EXTRACTIVE INDUSTRIES AND PARLIAMENTARY OVERSIGHT: MAKING

THE LINK

Dr. Rasheed Draman

Extractive Sector and Developing Countries

• Many developing countries rich in natural resources

• Challenge: Ensuring that revenue from extractive sector is used to help reduce poverty and improve living standards of population

NATURAL RESOURCES

ENHANCED WELFARE

Extractive Sector Governance

• Transparency and Accountability

• Strong institutions

• Clarity of Goals, Roles and Responsibilities

• Accurate and timely information

Extractive Sector Governance

• Proper policies and regulatory frameworks

• Effective systems and processes for decision-making and implementation

• Proper oversight of revenue management and wealth distribution

Failure of Extractive Governance – “The Resource Curse”

• Conflict• Corruption• Damaged social

contract/compact• Difficult macroeconomics:

volatility excessive borrowing; low savings

• Skewed development

• Lack of diversification/ enclave effects

• Insufficient investment in human resources

• Lack of democracy and human rights

• All leading to low growth & worsened level of poverty

Dividends of Good Extractive Governance

• Peaceful Society• Investor confidence• Diversified economy with

forward & backward linkages to the extractives sector

• Economic Growth• Improved Social

Infrastructure• Shared Prosperity• Positive Corporate Social

Response

THE PARLIAMENT-LED REFORM PROCESS

Weak Governance

System/Structures

Status quo

No or Weak Laws &Institutions

StrongGovernanceFramework

Improved state

Good Laws & Well ResourcedInstitutions

Parliamentary - Representation - Legislation - Oversight

THE EXTRACTIVE INDUSTRIES VALUE CHAIN

Role for Parliament in the Extractive Value Chain

• Assessment of the resource base and potential social & economic impact in exploiting it

• Obtaining prior informed consent of resource owners or communities

Role for Parliament in the Extractive Value Chain

• The Award of Contract relies on:

• Institutional, legal, regulatory and contractual framework

• Open access to title• Local content

Role for Parliament in the Extractive Value Chain

• During Monitoring of Operations (Regulation) important to ensure that it is:

• In line with contract clauses

• In line with international standards

• National cadastre• Geological data centre

Role for Parliament in the Extractive Value Chain

• Fiscal terms choice• Transparent reporting • Procedure to budget EI

revenues• Country economic

policies• Revenue saving and

expenditure• Transparent revenue

redistribution

Role for Parliament in the Extractive Value Chain

• Revenue to benefit the population

• Ensure procurement practice

• Monitor expenditure at local level

A Role for the State??

0 50 100 150 200 250 300

Saudi Aramco

NIOC

Gazprom

Iraqi NOC

PDVSA

KPC

ExxonMobil

RD/Shell

Qatar Petroleum

TotalFinaElf

Abu Dhabi NOC

Sonatrach

ENI SpA

PEMEX

BP

Oil (bn bbl)

Condensate (bn bbl)

Gas (bn boe)

The Case of Ghana

• Parliamentary Centre has supported the Parliament of Ghana since 2009 in strengthening its oversight capacity of its emerging petroleum sector

• Key committees: • the Committee on Mines and Energy• the Committee on Local Government and Rural

Development• the Finance Committee • the Public Accounts Committee

The Case of Ghana

• Support included: • Capacity building to better understand the sector and

make new laws • Training on key governance issues in extractive industries• Facilitation to participate in international conferences and

networking sessions to share ideas• Implementation of public consultation on petroleum bills• Expert analyses and direct input into bills under

consideration and amendments, through memorandum

The Case of Ghana

• Several key results have been achieved: • Parliament adopted the Petroleum Revenue Management Act,

2011 (Act 815)• Parliament rejected a weak Exploration & Production Bill and

insisted redrafting• An independent regulatory body - the Petroleum Commission

was established• An innovation – the Public Interest Accountability Committee

(PIAC) established• Greater insight on extractive revenues and potential increased

demands for accountability• Active Civil Society • Short Guide to Parliamentary Oversight of the Oil & Gas Sector

Oversight Challenges• Oil Partisan Politics• Lack of resources for oversight• Extractive Industry Transparency Initiative (EITI)

Legislation – from voluntary to non-voluntary• Contract Transparency• Disclosure of Revenues/Corporate Taxes• The Africa Progress Panel Report 2013• Freedom of Information Law – “The Right To

Know” Legal Process• Good laws but no resources for implementing the

laws – i. e. PIAC

A United Parliament and Independent Committees

• Effective oversight depends on how united Parliament is in protecting its independence and institutional interests– Partisanship– Executive Dominance/Subordination of Parliament– Fusion vs. Separation of Powers– Winner-takes-all

• How skilled or determined/independent committees are in utilizing powers, rules and tools available to them