to concessional and commercial finance for government. The paper provides evidence for this claim.

The paper by Glennerster and Shin begins with the premise that transparency can improve accountability and undermine special interests, and thereby lead to enhanced policies and institutions. This is examined through using data on an IMF transparency initiative whereby governments were given the option of making IMF reports publicly available. These reports contained detailed assessments of the country’s economic institutions, prospects and policies. The authors proceeded to test whether the release of these reports resulted in lower borrowing costs in sovereign bond markets (an indicator of the markets perception of economic conditions). The authors find that:

     - Countries which decided to publish the Article IV reports had their credit spread fall by 11percent on average.

     - There is a diminishing marginal benefit to transparency. This means, countries that are less transparent when transparency reforms are initiated have the most to gain from doing so.

     - Countries with smaller, less liquid, debt markets benefit particularly from increased transparency.

 The authors conclude by noting that whilst the paper focused upon a specific transparency initiative, the reforms are, in effect, merely government changing its disclosure policy. Thus, the results can possibly have wider applicability.

 

March 28, 2011

Precisely because of past failures—and successes. These have produced research and experience, as well as great demand from policymakers seeking to find out how to avoid the resource curse and follow in the footsteps of emerging economies. Past success stories, from Malaysia to Norway, need to be disseminated and adapted to new circumstances, with new constituencies built to support best practice. In addition, there has been startling progress in global governance of the extractive industries that provides grounds for optimism. EITI, Cardin-Lugar and similar requirements forthcoming or already in place in Europe and China have created fresh momentum. Finally, new technology has reduced the cost of disseminating information and building broader civil society groups.

March 28, 2011

Many resource-rich countries face a singular opportunity, a generational window providing a 'one-shot' chance to escape persistent poverty and achieve broad-based economic growth. Others are facing dwindling opportunities to diversify and invest for the post-depletion future. The commodity boom and the prospect of a secular increase in demand from emerging markets comes at a time of increasing donor austerity—but also at a time of exciting progress in the global governance of extractives and substantial recent discoveries, e.g. Ghana and Brazil. This progress is fledgling. It must be secured and built upon. But it demonstrates what is possible and creates the momentum for improving decision making about natural resources across the value chain.

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