Governance and Sustainable Development in mining and metals
World Mines Ministries ForumToronto, Canada, 29th February 2008
Kathryn McPhail, International Council on Mining and Metals
Session overview
Kathryn McPhail, ICMM: Governance and sustainable development in mining and metals
Peter Sinclair, Barrick Gold Corporation: The role of mining in socio-economic development in Tanzania
Rees Warne, Catholic Relief Services: Encouraging accountability in the mining sector
Siyan Malomo, Nigerian Geological Survey: The role of government
Jonas Moberg, Extractive Industries Transparency Initiative: Global trends in transparency
3
Outline
With safeguards, mining FDI can help kick start fragile economies…(29% of Paul Collier’s “Bottom Billion” reside in resource rich economies)
Addressing human rights violations requires partnership
EI Investments that contribute to conflict sensitive, high quality growth (rather than to social tensions that may spin out of control and lead to violence) require:
Companies to act responsibly
Donors to link mining agendas with mainstream poverty reduction strategies
Partnerships to fill governance gaps, particularly at local levels, with far greater donor support
FDI can help kick start fragile economies….
Previously failing economies (e.g. Ghana in the 1970s; Peru and Tanzania in the 1980s) do not have a wide choice about where they will find new investment to jump start economic recovery
Even “basket case” economies that fail most FIAS-type tests for attracting FDI can and do attract mineral investments (Sudan, Burma)
Mining (especially high value metals such as gold) offers many advantages:
Requires limited institutional basis of good institutions
Modest demands on a weak or damaged physical infrastructure
Large domestic market for sales not required
Is relatively easily taxed by moderately well-organized governments
But…let’s recognize the risks
Collier’s analysis identifies 3 lethal contributors to the likelihood of civil conflict in bottom billion countries: low income; low growth and high dependence of limited set of natural resource-based exports
Dutch disease is the main economic channel that may preclude the diversification away from the natural resource dependence
Rent seeking is a major political-economy factor that lead such economies into autocracy
But it is the presence of dysfunctional democracy that can also damage economies of this type Intensive electoral competition But no checks and balances on exercise of power by those who
win elections CONCLUSION – we need the ‘public good’ of institutional checks
and balances
Human rights: most cases in the middle layer of the ‘onion’
No consensus on boundaries of responsibilities
Centre of the ‘onion’: company has direct control/responsibility (e.g. employee safety)
Outermost circle: exclusively domain/control of government (e.g. host government actions far from its operations)
Most cases in middle layer of the ‘onion’ – where there is blurring of lines between local communities, governments, and companies
…but were perceived to have significant links with the mining operations
…donor agencies can help provide the missing ‘public goods’….
Lessons of history (e.g. Daniel Litvin’s ‘Empires of Profit’) from multinationals still play out today:
Firms are ‘fumbling giants’ e.g., they’ve often failed in past to understand local socio-political context. But they have a key role to play
Western ‘ethical’ activists throughout history also have often failed to understand local context, & sometimes have made things worse
Slow progress (or worse) if firms and NGOs try to supplant role of governments…
But… Effective tripartite partnerships require governments to act
more effectively…this is where development agency help is needed…
Responsible foreign direct investment can also help...
ICMM’s Resource Endowment initiative addressed 2 questions:
What are the critical success factors that have enabled some countries to benefit from substantial resource endowments and avoid the so-called resource curse?
What practical steps might be taken by the industry, governments, local communities and aid agencies to build these success factors?
8
Analytical Framework: composition of effective governance
The Resource Endowment Toolkit
Provides systematic approach to documenting impacts (good and bad) of individual mining projects on local, regional and national level
Maps how mining projects affect governance structures, institutions and policy changes at all levels of government
Contains quantitative and qualitative tools
Can be readily applied by non-specialists, including non-economists
Not just relevant for companies, but all mining sector stakeholders, including government agencies
Toolkit complements existing initiatives
Toolkit uses the Extractive Industries Transparency Initiative company reporting template
ICMM member Anglo American’s Socio-Economic Assessment Toolbox: Provides user-friendly methodology
for company managers to identify local social and economic impacts
Develops management plans to enhance positive impacts
SEAT version 1 has been made publicly available from Anglo American website
Toolkit has been tested at global and country levels
Peer review, feedback and guidance
Phase 1 Global workshop
Phase 2Global
workshopPhase 3
Country workshops
• Literature review
• Define ‘mining country’
• Assess the performance of mining countries
• Develop a toolkit for four country case studies
• Undertake country case studies (Ghana, Peru, Chile and Tanzania)
• Assess findings and identify common themes
• Develop recommendations
• Prepare Synthesis Report
• Country pilots in Ghana, Peru and Tanzania:
Mapping multi-stakeholder initiatives
Workshops for action learning partnerships
• Mineral Taxation supplement for toolkit
May - Dec 2004 Jan - Dec 2005 Jan 2006 onwards
Analytical Framework
How can quality, conflict sensitive outcomes be achieved?
Broad-based income and employment generation facilitates effective absorption of mining into the national economy (Chile)…
But this type of spill-over will not occur naturally in less developed economies (e.g. Tanzania) where diversified development has yet to take root
Deepening governance reforms (i.e. moving beyond the threshold improvements) particularly at the local level is critical to (a) help limit negative effects and (b) capitalize on positive growth opportunities
In particular, greater fiscal decentralization and empowerment of local and regional authorities is needed – but capacity, checks and balances, and accountability must be built in parallel
Transparency: EITI provides for governments and companies to publicly report resource revenues with civil society monitoring
Security: VPs sets standards companies can expect from state/private security forces protecting assets
Conflict: Kimberley Process certification for diamonds reduces risk of violence fuelled by mineral revenues
Economic impacts: Resource Endowment initiative
Multi-stakeholder initiatives also contribute to positive outcomes
Partnership will be needed to help fill governance gaps...
The challenge is that governance reforms do not come about by technocratic interventions only. They call for strategic domestic alliances and consensus building around tangible improvements in six areas
Partnership implies shared objectives, individual responsibilities and mutual accountabilities - collaboration is fundamental to enhanced outcome
Priority should be given to building such partnerships at the sub-national, i.e. regional and local levels between companies, governments, donor agencies, and non-governmental organizations
For example…..
Mining and poverty reduction: partnerships key…
Host Governments:• Explicitly recognise mining’s
potential contribution to poverty reduction
• Integrate mining into poverty reduction initiatives
Companies:• Understand poverty in
mining area • Participate in national
development dialogues• Support local capacity
building in relation to MDGs
Donor agencies:• Link mining sector and
poverty reduction support• Tri-sector partnerships key
pending effective capacity• Engage with local NGOs and
faith groups
Partnership for Poverty Reduction
NGOs, Civil Society, Communities:• Participate in policy dialogue• Recognise role of mining in
poverty alleviation• Participate in delivery of
poverty reduction projects
QUESTIONS
www.icmm.com
ICMM35 Portman Square
London W1H 6LRUnited Kingdom
Telephone: +44 (0)20 7467 5070Fax: +44 (0)20 7467 5071
Email: [email protected]
Top Related