To Have and Have Not - Resource Governance

Executive Summary

Despite their wealth in natural resources, many countries in Africa, Asia, and Latin America suffer from increasing poverty as the exploitation of their resources is often accompanied by serious environmental and social impacts or even violent conflicts in the producing regions. Meanwhile growing consumption is increasing the pressure on the natural resource base.

How natural resources are accessed, how contracts are negotiated, and how economic benefits are managed and used are crucial factors in the struggle to alleviate poverty.

These elements of resource governance are also critical in bringing about and maintaining national and regional stability, in fostering truly democratic governments, and in avoiding conflict.

The challenges for the natural resource sector in the 21st century are numerous and closely interrelated. They include: macroeconomic conditions (terms of trade, investment regimes), climate change, high consumption rates, peak oil, energy security, social and environmental impacts, corruption, human rights abuses, and conflict resources.

Macroeconomic conditions for development

New rules have to be installed and existing rules have to be enforced for investors in the resource sector with the aim of fairly sharing costs and benefits between investors and resource-rich countries.

The existing International Investment Agreements (IIAs) emphasise investors’ rights rather than the development interests of the host countries. They should be reframed with development linkages. At the same time, the deteriorated terms of trade, which fuel indebtedness of resource-rich countries, need to be improved.

Governance of natural resources

Corruption and mismanagement of revenues contributes to the discontent of populations and to political instability. The key stepping stone for improving governance is transparency at all levels, including revenue flows, contracts, and the allocation of concessions.

Natural resources have often played an important role in providing money to maintain and to prolong armed conflicts. The international community is providing armed groups and corrupt regimes with unfettered access to world markets. With the UN Security Council as a key player, the international community must address the economic base for conflicts and wars and establish corresponding rules and regulations to control the flow of finances. A first step is to agree upon a common definition of what a “conflict resource” is.

Private and public banks play a key role within the network of trusts and companies acquiring and generating money from corruption and crime, which is used for personal profit or the maintenance of conflicts. Although in the last few years a network of laws and regulations was established, the money still finds its way into the international financial system. Existing rules and regulations have to be strengthened. Transparency initiatives need to cover the financial sector as well.

Forests – time for a change

Forests demand special consideration as 1 billion people living in extreme poverty depend on forests for their livelihood and more than 350 million people living in and around forests are heavily dependent on them. The enormous ecological importance, in terms of biodiversity and climate change, underline the need for the implementation of special rules and regulations. The industrialscale export-based logging paradigm has rarely if ever contributed to sustainable mdevelopment in tropical forest-rich countries. Alternative models of forest use are mgiven little chance. The industrial logging model is even enhanced by the undifferentiated mimport customs of timber-demanding countries, of which only the G8 nations mimport around 40 per cent of illegally traded timber. The forests of the Democratic Republic of Congo (DRC) could be a focal point for a paradigm change, and the window of opportunity to act is now, since most of the forest has not yet been allocated to timber companies.