The Extractive Industries Value Chain Dr. Ingilab Ahmadov World Bank Annual Conference for...
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Transcript of The Extractive Industries Value Chain Dr. Ingilab Ahmadov World Bank Annual Conference for...
The Extractive Industries Value Chain
Dr. Ingilab AhmadovWorld Bank Annual Conference for
ParliamentariansBaku, May 23, 2013
Outline
What is Extractive Industries (EI) Value Chain? Why value chain approach? EITI in value chain Who are the actors and how they can be
engaged in EI development? What could be the role of MPs in value chain?
What is EI Value Chain?
EI value chain
Getting a good deal
Ensuring revenue transparency
Managing Volatile resources
Deciding to extract
Investing in sustainable development
Advantages of Value Chain Approach
- diagnostic tool for governments and civil society to assess policy options and trade-offs for managing their natural resources
- advocacy tool to pin-point the challenges and prioritize places for engagement.
Non-renewable resources
Non-renewable resources
Sustainable developmentSustainable development
History In 2007, in his book The Bottom Billion, Paul
Collier told about Value Chain approach to
stress the key steps in ensuring that natural
resource wealth transforms into citizen
wellbeing.
This framework has since been used as a
reference for other organizations working on
natural resource governance, such as Revenue
Watch Institute, the World Bank, and EITI.
Components of EI Value Chain
Deciding to extract
Getting a good deal
Ensuring revenue transparency
Managing volatile resources
Investing for sustainable development
Decision to extract
•Making correct decision whether to extract or not
•Being transparent on possible environmental and social impacts
•Explaining how the project will work
Getting a good deal
• Open tender process
• Getting the best deal
• Being transparent and responsible for present and future of contracts
• Ultimate result – signing the contract providing maximum benefit for country and society
Ensuring revenue transparency
• Transparency of payments from EI companies to the Government
• • EITI fully covers this stage through disclosure of
systematic, regular and qualitative reports of companies and government
• An independent administrator (reconciler) checks the payments by companies with receiving of Governments, to make sure the credibility of this process
Managing volatile resources
• Oil & gas and mining revenues are volatile by nature
• Solution of volatility problem; mitigate a fluctuations and ensure more or less smooth public expenditures
• Deciding on optimal proportion between saving and spending - What is fiscal regime?
• Sovereign Wealth Fund and its role in public finance structure
Investing for sustainable development
• Taking into account the fact that natural resources are non – renewable
• From subsoil resources to sustainable development and prosperity
• Diversification of economy
• Identifying priorities of national economy beyond the extractive industry?
• Achieving sustainable development in resource rich countries
Key actors at Value Chain
+Local and international civil societyInternational organizations
Governments Companies
Citizens Investors
Endnote
• The EI value chain is not a theory, but practical tool to improve EI management
• The success of each EI value chain component cannot guaranty a desirable sustainable development
• The overall performance through Value Chain is measured by the level of its worst implemented component.
Parliaments and Extractive Industry
• Parliamentarians as a law makers
• Parliamentarians as an Oversight Body over Oil & Gas and Mineral extraction
• Paying attention to specifics of Extractive Industries: finite, generate rent, huge & volatile revenues
• Opportunity: How can oil & gas mining sustain national development?
The Sequence of Government Decisions
Get a good deal
Collect the
revenues
Spend the
revenues
correctly
Licensing Fiscal regimes
EITI Natural Resource Funds
Legislation
Contracts
How to oversee?Access to contracts for exercising duties effectivelyRatification by ParliamentPossible influence to contract terms
Participation at EITIPushing for broader EITIQuestioning the government on how findingsand recommendations are being addressedPassing an EITI law
Passing good revenue management lawMonitoring use of oil revenuesWatching the Natural Resource Funds
Budget process; selecting correct prioritiesWatching budget execution effectiveness of budget spending
Getting a good deal
Ensuring revenue transparency
Managing Volatile resources
Investing in sustainable development
Thank you!