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Introduction to the resource curse Asia-Pacific regional workshop Willy H Olsen Advisor to INTSOK, Norwegian Oil and Gas Foundation Member of the Governing.

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Presentation on theme: "Introduction to the resource curse Asia-Pacific regional workshop Willy H Olsen Advisor to INTSOK, Norwegian Oil and Gas Foundation Member of the Governing."— Presentation transcript:

1 Introduction to the resource curse Asia-Pacific regional workshop Willy H Olsen Advisor to INTSOK, Norwegian Oil and Gas Foundation Member of the Governing Board, Revenue Watch Institute Bali 7th August 2007

2 Civil society has during the last decade been a driving force for change Civil society has during the last decade been a driving force for change The political agenda The political agenda The oil companies’ strategy The oil companies’ strategy The financial institutions’ policy The financial institutions’ policy Environment Environment Human rights Human rights Corruption Corruption Oil revenue transparency Oil revenue transparency You are making an impact!

3 The challenge is still enormous More than one billion people live on less than a dollar a day More than one billion people live on less than a dollar a day 70% in Africa 70% in Africa Laos, Cambodia, Burma and North Korea fall into the “bottom billion” group Laos, Cambodia, Burma and North Korea fall into the “bottom billion” group They are in the conflict trap They are in the conflict trap More than 70% have recently been through a civil war – or are still in one More than 70% have recently been through a civil war – or are still in one And in the natural resource trap And in the natural resource trap More than 30% of the poorest people live in countries where resource wealth dominates the economy More than 30% of the poorest people live in countries where resource wealth dominates the economy And where autocracies tend to outgrow democracies And where autocracies tend to outgrow democracies Source: Paul Collier, The Bottom Billion

4 The resource curse will not go away  Escalating global demand for natural resources, higher prices and fierce competition is deepening the challenge  The problem of the resource curse is likely to become even more entrenched and prominent in this environment  Autocratic leaders will have fewer incentives to forge compromises with domestic opponents  They will no longer have to yield to international pressure

5 What is required to turn the tide? Good governance, transparency and participation are essentially prerequisites Good governance, transparency and participation are essentially prerequisites Extractive industries can be an engine of development Extractive industries can be an engine of development It will require It will require Capacity to monitor companies and enforce laws Capacity to monitor companies and enforce laws Rights of assembly Rights of assembly Freedom of information Freedom of information Other basic civil and political liberties Other basic civil and political liberties We have seen successes We have seen successes Norway Norway Chile Chile Botswana Botswana Trinidad Trinidad

6 Strong governance Weak Governance Governance Indicator Mexico Malaysi a Kuwait United Kingdom Norway Source: World Bank Most resource rich are at the bottom of the governance list

7 Why is good governance an issue?

8  West Africa has produced 35 billion barrels of oil worth $1 trillion over last 40 years  Oil producing countries are no better off than non oil producing countries

9 “ By past experience, you could wish nothing worse upon a developing country than an oil find... “ By past experience, you could wish nothing worse upon a developing country than an oil find... No longer needing to rely on taxes, they become less answerable to their people No longer needing to rely on taxes, they become less answerable to their people Oil has proved an addiction for the rulers Oil has proved an addiction for the rulers Financial Times editorial, 8 October 2003 Financial Times editorial, 8 October 2003

10 The regions natural resources has been an attraction for generations….

11 Oil has historic roots in the region Oil seepages were reported from the Dutch East Indies for hundreds of year before commercial exploitation Oil seepages were reported from the Dutch East Indies for hundreds of year before commercial exploitation “Earth oil” was used in traditional medicine “Earth oil” was used in traditional medicine The first commercial discovery was made in 1885 in a concession awarded to Aelilko Jan Zijlker, manager of a tobacco plantation by the Sultan of Langkat The first commercial discovery was made in 1885 in a concession awarded to Aelilko Jan Zijlker, manager of a tobacco plantation by the Sultan of Langkat He called the company Royal Dutch He called the company Royal Dutch Dutch King William III allowed use of “Royal Dutch” after the first oil discovery Dutch King William III allowed use of “Royal Dutch” after the first oil discovery

