Thank you very much, Madam Chair. Thank you for giving us the opportunity to talk about the role of parliamentarians in the extractive industries.
I am the president and CEO of the Parliamentary Centre, which is a Canadian organization that has existed for 40 years. We have worked in 45 legislatures around the world and have conducted more than 85 projects to support parliamentary strengthening around the world.
A lot of discussion has taken place in Canada on how Canadians should contribute to global prosperity in the long term through the extractive industries. That discussion is even deeper in other countries that are resource rich. It is my understanding that the need of emerging economies is mainly to acquire the tools to help governments, parliaments, and stakeholders reach a common understanding of the opportunities offered by the extractive industries and to mitigate the risks associated with them.
An important way to achieve a balance between the different views on this is to enhance the capacity and the knowledge of parliamentarians so that they can contribute to good governance in the industry sector. This is the reason the Parliamentary Centre has undertaken a job in Ghana to support the Ghanaian Parliament in managing the discovery of oil resources.
There are three core functions of Parliament—I'm not teaching you anything new—which are to represent the interests of the constituents, to legislate, and to oversee what the executive branch does.
In the value chain of extractive industries there is a role for parliamentarians at every step. The extractive industries value chain demonstrates that we have the ability to transform this into an opportunity and a source of development and prosperity for the people.
The chain is only as strong as its weakest link. It is up to us to seize the opportunity or squander it.
I'll deal now with some of these phases of the chain. The first is how to decide whether you extract resources. We have to think about the society as a whole. And it is important to assess realistically and accurately the potential of these resources. I also suggest that a cost-benefit analysis be done at this stage so that we know whether it's valuable and in the interest of the nation to exploit that resource.
The second phase is what we would call negotiating the best deal. The issue, primarily, for parliamentarians at this stage is to answer three main questions: who can explore and exploit the resources; how can such rights be allocated; and under what conditions will it be done?
We think a competitive bid process provides the host nation with a better opportunity to evaluate the prospective companies that intend to invest, which bring with them diverse experiences and capabilities, and for the nation to choose what is of the most benefit to them. Parliamentarians, particularly the members of the relevant committees, such as natural resources, should have a very good understanding of what such contracts entail. It is at this stage that we also must examine the potential negative impacts that could occur from such investments.
An efficient, effective award policy will exhibit certain characteristics. It has to be transparent. It has to be a competitive. There have to be non-discretionary procedures for the award of exploration, development, or production rights. There has to be a clear regulatory and contractual framework and well-defined roles for the institutions of the state.
In the third phase, which is actually the developing of the resource properly, parliamentarians have a key role to play in ensuring that the proper policies and regulatory frameworks are in place to enable efficient, effective, and sustainable management and oversight of the extractive sector. Parliament plays a role in overseeing the government agencies and in looking into how they allocate and account for the revenues.
The fourth aspect or phase is the collection and optimization of revenues. Extractive industries are subject to a great variety of fiscal instruments. These include various taxes, royalties, surface fees, bonuses, and production-sharing agreements.
Corporate tax structures and laws governing employment, the environment, and occupational health and safety also have implications for how the extractive industries will be managed. The key steps in transparent and sound revenue management are as follows.
First, we must have a macroeconomic policy and fiscal framework in place.
Second, we must also allocate public expenditures judiciously based on a medium-term expenditure framework that is also aligned with the country's priorities.
Third, we must ensure adequate scrutiny and appraisal of public investment choices to provide for sound revenue-sharing policies.
Fourth, we must encourage a public dialogue on the management of national extractive industries that stimulates and improves the transparency and the oversight by governments. Empowering Parliament and civil society to carry out their respective roles is essential to ensure the proper oversight and accountability of the government’s macroeconomic policy decisions.
Fifth, audits are also very critical to having sound industry management and can provide legislators and the general public with useful information on problem areas and recommendations that may reform it.
Last but not least, we must ensure long-lasting prosperity. Extractive resources are finite. Therefore, it is even more important that revenues from extractive industries are used to ensure future benefits for citizens, both for today and for tomorrow.
In conclusion, Madam Chair, I would like to say that the more that governments respect democratic freedoms, uphold standards of transparency and accountability, and demonstrate a commitment to building administrative capacity, the more likely it is that oil and mineral wealth will be used for the development purposes that improve the lives of citizens.
Thank you very much, Madam Chair.