Dear friends and colleagues,

I write to share some NRGI developments and a few thoughts in the midst of what admittedly are uncertain times globally.

Let me first focus on the shrinking civil society space in many resource-rich countries. Further entrenchment of authoritarian governments (in increasingly “managed” democracies) and the radicalization of factions that oppose them has resulted in increased civil strife and violence, and a squeeze on civic space in the middle.

Add to this the economic slowdown in Europe and China, the recent drop in commodity prices, and high-level corruption scandals in a number of countries, and it is evident that we are facing a new and complex reality. This current environment of multiple “lows”—low tolerance, low prices, and low growth—poses fresh challenges as well as opportunities, and warrants rethinking and adaptation, including for us at NRGI.

The picture is particularly grim in many oil-rich countries, such as Azerbaijan, Russia and Venezuela. We have found that in most resource-rich countries, many of which are members of the Extractive Industries Transparency Initiative (EITI), the now-past period of high prices coincided with growing constraints on civil society.

This is of grave concern, since civil society engagement is essential if transparency initiatives are to be effective in making governments accountable to their citizens. Recently, a concerted push led to EITI’s adoption of a protocol for assessment of civil society environments in EITI countries. The protocol is already being applied in practice: Azerbaijan has just been held to account by the EITI international board (on which I serve) and the country has been downgraded from “compliant” to “candidate” status. At issue is the systematic and growing government-led persecution of civil society leaders and organizations. During my visit to Baku last week (to present at the Asian Development Bank annual meetings), I met with many stakeholders to review and discuss the multiple challenges faced by civil society in Azerbaijan, and I participated in constructive discussions aimed at moving the country out of dire straits.

When harnessed accountably, oil is still a valuable national asset, even if its market value has fallen; likewise with minerals. With the plunge in commodity prices has come much understandable anxiety, in many corners—from ministry offices and legislative chambers to corporate executive suites. In fact, extractive companies face a rather different reality today, due to the drop in prices; the changing landscape in governance and politics; and enhanced scrutiny of corporate accountability, tax avoidance and corruption. Engaging with companies, as well as governments, civil society, parliaments and media, is an integral part of NRGI’s strategy.

With partners, we are working on the challenges and opportunities brought by lower prices, including in areas of governance improvements, such as reductions in inefficient, unequitable and fiscally onerous subsidies; the revamp of state companies and natural resource funds; and approaches to improving subnational governance and addressing corruption in extractives.

In the past boom decade, innovations in natural resource analysis, policy advice and advocacy surfaced, yet the actual implementation of governance and policy reforms in the extractives sector fell short. We must learn from this experience if decisive progress is to take place in the coming decade. We must operate more effectively by infusing technocratic solutions with a smart dose of governance and political economy considerations. The causes and consequences of Brazil’s Petrobras corruption scandal make up one cautionary tale about the risk of over-reliance on technocratic solutions alone. Similarly, sensible strategies and reform initiatives (such as the revamp of the national oil company) by Nigeria’s new government must address corruption in key institutions while taking into account political incentives.

It is also the case that that the drop in oil prices can be used as a fig leaf. While some governments may point to low prices as an explanation for their troubles, the fundamental determinants of their woes are more self-inflicted than external: in countries like Venezuela, Ghana and Sierra Leone, prior mismanagement and misguided policies are the root cause.

Meanwhile, we at NRGI are deepening our capacity building and shared learning offerings, such as the recently completed natural resource global course with the Central European University in Budapest, an innovative training of trainers held in Bogota, and the regional training on data in extractives held in Istanbul. We launched an online reader series on key aspects of oil, gas and mining governance, and look forward to a flagship course with senior policy-makers to be held with the Blavatnik School at Oxford University, as well as the upcoming regional summer course in Africa.

Encouragingly, we are also witnessing some results from the hard policy analysis and advocacy work around mandatory disclosure of extractive companies’ payments to governments. Statoil’s watershed reporting and Tullow’s now-annual project-level disclosures show that some companies recognize the benefits of transparency and are taking initiative, in some cases prodded by new regulations. Yet even as moves by Statoil and Tullow undermine the oil lobby’s arguments against transparency, most of the oil majors are still stuck in the opacity of the past.

Governments in the industrialized world, often unduly influenced by industry, must step up as well: further progress on implementing payment disclosure legislation ought to take place in the coming months in the UK, US and Canada. In tandem with securing these revenue transparency gains, we will work on furthering the disclosure of contracts and the identities of beneficial owners of extractive companies. Transparency is a prerequisite for advancement that we have yet to fully attain.

We face a landscape with many challenges and crises, but also new opportunities. We look forward to making progress in partnership with you all.

Best regards,
Daniel Kaufmann
President, Natural Resource Governance Institute

The Natural Resource Governance Institute (NRGI) helps people to realize the benefits of their countries’ endowments of oil, gas and minerals. We do this through technical advice, advocacy, applied research, policy analysis, and capacity development. We work with innovative agents of change within government ministries, civil society, the media, legislatures, the private sector, and international institutions to promote accountable and effective governance in the extractive industries. For more information, please see: www.resourcegovernance.org.