6. Key policy considerations
Process and Substance
Many people divide the relationship between a company or a government and a community into questions of “process” and questions of “substance.” The reality is that success requires attention to both.
Where there is no proper participatory element, attempts at delivering substance are generally unproductive. Often the frequency of contact between companies and communities is related to how well they get along.
Process is therefore critical. But so is substance. Essentially, there are three possibilities for generating funds to support local development efforts:
In some legal systems, local governments have the authority to tax the project directly, with taxes such as property taxes, sales taxes, or land use charges. Of course, many legal systems do not allow local governments to impose their own taxes. And many of the taxes local governments have the authority to impose may also suffer from the ‘revenue lag’ effect.
More often, any local share comes from the national government, which dedicates a share of the taxes it receives to local government in producing regions. As we have seen above, those taxes are generally low until the project is producing, and earning taxable income.
In a growing number of cases, companies are making their resources available to local communities under negotiated “Community Development Agreements,” or through company supported foundations.
Many national governments already share resource management powers with local governments. Approximately 30 of the 58 countries assessed in the 2013 Resource Governance Index featured some form of revenue sharing between the national and subnational authorities. The responsibilities shared with local governments are often significant. For example, Bolivia decentralised more than USD 2 billion of its oil revenues in 2012, amounting to more than USD 1,000 per capita per year in some areas. Some districts in Nigeria receive more than 80 percent of their revenues from resource projects. In Indonesia, local governments have the power to grant – or deny – licenses for many mining projects. When development actors only address resource management issues with national governments, they risk missing these large areas of impact.
Unfortunately, the design of power or revenue sharing systems is often done in a reactionary manner. In some cases, poor design can lead to gaps or overlapping national and local government authority. In others, it can increase the opportunity for conflict, corruption and waste. In Peru, some local leaders in mining regions attempted to foment violent protests to compel additional revenue transfers from the national government when commodity prices rose between 2005 and 2008. When powers are decentralised without adequate institutional preparation, capacity gaps can emerge as there is a sudden demand for extractive expertise in more locations throughout the country.
What is success?
One of the concerns about community development efforts in conjunction with resource projects is the expressed desire to identify a site where community development processes have been successful, and which we can hold up as an example of best practice.
But success in these matters can only be measured by sustained progress over time. There are very few instances where there have been credible attempts to measure success by gathering hard data over the period of a generation, for example by showing a clear increase in some recognised measure such as the Human Development Index over a period of fifteen or twenty years. Further, we would have to show that this increase was greater than the increase in comparable communities outside the zone of influence of resource extraction and in which there were no targeted community development efforts.
There are many notable efforts and many encouraging signs. We need to follow these, learn from them, and measure things more often and more rigorously. We are clearly doing better than we were even a few years ago; credibly demonstrating positive impact will take time.