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May 2nd 2012
Luqman Ahmad
Implementing Extractive
Industries Governance Reform
Overview
1. Background to ASI’s Extractive Industries Practise
2. Key trends in sector shaping government responses
3. State of EI governance reform
4. Development partner/Donors
5. Implementation challenges
2
Adam Smith International
» Consulting company established in 1992, focused on advising on
Government reform and economic growth.
» Experience in close to 70 countries, currently delivering projects in
25 countries.
3
ASI’s countries of experience
ASI’s permanent offices
ASI’s Extractive Industries Practise
4
Legislative Reform
Primary Law
Regulations,
Stakeholder Consultation
Institutional Reform
Sector Strategy,
e.g. Political Economy Analysis
Institutional Audit & Design
Organisation Design &
Process Re-engineering
Fiscal Reform
Minerals Fiscal Policy Analysis &
Advice
Tax & Non-Tax Administration
Revenue Management,
e.g. compliance, sovereign funds
Change Implementation
Capacity Building / Training
Strategic Communications
Community Outreach &
Sensitisation,
e.g. artisanal communities
Technical Services
Geoscience Information
Management,
e.g. GIS
Mineral Rights Information
Management,
e.g. cadastre
Environmental Assessment
Transparency & Governance
EITI Implementation
Support
EITI Validation
Certification Support,
e.g, Kimberley Process, conflict
minerals
Specific ASI projects -last 18 months
5
Legislative
Reform
Institutional
Reform
Fiscal
Reform
Capacity
Building
Technical
Services
Transparenc
y
Afghanistan
Cameroon
Ghana
Liberia
Macedonia
Mongolia
Mozambique
Nigeria
Pakistan
PNG
Sierra Leone
South Sudan
Sudan
Tajikistan
Tanzania
Zimbabwe
Trends in Extractive Industries
Influencing Governance Reform
Trends in the Sector
7
Post colonial nationalisation
Weak performance of state run enterprises
Privatisation & liberalisation
Rise in Chinese competition for resources
Commodity price boom (super cycle)
Rethink role of Government and
investment environment
Some messages coming from Governments
» We haven’t received adequate share of benefits from private mining companies.
» State ownership in production companies might better protect our interest (Chinese examples).
» Companies are realising massive capital gains through selling licence holding companies – we are not.
» There have not been sufficient benefits to the local economy.
RE-THINK OF LEGISLATIVE ENVIRONMENT AND ROLE OF GOVERNMENT.
8
State of EI Governance Reform
» Some regions never went through reform – still limited private sector involvement (Central Asia)
» Some countries who liberalised early now looking to claw back and increase Government role and stake. (Tanz, Ghana, Zambia)
» Indications of growing resource nationalism (Zim, South Africa)
9
What type of assignments are we seeing
» Changes to the fiscal regime (tax,
royalties, VAT, Customs)
» Re-negotiating agreements
(stabilisation, harmonising enabling
environment)
» Changes to licensing regime (first-
come/first serve, auctions, use it or
loose it.)
» Institutional reform (ministries vs.
agency)
10
International Initiatives and
Development Partners
Types of support interventions
11
Some international initiatives related to EI
12
Initiative Subject matter Users
EITI Revenue transparency, multi-stakeholder
dialogue
Government
Private Sector
Civil Society
Equator Principles Environmental and social performance
standards
Private sector
Global Reporting
Initiative
Reporting on sustainable development issues Private sector
ICMM Range of issues (social, environmental) Private sector
IFC Range of issues (social, environmental) Private sector
OECD Corporate governance Private sector
UN Global Compact Guidance on human rights, labour,
environment, anti-corruption
Private sector
NRC Precepts – across EI governance chain Government,
Private sector
Civil Society
International partners supporting EI governance
reform
» World Bank
» IMF
» Norway (OfD)
» DFID
» EBRD
» GIZ
» AusAID
13
Types of support
» Technical assistance (advisory)
» Drafting legislation
» Institutional change management
» Fiscal affairs and agreement negotiations
» Geological information
» Airborne survey
» Geo-chem survey
» mapping
» Support to civil society
» Building capacity to increase accountability
14
Implementing EI governance
reform
Experiences from the “coal-face”
15
Anatomy of a poorly managed EI sector
» Capacity gaps – easier said than done
» Discretionary decision making – vested interests
» Complex laws and dysfunctional institutions – lack of clarity and leadership
» Artisanal mining – much more than a resource issue.
» Speculators and non-performing investors – “gaming it”
» Limited geological information – increased risks
Why haven’t we been more successful?
» A lot of smart people have been working on EI
governance issues – “avoiding the resource curse”
» We know what good governance looks like.
» Why do we still have a hard time implementing
reform?
17
1. Complex political economy
» Understanding what influences current decision making.
» While there may be interests to reform, there are going to be
vested interests in the status quo.
» Reform initiatives need to understand this and even go further
to identify entry points and opportunities for leverage.
18
2. Misaligned timeframes
19
1 2 6 5 4 3 7 8 12 11 10 9
Political cycle 1 Political cycle 2 Political cycle 3 Politicians
Exploration Prospecting Companies
Policy direction 1 Donors
Policy direction 2
Policy direction 3
Policy direction 4
Years
Feasi bility study
Build mine Operate mine
3. Capacity constraints
» Reforms not necessarily matched against absorptive
capacity (shelves full of analysis and reports)
» Administrator capacity part of wider civil and public
service challenges (attract and retain) – discrete capacity
building not effective
» Focus on licencing and agreements, limited attention to
monitoring and implementation
20
4. Inconsistent or unclear policy framework
» Weak policy formulation process – stakeholder
engagement (still a lot of mistrust)
» Reform efforts piecemeal (avoiding the elephant in the
room)
» Unique agreements and renegotiations
» Disconnect between policies and decisions
21
Influencing Systemic Change
22
Influencing systemic change
Policy, Legal and Contractual Framework
Sector Organisations
and Institutions
Fiscal Design
and Administration
Revenue management & distribution
Sustainable development
Political economy
Conflict issue
National – subnational dynamics
Information asymmetries
Stakeholders
Capacity issues
Market forces