Bank Group Engagement in Extractive Industries (EI)

1. Bank Group Engagement in Extractive Industries (EI) Presentation by Tove STRAUSS Governance Division (OSGE.1) African Development Bank Tunis, TUNISIA

2. Background • The historical record of EI in contributing to economic growth in Africa has been mixed. • Governance of the EI has in recent years become critical as RMCs intensify their reliance on EI as a means for development financing. • Main issues are related to the lack of transparency and accountability in exploitation, concession and revenue management, and revenue distribution

3. Recent ADB Activities Public and Private Sector Lending • To date, the Bank has approved and considered almost 60 projects in the gas and mining industries, for amounts equivalent to more than US1.5 billion. Tunis Round Table • Efforts to coordinate Bank Group activities in the EI started in 2006. • The Bank hosted a Round Table meeting on EI capacity building in October 2006 with participants from the World Bank, EITI, and NORAD.

4. Tunis Round Table (cont.) • The Round Table concluded with agreements on the following: • Conduct a survey of donor funded TA for capacity building in EI governance in Africa, with the objective of identifying gaps and overlaps; • Undertake a study of EI governance in Africa, focusing on the scope of the African "resource boom", the risks that it brings in light of past experience, and how to translate EI revenues into sustainable development;

5. Tunis Round Table (cont.) • Carry out global advocacy for improving EI sector governance in Africa and create political will and institutional capacity among RMCs to endorse and implement the EITI; and • Exchange knowledge among oil, gas, and mining specialists from the World Bank, NORAD, and the Bank.

6. Endorsement of the EITI • Consistent with its commitment to transparency and accountability and policy good governance, the Bank formally endorsed the EITI principles and criteria at the Third Plenary EITI Conference held in Oslo in October 2006. • Consequently, the Bank, along with the UN, World Bank and IMF holds an observer seat on the new EITI Board.

7. ADB EI Task Force • A Bank-wide task force has been established to examine and propose modalities for future Bank engagement to promote good governance in the EI sectors. The task force is mandated to: • Take stock of ongoing Bank activities and experience in the EI sector and draw lessons from global best practices with a view to identify internal institutional capacity gaps, including resource implications of the Bank’s engagement in this domain;

8. ADB EI Task Force (cont.) • Advise Senior Management on recommended scope and scale of Bank engagement in the EI sectors, including strategies for creating political will to improve transparency and accountability, and provision of assistance to RMCs that demonstrate political will but lack implementation capacity. • The task force will submit its recommendations on Bank support of accountability and transparency in the EI sectors to Senior Management before the Annual Meetings in May 2007.

9. Knowledge and Dialogue on EI Management • As part of its commitment to global advocacy to transparency and accountability, the Bank has initiated the following activities: • Joining the ECA to co-host the Big Table 2007 on “Managing Africa’s Natural Resources for Growth and Poverty Reduction”;

10. Knowledge and Dialogue on EI Management (cont.) • Building on the discussion at the Big Table by convening a high level symposium during the 2007 Annual Meetings on “Fragile States and the Extractive Industries”; and • Carrying out policy based research on the impact of high oil prices; the state of oil and gas in Africa; and the African Petroleum Fund.

11. Future Role of the ADB in EI Governance • Along with political will and leadership at the country level, predictable support from development partners is vital to encouraging RMCs to endorse and implement the EITI. • The missing element to effective implementation has so far been the lack of a clear lead coordination mechanism. This provides the Bank with a niche to play a lead role as a coordinating, monitoring, and reporting institution for the African countries.

12. Future Role of the ADB in EI Governance (cont.) • The Multi-Donor Trust Fund supports the implementation of the EITI. However, the Trust Fund does not provide any systematic start-up technical guidance and funding to candidate countries. • This type of technical support could be provided by the Bank to assist with: • preparing scoping studies and Country Work Plans; • enhancing capacity in government agencies to address needs pointed out in sector audits; and • playing an advocacy role to actively encourage and support other resource rich countries to implement the EITI, including gas and solid mineral producers.

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