Possibilities of Support by the World Bank to the Mining Sector of the ACP Countries

Ministerial Meeting on Mineral Resources
Brussels December 13-15, 2010

Paulo De Sa Sector Manager Oil, Gas and Mining Policy Division World Bank

Outline of Presentation
Recent Developments in the Extractive Industries
   

Role of Emerging Players Flexible Fiscal Regimes Sustaining Community Benefits Beyond the “Resource Curse”

World Bank Response
  

World Bank Group – Oil, Gas and Mining Policy Division EITI++/Value Chain approach Lending, Non-lending, and Global Partnerships

but continue to value stable and transparent countries  Good governance on expenditures is key to maximize contribution to the economy  .Part I: Recent Developments in the Extractive Industries Commodity prices have gone through the full cycle. but the mid-term fundamentals remain the same: Governments remain key players in fostering enabling environment for sustainable development of the sector  Companies struggle to have access to new resources.

will play an increasingly important role in success of extractive industries ventures Climate change agenda puts spotlight on use of fossil fuels .What’s New?       Demand from emerging markets (BRICs) is expected to remain strong over the medium term Major consuming countries are setting-up “security of supply” policies BRIC companies are increasingly investing in extractive industries abroad and changing the traditional playing field Despite the rise in fiscal revenues. particularly around mining areas. many governments believe profits weren’t shared equitably in high price period Avoiding local conflict.

but investment flows to Africa remain strong In the long-run. the perception of risk and profitability of the two groups should converge.Role of Emerging Players     Important transfer of power from traditional western companies to firms headquartered in BRICs (mining) and national oil companies (petroleum) Non-traditional companies have different financial models and perceptions of risk than western firms. low-cost investment opportunities in Australia and Canada. financial crisis has opened new. former often invest where latter are reluctant (under new models) In mining. similarly for corporate behavior with respect to the environment and social responsibility .

resource rent taxes (Chile). Afghanistan) and renegotiation of “unfair” contracts . e. windfall profits taxes (Mongolia)..Governments Want a Better Upside from Investments Taxation: predictable flexibility  Mining sector saw negotiation of new frameworks to share revenues during good times.g. sliding scale royalties (Ghana.

increased local content. environmental management Distribution of revenues: how much back to the community? Some new players lack experience in dealing with host communities in developing countries .Sustaining Community Benefits Countries calling for more local economic development: more jobs. diversification of economy. Development of multipurpose infrastructure Transferrable skills development Capacity building for local governance. more integrated infrastructure development        Vibrant communities. even after mine closure Development of alternative livelihoods.

Avoiding the “Resource Curse” Goes beyond sector policy:  National strategy and integrated policies • Role of extractive industries in national development strategy • National level political institutions .integrated approach • Sector policy and governance • Policies to promote macro stability. within well-defined medium-term expenditure framework • National investment plans .all revenues/expenditures through Treasury/budget • No stand alone entity with discretionary spending power  Prudent macroeconomic policies . social investments • Development funds .infrastructure.

Part II: World Bank Response  World Bank Group Role: Oil. Gas and Mining Policy Division EITI++/Value Chain Approach Lending and Non-lending Activities    Global Programs and Partnerships .

World Bank Group Role Extractive Industries Review  Strengthen governance and transparency  Ensure that extractive industry benefits reach poor people  Mitigate environmental and social risks  Protect the rights of people affected by extractive industry investments .

and regulatory frameworks Capacity building to put in place modern licensing systems and institutional frameworks. fiscal. and to protect investor contractual rights Transparent and efficient revenue collection capabilities to maximize the generation of revenues over time Adequate revenue management for sustainable socioeconomic development Benefit sharing agreements with regions/communities Satisfactory environmental and social protection framework and procedures to make local communities benefit from operations .Achieving Better Governance       Satisfactory legal. institutional capabilities to ensure investor compliance with applicable laws and regulations.

and safety regulations  Environmental Impact Assessments (incl. Mine Closure and Oil Decommission Plans  Social Impact Assessments. health. including identification of affected communities members and vulnerable groups (gender. Monitoring and inspection capacity  Assistance in prudent local government use of revenues  Introduction of more environmentally friendly artisanal mining techniques .Mitigating Social and Environmental Risks  Environmental. Community Consultation Frameworks. Environmental Management Plans. youth)  Generating community benefits by broadening economic opportunities (linkages): Regional Development Plans. Community Development Plans  Enhanced Oversight. baseline data).