12 Burma became Britain’s oil source Burmah Oil was created based on oil in Burma in 1896 by Scottish merchants Burmah Oil was created based on oil in Burma in 1896 by Scottish merchants They transformed small “oil industry” in Burmese villages, building a refinery in Rangoon They transformed small “oil industry” in Burmese villages, building a refinery in Rangoon Supplying India and the British navy with oil Supplying India and the British navy with oil Burmah Oil was the first British NOC – worked closely with the Royal Navy for years until BP emerged in Iran Burmah Oil was the first British NOC – worked closely with the Royal Navy for years until BP emerged in Iran Burmah collapsed in the 1990s and the remains ended in BP’s hands Burmah collapsed in the 1990s and the remains ended in BP’s hands

13 Intense rivalry between companies and countries By the turn of the century, oil had been discovered in North and South Sumatra, Central and Eastern Java and East Kalimantan By the turn of the century, oil had been discovered in North and South Sumatra, Central and Eastern Java and East Kalimantan Refineries had been established in each area. Refineries had been established in each area. The attractiveness of the region, resulted battles between companies and countries The attractiveness of the region, resulted battles between companies and countries The Dutch Government kept US companies out of Indonesia for years The Dutch Government kept US companies out of Indonesia for years Britain kept all others out of Burma Britain kept all others out of Burma

14 The region created two of the world’s most famous oil men Marcus Samuel Marcus Samuel The founder of Shell The founder of Shell His success was based on discoveries in Borneo His success was based on discoveries in Borneo Henri Deterding Henri Deterding The founder of Royal Dutch The founder of Royal Dutch His success was based on discoveries in Sumatra His success was based on discoveries in Sumatra The two merged and controlled oil in Asia and Russia

15 Where are we now?

16 Big Oil is still the leading force The major oil companies have dominated the development of the oil and gas sector in Asia Pacific for some 100 years The major oil companies have dominated the development of the oil and gas sector in Asia Pacific for some 100 years The international oil companies have the financial strength The international oil companies have the financial strength They have the technology increasingly required in the region as it moves away from easy oil and gas They have the technology increasingly required in the region as it moves away from easy oil and gas

17 NOCs are becoming more aggressive The region’s national oil companies have a varied background and history The region’s national oil companies have a varied background and history ONGC established in 1956 replacing the oil and gas commission ONGC established in 1956 replacing the oil and gas commission Pertamina established in p ioneered the production sharing contracts Pertamina established in p ioneered the production sharing contracts Several were established in the 1970s to secure supplies of oil and gas Several were established in the 1970s to secure supplies of oil and gas Others were former communist ministries Others were former communist ministries The NOCs are now expanding outside their home country – competing with IOCs The NOCs are now expanding outside their home country – competing with IOCs

18 A new group of explorer moving in Aabar Petroleum Aabar Petroleum Anardarko Anardarko Anzon Anzon Apache Apache Arc Arc Austral Austral Baraka Baraka Beach Beach BHP Billington BHP Billington Cairn Cairn Camar Resources Camar Resources Canoro Canoro Cooper Energy Cooper Energy Continental Energy Continental Energy Cosmos Oil Cosmos Oil Cue Energy Cue Energy EMP EMP Essar Essar Gail GFI Hess Horizon Idemitsui Incremental Resources Inpex Indian Oil Corp Itochu Jana Corporation Japex Kufpec Lapindo Loon Energy Markmore Medco Mitsui Mitra Mosaic Oil MOGE MOGE Nexus Nexus Niko Resources Niko Resources Nippon Oil Nippon Oil Oil Search Oil Search OMV OMV Origin Energy Origin Energy Otto Energy Otto Energy Petrobangla Petrobangla Petromin Petromin Petron Petron Premier Premier Range Resources Range Resources Reliance Reliance Roc Oil Roc Oil Salamander Energy Salamander Energy Santos Santos Satria Energindo Satria Energindo Satria Wijaya Kusuma Satria Wijaya Kusuma Soco Soco Sound Energy SK Energy Sound Energy SK Energy Swift Energy Swift Energy Tara Resources Tara Resources Teikoku Oil Teikoku Oil Tepco Tepco Todd Exploration Todd Exploration Valient International Valient International Vital Resources Vital Resources Woodwide Woodwide Woodside Woodside

