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Featured Conversation: Large Contracts and Community Oversight

Coalitions Against CorruptionExtractives contracts for minerals and oil are significant sources of government revenue and can play a major role in development. Moderator Michael Jarvis and three contract transparency experts invite you to discuss innovations that companies, governments, and citizens can use to turn these contracts into tools for building a more prosperous and equitable future. Explore their approaches and join in the conversation about how citzens can get a better deal.

Leading the Conversation

Michael D. Jarvis, World Bank Institute, on getting a better deal

Michael D. Jarvis, World Bank InstituteHow can visibility into large government contracts help citizens in resource-rich countries to improve the quality of life for everyone? How can community oversight positively influence the outcomes of resource agreements? And with thick legal contracts, how can those at the grassroots level even hope to understand where money goes and how their community can gain greater benefits from oil and mineral investments in their country? What is the role of government and industry in building such understanding and ensuring "win-win" deals?

Oil, gas and mining production alone can account for more than 80% of exports and 50% of government revenues in some countries. Yet, for many reasons, this concentration of minerals and oil wealth has also led to what some term as "the resource curse" – or "the paradox of plenty," because of a phenomenon whereby "some countries that are rich in natural resources such as oil, gas, or minerals end up poorer and more unequal than countries without them," according to watchdog organization Global Witness.

In an effort to address this issue, Dr. J. Chris Anderson, Rio Tinto, shares industry innovation in developing a "social contract" with communities; Daniel Kaufmann, Revenue Watch Institute, lets us in on new training and tools for governments; and Marinke van Riet, Publish What You Pay, describes innovative advocacy approaches with NGOs to improve community capacity and awareness.

From industry to NGOs to governments, our guest innovators are showing new ways to engage citizens in improving transparency, preventing corruption, and ensuring that communities providing resources to the world see real benefits.

Dr J. Chris Anderson, Rio Tinto Limited, on the role of corporations in ensuring transparency

Dr J. Chris Anderson, Rio Tinto LimitedFor those who consider the extractives to be an "old" and "antiquated" industry, it may come as a surprise that some mining companies are in the forefront of comprehensive and transparent citizen engagement. This is not merely an ethical stance. It is simply because there is no other way for us to do business now. If a business person wishes to build a car factory and the local neighbors are not happy, he or she can merely pick up and move the project somewhere else. This is not possible with mining: the ore bodies are where they are. If it happens that there are 200,000 people living on top of a mineral deposit, this is not a group that can be ignored.

Engagement in such situations is not easy. For my company, Rio Tinto, and other of the responsible majors, the ultimate aim of the process is free, prior and informed consent of impacted citizens. This in itself is an innovation and one not used or accepted by most other commercial entities or projects in either the developing or developed world. However, the real innovation is represented by the nature of engagement needed to arrive at consent.

Building a knowledge base of the local communities, including local social and political structures and processes; developing forums for ongoing joint discussion, listening, sharing information, building awareness; setting up complaint management mechanisms; and finally, building capacity on both sides for representative negotiation on the terms of a comprehensive and binding agreement – these are the difficult, time-consuming, but ultimately necessary steps in order to achieve a mining project that minimizes negative impacts and maximizes both local citizenry involvement in decision-making and sustainable benefits for themselves and the company. These processes and the resulting agreements, like the investment contracts that companies make with host governments, need to be wholly and utterly transparent for it all to work.

I realize that what I have said here may be controversial for some people (see the Community Consent Index). However, I am happy during the course of this conversation to provide examples and references to allow participants to judge for themselves.

Daniel Kaufmann, Revenue Watch, on multi-stakeholder approaches and strategies for governments

Daniel Kaufmann, Revenue WatchFrom a development perspective, the field of extractives is so much more than "a sector." It is arguably the critical development and governance challenge for scores of countries – a truly make-or-break issue in terms of their overall prospects. Revenue Watch, working closely with many partners, focuses on helping petroleum- and mineral-rich countries translate natural resources into sustainable development. Efforts to improve contract terms and processes are at the core of our work, through a combination of technical, policy advocacy and action-oriented initiatives. These are multi-stakeholder, working with governments, civil society, the private sector, and parliamentarians.

Technical assistance to governments is one key component of our action-oriented policy advisory approach, providing experts to help negotiate better deals with multinationals and adapting international practice to inform domestic legislation that promotes accountable licensing. In this work, contract transparency is a major focus, and our government counterparts in places like Guinea, Niger, and Sierra Leone have adopted laws requiring publication of contracts.

We also train civil society to help enhance skills to analyze and monitor complex contracts. In Latin America, we advise organizations such as Ecuador's Grupo Faro, providing international perspective to inform their analyses of mining contracts and citizen guides to monitoring. In Africa, RWI and WBI organized intensive training on contract monitoring for activists from Burkina Faso, Cameroon, DRC, Guinea, and Niger. Contract analysis and monitoring also feature in our "core courses" at regional knowledge hubs in Peru, Ghana, Azerbaijan, and Cameroon.

Underpinning these efforts, there is also an innovation in the research and data realm, namely the Revenue Watch Index. A revamped and updated Index will be launched in early 2013, assessing nearly 60 oil- and mineral-rich countries on multiple transparency and accountability dimensions in natural resources, including specialized indicators on licensing and contracts. As part of investing in analysis on these issues, we have also examined the legal obstacles to contract disclosure (Contracts Confidential) and strategies for governments and CSOs to promote effective monitoring (Enforcing the Rules).

Marinke van Riet, Publish What You Pay, on advocacy and citizen engagement

Marinke van Riet, Publish What You PayOver 10 years, in response to the Publish What You Pay campaign, we have seen the birth of the EITI, the Dodd-Frank law that requires all US-listed companies to publish their payments to governments, and a similar draft law in the EU context. The new PWYP strategy Vision 20/20 includes a Chain for Change, the value chain that has been created from the point of view of (and for) civil society.

As a coalition committed to transparency, we used voting machine technology to help endorse the Vision 20/20, to respond to some critical questions, and to provide input into the future directions of our movement. One of these directions is Publish Why You Pay and How You Extract, covering the areas of the value chain before company payments are made, that determine whether citizens are getting a fair deal for their resources. It includes themes such as the decision to extract, extraction rights, and the monitoring of the terms and conditions of deals and contracts signed between governments and extractive industry companies.

