FEATURE STORY March 20, 2018

A Guide to Good Governance in Extractive Industries

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STORY HIGHLIGHTS

  • For countries tapping into their mineral resource wealth, there is an urgent need for guidance about what constitutes good practice in natural resource management and how to apply it while avoiding the much-publicized mistakes of other countries.
  • The World Bank has published a Sourcebook for those seeking to better understand the myriad options around oil, gas, and mining development.
  • The Sourcebook is a guide for good practice and effective management of the sector.

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For the first generation of countries, those undertaking resource development for the first time or having limited experience in transactions, knowledge of the optimum practices for developing their oil, gas, and mineral wealth not readily available. Many countries also lacked experience designing and implementing their own policies to use natural resources for economic growth and development. Until relatively recently, governments around the world were dependent on international firms and the private sector for this complicated and challenging endeavor.

In the 21st century, on the crest of a wave of high commodity prices and robust investment, a new group of countries have begun to use their oil, gas, and mineral resources. These countries have diverse origins – some have emerged from armed conflicts and are hungry for reconstruction and growth; others have shaken off political ideologies that constrained policy choices and squelched initiative.  A large percentage of these countries are low-income and face a wider range of potential investors than ever before; new markets in Asia; new areas available for exploration due to technological innovation; and the impact of new products and materials that require expanding mineral production. , where relatively little is known about the value of these resources.

For those countries that have recently joined or are about to join the club of resource-rich economies, . In countries new to oil, gas, and mining development, there is uncertainty about where to find data that can be used to inform decision-making and qualified professionals to assemble, analyze, and use such knowledge and about the cost of accessing it.

The aspirations and needs of these countries were the impetus and stimulation to create the World Bank’s Oil, Gas, and Mining Sourcebook for Understanding Extractive Industries.

, ranging from the allocation of resource extraction rights to the use and distribution of revenues. It recognizes and emphasizes the importance of the political and institutional context, taking complex issues and presenting them in understandable ways. The Sourcebook also describes alternative organizational structures and provides illustrative examples and useful citations from literature.

No two resource-rich countries can manage their resources in the same way, leaving each country with important choices about the type of management that suits its unique combination of circumstances, including its institutional structure and level of social and economic development. For decision makers and their advisers, for parliamentarians charged with oversight of these decisions, and for others such as civil society groups, .

Michael Stanley, Lead Mining Specialist for the World Bank and co-author of the Sourcebook said “The Sourcebook continues to evolve to meet a diverse set of needs. Integration of this Sourcebook with the Sharing in Governance of Extractive Industries online community connects thousands within a single network – all working together towards greater accountability and, in turn, better development outcomes from extractive industries.

To be effective, however, this transformation needs to take place within a transparent framework of sound institutions established to ensure extractives sector development brings more to societies than it takes out.

“The shift to solar, wind, and other renewable sources of energy will result in opportunities for many resource-rich countries because they possess the minerals and metals used in manufacturing these new technologies,” said Christopher Sheldon, Practice Manager for the World Bank’s Energy and Extractive Industries Global Practice. “The Sourcebook will help guide these countries forge long-term strategies for sustainable mineral extraction.”



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