The Extractive Industries Governance Framework

Together with an open system of transparency and accountability, the right social and economic policy choices can counter the resource curse. The figure below shows how economic and social policy interrelate, the relationship between the economic, legal and social framework, and how these frameworks relate to the natural resource chain. Transparency and accountability are important in all stages of the policy decision-making process, including the monitoring and evaluation of progress and policy outcomes.

The ultimate goal is to make resource revenues contribute to long-term sustainable development.  Effective use of resources requires a plan or vision of what the country wants to do and how resources can help the country in getting there. These larger goals should guide all of the individual decisions along the entire value chain. All decisions that have to be made throughout the value chain, such as the decision to extract, the awarding of contracts, the laws and regulations regarding environmental issues, fiscal regimes, and the spending of resource revenues should be set so as to provide maximum benefit for the citizens.  Citizens benefit from extractive industries if the sector’s revenues are used or invested by the government in such a way that results in economic and social welfare for all of its citizens and future generations (for example through job creation, infrastructure improvements, improved healthcare facilities, access to education, etc.)

The management of natural resources along the value chain should fit into the country’s long term economic and social development goals and poverty reduction strategies (the Natural Resource Charter, 2009). The development of natural resources should be designed to facilitate the maximum benefit to the citizens of the country within the framework of its long-term development goals. This requires a vision and a plan for natural resources management.

A country’s long term economic and social development goals should be clearly outlined in a strategic framework that uses social and economic planning scenario’s to reach the country’s long term goal. A strategic framework should reach beyond the annual budget and include a medium-term budget, strategies for consumption, investment and expenditure smoothing, and it should include ways to let resource-revenues contribute to the country’s economic and social development and poverty reduction.