19 The regions reserves are small Middle East Europe/ FSU Asia PacificAfrica Latin America North America Share of global oil reserves Share of global gas reserves

20 But companies invest like never before * SEA : Australia, China, Indonesia, Malaysia Investments in new offshore projects 2008 – 2011 Nigeria Angola China Australia Malaysia Indonesia Billion dollars

21 Billion cubic meters Source: BP’s statistical review of world energy Lack of democracy no obstacle Natural gas exports are Burma’s largest source of foreign exchange earnings Several NOCs are at the front

22 Economic growth needs energy

23 Securing energy supplies Security of supply is on top of the agenda Asia Pacific’s new challenge is to secure enough energy to meet the fast growing demand Asia Pacific’s new challenge is to secure enough energy to meet the fast growing demand The region is still discovering new resources in challenging environments and deeper waters The region is still discovering new resources in challenging environments and deeper waters Countries like Timor Leste and Papua New Guinea are increasingly exposed to risk of resource curse Countries like Timor Leste and Papua New Guinea are increasingly exposed to risk of resource curse

24 Politics and oil go hand in hand

25 Strengthening links between countries  The Asian countries offer billion dollar investments in infrastructure for attractive oil and gas assets  China, India and Korea are grabbing assets all over the world  Paying well above what IOCs are willing to offer – entering deals of limited interest to most IOCs President Roh Moo-hyun of Korea meets President Olusegun Obasanjo

26 Driven by the need to secure energy North America Middle EastAfrica Latin America Share of global oil consumption Asia Pacific Europe FSU Share of global gas consumption North America Europe FSU

27 “Resource nationalism” not a major factor in Asia Pacific National interest Commercial interests High Russia Venezuela Kazakhstan India China Angola Libya Timor Leste Iran Russia Malaysia Thailand Vietnam Indonesia Philippines Nigeria Bolivia Algeria Bangladesh Australia

28 Economic growth needs raw material

29 Symbols of wealth – but often only symbols Gold and diamonds are a symbol of wealth, but mining in developing countries has done little to reduce poverty Gold and diamonds are a symbol of wealth, but mining in developing countries has done little to reduce poverty Mining has been closely linked to conflict Mining has been closely linked to conflict Mineral-dependent developing countries are as likely to suffer from corruption and poor governance as the oil and gas dependent Mineral-dependent developing countries are as likely to suffer from corruption and poor governance as the oil and gas dependent And the mining companies have often caused lasting damage to communities and to the environment And the mining companies have often caused lasting damage to communities and to the environment

30 Civil society scrutiny can work The Norwegian Petroleum Fund has withdrawn its investments in several mining companies due to their behavior after strong civil society engagement The Norwegian Petroleum Fund has withdrawn its investments in several mining companies due to their behavior after strong civil society engagement DRD Gold Limited, the owner of Emperor Mines Limited, which runs a gold mine in Papua New Guinea and disposes tailings into the river DRD Gold Limited, the owner of Emperor Mines Limited, which runs a gold mine in Papua New Guinea and disposes tailings into the river Freeport McMoRan Copper and Gold Inc, operating one of the world’s largest copper mines in New Guinea in Indonesia. Freeport McMoRan Copper and Gold Inc, operating one of the world’s largest copper mines in New Guinea in Indonesia. The pressure is now on to exclude Barrick Gold for its operations in the Philippines The pressure is now on to exclude Barrick Gold for its operations in the Philippines

31 Competition is becoming tougher Mining activity is dominated by multinational companies, from the United States, Canada, South Africa, Australia and the UK They have the capacity to carry out large-scale operations. New aggressive giants are emerging from Russia, Brazil and China A large number of mining ‘juniors’ are prepared to take on higher risks, operating in an area of political instability, often far less transparent than the big companies The mining industry is again making large profits, pursuing the few world-class assets left

32 The miners find the region tough 65 mining regions are included and most Asia-Pacific countries are among the bottom 20 Source: Fraser Institute’s annual mining survey 2007

33 The new issue on the top of the agenda

34 T he climate issue will become critical Illustration: The Economist Energy fuels the regions – and especially China’s relentless economic growth China ’ s carbon dioxide emissions in will surpass those of the United States Coal delivers 80% of the China’s electricity 500 new coal fired plants planned How will the region react to the climate issue?