If contracts are not open and then monitored, how do we know that citizens, and especially communities living near extractive sites, are getting a fair deal for the exploitation? A public contract is an accountable contract – there are very strong incentives to obtain the best deal possible for the most stakeholders possible, and not just satisfy a few individuals. Countries like Niger, DRC, and Guinea have legislated contract transparency, and we have seen positive developments elsewhere, including the potential to have contract transparency as part of a new EITI standard.

But in honour of Frank Zappa's quote, "Without deviations from the norm, progress isn't possible," PWYP wants to go further than simply having open contracts: we want open contracting so that communities can have a seat at the table during negotiation processes and influence the contractual terms and conditions. And why not use technology to ensure that this is an open process? Could we use a simple SMS technology to crowd-source a contract negotiation process, involving more community representatives directly impacted by an extraction? I am looking forward to an open and frank conversation to help us deviate from the norm once again!

Join the discussion! Share your thoughts in the comments below.

Conversation Summary

With extractives contracts, stakes are high, and resource projects should be catalysts for development, not one-off efforts. This conversation explored fair, transparent contracting; engaging citizens in fixing bad contracts; and ensuring compliance and positive community outcomes, as well as possible over-emphasis on anti-corruption vs. human development and the poor.

Proactive disclosure to communities should precede signing of contracts, and community agreements, MOUs with local chiefs, contracts, and impact assessment and exploration should be transparent. Best practices like sign posting at extraction sites are vital. Contracts can be legal when tested but morally dubious; can criteria for top margins and fair deals be developed? Frameworks like ring fencing help enforce financial commitments, but contracts also need social and environmental criteria such as skills training and job creation.

To negotiate equitable contracts that survive public scrutiny and fix dubious contracts, we must build citizens' awareness and capacity to understand and act upon this data. Transparency increases incentives to be fair, is a prerequisite to accountability, and lessens information asymmetry, but good governance is needed to ensure deals satisfy citizens and meet constitutional obligations. Some have put contracts before Parliament for discussion and ratification. To build capacity, multi-stakeholder accountability committees, NGOs, civil society groups, and other intermediaries are developing books and trainings, legal literacy tools, and web-based projects to help civil society engage.

Though civilian monitoring should verify if terms are being kept, how can we achieve compliance and accountability if checks and balances are absent or unreliable? Participants discussed frameworks for spending and funding mechanisms, and the importance of community level agreements to reduce incidents of fraud. Positive on-the-ground impacts are sought, since it's easier for communities to verify the building of a school than a transfer of funds.

Sustaining capacity-building programs is a challenge; a pooled-funding model was discussed. Peer learning between countries and sharing of case studies and resources (e.g. a pilot database that aggregates publicly-available contracts) are helping to change the operating climate. From NGOs to corporations and governments, innovations discussed go beyond release of information to reconfigure relationships and provide value to all stakeholders.

Comments

MarinkevanRiet's picture

While the evidence base for open contracting still needs to be built up one of the strongest examples comes from the PWYP-affiliated coalition in Sierra Leone called National Advocacy Coalition for Extractives (NACE). In 2009 the Sierra Leone government signed a deal with London Mining for the extraction of iron ore from the Marampa mine. When the contract was made public NACE and Christian Aid publically criticised the terms in the deal (for giving too many concessions to the company and for not complying with the country’s 2009 Mines and Minerals Act). After sustained public pressure the deal was revised in April 2012 and although some improvements were made both NACE (and partner Christian Aid) have been saying the deal is still does not comply with the new legislation. For more information please see http://www.christianaid.org.uk/pressoffice/pressreleases/april-2012/new-...

While this shows the power of open contracts and what an informed debate could lead to, PWYP would argue that a bad or non-compliant deal should be prevented in the first place by having an open contracting process. Do we already have examples out there of a solid open process which led to good deals?

MichaelDJarvis's picture

Many thanks, Marinke, for the good example of how mobilized and informed civil society can raise questions on extractives deals and push for better future deals.

I am intrigued to hear people's views on your question of open processes already yielding good deals, but also wonder about whether the terms of existing deals are being met. Even in cases where some might consider it a poor deal for a country, is there capacity and interest to ensure that at least the commitments made are delivered? Nigeria has done effective tax audits to identify missing taxes from oil production that it has then been able to try to recover. Are there others innovations to ensure compliance, including for social and environmental impacts?

MarinkevanRiet's picture

Thanks Michael I do want to give you another example that is hot off the press. Following a public conference in mid October organised by ROTAB/Publiez Ce Que Vou Payez Niger (French report available via http://nigerdiaspora.info/journaux/sahel-22-10-12.pdf) where they called upon the government to renegotiate the contract with AREVA, the Conseil des Ministres in their latest interministerial meeting announced that they consider the deal with AREVA as unfavourable and not in line with the constitutional obligations that natural resources need to benefit the people. This is now all over the news as potentially the start of new negotiations http://www.jeuneafrique.com/Article/ARTJAWEB20121026121225/

DanielKaufmann's picture

We’re observing growing evidence of impact in places where contracts are made public and there are also channels for engagement between government and citizens.

In Bolivia, where the government has made the content of hydrocarbons contracts available to civil society and citizens, RWI partner Fundación Jubileo has constructed a detailed set of financial models and is using them to advise the Ministry of Energy and the National Oil Company on reforms to model contracts and negotiations with companies.

Fundación Jubileo is also working with the Ministry of Energy to develop a web page that will disseminate information to local citizens about the terms and implications of hydrocarbons contracts, which has the potential to reduce tensions surrounding these projects, enhance opportunities for constructive policy dialogue and facilitate citizen monitoring of contractual obligations.

JChrisAnderson's picture

When I worked with Newmont in Ghana, we developed a very comprehensive investment agreement ('contract') with the Ghanaian government. To their surprise we insisted that the contract not only be made public but that it be put before Parliament for discussion and ratification. To my knowledge, this had never happened before with a mining contract in West Africa. It set the bar very high for other companies doing business with governments in the region and, I think, ultimately protected both the interests of the company and the citizens. Similarly, when we developed the community agreements with ten local communities, these too were made public as also were the MOUs with the local chiefs. In all these cases, the transparency evinced in these actions helped build trust and credibility on all sides for working constructively to mutual benefit and social harmony (something quite rare with mining projects!).

