- The Independent Evaluation Group (IEG) of the World Bank Group has published an evaluation of World Bank Group’s Assistance to Low-Income Fragile and Conflict-Affected States (FCS).
- As many FCS economies are highly dependent on extractive industries, the Bank Group and evaluation report have paid attention to legislation and regulatory reform that can help ensure that revenues are equitably collected, and returns are shared among citizens
- The report provides recommendations on inclusive natural resources management which can contribute to peacebuilding through economic growth, sustainable livelihoods, and shared benefits
Fragile and Conflict-Affected States (FCS) are an important focus of World Bank Group assistance as a response to the growing recognition of the nexus of fragility, conflict, violence, and poverty. In this respect, the Group’s poverty reduction mission concentrates on issues of recurring conflict and political violence and helping build accountable and legitimate state institutions.
Extractive industries can help spur economic growth and create opportunities for people in fragile and post-conflict countries. To manage and finance the recovery effort, and to restore and maintain state functions, governments in such countries may seek to resurrect the extractive sector for its revenue potential.
Restarting the operation of extractive industries is a chance for the government to ensure their effective administration and sustainable management from the outset. However, the ability of the state to manage resources and establish institutions that will ensure accountable and transparent governance of the sector and equitable sharing of revenues is often seriously damaged in countries affected by long-term conflict. Due to a range of political, institutional, operation and resource factors, the task becomes just as much an opportunity as it is challenge.
A number of such challenges are by and large inherent to extractives. In many countries, the abundance of natural resources such as oil, gas and minerals has had far-reaching negative impacts on the economy, failed to reduce to poverty and boost economic growth, and resulted in undemocratic practices. This effect is known as the “resource curse”. When natural resources are not governed by strong, transparent and accountable institutions, large, unregulated revenue flow to the government is likely to support large-scale corruption, with policy makers delivering short term solutions to social and economic problems in return for own economic gain.
Moreover, post-war economies face a risk that the control of natural resources may exacerbate further conflict and undermine peace building. The instances of diverting revenues into financing conflict are plenty – e.g. Afghanistan, Angola, Cambodia, Democratic Republic of Congo, Liberia or Sierra Leone.
For natural resources to be used effectively and for reconstruction and development purposes, governments, their donor partners, parliaments, multinational corporations, media and civil society can work together to design inclusive, transparent and accountable natural resources management strategies with adequate risk-management measures.
The three major functions of the parliament – representation, law-making and oversight – are crucial at every stage of the extractive industry value chain; from the initial decision to extract a resource, to ensuring the fairness of contracts with the private sector, to establishing fiscal and legal framework and, finally, to overseeing that revenue from extractive industries is are well spent and equitably shared, acting as a catalyst for sustainable growth.1
The evaluation report has found that such strategies can contribute to peace-building through economic growth, sustainable livelihoods, and shared benefits. It provides a number of messages and insights which can contribute to achieving these goals. While directed primarily at the World Bank Group Assistance to Low-Income FCS, they can also support the work of policy makers, legislators, and development and post-conflict reconstruction practitioners. Some of the key messages are:
- Conflict dynamics differ across FCS despite a number of shared features. Strategies and programmes should be underlined by an analysis of the relationship between natural resources management and conflict to realise the benefits of natural resources while minimising conflict risks.
- Steps along the World Bank's Extractive Industries Value Chain can support the creation and enforcement of policies that promote sustainable management and intervention planning.
- The overarching challenge for extractive strategies in FCS is to balance saving with spending in the face of prevailing poverty. A critical goal is to establish a management system which improves revenue collection and administration, while smoothing expenditures.
- Country-level analysis of potential benefits can help determine the approaches to directing revenues towards inclusive and sustainable economic development. The approaches and examples set forth in the report include an investment on infrastructure and communications, and a strategy to maximize socioeconomic benefits to local communities.
- Institutional arrangements which ensure local benefit sharing should complement policies and laws as part of a strong natural resources management system in FCS. These may include, for instance, agreements with communities and user groups, or local benefit sharing provisions in extractives laws and regulations. The report discusses a number of examples from the mining and timber sectors.
For a more detailed recap of IEG report’s main takeaways see the IEG insight.
For a blog post on IEG insights on the needs of women in FCS see here.
For more materials on parliaments and extractive industries, visit our Extractives Portal.
1 Parliamentary Centre “Parliaments and the Extractive Industry”