35 Lets return to the resource curse and look at the Asia – Pacific region…

36 The dream for many… The petroleum sector should be The petroleum sector should be Source of Government revenues Source of Government revenues Engine of growth Engine of growth Supply industrial raw material Supply industrial raw material Creating multiplier effects in the society Creating multiplier effects in the society And not leave harmful environmental footprints And not leave harmful environmental footprints

37 The dream is just a dream for many Some 50 countries are rich in hydrocarbon and mineral resources, but the potential for positive developmental impact has not been realized Some 50 countries are rich in hydrocarbon and mineral resources, but the potential for positive developmental impact has not been realized Resource-rich developing countries have experienced Resource-rich developing countries have experienced Low per capita growth rates Low per capita growth rates  Slow progress in human development  Social and political instability and violence  And high corruption

38 PNG has not seen the benefits yet Mining has been a dominant part of the economy Mining has been a dominant part of the economy Oil and gas is growing in importance Oil and gas is growing in importance LNG scheme on the drawing board LNG scheme on the drawing board Oil Search generates 13% of GDP and 23% of export earnings Oil Search generates 13% of GDP and 23% of export earnings Economic growth has been volatile and declining since 1960 Economic growth has been volatile and declining since 1960 Real GDP per capita was 50% lower in 2004 than at independence in 1975 Real GDP per capita was 50% lower in 2004 than at independence in 1975 But some progress in the last 4 years But some progress in the last 4 years Rent-seeking activities are reportedly high in many areas, particularly in the resource-based sectors Rent-seeking activities are reportedly high in many areas, particularly in the resource-based sectors

39 Did Indonesia escape the resource curse? Indonesia illustrates how a major oil producer has overcome unfavorable initial conditions and temptations to squander oil windfalls Indonesia illustrates how a major oil producer has overcome unfavorable initial conditions and temptations to squander oil windfalls

40 Saved by the oil price collapse Indonesia was one of the world’s poorest countries in the mid-1960s Indonesia was one of the world’s poorest countries in the mid-1960s Invested in agriculture during the oil boom in the 1970s Invested in agriculture during the oil boom in the 1970s Economic reforms when the price collapsed in the 1980s Economic reforms when the price collapsed in the 1980s The share of manufactures exports rose from 7% to nearly 50% between 1983 and 1992 The share of manufactures exports rose from 7% to nearly 50% between 1983 and 1992 The collapse of world oil prices became a blessing in disguise The collapse of world oil prices became a blessing in disguise

41 Pertamina – one of the worst NOCs The national oil company Pertamina has been one of Indonesia’s problems Made risky investments in the 1970s Lost billions of dollars in the 1990s through corruption and inefficiencies Pertamina built strong political alliances It had a large number of contracts with former President Suharto’s family and associates More than 150 contracts have now been cancelled or re-tendered President Suharto held office from 1967 to 1998

42 Facing a new reality with new reforms Oil sector Gas sector World’s largest LNG exporter Domestic consumption Focus on domestic gas use

43 Malaysia has been successful Malaysia initiated export oriented industrial policy, welcoming foreign direct investment Malaysia initiated export oriented industrial policy, welcoming foreign direct investment The government invested in infrastructure, education and health The government invested in infrastructure, education and health The petroleum sector was not allowed to drive up costs and wages in the economy, resulting in rapid non-oil industrialization The petroleum sector was not allowed to drive up costs and wages in the economy, resulting in rapid non-oil industrialization The result has been sustained economic growth, curtailed high poverty rates and reduced income inequalities The result has been sustained economic growth, curtailed high poverty rates and reduced income inequalities

44 Petronas is a model NOC for many Petronas is a Ministry, a regulator and a NOC It reports directly to the Prime Minister It is an important instrument at home and abroad Government does not interfere in day-to-day operations But is it a transparency model? Billion RM Gas subsidies Payment to Government 2006

