Extractives Sector Governance Over View of Global Practices

Transcription

1 World Bank Extractive Industries Extractives Governance Extractives Sector Governance Over View of Global Practices Michael Stanley, Sector Lead Mining Sustainable Energy Oil, Gas and Mining Unit The World Bank Group Washington, D.C. USA

2 The Oil, Gas and Mining Group works with Governments to Strengthen Sector Governance Governance Appropriate and adequate content of rules developing policies, laws and regulations that are adequate in coverage and appropriate in detail to manage the demands of a given functional realm; Effective implementation, monitoring and enforcement of rules ensuring that actors, both within and outside governments, have the requisite capabilities, resources, and information to effectively implement, monitor and enforce policies, laws and regulations; and Accountability of actors making the rules promoting governance arrangements that allow relevant stakeholders be they individuals, groups or the larger citizenry to hold decisions-makers to account for their conduct, the rules they make and how these rules are implemented.

3 Why is it important? If well-managed, extractive industries have huge potential to drive economic growth and contribute to sustainable development. employment, Knowledge and skills transfer, and generate significant income. provide governments with a financial base for infrastructure development and social service delivery. If not well-managed, can be a major contributor to: Conflict Corruption, economic losses Reduce prospects for development

4 Why is this a Priority with the World Bank? The global population is consuming the stock of inventoried (discovered) resources Even with improved efficiency in how resources are extracted and used new sources would still be required to replace those that are running out. By 2030 an estimated $11-17 trillion of new investment needed in mineral and oil and gas projects in lower-income countries Source: McKinsey on Sustainability & Resource Productivity 4

5 Emerging Producing States New Governance Needs Historically: About 90% of resource investment has been in generally stable high- and upper-middle-income countries. Future: More resource investment flowing into poorer and often more volatile environments. (Source: Macroeconomic Policy Frameworks for Resource-Rich Developing Countries, IMF 2012

6 Emerging Producing States New Governance Needs Many resource rich countries are on the OECD Fragile States List Afghanistan, Angola Bosnia and Herzgovina, Burkina Faso Cameroon, Central African Republic, Chad, Congo, Democratic Republic, Cote d'ivoire Egypt, Eritrea Guinea Iraq Korea, Democratic Republic Libya Madagascar, Mali, Mauritania, Myanmar Niger, Nigeria Sierra Leone, Sudan, South Sudan, Syrian Arab Republic Togo Uganda Yemen Zimbabwe 6

7 And New Investors / Producers New Governance Needs More than half of the top 40 mining firms are from emerging market economies 7

8 Demands Being Placed on Governments Can weak governments deliver what good investors are looking for? Investment Decision Criteria Geological Potential / Resource Certainty What Government Needs to Do Geological Survey providing basic geo-data and undertaking mineral resource assessment Profitability of Potential operations competitive fiscal regime, realistic foreign exchange controls Security of Tenure clear, non-discretionary mining rights and title for permitting Consistency of Mineral Policy clarity of roles & responsibility, stability of exploration / exploitation terms and conditions, mineral ownership (resource nationalism) Stability of Legislation predictable environmental / social obligations, non-discretionary transparent regulatory environment Availability of Infrastructure Investment Laws Mining Cadastre Mineral Policy Tax Legislation Clear, consistent mining, environmental, social, and tax regulations Public Private Partnerships

9 Demands Being Placed on Governments promote scientific and geological investigation of mineral resources and information available to the public and potential investors; emphasize professional development of personnel through training and exposure to best international practices in the mineral industries; create administrative units/departments having clear and consistent mandates and procedures established to enhance communication and coordination between them; ensure transparent, non-discretionary administrative processes; strengthen departments to handle policy and administration, cadastre services, mines inspection, health and safety issues, environmental matters, commodity certification and quality control, and geological survey and laboratory services; begin to regularize small scale mining and provide for adequate institutional and technical support of these activities.

10 Political Economy Considerations Extraction Promote simple non-discretionary legal and regulatory framework Sector agency capacity building Checks and balances in decision making about license allocation Flexibility on contract terms Ease information asymmetries through contract disclosure Taxation Building audit capacity through broader coalitions Progressive income tax, price based windfalls and sliding scale royalties, with uncertain geology use production based methods Use stability clauses with built-in regular revisions Investment Enhance transparency, crowd in subnational constituency level Illuminate key nodes of public investment management (for example procurement by emphasizing collective checks and balances) Adapted from Barma,N et al Rents to Riches: The Political Economy of Natural Resource-Led Development, World Bank, 2011

11 Democratic Republic of Congo Balochistan Kazakhstan Mongolia Madagascar Burkina Faso Argentina Peru Mexico Level of Activity Tanzania Brazil Reforms Take Time 5+ Years Mineral Resource Production Stage Stage Reko Diq Grassroots Generative Exploration Stage (Exploration Boom) Exploration Investment Existing Project Investment Stage Mineral Resource Production 5 10 years Saindak 0 to more than 5 years Macro Economic Reform Initial Reforming Stage Time Reforming Stage Reformed Stage