Remember as a very young man being in the company of a few young minds in Ghana renegotiating the VALCO deal back in the early 80’s where energy costs were one of the sticking points even then before the critical situation we find ourselves today.

For me poverty is not a simple case of lack of wealth of those considered poor, but rather an unequal distribution of global wealth through deals which are yes legal when tested but questionable when it comes to a moral obligation, which if am correct has a place in this discussion.

So although none of us would like to stunt the growth of development through the capitalist system, while donor countries would pay lip service to wanting to do something about this imbalance, why do we not come to some agreements on a common template regarding contracts between what is accepted as developed world, and underdeveloped. With criteria set for top margins that can be gleaned from set deals, and clauses included with regard social responsibilities as set out by others above?

The reason I raise this move by those that would look for investment in our nations is the reality is governance on our continent “Africa” cannot be said to be the institutions in a perfect world we could rely upon for the checks and balances some have mentioned above, so will need moves by both parties for the change to happen .

As I mentioned at the beginning its energy & resource security being driven by larger economies around the world which cause some of the inequalities of contracts we discus here, and as all try to pull themselves out of the reality they find themselves it will only get worse.

Thanks for an interesting dialogue .

JChrisAnderson's picture

Thanks Julius for your comments. As you say, the capacity of institutions is very important. Study after study on the impact of the ‘resource curse’ shows that good governance and strong institutions are the critical factors for a country to benefit as a whole from resource development. See examples at http://www.icmm.com/role-in-economy-and-trends. Partly, this is why in Ghana we insisted on developing local level public community agreements and a separate funding mechanism (over and above royalties paid to central government as against just relying on an investment agreement with the government. I'll bet that the people displaced by the Akosombo dam now wish that they had community level agreements!!

Nii Mokobi's picture

I applaud the views of Julius and Chris. Those views seem to be made based on experience on the Ghanaian terrain. In my opinion leaving the powers within the local community reduces the incidence of fraud. Therefore building the capacity of the locals to be able to query these contracts legitimately is key. The practice of planting a signpost close of project sites with details of contract (technical, financial & timelines) is important and must be maintained. The locals - traditional, opinion leaders & assemblies - must take the responsibility of building their capacity and capabilities to supervise these projects/contracts. Central government must not be responsible for this. The locals must then make a determination on what their immediate needs are. After all "He who pays the piper must call the tune", true!!!!!

MichaelDJarvis's picture

What stood out for you from these initial examples mentioned? We are seeing two dynamics at play - one in terms of proactive disclosure and effective monitoring in search of that too often elusive "win-win" deal for country and investor at national level, and another in terms of localized impacts on affected communities and innovative ways to strengthen that "social contract". How do you see these playing out in your country contexts? What is working on the ground?

Hello all.

I was part of the first global Open Contracting meeting in Johannesburg last week. Something that Angge Gregorio Mendel from the Affiliated Network for Social Accountability in East Asia Pacific asked, stayed with me. She asked: "How is improved transparency contributing to the fight against poverty and to human development?" I am very keen in hearing your opinions on this. It seems to me that the international debate often emphasizes anti-corruption, but that there is less focus on human development. What is your view on this? Are we overemphasizing anti-corruption and forgetting about the poor?

MarinkevanRiet's picture

To me this question is the most critical one and I am happy that Kathryn is raising it. I remember vividly having discussions with communities in rural Chad and Timor Leste (two EITI implementing countries) who told me: Marinke it is great that we have access to the revenue information but it hasn't led to impacts on the ground. We haven't seen more schools more roads more public services as a result. In my view transparency is the prerequisite step that may lead to accountability only if the essential investments are made in people and institutions (To echo Chris, Julius and Nii's points of view). What excites me about open contracting and the new PWYP pillar Publish Why You Pay is that there is a strong focus on the 'fair deal' governments get for their natural resources so that the resources can be spent on a country's sustainable development priorities. Ring-fencing a part of the extractive resource revenues for reducing maternal health, invest in education etc is in my view a good start to ensure the link between transparency and pro-poor development! Looking forward to hearing other people's views.

DanielKaufmann's picture

There is another important element of all of this, which is the fact that as more contracts become public, the information gap between companies and governments in negotiations narrows (less ‘information asymmetry’), for two reasons. First, open contracting creates opportunities for innovative and constructive recommendations to governments by civil society and other outside parties - like the example of our partners Fundacion Jubileo in Bolivia - which can enrich the government's negotiating strategy. Second, as more contracts become available at a global level, governments will have access to information about what has been done in peer countries.

MichaelDJarvis's picture

Thanks, Kathrin for your stimulating question and Marinke for your important point that transparency of contracts (including the community development agreements that Chris usefully raised) is only one necessary step among many in a chain to ensure that resources in the ground translate into improvements in the lives of current and future generations.

Dani - reflecting on the engagement of Revenue Watch with governments, do you think that government officials are more likely to push for that "fair deal" and ensuring terms conducive to national development if they know the key terms will be made public?

Chris - you mention the positive results, including greater trust, of making community agreements public in Ghana. How does a company work with a community to ensure such agreements are addressing real local development needs? Are there examples you consider "best practice" in this regard? (of course recognizing that we should be wary of demands on companies who risk becoming proxies for local government)

DanielKaufmann's picture

In terms of the impact of transparency and the interactions with governments, in addition to the Bolivia and Fundación Jubileo examples I gave in an earlier comment, in Ghana, the availability of oil contracts enhanced the analysis done by the Public Interest and Accountability Committee (PIAC) —a multi-stakeholder body statutorily charged with monitoring petroleum revenue management. In preparing its 2012 report, the Committee compared the actual crude oil liftings and income tax allowances against the requirements of the agreement.

The PIAC found that Ghana had lifted roughly the amount of petroleum to which it was entitled under the agreement in 2011, with a slight shortfall expected to be made up in January 2012. The fact that these contract provisions were public enabled the PIAC to explain why income tax collection in 2011 had fallen short of projections.

