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At the UN Security Council on Fragility and Natural Resources

Caroline Anstey's picture

Imagine you are a leader of an African country and your entire government budget for the year is $1.2 billion.

That same year, an investor sells 51 percent of their stake in a huge iron ore mine in your country for $2.5 billion — more than double your annual government budget.

And imagine having ordered a review into mining licenses granted by previous regimes and knowing that the investor who made the $2.5 billion sale had been granted a mining license in your country for free.

It's what happened in Guinea. It's a story I heard Guinea's president, Alpha Condé tell the G8's trade, transparency and taxation conference in London. And it's a story I thought well worth sharing at the UN Security Council's meeting on fragile states and natural resources last week.

In sheer dollar terms, it is clear natural resources have the potential to finance transformative development in fragile states. Managed well, countries can use their natural resources to help break the cycle of violence and fragility. Success potentially means stability, development, and an end to aid dependency.

But resources are finite. Fragile states have only one chance to get the resource transformation right. Miss the chance and pay the price. And the price is high: Our research shows that slow-developing, low-income economies largely dependent on natural resources are 10 times more likely than others to experience civil war.

Make no mistake, some people are benefiting — through clever accounting, secrecy, and profit shifting. As former UN Secretary General Kofi Annan told the Security Council, Africa loses more money every year through a tax avoidance technique, known as trade mispricing, than it receives in international development assistance.

It's a loss countries can ill-afford if they want a future built on healthy partnerships between government and the private sector, with a commitment to transparency and a focus on using the resource wealth to deliver a higher standard of living for people.

We know it's no easy task. The World Bank Group has activities in more than 70 resource-rich countries. Many are in Sub-Saharan Africa and many are in fragile and conflict-affected situations — and benefit from assistance from our fund for the poorest countries, IDA.

Importantly, we work with countries through the entire Extractive Industries' value chain. Why? For the simple reason that there is no point fixing the royalty collection system if contracts are poorly negotiated or revenues are wasted. We need to start at the beginning — at the point of negotiating contracts so countries aren't at a disadvantage in negotiating with legions of lawyers employed by international companies. We're helping governments to negotiate contracts through the Extractive Industries Technical Assistance Facility and our new Africa Extractive Industries Facility. We are also helping countries improve their legal and regulatory mining and hydrocarbons sector frameworks, for instance in Afghanistan, Madagascar, and Mauritania.

And we are supporting countries to implement the Extractive Industries Transparency Initiative (EITI) in 40 countries, including Afghanistan, Côte d'Ivoire, Democratic Republic of Congo, Guinea, Iraq, and Timor-Leste.

Just think of Liberia, a country wracked by civil wars fuelled by "blood diamonds". Liberia was the first African country to be designated EITI-compliant in October 2009. Liberia became, with the Bank's help, the fastest implementer of EITI, voluntarily establishing a mineral resources law that went beyond the EITI requirements to manage resources sustainably. The lessons learnt there were shared with other countries like Sierra Leone.

We know from experience that the role of civil society groups is critical. They, along with parliamentarians and the media, have a key role to play to enable better policy debates, better contractual negotiations, and better ability to enforce contracts and track contractual obligations.

Transparency is key. Transparency can enable a level playing field, and give citizens the tools to hold their governments — and private sectors — to account. Transparency can empower investigators to track the flow of funds. Above all, transparency can accelerate the transformation of underground and secret wealth into poverty eradication and shared prosperity done in the full sunlight of results and accountability.

To help bring greater transparency around contracts, licenses and concessions and their beneficial owners, we've launched the Open Contracting Partnership to ensure effective disclosure and participation in all public contracting.

And to help spur the private sector to become agents for development, we've just announced the Open and Collaborative Private Sector Initiative, bringing together a range of tools to help spur the private sector's role as agents for development.

One of these, the Open Company Data Index, enables you to search for a company on a website and see not only its corporate registration information, but also generate a visual representation of the corporate network to which it belongs and the registry information of all the companies in its network.

Before countries sit down at the negotiating table with companies, they would benefit by one further set of data: knowing the exact extent of minerals beneath the ground. That's why we're also working to create a "trillion dollar map" of Africa to put all the continent's mineral resources literally on the map.

The fact is today much of the continent's true mineral wealth remains unknown. Lack of geological and mineral information has too often disadvantaged African countries during mining negotiations. Knowledge of these resources would give Africa a competitive edge.

And effectively leveraging Africa's mineral wealth would help it break the cycle of violence and fragility, and take its rightful place as an engine of inclusive growth and sustainable development.

This post was first published on Huffington Post.

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