Reining in Cowboy Mining Companies

•  washington
• Tuesday, September 27, 2011
• Inter Press Service

But laws do exist, and better governance of what is known in technical terms as 'resource extraction' can help prevent such abuses, according to University of Oxford economics professor Paul Collier.

Collier, who spoke at World Bank meetings here last week at a panel session hosted by the Revenue Watch Institute (RWI), said civil society has a key role to play. RWI is a policy organisation that advises governments and citizen groups on 'effective and sustainable' resource use.

In a new book edited together with Anthony Venables, 'Plundered Nations? Successes and Failures in Natural Resource Extraction', Colliers argues three factors are necessary to make sure everyone gets a fair share of the resource pie. The book features case studies of eight resource-rich countries and presents analyses of the countries' use of their resources according to certain indicators. The countries include Cameroon, Chile, Iran, Kazakhstan, Malaysia, Nigeria, Russia and Zambia.

According to the authors, two of the countries, Chile and Malaysia, have a successful history of natural resource use, while the other countries largely fell victim to the so- called 'resource curse'. 'Actually the reason why success is so rare is that actually there is a whole chain of decisions, all of which have to go right in order to harvest the enormous opportunity of natural assets,' they say.

Malaysia, for example, reduced poverty from 50 percent of the population in 1970 to less than four percent by 2007 because of successful natural resource extraction governance. 'That could have been resource-rich Africa,' Collier said.

According to Collier, that chain includes three important steps necessary for avoid plunder. According to a 'first discover, then capture' mantra, Collier said governments should first obtain geological information in order to know the extent and value of their countries' natural resources before ever letting companies break ground to dig.

Then, governments should retain a 'substantial' portion of companies' profits from resources through taxes and, lastly, should use that money for public projects that support livelihoods and diversify economies.

'The few can steal from the many or the present can expropriate what should belong to the future, but both plunder,' Collier said. 'Natural assets should benefit all future generations.'

Karin Lissakers, executive director of RWI, said weak legal codes in the area of resource extraction often prevent countries from benefiting from their natural resources.

'Public audits, conflict of interest laws, companies being required to sign a pledge to meet standards...these are the kinds of things you can do to increase the revenue stream,' Lissakers said, adding that contracts should be made public.

She said that Guinea, an African country rich in copper, approved a new mining code in early September, with policy help from RWI. The new mining code in Guinea doubled taxation on iron ore extraction, which will mean an addition three billion dollars per year in tax revenue for a country where, according to Think Africa Press, 47 percent of the population lives on less than one dollar per day.

According to Collier, for a resource extraction law to be effective, government approval is just the first step. He said the law also needs a 'critical mass of citizens who know what that rule is for and scrutinise it to make sure what is needed is being done'.

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service

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