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  • 1. Implementing ExtractiveIndustries Governance ReformLuqman AhmadMay 2nd 2012
  • 2. Overview1. Background to ASI’s Extractive Industries Practise2. Key trends in sector shaping government responses3. State of EI governance reform4. Development partner/Donors5. Implementation challenges 2
  • 3. 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. ASI’s permanent ASI’s countries offices of experience 3
  • 4. ASI’s Extractive Industries PractiseLegislative Institutional Fiscal Change Technical Transparency & Reform Reform Reform Implementation Services Governance Sector Strategy, Geoscience Minerals Fiscal Information EITI e.g. Political Capacity Building Primary Law Policy Analysis & Management, Implementation Economy / Training Advice Support Analysis e.g. GIS Mineral Rights Institutional Audit Tax & Non-Tax Strategic Information Regulations, Management, EITI Validation & Design Administration Communications e.g. cadastre Community Certification Organisation Revenue Outreach & Support, Stakeholder Design & Management, Environmental Sensitisation, e.g, Kimberley Consultation Process Re- e.g. compliance, Assessment engineering e.g. artisanal Process, conflict sovereign funds communities minerals 4
  • 5. Specific ASI projects -last 18 months Legislative Institutional Fiscal Capacity Technical Transparenc Reform Reform Reform Building Services y Afghanistan        Cameroon  Ghana     Liberia  Macedonia     Mongolia  Mozambique   Nigeria  Pakistan   PNG      Sierra Leone      South Sudan  Sudan  Tajikistan Tanzania    Zimbabwe  5
  • 6. Influencing Governance ReformTrends in Extractive Industries
  • 7. Trends in the SectorPost colonialnationalisation Weak performance of Rise in Chinese state run enterprises competition for resources Privatisation & Commodity price boom liberalisation (super cycle) Rethink role of Government and investment environment 7
  • 8. 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
  • 9. 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
  • 10. 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
  • 11. Types of support interventionsInternational Initiatives andDevelopment Partners 11
  • 12. Some international initiatives related to EIInitiative Subject matter UsersEITI Revenue transparency, multi-stakeholder Government dialogue Private Sector Civil SocietyEquator Principles Environmental and social performance Private sector standardsGlobal Reporting Reporting on sustainable development issues Private sectorInitiativeICMM Range of issues (social, environmental) Private sectorIFC Range of issues (social, environmental) Private sectorOECD Corporate governance Private sectorUN Global Compact Guidance on human rights, labour, Private sector environment, anti-corruptionNRC Precepts – across EI governance chain Government, Private sector 12 Civil Society
  • 13. International partners supporting EI governancereform» World Bank » EBRD» IMF » GIZ» Norway (OfD) » AusAID» DFID 13
  • 14. 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
  • 15. Experiences from the “coal-face”Implementing EI governancereform 15
  • 16. 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
  • 17. 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
  • 18. 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
  • 19. 2. Misaligned timeframesPoliticians Political cycle 1 Political cycle 2 Political cycle 3 Feasi Companies Exploration Prospecting bility Build mine Operate mine study Policy Policy Policy Policy Donors direction 1 direction 2 direction 3 direction 4 Years 1 2 3 4 5 6 7 8 9 10 11 12 19
  • 20. 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
  • 21. 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
  • 22. Influencing Systemic Change 22
  • 23. Influencing systemic change Information asymmetries Political economy Stakeholders Market forces Sector Fiscal Design Policy, Legal and Revenue Organisations Sustainable Contractual and management and development Framework Administration & distribution Institutions Capacity issues Conflict issue National – subnational dynamics