12 Good Governance Leads to Sustainable Outcomes Appropriate and adequate content of rules policies, laws and regulations adequate in coverage and appropriate in detail to manage demands; Effective implementation, monitoring and enforcement of rules ensuring that actors, both within and outside governments, have the requisite capabilities, resources, and information to effectively implement, monitor and enforce policies, laws and regulations; and Good Governance Environmental Management Licensing & Contracts Local / Regional Economic Development Effective Economic Corridors Sustainable Outcomes Regional Development Planning & Coordination Infrastructure and Transport Corridors Accountability of actors making the rules stakeholders to hold decisionsmakers to account for their conduct, the rules they make and how these rules are implemented. Collection of Taxes & revenues management Social & Human Development Community Development Agreements & Outcomes

13 Good Governance Leads to Sustainable Outcomes National Government leadership for overall governance, policy, fiscal and broad legal regime. fiscal regime (taxes, investment rules, customs) geological survey (data, mapping) Sovereign guarantees Broader development agreements Sub-national (Provincial/District) Government legal basis, licensing, technical requirements, facilitation of good investments, information. mine licensing conditions/royalty regulations (e.g., health and safety) linkages to local community grievance mechanisms Private Sector (mine company) commitment to transparent, safe and productive operations. Local Community maintain communication with Company for mutual benefit; identify needs. Civil Society monitoring social, environmental impacts

14 Good Governance Leads to Sustainable Outcomes Outcomes Improved spatial planning Shared Access Infrastructure Inclusive & integrated growth Regional Economic Diversification Improved Livelihoods & Local Benefits Improved Human Development Indices (HDI s)

15 A Key Diagnostic Tool : EI Value Chain Discovery Depletion Development Diversification See

16 A Key Diagnostic Tool : EI Value Chain KEY QUESTIONS Is the framework clear? Are the bidding procedures transparent? How are companies qualified? What are the fiscal terms? Are they publicly available? Has consultation taken place?

17 A Key Diagnostic Tool : EI Value Chain KEY QUESTIONS Do the regulations meet international standards? Is there sufficient capacity to enforce them? Are audit processes in line with international standards? Are they publicly available?

18 A Key Diagnostic Tool : EI Value Chain KEY QUESTIONS Are all revenues deposited into a treasury account? Are accounting rules and reporting standards clear? Is government revenue published?

19 A Key Diagnostic Tool : EI Value Chain KEY QUESTIONS Are decisions on revenue use transparent? Are they made in line with a sound macro fiscal framework and development plan? Are sub-national payments transparent, rule-based and equitable?

20 A Key Diagnostic Tool : EI Value Chain KEY QUESTIONS Do investment decisions make the most of the benefits? Is procurement competitive? Are producing regions supported adequately? Are programs and investments monitored?

21 A Key Diagnostic Tool : EI Value Chain Licensing: including tenders / bid rounds where appropriate, provision of resource data Sector Promotion: provision of GeoData, building professional capacity, increasing capital & innovation Regulatory Compliance strengthen institutions and capacities, address illegal mining Taxes / Royalties value-chain assessment, pricing, and improved compliance & collection Transparency of payments to inform forecasts &monitoring PFM Strengthening including expenditure and investment frameworks Inclusive Growth & Integrated spatial planning: Resource Corridors facilitate state mineral development funds and foundations integrate public / private planning including shared infrastructure to address bottlenecks integrate mining / forest protection support enterprise development & clusters environmental issues

22 Summary The World Bank works with Clients to Build Governance Appropriate and adequate content of rules policies, laws and regulations Effective implementation, monitoring and enforcement of rules all actors have the requisite capabilities, resources, and information to effectively implement, monitor and enforce policies, laws and regulations; and Accountability of actors making the rules allow relevant stakeholders to hold decisions-makers to account for their conduct, the rules they make and how these rules are implemented.

23 Thank You Michael Stanley Oil, Gas & Mining Policy Unit 1850 I Street, Washington D.C. USA 20043

24 World Bank Extractive Industries World Bank Group Response IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MIGA Multilateral Investment and Guarantee Agency Est Est Est Est Role: To promote institutional, legal and regulatory reform To promote institutional, legal and regulatory reform To promote private sector development To reduce political investment risk Clients: Products: Governments with per capita income between $1,025 and $6,055. -Technical assistance - Loans - Policy Advice Governments of poorest countries with per capita income of less than $1,025 - Technical assistance - Interest Free Loans - Policy Advice Private companies in member countries - Equity/Quasi- Equity - Long-term Loans - Risk Management - Advisory Services Foreign investors in member countries - Political Risk Insurance