45 Philippines’ gas dream Malampaya is the first deep water gas field in the region and will have significant impact on the country’s economy Malampaya is the first deep water gas field in the region and will have significant impact on the country’s economy Reducing energy import burden with some 700 mill dollars a year Reducing energy import burden with some 700 mill dollars a year 13 billion dollars in royalties over 20 years 13 billion dollars in royalties over 20 years “These enormous sums should go a very long way towards financing our plans and programs for the conquest of mass poverty and for our country’s modernization” Prime Minister at the opening of production 2001

46 Timor Leste’s dream The Bayu Undan gas and condensate field is providing substantial revenues The Bayu Undan gas and condensate field is providing substantial revenues Part of the treaty with Australia Part of the treaty with Australia Timor Leste will become very dependent on petroleum revenues Timor Leste will become very dependent on petroleum revenues 90% of GDP by % of GDP by 2010 The oil fund is growing fast The oil fund is growing fast Institutions and objectives in place but do not match the rapid growth in revenues Institutions and objectives in place but do not match the rapid growth in revenues Building a transparent system Building a transparent system Looking for a sustainable future Looking for a sustainable future

47 Vietnam prefers to invest – not save Vietnam has achieved sustained economic growth and progress in poverty reduction Growth has outperformed most other low-income countries IMF recommends saving the windfall oil profit, but Vietnam disagrees and will increase investments Thousand barrels/day Oil production

48 Bangladesh dilemma – export or not Export of natural gas has been a major political issue in Bangladesh for years Export of natural gas has been a major political issue in Bangladesh for years The government has been under pressure to take a decision in favor of exporting natural gas to India, but has preferred gas export in the form of electricity and fertilizers The government has been under pressure to take a decision in favor of exporting natural gas to India, but has preferred gas export in the form of electricity and fertilizers “No exports unless we have reserves to meet domestic demand for 50 years”, has been the message “No exports unless we have reserves to meet domestic demand for 50 years”, has been the message Bangladesh has seen good economic progress, but will not to prosper until the country has improved its political and economic governance Bangladesh has seen good economic progress, but will not to prosper until the country has improved its political and economic governance

49 Can Cambodia prepare itself? Cambodia has found oil – but will it be able to handle future revenues? Cambodia has found oil – but will it be able to handle future revenues? Up 1 billion dollar annually are seen as the potential future revenues Up 1 billion dollar annually are seen as the potential future revenues The country has seen progress, but still faces difficult challenges The country has seen progress, but still faces difficult challenges High rural poverty rate High rural poverty rate Lack of access to quality health services. Lack of access to quality health services. Weak institutions and high level of corruption Weak institutions and high level of corruption Hydrocarbon law on Hydrocarbon law on the menu Chevron has found oil but how much? And when will it begin to flow?

50 New countries hope to join the club Sri Lanka will offer three blocks in its maiden offshore licensing round in August Sri Lanka will offer three blocks in its maiden offshore licensing round in August Two blocks are earmarked for Indian and Chinese NOCs Two blocks are earmarked for Indian and Chinese NOCs Laos has awarded the UK based Salamander Energy the first PSC Laos has awarded the UK based Salamander Energy the first PSC The block was operated Enterprise from The block was operated Enterprise from Nepal is hopeful that Cairn Energy will be successful Nepal is hopeful that Cairn Energy will be successful Its subsidiary Capricorn holds most of the acreage and is accelerating exploration work Its subsidiary Capricorn holds most of the acreage and is accelerating exploration work Afghanistan is trying to revitalize the old oil and gas sector and has been approached by companies Afghanistan is trying to revitalize the old oil and gas sector and has been approached by companies

51 Why is the natural resources such a challenge? The revenues are a source of revenue independent of a countries’ citizens The revenues are a source of revenue independent of a countries’ citizens Economists call it “rent” Economists call it “rent” Government see no need to grow tax base Government see no need to grow tax base Patronage politics often dominate Patronage politics often dominate Rapid increases in revenues leads to unsustainable spending Rapid increases in revenues leads to unsustainable spending Brain-drain reduces capacity to diversify economy Brain-drain reduces capacity to diversify economy Rent-seeking reinforces clan structures and social divisions Rent-seeking reinforces clan structures and social divisions Dutch Disease Dutch Disease Oil Revenue Volatility Oil Revenue Volatility Institutional capacity Institutional capacity

