Lessons from Around the World: Getting Subnational Governance Right

Community Insights' Ana Maria Esteves and RWI's Tony Paul and Carlos Monge speak on a panel on local content.
Country: International
Facebook logoTwitter logo

Following day one of the subnational workshop where participants shared challenges and solutions on planning for and managing extractive revenues at the local level, participants gathered in London to continue sharing experiences and to discuss the management of the oil, gas and mining industries from a local viewpoint, this time looking at local content and transparency in expenditures.

Local content is about capturing value from company operations in ways that the country reap benefits through skills and technology transfer, facilities, employment and access to capital. For example, Newmont Mining spent $139 million in Ghana on local procurement of goods and services in 2010: 3 ½ times the $39 million it paid to the Ghanaian government. The big question is, how can countries, and the local communities in particular, get a share of that money and use it for local economic development?

The day started with comments from Soehadi Melyono, who works for the local government in Bojonegoro district, Indonesia. The district has passed regulations to make sure each operating company opens a local office and to ensure that 100 percent of the companies' unskilled labor force comes from Bojonegoro. RWI's Latin America coordinator Carlos Monge shared experiences of local content in Peru and Brazil, where strong legislation means companies have no choice but to use local services for everything from catering to construction needed for oil exploitation. RWI board member Tony Paul spoke of the importance of considering local content beginning with the conception phase of a project. Otherwise, locals can be eliminated before the project has even begun. This RWI draft paper looks at local content, and we'd like to have your comments on it.

The conversation turned to the monitoring of direct social expenditures, which can take the form of fund transfers from companies to local governments for agreed-upon projects or in-kind benefits to communities. These expenditures are growing in significance as companies place increased importance on their corporate social responsibility programs. In Mexico, access to these funds is managed by the national oil company, PEMEX. Francisco Cravioto from Fundar told of the push for PEMEX to publish details on the beneficiaries and allocation of funds. This information is now available on the PEMEX website.

In Brazil, the Brazilian Institute of Social and Economic Analyses collaborated with companies so the money could be spent in the best way, but faced challenges regarding the reliability of company data on the nature and value of the social projects that were completed. These direct expenditures, which will continue growing, are beginning to be included in agreements signed by companies with governments, thereby ceasing to be voluntary. We are currently accepting comments on our draft paper on the issue of social expenditures.

The final session looked at the transparency of revenues and expenditures at a subnational level. While it's been easier to find information on revenue receipts and overall allocations from the national government through budget information and Extractive Industry Transparency Initiative reports, gaining access to information on a subnational level is harder.

A Nigerian participant told of his organization publishing state budgets acquired informally, as the state government wasn't publishing them officially. Earlier this year however, the Bayelsa State in the Niger Delta in Nigeria passed the Bayelsa Income and Expenditure Transparency Act 2012, mandating the publication of both revenues and expenditures. This was achieved thanks to the Bayelsa Expenditure and Income Transparency initiative, involving civil society, companies and government. RWI supported this work by monitoring and tracking revenues in the Niger Delta. In much the same way, Maryati Abdullah spoke of a similar approach in Indonesia and the need to bring different stakeholders to work together so everyone is part of making the sector more transparent.

After looking at a range of topics over the two-day workshop, participants took stock of the different types of challenges and solutions and set out their hopes for making mining work better for communities. Francisco Cravioto from Fundar in Mexico said, "I wasn't aware of the diversity of the approaches to the same problems in so many different countries and contexts. It gives me new ideas." We should learn between countries and across continents. Niger can be inspired by Peru, who in turn is inspired by Indonesia.

In a discussion moderated by RWI President Daniel Kaufmann, participants and RWI staff further explored the relevance of subnational work in their regions and countries. With increasing decentralization in countries across the globe, more power lies with local governments, and we should not underestimate their potential to be effective. Difficult contexts should not be an excuse for old mistakes to be repeated, Kaufmann said, but rather we should seek political will for increased engagement and transparency at the local level for resource extraction to benefit communities.

Emma Tarrant Tayou is RWI Africa Regional Associate.

Post new comment