EITI++: Sound Governance along the Value Chain  EITI++. to help resource-rich countries to leverage natural resource wealth for sustainable development Extractive Industries Value Chain + Nonrenewable resources Access to resources Monitoring of EI operations EITI Collection of taxes + royalties + Revenue management + allocation Sustainable utilization of resources Inclusive & Sustainable Development . integrated approach to the management of extractive industry resources. is a comprehensive. or the value chain approach.

of Congo. Philippines. and mining components of lending operations: Botswana. Romania.the Unit currently manages 13 projects. Rep.Supporting the Value Chain: Lending Operations  The Oil. for Petrol (FY07) Madagascar Suppl. Kosovo. Resources (FY06) Mauritania Suppl. Supplemental/Additional Financing) Actual Zambia Copperbelt (FY03) Madagascar Mining TA (FY03) Mauritania Mining TA (FY04 Uganda Mining TA (FY04) Nigeria Mining TA (FY05) Afghanistan Nat. Gas and Mining Policy Unit delivers assistance inter alia via lending TA operations . Gas and Mining Policy Unit Lending Operations (incl. and is working with several countries on preparation of others Oil. Ghana. Mali. gas. (FY07) Mongolia Mining TA (FY08) PNG Mining TA II(FY08) Uganda AF (FY09) Tanzania Mining TA (FY09) Afghanistan AF (FY09) Plan Pakistan Thar Coal to Power Balochistan Mining TA Lao Hydro Power for Mining Mongolia Mining TA II DRC Mining TA Africa Mineral Governance (regional project) possible countries to be included: -Burkina Faso -Cote d’Ivoire -Guinea -Sierra Leone  The Unit supports other World Bank teams on oil. and Sao Tome & Principe .

Ethiopia. Niger. Philippines. Yemen . CAR. Armenia. the Unit provides technical advisory assistance to many countries on issues along the value chain. for instance most recently in:  Mining: Angola. India. Albania. Saudi Arabia.Supporting the Value Chain: Technical Advisory Assistance In addition to lending operations. Solomon Islands. Cameroon.

Experience with Mining Foundations. Petroleum and Mining Fiscal Regimes. Mining Cadastres. including most recently in the following areas:  Mining: Mining Together. West and Central Africa Aluminum Study. Gas and Mining Operations. Country-specific Mining Sector Reviews  Global: EITI++/Value Chain Approach. Local Economic Development. Decommissioning of Oil. Financial Surety for Mine Closure. Engagement with Civil Society in Extractive Industries .Analytical Work/Publications The Unit also has an active program of knowledge management.

Global Programs and Partnerships The World Bank Oil. Gas and Mining Policy Unit manages 3 Global Programs and Partnerships for the mining sector:  Extractive Industries Transparency Initiative (EITI)  Extractive Industries Technical Advisory Facility (EI-TAF)  Communities and Small-scale Mining Partnership (CASM) .

approximately US$25 million in contributions  Grants to 19 countries. EITI promotes extractive industries revenue transparency  Reconciliation and publication of payments and receipts  Tripartite approach – government.” 1 “compliant”)  World Bank assisting close to 50 countries (includes precandidates)  Focus on validation in coming months World Bank administers multi-donor trust fund  10+ donors. industry. and civil society.Extractive Industries Transparency Initiative (EITI)    A small part of the value chain. international Board/Secretariat Well-established as a global standard  30 countries implementing EITI (29 “candidate. and growing .

including competitive tender.  Allocating  Capacity . preparatory work.EI-TAF: Rapid-response Advisory Services Address demand for rapid-response advisory services. determining benefits sharing mechanisms at the national and local levels. etc. ancillary infrastructure and E&S management) Resources: Assistance in structuring public offerings of extractive industry resources. or auction Building: Assistance in preparation for development of EI resources (legal/regulatory framework). aspects of EI revenue management. The types of support to be provided include:  Negotiations: Advisory assistance on negotiations on a transaction related to the development of a specific project with a selected company (inc. licensing/bidding rounds.

Maputo.Communities and Small-scale Mining Partnership (CASM)  CASM’s objective is to reduce poverty by improving the environmental. 2009. Gas and Mining Policy Unit  9th Annual CASM Conference – September 8-14. coordination. and economic performance of artisanal and small-scale mining in developing countries  Is a network. social. Mozambique . with Secretariat provided by World Bank Oil. and knowledge clearing house facility  Chaired by DfID.

Risk Management .Policy Advice . 1960 Est.Equity/QuasiEquity . Private companies in member countries Foreign investors in member countries Products: -Technical assistance .World Bank Group IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MIGA Multilateral Investment and Guarantee Agency Est. legal and regulatory reform To promote institutional.025 and $6.Interest Free Loans .055. 1988 Role: To promote institutional.Loans .025 . 1956 Est.Technical assistance . legal and regulatory reform Governments of poorest countries with per capita income of less than $1.Political Risk Insurance Shared Mission: To Promote Economic Development and Reduce Poverty .Policy Advice To promote private sector development To reduce political investment risk Clients: Governments with per capita income between $1.Advisory Services . 1945 Est.Long-term Loans .

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