1. CASM 6th Annual Conference, Antsirabe, Madagascar November 11-15, 2006
Strategic Environmental Assessment as a Tool for Minerals Policy*
Gary McMahon
Consultant
* - Adapted from a presentation made in collaboration with Fernando Loayza, World Bank

2. STRUCTURE

3. Introduction: SEA and institutional analysis
Institutional challenges of mining sector
Implications for SEA
The Sierra Leone Pilot
Conclusions

4. INTRODUCTION

5. What is SEA? Strategic Environmental Assessment (SEA)
includes analytical and participatory approaches
integrates environmental considerations into policies, plans and programs and
evaluates inter linkages with economic and social considerations.

6. Institutions and governance are
Policy SEA
Policies have significant effects on future projects and programs
Induced development impacts are paramount in policies
Political economy is crucial as policy impacts are influenced by powerful stakeholders
Environmental
Impacts are
uncertain
Institutions and governance are
the main thrust of SEA

7. INSTITUTIONAL CHALLENGES IN THE MINING SECTOR

8. Institutional Framework
Mining Policy
Mineral rights
Access to land & water
Mining taxation
Local/regional obligations
Other Key Institutions
Environmental regulations
FDI regime
Property rights, contract law, judiciary, dispute resolution mechanisms
Indigenous peoples’ rights
Labor laws

9. Institutional Challenges (1)
Local production but national implications
Leading sector for export & fiscal revenues
Point source so more easily ‘corruptible’; powerful stakeholders against reform
Distribution of rents (taxes)
Inter-jurisdictional conflicts
Large investments with long time horizons
Long-term property rights
Contingent contracts; dispute resolution
Costs continue after site closure

10. Institutional Challenges (2)
High capacity requirements
Demanding macro policy capacity
Mining administration including negotiations
Local governance capacity
Monitoring and enforcement capacity
Socio-economic and technological heterogeneity
Artisanal low-tech & difficult to control but high employment & complex sociological setting
Large-scale high-tech & more controllable but low employment & wealthy sociological enclave

11. Results of Weak Institutions
Mining sector held hostage to macroeconomic needs
Property rights not well defined or well defended
Rule of law difficult to enforce & superseded by short-term decisions
Key stakeholders are marginalized or excluded
Local and indigenous communities
Small scale and artisanal miners
Unsustainable local development
Environmental and social impacts dominate
Linkages, social capital and human capital undeveloped
Boom and bust cycle

12. Implications for ASM
Importance depends on generation of fiscal & forex revenues
Government pays little attention to ASM otherwise (unless conflicts)
Might makes right
Security is a private affair
Conflicts of ASM with larger-scale operations
Policy focuses on needs of formal sector
Reforms often irrelevant to ASM sector
Collective action problems dominate in ASM sector
Conflicts with local communities
But no other options

13. IMPLICATIONS FOR SEA

14. Levels of institutional analysis (1)
Political economy analysis
Reforms distorted at policy-making stage
Reforms only partially implemented
Local issues subservient to macro goals
Distribution of rents (and other taxes)
Local benefits captured
Legal and security issues
Equity in property rights
Enforceability of property rights, contracts, and laws in general
Efficiency of judicial system
Controlling potentially violent situations

15. Levels of institutional analysis (2)
Capacity analysis
Ability of local communities to benefit from new opportunities (governance, social capital)
Capacity to M&E new laws & regulations (funding)
Ability of civil service to use skilled people efficiently and retain them (funding)
Local community issues
Relationship between artisanal miners & lcs
Relationship between large mining operations & lcs
Skills development for mining jobs, provision of goods & services to mines, alternative income opportunities
Infrastructure
Informal institutions

16. Stakeholder Participation
Intersectoral and multi-stakeholder coordination
Trilateral dialogue: government, industry and communities
Benefit sharing and greater equity between holders of mineral rights and natural resources property rights needs to be discussed
Views and concerns of vulnerable stakeholders need to be incorporated in policy design and implementation

17. SEA Institutional Analysis
Effectiveness requires to focus on key issues
Institutional analysis should not be a standalone exercise
Identification of environmental and social priorities
Assessing likely significant effects of mining policy on priorities
Assessing institutional weaknesses to address likely significant effects
Adjust proposed policies to address institutional weaknesses, and
Implement monitoring and evaluation mechanism for continuous learning

18. SEA and the ASM Sector Beyond measuring community impacts of ASM
Recognition of ASM as important source of employment & income
Understanding political economy of ASM
Analyzing how current policies affect ASM behavior
Designing innovative policies to overcome political economy and collective action obstacles
SEA as a tool for ASM
Forum for providing input to mining policy reform
Identify major obstacles to better sectoral performance and institutional solutions to benefit all stakeholders

19. THE SIERRA LEONE MINING SEA PILOT

20. Prioritization of Issues
Stakeholder analysis and identification of priorities
Local consultants using existing knowledge base
Emphasis on most vulnerable stakeholders
Political economy and institutional analysis
Report on international best practices
Prioritization workshops (4)
Stakeholders identify their top priorities
Stakeholders provide policy proposals or key issues that new policies must take into account
Ranking across impacts and across solvability

21. Policy Analysis and Recommendations
From policies to priorities
Effects of existing and proposed policies
Transmission mechanisms are key
3 case studies—artisanal, mechanized small-scale, large-scale
Measures to mitigate negative externalities
Institutional and governance analysis
Validation
4 regional validation workshops
Draft reports and policy matrix
National workshop
Final report and dissemination

22. CONCLUSIONS

23. Evolution and functioning of institutions cannot be neglected; local knowledge of history and transmission mechanisms very important
Policy reform must often include country specific institutional features for second best solutions to seemingly intractable sustainability problems
Environmental solutions must be socially sustainable and social solutions must be environmentally sustainable
The most state-of-the-art policy and institutional reforms may have perverse effects due to weak implementation or interest group capture