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Promoting Good Governance in the Extractive
Industry Sector in Asia Pacific A Value Chain
Approach

• Chandra Kirana
• Asia Pacific Regional Coordinator
• October, 2009

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(No Transcript)
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• Two things are infinite
• The universe and human stupidity AND
• I'm not sure about the universe.

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• Extraction Benefits - Mitigating Risks
• Oil, gas, minerals and metals are FINITE
• Extracting these resources entail RISKS
• Environmental Risks
• Social Risks
• Human Rights Violations
• Extracting these resources can bring VALUABLE
  BENEFITS development.
• GOOD GOVERNANCE can help ensure that benefits
  outweigh the negative impacts.

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Environmental Risks
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Social Risks and Human Rights
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Is the Revenue Used Wisely?
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Characteristics of Good Governace According to
the UN - Economic and Social Commission for Asia
Pacific
Accountable
Transparent
Consensus Oriented
GOOD GOVERNANCE
Responsive
Participatory
Effective Efficient
Follows Rule of Law
Equitablee and Inclusive
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The Extractive Industries Value Chain
Revenue Mngt and allocation
Decision to extract/not to extract
Trading of commodities
Fiscal Terms
Tax and revenue collection
Extraction prosess
Awarding of contracts/ licenses
Development project/policies
Good Governance needs to be Comprehensive
Throughout the Value Chain
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Governance can only be as strong as the weakest
link in the Value Chain

• Do the laws and regulations of a country address
  all the issues relating to the Extractive
  Industry equally?
• Is there civil society participation and
  oversight throughout the entire Extractive
  Industry value chain?
• Is the governmnet able to enforce GOOD GOVERNANCE
  of the Extractive Industry sector?
• Do companies operate in a responsible and
  accountable wasy throughout the Extractive
  Industry value chain?

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Concentration of NGO Work Along the EI Value
Chain in 10 Asia Pacific Countries
Decision to extract/not to extract
Revenue Mngt and allocation
Trading of commodities
Fiscal Terms
I 87
II 43
III 18
IV 56
V 12
VI 56
VII 56
VIII 56
Tax and revenue collection
Extraction prosess
Awarding of contracts/ licenses
Development project/policies
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The Need Work Together Constructively

• Individually organizations/stakeholders are
  strong in certain parts of the EI value chain.
• Together all organizations/stakeholders could
  potentially be strong throughout the entire value
  chain and could push Good Governance in the
  sector in a powerful way.

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In Summary

• The Extractive Industries Sector can provide
  valuable benefits for development
• The Extractive Industries involve serious risks
• Safeguards for responsible and accountable
  Extractive Industries must be comprehensive.
• GOOD GOVERNANCE must be established throughout
  the Extractive Industry value chain.

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SOME EXAMPLES

• THE RESOURCE CHARTER an example of overarching
  values and principles to achieve responsible
  extraction for sustainable development.
• THE Extractive Industries Transparency Initiative
  (EITI) an examples of a tool to establish and
  implement good governance.

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THANK YOU ?
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Decision to extract/not to extract

• Here it is important that local communities (in
  many cases Indinegous People) are also included
  in the decision making process and are
  facilitated to be able to make prior informed
  decisions. Is a Prior Informed Consent proccess
  being honored? In this decision making process
  the government and the companies involved need to
  be transparent about the environmental and social
  costs such a project will entail. And explain
  how these will be dealt with.

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Awarding of contracts/licenses

• Is this process trasparent, are the responsible
  government officials ensuring that through their
  actions, the public are getting the best deal, or
  is the handing out of contracts shrouded by
  opacity? Is there an open tender process, with
  clear criteria of selections that are
  communicated openly and publicly?

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Fiscal terms

• Does the government have the ability to negotiate
  the best fiscal terms for the public good? Is it
  reflected in the agreed conract between the
  company and the government?

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Extraction process

• Are environmental and social costs being
  externalized onto the local communities and
  environment? Does the company regularly inform
  the local government and local communities about
  its environmental and social safety standards,
  does it have implementation mechanisms in place,
  does the community know what it must do in case
  of an accident? Does the company inform the
  community of what it will be responsible for? Etc.

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Trading of commodities

• In many cases, for example like in Oil ans Gas
  contracts, the government receives shares of the
  production, this product (oil, gas) is then sold
  by a government agency on the market to gain
  revenues. Is the government agency responsible
  for the trading of government shares of
  commodities doing it in a transparent and
  accountable way?

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Tax and revenue collection

• Are taxes and reveues collected by the government
  being accounted for in a trasparent manner? Is
  the country implementing EITI, where CS, through
  the Multi Stakeholder Working Group, has
  oversight power together with other stakeholders
  on how government revenue receipts, and company
  payments to governments are publicly reported?

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Revenue management and allocation

• How is the government managing its revenues to
  address the various challenges related to EI
  revenues? Is it able to save prudently in times
  of great windfalls? Does it go on a spending
  spree on projects that do not contribute to
  sustainable development? And most importantly is
  the government regularly reporting to the public
  how it is managing its EI revenue funds?

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Development projects/policies

• Is the government carying out development in
  consideration of the fact that EI resources are
  finite/ Is it strengthening other sectors of its
  economy? How is spending on health,
  infrastructure and education?