This Committee in Ghana also found that the government’s revenue projections for 2012 did not accurately reflect the contract provisions on surface rental payments, and it issued recommendations on how these funds should be collected and accounted for going forward.

DanielKaufmann's picture

Michael,
Awareness about forthcoming publication of contracts does increase the incentives of public officials to negotiate contracts that will stand up to public scrutiny. Marienke’s Sierra Leone examples illustrates - public knowledge and pressure spurred the government to go back and review the deal afresh, and provided impetus for the content of the new arrangements to actually benefit the country.

In places like Liberia where contracts are systematically published, public officials think seriously about what the public reaction to deals will be. The logic is clear: when a government official knows that s/he will be held to account for the specifics of what has been agreed, the pressure to come up with a deal that is acceptable to citizens rises. We think that as more countries move toward systematic contract transparency, the evidence bearing out this disclosure approach will continue to grow.

Dani: Thanks for showcasing the example of PIAC in Ghana. Your comments about the role PIAC has played in comparing actual practice with the stipulations of the Jubilee Field contracts raises a very important question. What power do such multistakeholder oversight committees have or should have in holding government accountable for compliance to contracts and to established laws? Is it adequate to have an independent body like PIAC, which conducts its own investigations on government compliance and provides recommendations, or should such bodies evolve into committees that actually have the authority to require government action in cases where there have been violations of the law or contracts. Are such bodies even feasible?

DanielKaufmann's picture

Thanks for the questions. Multi-stakeholder bodies like the PIAC indeed can play an important role in the effective implementation of extractive-sector contracts. For those who may not be familiar with it, the PIAC is a body established by Ghana’s revenue management law. Its membership, by the legislation, includes representatives from civil society, traditional leaders, trade unions and academia, among others. It is not mainly a contract monitoring body—the role of the PIAC is to monitor compliance with the revenue management act, to provide a “formal and active voice in the use and management of petroleum revenues” and to assist Parliament and the executive with analysis that helps them better pursue the goal of effective long-term revenue management.

But the PIAC provides a useful example of the potential of open contracting and the ways in which multi-stakeholder bodies can benefit from contract disclosure and use contracts to promote better management. In its first report the PIAC emphasized that the terms of the contract and the mechanisms the government was using to project surface rental revenues did not match up, and succeeded in advocating for implementation of fiscal terms more consistent with the contract and the law (see http://www.piacghana.org/) . In fact, Timor-Leste uses a similar multi-stakeholder body to promote implementation of its own revenue management rules. The experiences of Timor-Leste served as an inspiration to the drafters of the Ghanaian system.

jillfinlayson's picture

Hi Dani - Your comments about Timor-Leste being inspired by the Ghanians really showcase the importance of sharing successful models between countries and the value of south to south learning. It also reminded me of a couple remarks made recently by Sanjay Pradhan of the World Bank Institute. Here are few quotes from his TED speech that are especially relevant to our conversation. In addition, he lays out three guidelines to help relief efforts make the most impact -- while curbing corruption.
(http://www.ted.com/talks/sanjay_pradhan_how_open_data_is_changing_intern...)

"Governments today are opening up just as citizens are demanding voice and accountability. ... And you know what's exciting is that this innovation is now spreading South to South, from the Philippines to Indonesia, Kenya, Moldova and beyond. In Dar es Salaam, Tanzania, even an impoverished community was able to use these tools to voice its aspirations."

"In Ghana, courageous reformers from civil society, Parliament and government, have forged a coalition for transparent contracts in the oil sector, and, galvanized by this, reformers in Parliament are now investigating dubious contracts. These examples give new hope, new possibility to the problems I witnessed in Uganda or that my father confronted in Bihar."

Jill Finlayson, Striking Poverty Team

MichaelDJarvis's picture

The case of the PIAC in Ghana shows the value that can come from well-informed analysis of contracts and resulting revenues. However, some contract documents can run to hundreds of pages and for many they are in legalese. Making the connection to what it means for the average citizen is not easy.

So what new tools and approaches exist to build better understanding of these large, complex contracts? What is working to build understanding among government officials outside of the negotiating teams, among affected communities, among parliamentarians, media? Is this an area where industry can offer support given they know the ins and outs of these deals and their underlying financial models better than anyone?

jillfinlayson's picture

Michael, your question about "translating contracts" made me think of two recent conversations:

1. I am intrigued by the activities of Lorenzo Cotula and the IIED (International Institute for Environment and Development) including identifying innovative legal tools to secure local resource rights, to strengthen the procedural safeguards for participation of local groups in consultation processes, and designing, testing and implementing legal literacy training and other tools.
http://www.iied.org/legal-empowerment-investment-projects

What more do you know about these efforts and whether there are specific tools that should be shared or showcased? Emily Polak at IIED also just blogged about "African land solutions: making the resource blessing a reality" - Check it out: http://www.iied.org/african-land-solutions-making-resource-blessing-reality

2. This comment from Sanjay Pradhan of the World Bank Institute in a recent TED talk highlights how difficult it is to make this type of information comprehensible. He also points out the importance of visualizing data (check out the mapping conversation https://strikingpoverty.worldbank.org/c121017).

"This is a public budget. (Laughter) And as you can see, it's not really accessible or understandable to an ordinary citizen that is trying to understand how the government is spending its resources. To tackle this problem, governments are using new tools to visualize the budget so it's more understandable to the public. In this map from Moldova, the green color shows those districts that have low spending on schools but good educational outcomes, and the red color shows the opposite. Tools like this help turn a shelf full of inscrutable documents into a publicly understandable visual, and what's exciting is that with this openness, there are today new opportunities for citizens to give feedback and engage with government."
http://www.ted.com/talks/sanjay_pradhan_how_open_data_is_changing_intern...

