Successful resource governance requires government to possess the political will, capability and capacity to make difficult and complex decisions and effectively implement them. Resource governance is strengthened when those decisions are subject to well-informed public scrutiny and when decision makers are held to account. Extractive resources are public assets and decisions concerning their exploitation and use should be a matter of public debate. Transparency along the entire decision chain is essential.
Effective resource governance requires that citizens are able to hold their government representatives accountable for decisions and policy choices. Accountability to an informed public can mitigate the mismanagement of resource revenues. A well-informed public with the capacity to act can engage in constructive discussion around policy formulation and government oversight of resource wealth. Through public scrutiny, officials can be held to account for abuses of power for private gain.
Citizens are best able to hold governments and companies to account where they, their parliamentary representatives and civil society organizations (1) are well-informed and have the capacity and freedom to act on information they obtain. It is increasingly accepted that citizens have a basic right to information about government activities and use of public assets. This principle is enshrined in international instruments including the Universal Declaration of Human Rights, the Rio Declaration, the Aarhus Convention and the OECD Guidelines for Multinational Enterprises. The wide international support and country participation in the voluntary Extractive Industries Transparency Initiative (EITI) have advanced the principle that the public is entitled to information on the payments and revenues derived from extraction.
An increasing number of countries have so-called Freedom of Information laws stipulating, in one form or another, that all government information is public unless specifically proscribed by law. Furthermore, the IMF’s Code of Good Practices on Fiscal Transparency sets out strong rules for all member governments for informing the public about the use of public assets, specifically including natural resources.
Alongside disclosure of information, government should adopt transparent processes for establishing and implementing resource policies, for awarding contracts, for taxing, collecting and managing revenues, and for taking spending decisions. Resource decisions involve long-term commitments. These will be more credible and less subject to abuse if their rationale is understood by citizens. Legislative oversight is a critical part of establishing government accountability. Any concessions which depart from standard legislated terms should be submitted to and approved by the legislature. Citizens can only be confident about the integrity of the resource extraction process if they know about it.
An informed citizenry requires informed government, at both the national and regional levels. Governments should have the capabilities and capacity to take effective decisions around resource extraction. In some cases, particularly where new resource discoveries take place, governments may lack the internal expertise for effective policy formulation and governance at various stages of the decision chain, including the collection and disbursement of data. Such transitional deficits may be overcome by a combination of capacity building and/or acquiring expertise from a trusted source or institution.
Transparency and availability of information yield other direct benefits for policymaking. Transparency can improve the efficiency and effectiveness of government policies. Public disclosure requirements can improve the quality of data the government gathers and maintains. This makes it easier for relevant bodies such as financial, energy and mining ministries, as well as environmental and regulatory agencies, to do their jobs. Reliable and frequent data can make it easier for governments to plan and manage their budgets and long-term development plans. Where an extractive regime enjoys public legitimacy there may be a reduced likelihood that successor governments will make arbitrary and ill-considered changes to a country’s extraction regime. Transparency also lowers the cost of capital (2).
Availability of information should be supplemented by an active civil society with the capacity and freedom to hold governments and companies to account. Capacity building in civil society requires balance and a long-term perspective. Governments and extraction companies may have a role in providing resources and capabilities to help civil society organizations establish themselves and develop their skills. But the ultimate objective is to create self-standing and independent civil societies. Governments must allow civil society, especially the press and electronic media, to operate freely and without harassment or intimidation. It has been known for governments to take a role in appointing civil society representatives for multistakeholder discussions. In order to improve credibility, civil society should be free to appoint these individuals independently. Civil society must remain independent of government.
Finally, citizens will be empowered to oversee the governance of natural resources where there are enforceable penalties in place for the abuse of power. These penalties should be legislated for at both the national and international level. They will require strong political will and capacity to administer. The theft of natural resource wealth is a criminal offense and those found guilty should be held to account.
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1 Reference to Civil Society and civil society organizations throughout is intended in the broadest sense; the totality of voluntary civic and social organizations and institutions that form the basis of a functioning society.
2 An IMF study of fiscal transparency found that “Fiscal transparency is associated with higher credit ratings even after controlling for various economic fundamentals”. Farhan Hameed, 'Fiscal Transparency and Economic Outcomes', IMF Working Paper December 2005.
