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Transparency, economic governance and development: The Extractive Industry Development Forum

16-12-2011

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Transparency is hot. Never before in debates about development or economic governance has there been such a strong focus on transparency. This has been well illustrated in the European Union (EU) over the past few months where the European Commission (EC) has taken action to promote transparency in three different arenas.

One action related to private sector transparency. The European Commission proposed amendments to existing transparency requirements for companies in extractive industries. Stricter rules for mining, forestry and energy firms could improve governance in resource rich developing countries.

Secondly, the EC’s new draft policy on budget support also prominently features transparency. This measure will help to push developing countries to become more transparent about their prime policy tool: the public budget. If partner countries want to benefit from the Commission’s budget support modality (a preferred aid modality since it transfers donor money directly to the treasury of a developing country) they will have to do better in terms of budget transparency. Measured by the Open Budget Index (an independent index weighing and comparing transparency of public budgets) most of the developing countries that receive budget support could do a much better job at being transparent. This is a prerequisite to improved accountability in partner countries through civil society, legislatures, media and audit institutions.

Thirdly, the EC and the EU endorsed the Busan Partnership for Effective Development Cooperation adopted at the December High Level Forum on Aid Effectiveness. At that meeting, the EU Development Commissioner also presented the EU’s new proposals on EU Joint Programming and an EU Transparency Guarantee that commits EU Member states to publicly disclose all information on aid programmes.

How to improve transparency, and what alliances need to be made in a particular country context?

 

Lack of transparency in the extractive industry and in forestry has proven to have a very harmful impact on development and feeds violent conflict and deep corruption. Together with the Canada-EU Mining Council, ECDPM invited promoters of transparency from within the private sector (such as AngloAmerican, Rio Tinto, ArcelorMittal), from NGOs (such as ONE and EURODAD), from EU member states and the EC (DG Market and DG DEVCO) and from the Organisation of Economic Cooperation and Development (OECD) to a workshop in Brussels in November to compare notes, exchange experiences and identify synergies on financial transparency and economic governance. Both public and private sector discussants agreed on the overarching objectives of promoting transparency: to push back corruption, to weed out waste and to improve (economic) governance for development outcomes.

Participants at the workshop also admitted that it is more difficult to ensure that actions to promote transparency – by multinationals, by rich country legislation (the US, the EU), by donors, by NGOs, or by partner country governments – also benefit or empower citizens in developing countries. And this is where development outcomes and results matter most. This is particularly important, and cumbersome, in the extractive industry and in forestry. Given the scale of operations and profit margins in these sectors, the danger is real that local elites seek rents and capture profits to entrench their hold on power. Such dynamics create and perpetuate fragility and conflict.

The Extractive Industry Development Forum

Workshop participants also agreed that isolated actions in support of transparency will not result in improved economic governance. Nor will such measures automatically promote accountability to citizens or enhance responsiveness from the state. This requires multiple stakeholders to find common ground and to value cooperation. External actors can facilitate such cooperation – and transparency can help. To explore opportunities more pointedly for such collaboration at different levels (local, national and regional) ECDPM and the Canada-EU Mining Council decided to create an Extractive Industry Development Forum. This forum will connect multiple stakeholders, bring out relevant findings or experiences, and test out practical ways for collective action in support of transparency and economic development. See the report of the workshop for further details on the Extractive Industry Development Forum as well as the other discussions held.

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 Jan Vanheukelom is Head of Programme, Governance, at ECDPM.

 

This blog post features the author’s personal view and does not represent the view of ECDPM.

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Economic Transformation and TradeExtractive SectorsBudget supportGovernanceEurope