Jill Finlayson, Striking Poverty Team

Lorenzo Cotula's picture

Thank you, Jill, for referring to IIED’s Legal Tools initiative.
The initiative works to strentgthen capacity to scrutinise the contracts governing natural resource investments in the global South. See for example this publication on ‘investment contracts and sustainable development’, http://pubs.iied.org/17507IIED.html , and this more recent report on contracts for agricultural investments, http://pubs.iied.org/12568IIED.html.
In addition to helping scrutinise the contracts, Legal Tools strengthens local capacity to defend rights and get a better deal from incoming investment. Partners in lower-income countries lead much of the action.
In Mali, for example, the Groupe d’Etude et de Recherche en Sociologie et Droit Appliqué, GERSDA – an outfit linked to the Faculty of Law of the University of Bamako – has been running legal literacy trainings in communities affected by mining. See eg this learning material (http://pubs.iied.org/G02753.html), available in French and local language Bambara.
As part of Legal Tools, colleagues from GERSDA have also done critical analysis of Mali’s mining legislation (http://pubs.iied.org/12554IIED.html) and of the legislative changes required by the ECOWAS Mining Directive (http://pubs.iied.org/G03147.html). They have fed insights into the revision of the mining code at the Malian parliament.
Legal Tools also documents innovative approaches developed by legal services organisations in different contexts. See for example this practitioner write-up of experience with paralegals in the Philippines’ mining sector - http://pubs.iied.org/G03420.html.

MichaelDJarvis's picture

Lorenzo - thanks for joining the conversation and sharing these great examples. You highlight the value of building capacity to understand and use the information in these large investment deals, and showing how it can loop back to influencing the legal framework.

I'm particularly interested to see you bring up the important role of intermediaries - in this case GERSDA - in pointing those with impacted interests to relevant information in an accessible format to which they can offer feedback and even take action. Think tanks, the media, even donor agencies, can potentially all help fulfill intermediary roles, which are increasing important as more and more information does become available (at least if you have reliable internet access), but can be bewildering and overwhelming.

Do others have views on how to create/support effective intermediaries? Should we have any concerns as to their role and potential to filter information in ways which may not always be constructive?

DanielKaufmann's picture

There are several new, exciting web-based projects aimed at increasing public knowledge and the ability of civil society to engage constructively. Organizations like Grupo Propuesta Ciudadana in Peru (http://www.propuestaciudadana.org.pe/) and the Carter Center in DRC (http://congomines.org/) have put together interactive maps that let citizens and public officials access key information on concessions in a manner that facilitates rapid comprehension and helps integrate advocacy around contracts into broader public policy in mineral-rich regions.

RWI and WBI are also working together to build a pilot database that will aggregate publicly-available contracts and provide searchable summaries, in a format that allows users to understand and compare terms across different deals. Alongside these technology-based tools has to be training and capacity building, to ensure that activists have a strong understanding of the structure of oil and mining contracts and strong skills to analyze the real-life implications of contract terms.

MichaelDJarvis's picture

Thanks, Dani, for sharing these great examples of online mapping of extractives data. WBI has pulled together these and more examples for those interested: https://sites.google.com/site/mymoxi/mapping-projects. We are excited to be partnering on the contracts database.

You raise an important point on capacity building to use these data tools. In Mongolia where we are building an extractives data map (http://mongoliamining.org), we have been able to combine that with trainings of media. The demand for specified extractives trainings for distinct, relevant audiences who have important monitoring roles from journalists to parliamentarians and oversight bodies, to CSO/Community leaders is still hard to meet. Any thoughts on how to do it at scale?

JChrisAnderson's picture

Good discussion. I witnessed the work of PIAC in Ghana at firsthand and knew that they would come up with the goods! Great example of donors/IFI, global and local NGOs working together with government towards a common-good goal.

Michael raises a question for me as to how to ensure that local community agreements address the needs of the community. The answer is, mainly, that they should not. Rather, the agreements should set up frameworks for how community needs can be determined by the communities themselves in a representative, transparent and sustainable manner and then how companies and government (particularly local governments) can fit into this. Agreement-making between companies and local communities is flowering into a very productive and positive space. I recommend that people look at (among many other accounts): B. Harvey & S. Nish, 'Rio Tinto & Indigenous Community Agreement Making in Australia', Jour. Energy & Natural Resources 23, 2005. Also, for an excellent 'how to' guide: http://www.riotinto.com/documents/Community_agreements_guidance_2012_201....

In Ghana, Newmont - working closely with the ten Ahafo communities - ensured that one of the three Ahafo agreements spelled out a framework for spending the subsequent foundation funds for sustainable development: a simple but effective governance structure, with each of the communities having a representative sustainable development committee who proposed projects to meet their needs. These proposed projects had to be in line with the local government development plans. This ensured that government was not marginalized by the process. Community SD committees were also given capacity training by NGOs and donor bodies. The foundation board and its secretariat then considered and approved projects and went to tender for implementation of the projects. Everything documented and required by the foundatoin agreements to be fully public. The results were and are remarkable. View them at http://www.nadef.org/pages/.

MichaelDJarvis's picture

Thanks to the panelists for the great examples cited. For those seeking some guidance on understanding and monitoring extractives contracts, I also recommend the new Contract Monitoring Roadmap: http://www.contractroadmap.org, put together by the World Bank Institute building on great work by Revenue Watch Institute, the International Institute for the Environment in Development and more.

It was an added bonus to get to hear panelist Chris Anderson talking on these issues at Rights & Resources 13th Dialogue on Forest, Governance and Climate Change in Washington, DC today: http://www.rightsandresources.org/events.php?id=687. It was clear that we need to find collective solutions to manage the enormous impacts - positive and negative - that these investments can entail. Do people see ways to better connect the innovations outlined targeting industry, governments and civil society/citizens?

What do you see is transferable to other sectors? Chris noted today that little is done to compare practices or share learnings across sectors that all involve significant land-use and share concession-style contracting processes. Can we facilitate that? There could be real value in bringing these innovations into consideration in forestry, commercial agriculture or infrastructure. Given that the extractives sector receives so much attention, the debate and emerging practice on transparency and managing community impacts is ahead of that in other industries in many respects. This presents a positive reputational opportunity to champion innovations.

bernardtcl's picture

Do we need to approach the resource curse not just from the vantage of distributing revenues to the common man; but also from the other vantage of reducing expenses to the common man? In other words, a holistic approach that consider both revenues and expenses.

To cite an example, the Malaysian public alleged that cyanide was used in the gold mines:
http://www.mining.com/thousands-of-malaysians-marched-against-cyanide-us...