52 Source: EIA You must handle volatile oil prices

53 But will they be as volatile in the future? Many governments and companies in the extractive industries are now emboldened by the new “super-cycle” Many governments and companies in the extractive industries are now emboldened by the new “super-cycle” The boom in commodity prices have lasted for more than five years The boom in commodity prices have lasted for more than five years China’s demand for oil, gas and metals to drive the economy forward will not change any time soon China’s demand for oil, gas and metals to drive the economy forward will not change any time soon India’s growth will provide further price support India’s growth will provide further price support Politicians and industry leaders are becoming more bullish Politicians and industry leaders are becoming more bullish Companies are paying a premium for assets enabling them to grow Companies are paying a premium for assets enabling them to grow And governments are fast expanding their budgets And governments are fast expanding their budgets

54 Many hope the price stays high Azeri profit oil Cost oil IOC profit oil 25 dollar per barrel 60 dollar per barrel Source: BP Azeri profit oil Thousand barrels per day

55 But catching a sniff of Dutch disease Azerbaijan has established an oil fund to handle the large revenues – but is struggling to manage the revenues Azerbaijan has established an oil fund to handle the large revenues – but is struggling to manage the revenues Some 500 billion dollars could be transferred to the Government by 2024 Some 500 billion dollars could be transferred to the Government by 2024 The high revenues are undermining budget discipline The high revenues are undermining budget discipline Government spending increased 80% in 2006 Government spending increased 80% in 2006 Inflation is growing fast Inflation is growing fast Azerbaijan signed the first PSA in 1994 Azerbaijan signed the first PSA in 1994 An Oil Fund was set up in 2000 An Oil Fund was set up in 2000 The Fund is now 1.3 billion dollars The Fund is now 1.3 billion dollars

56 What needs to be done?

57 Good governance is critical Resource-rich countries do not score well on governance Resource-rich countries do not score well on governance They often lack They often lack Clear and stable laws and regulations Clear and stable laws and regulations High level of capacity and skills in government High level of capacity and skills in government Fiscal monetary and budget discipline Fiscal monetary and budget discipline Open dialogue between government and civil society Open dialogue between government and civil society Public sector/private sector balance Public sector/private sector balance Transparency Transparency

58 Governance – you have a long way to go New Zealand Australia Japan China Myanmar Source: World Bank Governance Indicators 2006 The indicator is based on six different dimensions from voice and accountability to rule and law as well as corruption Vietnam Laos Brunei Cambodia

59 Good Governance adds significant value  Governance matters for the country’s competitiveness and income distribution  Improvements in governance and anti- corruption actions can unleash the full potential of private sector led growth  The impact of improving governance from a low level to an average level is substantial  Almost tripling the income per capita of the population  Reduce infant mortality and illiteracy

60 Transparency – crucial element Transparency is one of the fundamental building blocks of good governance Transparency is one of the fundamental building blocks of good governance Transparency: Transparency: Increases accountability and reduces the risk of waste and corruption Increases accountability and reduces the risk of waste and corruption Fosters democratic debate Fosters democratic debate Improves macroeconomic management Improves macroeconomic management Enhances access to finance Enhances access to finance Transparency and accountability will build trust Transparency and accountability will build trust

61 Companies will benefit from openness Several large companies have joined EITI Several large companies have joined EITI Others are still reluctant Others are still reluctant Some a making all revenue payments known Some a making all revenue payments known Others hide behind “aggregated payments” Others hide behind “aggregated payments” Corporations will benefit Corporations will benefit It will ensure that people has realistic expectations It will ensure that people has realistic expectations It can reduce social tension, potential for corruption and macroeconomic instability It can reduce social tension, potential for corruption and macroeconomic instability It will improve the investment climate It will improve the investment climate

