Developing countries that are rich in natural resources face a unique challenge to ensure that revenues from the extractive industries (EI) are efficiently used to generate economic development, reduce poverty and promote shared prosperity. Effective governance is essential for making certain that the ‘development dividend’ that should result from the decision to extract is delivered.
Achieving good governance of EI revenues, however, requires transparency, accountability and the active participation of multiple stakeholders across the entire value chain, from government agencies, the private sector, civil society to formal accountability institutions, including Parliament. EI is one of the sectors that the Parliamentary Strengthening Cluster (PSC) focuses on as part of its Open Budgeting Program.
As a constitutionally-mandated deliberative institution with direct responsibility for approving the annual budget and overseeing the government, Parliament is increasingly looked to as the stakeholder with the power to ensure that extractive revenues are equitably shared and used to achieve overall economic development and poverty reduction objectives. In particular, Parliament is uniquely placed to verify that extractive revenues are accurately captured in budget forecasts and estimates, to confirm that appropriations are focused on delivering services to affected communities, and to exercise effective oversight of government management of the sector.
Since 2011, the World Bank and CPA partner with other organizations (IMF, UNDP, NRGI formerly known as Revenue Watch) has been delivering Global Conferences on Parliament and Extractive Industries, which provide valuable and unique opportunity for parliamentarians, parliamentary officials and staff, experts in governance and influential leaders internationally, in the field to come together to discuss and share up-to-date experiences and knowledge of this important global parliamentary issue. In October 2013, the World Bank and its partners convened the first Practitioners’ Forum in advance of the Global Conference on EI in Vienna, which brought together EI Practitioners for the first time, to share their experience engaging with parliaments around EI and linked lessons learned from existing capacity building efforts with the broader discussion around the role of parliaments and EI that were canvassed during the Global Conference on the Role of Parliaments and Extractive Industries.
The Bank developed and piloted a new e-learning knowledge product through the Executive E-learning Course on the Roles of Parliaments and Extractive Industries conducted from February 17 to March 24, 2014. The revised e-learning knowledge product was used to train parliamentary staff and parliamentary practitioners on the roles of parliaments in ensuring good governance of the extractive industries.
Recently, the PSC’s work stream on EI is now primarily concerned with ex-ante analysis of the revenues accruing from the extractives sector and its focus is concentrated on Stage 4 of the Value Chain which concerns revenue management and allocation. While parliamentary institutions involved with revenue management and allocations - such as the Budget, Finance, and Estimates Committees and Parliamentary Budget Offices (PBOs) – are able make use of established budget procedures to review EI revenue streams in the context of the whole budget, to achieve efficient and effective oversight of revenue management and allocation, it is essential that the accuracy and relevance of EI revenue data is improved and access to all necessary data is available. With this in mind, the World Bank’s PSC program on EI is designed to equip legislators with the technical knowledge that will enable them to design policies and frameworks for optimizing state revenue flows from extractive industries. In particular, it is aimed at enhancing awareness of the different tools and processes available to parliamentarians for tracking revenues and expenditures related to the sector and to strengthen their capacity (and that of their staff) to undertake high quality budget analysis.
The Role of Parliament and Extractive Industries Revenue
The World Bank Group (WB) in partnership with the Parliament of Finland organized a seminar on “The Role of Parliament and Extractive Industries Revenue”. The event brought together some 30 members of parliament (MPs) and key parliamentary staff from the legislatures of countries to explore the role that parliaments can perform to harness and steward natural for the benefit of their national communities through ensuring effective revenue management. The 2015 Helsinki Seminar specifically set out to:
i. Equip legislators with the technical knowledge to design policies and frameworks that will optimize state revenue flows from extractive industries
ii. Enhance awareness of the different tools and processes that parliamentarians can use during the estimates process in order to better track revenue and expenditure related to the sector
iii. Strengthen the capacity of parliamentarians and parliamentary staff involved in the estimates process to undertake budget analysis.
The parliamentary community has already convened a number of times to explore how different aspects of the parliamentary budget process/ supply procedure can be used to improve oversight of EI revenues, and has distilled a number of key lessons. A practical toolkit for effective financial oversight of this sector by parliamentarians is currently under development (FORTHCOMING).