It is likely that in this case, both revenues and expenses will increase. But it is probable that the impact is not shared equally across society, thus leading to more inequality. What are your thoughts on this?

I agree with the last question asked. Contract transparency covers more than revenue distribution and allocation. I do agree that contracts (I'm referring to the primary investment contract between the state and the company) could give more insight into the amount of revenues the government should receive, but contracts do not cover revenue distribution and allocation. The PIAC in Ghana definitely benefited from contract transparency because it provides more pieces to the puzzle, but contracts are not all you need to get the whole picture. The PIAC relies on much more information than contracts alone - it has to have insight into how much money has made its way to the government and at what point in time. It also needs to know the operational costs of the projects and which of those are recoverable. The petroleum revenue management law gives the PIAC insight into some (but not all) of these matters.

I'm curious to find out if there have been specific topics outside of the financial issues in a contract that affected communities have monitored.

What could these topics be? Thinking and writing 'out loud' it crosses my mind that the contract might state that there is a local employment and/or local procurement obligation and it might specify percentages of 'local content' to be achieved, but specific plans to fulfill that obligation are drafted and approved separately. These plans are very often not publicly available. Same for social and environmental impact assessments - the contract might state the requirement of an ESIA and a complementary management plan, but the assessment and plan itself are not part of the contract. They are separate documents and not always publicly available.

Areas that could be of interest to find in a contract (and nowhere else) could be (without including financial issues such as royalty rates, taxes, etc.) the commitment to build a school, health facilities, housing or roads in the affected community. Communities could check if these commitments are fulfilled on time, if the facilities are of acceptable quality, and if the school does not consist of only a building but if teachers teach and students learn there. Not all contracts include such commitments though. The other thing is that the contract might give insight into what standards the company is required to use for issues that affect the communities. For example, the contract might refer specifically to World Bank Operations Policy 4.12 to be followed for resettlement and compensation procedures, or the Equator Principles for addressing environmental (and social!) procedures. Communities could also monitor the air/water/soil quality and compare that with international standards - some contracts refer to such quality standards specifically. Unfortunately few contracts refer to specific international standards.

I'm curious to find out from your experience how local communities have used a particular non-financial clause or topic in a contract and have monitored compliance?

EelcodeGroot's picture

Great discussions, deliberating the current ongoing discussions on contract transparency and participatory monitoring. I am happy that the Community Development Agreements are also part of the discussion, besides the classical national contracts between the government and the industry.

However, I miss two flavours in the discussion. First, communities that live on an exploitation side, are not massively participating in the discussion. And it is them who can face the negative consequences, like environmental degradation, immigration or inflation. It is not easy for them participating in this highly technical field, especially not when they are located in remote areas of poor countries. Given the depletion of resources, they will be won more and more in technical difficult areas (like the Arctic) or in political difficult areas. For the latter, it is important that communities participate in this debate, through allies and networks like PWYP.

Secondly, the oil industry seems not to participate in this discussion. This may partly stem from the more complex nature of oil contracts, partly because of the less labour intense nature of oil exploitation. At the same time, oil will continue to be won on shore and refinery will be more and more located in the area where the oil is won. The German energy consultancy and publishing house Open Oil published just a few days ago "Understanding Oil Contracts" : http://openoil.net/wp/wp-content/uploads/2012/11/oil-contracts-v1-nov-3.pdf

Still, civil society, especially at the local level, continues to need assistance to understand the impact and develop oversight of the extractive industry. It is in the interest of all stakeholders that they develop an informed position, negotiate their interests and participate in the monitoring of the extractive project.

MichaelDJarvis's picture

Eelco - thanks for the valuable comments.

Marinke - I wonder if you have thoughts on ensuring participation of those communities most affected by resource exploitation? The successful Publish What You Pay model is built around national coalitions. How much of a challenge has it been to ensure the voices of affected communities are heard and reflected in the advoacay agenda? Are there proven ways to ensure governments are adequately representing their interests through these deals?

This links back to Cindy's good point on looking beyond just the fiscal terms of contracts to also consider any commitments on environmental and social impact management (and job creation) that are so important at community level. These do feature in some national level agreements, where the legislative frameworks may be quiet on the issues, and certainly in the community development agreements that Chris has shown can be an innovative way to engage communities if done right.

Finally, I echo your point on the need to make information more immediately intuitive to citizens and the World Bank Institute was glad to be part of the development of the "Understanding Oil Contracts" publication - itself the result of an innovation. The Open Oil team managed a "booksprint" process where a select group of experts representing different perspectives produced a book in five days (presumably they did not keep them locked up until they were done!)

Zara Rahman's picture

Thanks Eelco and Michael for the mention of our Understanding Oil Contracts book (http://openoil.net/contracts-booksprint )

Amongst the authors of the book, we tried to have a balanced number of oil industry 'insiders' as well as development and governance specialists, and it became clear throughout the week that this was one of the first times that participants from both of these worlds had had a real opportunity to interact and work with each other.

I wonder whether focusing on really engaging with the industry on topics such as contract transparency (going on the lines that it is, in fact, a good business decision as it could increase stability of contracts and reduce the chance of renegotiation, if the public is kept informed throughout the negotiating process) - might be another way forward, focusing on the potential financial benefits for companies rather than the simply as a social responsibility.

One piece of evidence to back up this point, is that before the book was launched we had a contact form up on our site where people could leave their email addresses if they wanted to be sent a copy of the book and updated on progress. Amongst the variety of people who signed up, there was a small percentage of people who (from their email addresses) work for international oil companies; this would indicate that they are interested in the topic of understanding contracts, and even perhaps that they want to be included in the discussion!

I'm happy to report we've had an overwhelmingly positive response to our Contracts book, and we are now looking to develop low cost training courses as an alternative to the incredibly expensive ones offered at the moment on the topic (eg, £2,000 for two days in Dubai) - which are clearly inaccessible for the large majority of civil society working on this issue. We hope that developing a training curriculum out of the book will be the next step in helping more people understand contracts.

We also welcome ideas on locations for training courses, localised versions, and how to take the book project forward.