62 State owned companies must improve  Principles of good Governance  A clear mission  A professional Board  Good management structure  Published audited accounts  Transparent and accountable  The situation for many  Unclear mission and role  Low transparency  Lack of accountability  Inadequate budget procedures  Fund confiscating  And they often operate as a state – in - the - state

63 Fight the war against corruption Nigeria decided that being perceived as the poster child for corruption was no longer acceptable Nigeria decided that being perceived as the poster child for corruption was no longer acceptable Anti-corruption policies have to be more than a political statement Anti-corruption policies have to be more than a political statement It will require enforcement – also against the “big guys” It will require enforcement – also against the “big guys” It will require institutional reforms It will require institutional reforms It will need committed leadership It will need committed leadership

64 “ Oil profits generally seem to find their way by some invisible pipeline into private pockets” “ Oil profits generally seem to find their way by some invisible pipeline into private pockets” Lloyd George, British Prime Minister March 1920

65 New Zealand Australia Japan Malaysia Cambodia Myanmar Source: World Bank Governance Indicators 2006 Brunei Corruption is a huge drain on public resources Undermining the social fabric and people's confidence in their country's future. The region needs to intensify the fight

66 Contracts need to be transparent Contracts with oil, gas and mining companies should secure maximum revenue transfer to host country Contracts with oil, gas and mining companies should secure maximum revenue transfer to host country Indonesia created a “simple” production sharing contract in 1967 Indonesia created a “simple” production sharing contract in 1967 The contracts have become far more complex since then The contracts have become far more complex since then They are often non-transparent and difficult to understand They are often non-transparent and difficult to understand Even for government officials Even for government officials Many are now creating model contracts and introducing transparent bidding to reduce the risk of corruption Many are now creating model contracts and introducing transparent bidding to reduce the risk of corruption

67 Reduce opportunities for theft Transparency and reliability of natural resource revenue data are needed for the effective management of public resources Transparency and reliability of natural resource revenue data are needed for the effective management of public resources Policy makers need good information to devise the right policies Policy makers need good information to devise the right policies The public needs high-quality information to trust the policy makers in their handling of the country’s wealth The public needs high-quality information to trust the policy makers in their handling of the country’s wealth Fiscal systems and structures have to be transparent and accountable to ensure success Fiscal systems and structures have to be transparent and accountable to ensure success Nigeria is now publishing monthly all revenue allocation figures of all tiers of government. Nigeria is now publishing monthly all revenue allocation figures of all tiers of government.

68 Audit the sector Institutionalize regular independent audits of reserves, financial flows and processes and practices Auditors should identify and comment on any observed irregularities or discrepancies. Government may comment on the auditors’ reports, but audits should be made independently of any government review or editing. And audits must be made available to society at large

69 Building institutional capacity critical One of the major challenges for Governments is lack of skilled people One of the major challenges for Governments is lack of skilled people Norway has been active in capacity building in Bangladesh for a long period – but the results have been limited Norway has been active in capacity building in Bangladesh for a long period – but the results have been limited The Hydrocarbon Unit has not been able to retain is good staff due to lower salaries The Hydrocarbon Unit has not been able to retain is good staff due to lower salaries Petrobangla, the national oil companies, has been able to pay more – and get the best Petrobangla, the national oil companies, has been able to pay more – and get the best What will happen in Timor Leste? What will happen in Timor Leste? Or Cambodia? Or Cambodia?

70 The right to know  The public have a right to know how much revenue is being generated, ensuring that its distribution is fair and correct.  Transparency not only removes the cover for corruption, it also allows rapid intervention and builds trust.  Accountability of decision-making provides assurance to society

71 Secure EITI implementation Secure EITI implementation Get countries from the region to join Get countries from the region to join Scrutinize more companies Scrutinize more companies Expand the transparency agenda beyond natural resource revenues Expand the transparency agenda beyond natural resource revenues Licensing Licensing Contracts Contracts And expand focus on Government expenditures And expand focus on Government expenditures We still have a major job to do!

72 And never give up It is unfortunately a lot easier and quicker to build an oil pipeline than an efficient state or a functioning democracy. It is unfortunately a lot easier and quicker to build an oil pipeline than an efficient state or a functioning democracy.


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