The Challenge of Channeling Extractive Industries Revenues Towards LocalLevel Poverty Reduction. Ian Gary UN Expert Group Meeting September 21, 2007

Transcription

1 The Challenge of Channeling Extractive Industries Revenues Towards LocalLevel Poverty Reduction Ian Gary UN Expert Group Meeting September 21, 2007

2 Presentation Outline Oxfam and Extractive Industries Growing Movement for Transparency Framing Issues Local-level spending Mali, Chad and Peru Necessary ingredients for progress

3 Why does Oxfam work on Extractive Industries? EI activity causes direct impacts on poor communities (pollution of resources, human rights violations, conflict, displacement) Extractive activity increasing due to globalization, lowered trade barriers, increased demand Oil and minerals are the #1 export of most poor countries; dependence increasing recolonization

4 What are our objectives? Policy and practice change at the IFIs, corporations and governments Respect the right of communities to say no (or yes under the right conditions) Respect communities right to know transparency Protect indigenous cultures

5 OA s Approach Fully integrated North-South program and advocacy work Support partner advocacy and capacity building in the regions and in the North Provide technical assistance to partners Advocacy with IFIs, corporations, governments Campaigning Research

6 Extractive Industries Regional Programs and Partners US - Boston Central America San Salvador West Africa Dakar East Asia Phnom Penh South America Lima

7 Transparency A Vital First Step Growing global movement - Publish What You Pay Initial focus on national level Increasing recognition of need for Publish How You Spend at national and local level Chad report CRS/ BIC Nigeria example Human Rights Watch Rivers State report World Bank requirement for EI projects EITI does not deal with budget and expenditure issues / no contract disclosure required IMF Guide to Resource Revenue Transparency restricted to macro level

8 Generic Issues Local-level Spending of EI Revenue Complex formulas and multiple revenue streams Confusion at the local level regarding what is government spending and what is (tax deductible) company social development spending Weak links between capital-based budget monitoring groups and local level EI investments often in remote or frontier areas where government capacity is weakest

9 Generic Issues Local-level Spending of EI Revenue Mismatch between investment pace and capacity building efforts High expectations and low results Beyond earmarks to quality spending and development impact Reluctance of donors to discuss local level spending Sovereign choices

10 Role of Multilateral Development Banks World Bank projects and country assistance Revenues cited as major benefit of EI but many obstacles to converting revenues into poverty reduction in projects Cooperaccion study - Towards an Estimation of the Effects of Mining Activity on Poverty Indices in Peru (2005) Negative correlation between rates of mining investment and Human Development Indicators in 12 Peruvian departments with greatest mining investment The greater the minining activity in a given Department, the lower the human development indicators for the department.. Revenue / contract disclosure requirements Governance sequencing Yanacocha gold mine Peru late interventions Camisea project Chad-Cameroon oil project

11 Mali Gold-mining revenues and local development Some funds received from central government but local officials unaware of what they are entitled to receive by law Confusion over which funds come from mining company philanthropy and which come through government royalties Concern that if questions were asked by local officials they might sacrifice what they did receive Simplification of mining fiscal regime is needed Complex set of taxes, fees and duties are impossible for CSOs to understand, let alone track

12 Chad Unravelling of petroleum revenue management program 30-40% spending rate in most priority sectors Prioritization of infrastructure - roads Risk of multi-year projects uncompleted Capital vs. recurrent expenditures need schools AND teachers Decentralization plan stalled spending decisions made centrally Little budget transparency Lack of public participation in budgeting and local spending Confusion at local administrative level regarding source of funds for projects oil $, regular budget or corporate philanthropy 5% oil producing region earmark No regional development plan Divergence from Poverty Reduction Strategy

13 Peru Camisea Gas Project Camisea I and II largest foreign investment project in Peru s history Municipal level in Peruvian Amazon very low government capacity but large inflow of revenues Funding for GRADE research Forthcoming report from Oxfam-World Resources Institute and Bank Information Center Pace of expansion far outstrips capacity of government to manage impacts or revenues

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17 Camisea Gas Project and Local Revenues Camisea I Impacts Social and environmental impact 6 spills NGL pipe Lack of royalty spending Camisea II / Peru LNG Focus on ensuring local government capacity to spend money Example: $22 million in royalties to Municipality of Echarati in 2006

18 Camisea Project and Local Revenues Indigenous communities with little capacity to influence spending Need regional development strategy Cumulative impacts and spending decisions roads, colonization Pre-conditions for public sector financing?

19 New Town Hall in Echarati

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21 Necessary Ingredients for Progress Transparency alone will not lead to accountability but finish agenda Strong legal framework only an important first step Mandatory disclosure regimes at international / national level EITI plus including national and local budget transparency As transparency efforts progress, need to adapt campaigns, donor support and international requirements and standard setting exercises to include local level expenditure issues World Bank efforts, Norway s Oil for Development, UNDP efforts, etc.

22 Necessary Ingredients for Progress Money for government capacity building needs to be built in increase execution rates without sacrificing quality Managing pressure to spend while avoiding suspicions of corruption increase spending as absorptive capacity increases Local level expenditures need to be part of poverty reduction strategy owned by local populations Increase support for local budget monitoring by civil society increasing participation in spending decisions and report on project execution and impact International Budget Project to local level? Political space and role for media, e.g. community radio More political momentum from UN UN Resolution? Linking to UN Convention against Corruption implementation

23 The Challenge of Channeling Extractive Industries Revenues Towards LocalLevel Poverty Reduction Ian Gary UN Expert Group Meeting September 21, 2007