Zara
zara.rahman@openoil.net

jamal01962's picture

please training classes start in pakistan many peoples are need to training in petrolioum muhmmad.jamal@yahoo.com

muhammad jamal

DanielKaufmann's picture

Beyond multi-stakeholder bodies principally responsible for revenue management, there are also success stories of civil society groups specifically contributing to the effective monitoring and enforcement of contracts. Our report Enforcing the Rules (http://www.revenuewatch.org/sites/default/files/RWI_Enforcing_Rules_full...) offers several examples, including the experience of the Azerbaijan Social Review Commission, made up of civil society and academic leaders, which is working with BP to monitor operational impacts, community programs and engagement with Azerbaijan’s citizens. The structure has increased the transparency of the company’s operations and served as a source of constructive engagement around contract implementation in a country where relationships are often tense.

Ousmane's picture

Very interesting debate, indeed. I would like to react on Cindy's excellent point on monitoring non-financial contractual obligations.
Because it’s interesting to note that during the training workshop organized by WBI and RWI in Yaounde-Cameroon (July 2012) all the CSOs coalitions from Burkina, Guinea, Niger, Cameroon and DRC have identified the monitoring of social obligations as a priority in their agendas. Using the WBI's Extractive Industries Contract Monitoring Roadmap (http://www.contractroadmap.org/) and the RWI’s publication Enforcing the Rules (http://www.revenuewatch.org/publications/enforcing-rules), they developed action plans particularly addressing monitoring job creation (especially youth employment at the community and national levels). This is not to say that monitoring financial obligations is no longer an important issue. For instance, the DRC work plan includes both monitoring mining revenues at the community level and local employment.
Actually all these coalitions are staring to implement their action plans. It’s important to monitor the different activities in order to see how this debate will evolve and what lessons can be learnt.

Ousmane Bachir Deme

I cannot hesitate joining in this very interesting discussion and i have followed attentively all the points made by various participants. As Ousmane has rightly pointed out, monitoring non financial obligations came out strongly in the WBI and RWI organised training workshop in Cameroon last July. I can say from hind sight that contract transparency is very important in the work of civil society to monitor extractive projects. However, it is also true that other documents like the ESIA are equally important with regards to social obligations.
In our case in Cameroon, besides local mining royalties, RELUFA is focussing on local content but paradoxically, the country has no local content policy per se but we are currently exploiting all available documentation to highlight and monitor local content provisions. Local communities/local civil society organisations where extractive projects are implemented are important in monitoring the projects that affect them and we have chosen capacity building of these groups as the starting point for effective monitoring of the social obligations of the companies. Through capacity building they can also effectively articulate their concerns. The training in july has given us tools to go about this and by the end of next year, we will no doubt have important lessons to draw.

Jaff Bamenjo
RELUFA Cameroon

RELUFA CAMEROON

MichaelDJarvis's picture

Jaff - thanks so much for sharing this great example of the impressive work of RELUFA. It is fascinating to hear how you are fostering monitoring of national contract-related obligations that relate very directly to community concerns and including in areas where the legislative framework might be lacking.

Do you think that the findings of the monitoring of local content commitments might be fed back to government and influence creation of a local content policy? Ideally, a policy based pragmatically on the real data you are capturing but also aspirational in terms of encouraging skills development and increased local job creation/procurement in the future.

This suggests the potential of closing the feedback loop from monitoring of these contracts to influencing future deals and the policy framework, as already hinted by Dani.

Michael

MichaelDJarvis's picture

How do we pull these innovative approaches by government, industry, and civil society together? More and more countries are making commercially viable discoveries of oil, gas and minerals, and their government face quick decisions on developing the resources, which have immediate consequences for contracts and their outcomes. Particularly in those context without strong rule of law, effective legislation in place and/or informed dialogue, there are very real risks of counter-productive impacts. There is only one chance to get this right, so stakes are high - once extracted, the resource is gone.

Do you feel the innovations referenced here can be combined into a framework for action that will deliver real benefits from these national resources for current and future generations?

Eelco's picture

It seems to me that everybody agrees that the resource curse should be handled together. Also everybody agrees that there is an information asymmetry between the stakeholders involved. You simply cannot expect that local communities understand Impact Assessments in the Exploration phase, draft contracts in the development phase or several technical audits in the exploitation phase, apart from understanding what their world will look like when the project starts.

I believe most of you would agree that is better to negotiate with informed communities than with uninformed ones. So capacities need to be built at civil society and communities, but who pays for it ? A logical answer will be to create a fund on the national level that ensures this capacity strengthening. It is relatively cheap and can manage expectations with all stakeholders. But what if such a fund is not (yet) possible or depleted ?

Another possibility is to have the industry or the Contractor create a budget for this, and the costs can be included in the Operation Costs. The difficulty here is that sooner or later a conflict of interest might be suggested, true or untrue, that hampers or even destroys the process.
A third possibility is obtaining donor funding on the national or international level at multi- and bilateral donors and foundations. It often requires a lot of energy to go through proposal processes. Besides that each donor can have a particular policy in a country, not necessarily always covering good governance in extractives. This time and energy could be better geared to build capacities to tackle the resource curse together.
I like to suggest a fourth possibility and is in line with our multistakeholder approach. Let us take a closer look at the experiences of the Environmental NGOs. The Conservation Finance Alliance (CFA) was established in February 2002 to encourage and enhance collaboration among institutions and organizations involved in the sustainable financing of biodiversity conservation. Donors include the International Finance Corporation, IUCN, Forest Trends, the German Government (GIZ), RedLAC, TNC, the World Bank, USAID, among others. They currently finance many projects where the extractive industry is involved, along the same managing expectations along international standards logic. They have a professional organization to finance and monitor projects and a multistakeholder Board that oversees the activities.

I would be interested to have other views on this possibility, or what is already happening. CFA provides a toolkit that helps environmental NGOs, foundations, bilateral and multilateral donors and companies to act together in financing projects on environmental stewardship, where we can learn from. Please find relevant links here under.

http://www.conservationfinance.org/
http://toolkit.conservationfinance.org/

MichaelDJarvis's picture

Eelco, you are quite right on the unmet capacity need and the lack currently of sustainable financing mechanisms to meet them. This is a problem that came through clearly at the recent Open Contracting global meeting in Johannesburg that looked at the need for contract disclosure and monitoring not just in extractives but land, forestry, infrastructure, etc. For all, finding funds to build understanding but then to support monitoring activities on a sustainable basis is very difficult.

