* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
A contributing author of the Natural Resource Charter outlines how the guidelines could support countries in maximising benefits from their resource wealth
Jim Cust is a PhD student at Oxford University and a contributing author of the Natural Resource Charter.
The launch of the Natural Resource Charter on October 7, at the annual meeting of the World Bank and the International Monetary Fund, comes at a crucial time for the governance of extractive industries, especially in developing nations.
With the recent dramatic announcement of $1 trillion in mineral deposits in Afghanistan and major oil discoveries Ghana, Sierra Leone, Brazil and elsewhere, the coming decade will see many countries facing the challenges of governing a resource-rich economy.
In the face of high commodity prices and donor austerity over the coming decade these discoveries present a dramatic one-shot opportunity for transformation to sustainable prosperity.
The historical record on resource management in developing countries, however, is littered with missteps and cautionary tales. The "resource curse" has struck all too often.
Corruption, instability, "Dutch Disease" and squandering that once-in-a-lifetime opportunity all threaten to ensnare the resource-rich state. But the resource curse is not fate - it can be avoided.
Increasingly, countries are learning the lessons of the past. They are drawing upon the latest research, domestic expertise, technical assistance, and the accumulation of best practice around the world in order to maximise the gains from resource wealth.
The recent successful, televised auctions of Iraqi oil service contracts demonstrate how competitive bidding, open and transparent processes and careful government supervision can generate huge benefits for the citizens of resource-rich countries. Such successes can be replicated.
STRENGTHENING THE DECISION CHAIN
It is the purpose of the Natural Resource Charter to help governments to identify and strengthen any weak links along the entire decision chain - from how to manage the discovery process to transforming revenues into long-lasting prosperity.
Specifically the Charter contains guidance on better design of the process for selling rights to extraction, better management of revenue flow into government coffers and better decision-making on expenditure, as well as being more open and accountable to citizens throughout.
By serving as a clearinghouse for all the latest thinking, experience and expertise, the Charter can become an essential tool and common framework for tackling the problems of resource governance.
Research tells us that countries that are more open and accountable in their use of resource revenues are likely to be better off, with higher growth and more efficient public spending.
Great progress has been made towards making transparency the dominant paradigm, from Azerbaijan to Timor-Leste. The Extractive Industries Transparency Initiative (EITI), along with the work of groups such as the Publish What You Pay coalition, have led the way with startling success.
Voluntary international initiatives such as EITI are now being complemented by binding domestic legislation, most recently, the Cardin-Lugar Amendment in the United States. This legislation requires all extraction companies that raise share capital in the United States to report any payments made to governments around the world. It is hoped other countries will follow suit with similar legislation.
BEYOND TRANSPARENCY
Transparency in payments to government is the right place to begin reform of the extractive industries. It is the wrong place to stop.
Transparency can yield greater returns to citizens when it is the tool of informed societies and accountable governments. The Charter is deliberately designed to be comprehensive, to provide a common framework across the entire decision chain.
It is intended to help strengthen accountability and improve decision making by government, but also to build a critical mass of informed opinion on extractive issues, thus complementing the drive for public information and transparent processes.
The Charter is not a list of conditions or prescriptions, but a practical checklist for both citizens and policymakers to use in assessing the progress of their countries in meeting these challenges.
With its Oversight Board of distinguished international figures, including former Mexican President Ernesto Zedillo and international governance advocate Mo Ibrahim, the Charter hopes to build on its independent origins to become a widely used and adopted framework.