Your suggestion to learn from what has been working in other areas is an excellent one. The model of a pooled approach is the only viable way I can see this playing out, unless third party monitoring is more seriously institutionalized in project design and funds alloated for it accordingly as part of the standard compliance cost. That might be a far off goal, so an interim pooled fun could be a good one.

Industry certainly have an interest in educating to overcome misperceptions of these deals, and they understand the technical aspects better than anyone so have expertise to offer capacity building. The challenge as you note of asking industry to support capacity building directly is that there will be real or perceived conflicts of interest and trust in the information is vital. A pooled fund including industry contributions could get round that problem.

What do others think?

JChrisAnderson's picture

I realize it sounds pollyannish and perhaps naive, but please remember i was a hippy once! My response to Michael's recent question is 'Yes' with one proviso: we need a new era of cooperation to defeat the resource curse. Study after study shows that good governance is the key to this. However, all parties need to be part of 'good governance'. We need to work against the binary oppositions that so often exist where resource projects are mooted in emerging market countries: civil society versus extractive companies; governments versus companies; central governments versus local governments; civil society versus central governments, etc. Donors and international finance bodies must also be part of this. Only with an integrated, transparent approach from investment agreement negotiations to project construction and operation to closure can the curse be defeated! The resource projects must become catalysts for other development, not just stand alone, once-off efforts.

MichaelDJarvis's picture

Thanks, Chris. You have laid out a compelling clarion call for shared solutions to a shared problem. This is very much in tune with the collaborative governance approaches that the World Bank Institute is supporting not just on this topic but many other issues where collective action is needed, but too often forestalled by a lack of trust, misperceptions, lack of clarity on underlying interests.

On extractive industries, where the stakes are high and the potential developments so high, I am hopeful we can get there. It is already a very different climate of operation from even five years ago and increased transparency is one clear factor in that, but the innovations laid out in this conversation go beyond just release of information, but help reconfigure relationships.

They present opportunities for governments, investors and citizens alike. Clarifying the value they can deliver to each, and doing a better job of documenting that value will give impetus to replicate and expand.

In terms of getting to the scale of impact needed, what do you each see as the most immediate priority deserving of investment?

JChrisAnderson's picture

I agree with you Michael that the climate in the extractive sector is very different now than it was previously. All to the good! Going forward: personally, I believe the priorities lie in a) donors and IFIs encouraging governments to increase transparency of investment agreements; b) assisting in building capacity of local communities, including local government to improve negotiation skills, manage revenue and support sustainable development at the local level; c) international civil society working with local civil society to provide not only local capacity building but a degree of independent and objective monitoring; and, d) all parties working together for mutual development benefits!

DanielKaufmann's picture

In terms of getting to the scale of impact needed, what do you each see as the most immediate priority deserving of investment?

The question is open-ended, yet if we interpret it specifically regarding contract transparency, then resource-rich countries need to effectively link the supply and demand sides to build dialogue, understanding, and trust between citizens and governments around contracts. Otherwise, citizens will lack sufficient information and understanding of what authorities are up to, and will be impaired in their ability to react where governments propose poor contract terms or effectively or push for policy changes. Accountability would be undermined.

Thus, from the government perspective, getting effective and proactive information out about contracts and contracting processes is critical. This means doing much more than merely dumping documents somewhere in the public domain; instead reaching out to citizens creatively, providing them with user-friendly access to relevant know-how and data, is important, so to facilitate actual dialogue and accountability. This can be done through some of the data-dissemination tools we've discussed in previous posting, or also through simple meetings, public debates and forums, where officials have the opportunity to explain themselves and citizens ask questions and give feedback.

From the civil society perspective, this means developing a deeper understanding of complex contracts, and sharing experiences about how to build advocacy and policy recommendations around newly-available information. The kinds of initiatives that Zara, Jaff, and Ousmane have mentioned can be strong positive steps in this direction.

More broadly, one ought not lose sight of key ‘forest issues’ – the enabling environment that would significantly enhance the impact of specific innovations on contract transparency. Paramount in my mind are a free media –including online and social media, of course—and a functioning rule of law. Specific transparency in one area, such as contracts, in an environment where there is media censorship and impunity, will attain limited impact.

DK

MichaelDJarvis's picture

Thanks to everyone who has commented in recent weeks and particular thanks to our guest discussants for their insights, thoughtful commentary and ideas. I have certainly learned much myself.

Building on Chris and Dani's closing comments an agenda for action is presented - working with governments and companies to get more contracts in the public domain, ensuring information is in user-friendly formats and building capacity to use that information effectively both for greater compliance and to ensure better future contracts. Dani rightly also points us towards the many complementary needs for increased transparency on contracts to really lead to better outcomes for citizens - linking into broader debates on access to information, media freedoms, rule of law and effective governance. We need a chain of transparency to enable greater accountability from licenses and contracts through payments to spending.

However, though daunting, this should not deter us from pursuing the tangible objectives on the contracts angle alone. In fact, as many have shown through the examples referenced, the number of contracts available is growing fast and some ingenious efforts are underway to ensure their details are understood, monitored and debated - aided by technology. This bodes well for communities affected by oil, gas and mining operations worldwide.

How do we build a fairer world? how do we create a full employment world? maybe if we create a world where everything was in one place? why do we not increase the age of coming into the jobs market to a higher age? why do we not control births rates better? why do we allow people to hoard money because money is what controls everything? Why do we not create a world designed properly and not controlled by money?

Do not see how the AGECC is reconciling the GETFIT program in light of the fact that it
seems rather counterproductive while funding large coal and mining operations with huge,
lengthy, and permanent CO2 Footprints.
All coal operations should be shut down and never funded again!

Thank You,
Cordially,
Werner Loell

First of all I wish happy new year to all friends.As we all know that the climate change is an alarming problem for all the creatures in the world and somehow we are resposible for this but now time has come we should act unitedly to solve this problem before its too late.We shall have to plant as many plants as we can.

Sksajwan