Rebeca Grynspan: "The role of natural resources in promoting sustainable development”

Sep 28, 2012

Remarks for Rebeca Grynspan, Associate Administrator of UNDP
on the occasion of the Opening of the 67th UN General Assembly side event on “The Role of Natural Resources in Promoting Sustainable Development”
UN New York, 28 September 2012

I start by thanking the Governments of Belgium and Gabon and the Group of Friends on Natural Resources for inviting UNDP to speak at this timely and relevant event.

The existence of the Group of Friends on Natural Resources is itself a demonstration of the rising importance of this topic as well as an important tool to advance the discussion and action to improve governance and foster human development.

Member States at Rio+20 also underscores the importance of our topic – asking governments and businesses “to promote the continuous improvement of accountability and transparency, as well as the effectiveness of the relevant existing mechanisms to prevent the illicit financial flows from mining activities”.

Answering the question suggested by the event's title is, at one level, simple. Natural resources necessarily play a central role in promoting sustainable development if we understand it as "meeting the needs of this generation - without compromising the ability of future generations to meet theirs. For this to be true countries need to use and manage the limited natural resources available to them - efficiently, judiciously, and responsibly.

History shows us how many countries can use natural resources to jump start their economies and invest in the infrastructure, institutions, and quality public services needed to translate growth into human development.

Unfortunately, the role of natural resources in advancing sustainable development is not so straight forward. Many studies suggests that countries endowed with natural resources actually - on average - grow more slowly than countries without such resources.

Many reasons are given; let me refer to two of them:

Widespread corruption and patronage is widely recognized as an important reason.

Corruption only denies countries and people much need revenue - but can also undermine the legitimacy of governing systems and the stability of societies. Evidence suggests that where there is no public taxation and rents are used to ‘buy public support’ – state-citizen compacts can fail to take root.

The second reason to highlight is the lack of capacity and difficulty of adding value to natural resources exploitation. Where countries rely only on its primary value, it can preclude the development of a wider production base for growth. This has also been associated with growth that fails to impact the lives of people – as fewer jobs are created and the poverty impact is muted.

As natural resources play an essential role in supporting the livelihoods of the majority of the world’s poor, improvements in managing and extracting natural resources and practices can have huge repercussion on ecosystems, the environment they rely on, as well as a country’s potential to meet the MDGs.

Of course, it’s not all gloom and doom. What has been labeled a resource ‘curse’ is not insurmountable. History suggests that being rich in natural resources is, in fact, not a “curse” at all - but rather an opportunity that carries a risk - a risk that can be managed.

This was the entry point for UNDP’s involvement. Through our on the- ground efforts in countries around the world, UNDP has seen the use of natural resources translate into important human development benefits, BUT only where effective policies, accountability frameworks, and governance systems are in place.

As an increasing number of countries look to tap newly discovered natural resources and tensions over scarce resources increase - getting this right is particularly important to advance sustainable human development and stability world-wide.

It was against this backdrop, that the EU and the UN came together three years ago to form the multi-agency EU-UN Global Partnership. Within this Partnership UNDP, five sister UN agencies, the EU’s Instrument for Stability, and select EU Delegations have worked together - benefiting from inputs from the World Bank and the OECD – to produce four practical guidance notes, an inventory of source material, and on-line training modules designed to help countries identify the right policies – in particular to prevent and manage conflict over land and natural resources.

The Global Partnership is a testament to the commitment of the EU and the UN system to bring together multi-disciplinary expertise to increase our understanding and improve development practice.

I am pleased to join Commissioner Piebalgs here today in launching the “EU-UN Toolkit and Guidance for Preventing and Managing Land and Natural Resources conflict”.

The toolkit is designed to inform and support countries looking to safeguard human development –now and in the future –by improving the governance of natural resources.

In developing this toolkit and through UNDP’s experience on the ground, we understand there can be no single approach, no one size fits all applicable in all countries - but three broad lessons have emerged.

● The first lesson is that the enabling environment matters.
We know that establishing a transparent and principle-based environment is important.

Enacting and implementing freedom of information laws, empowers citizens to understand and claim the benefits theyare entitled to and help them exercise their rights.

Legislative measures such as those requiring senior public offices to declaration or disclosure their assets reduces the risk of corruption & encourages a culture of openness and transparency. Adopting national principles or compacts can also lead to more transparent and accountable management of oil, gas and mineral resources

Niger, for instance, with support from UNDP, adopted a “Charter of Good Governance” establishing, with broad stakeholder buy-in, fundamental principles which all commit to uphold in governing mineral resources. As of 2010 Niger’s Constitution also requires the publication of natural resource contracts & revenues on a disaggregated, company-by company basis.

Transparency is of course most powerful where citizens are engaged & legally empowered. In Indonesia, UNDP works with mining and logging affected communities to boost their ability to bring grievances which are investigated and followed-up.

Transparency is key- not only at the national level - but at the international level. External investment is critical for natural resource management in many countries. Improved transparency and accountability in the extractive industries is also essential to ending corruption and costly illicit outflows.

Greater global efforts are needed to address and end the bribery, theft, embezzlement, tax evasion and aggressive tax avoidance of international actors. As a result of illicit financial flows, it’s possible for developing countries to see little or even no revenue from foreign direct investment. The poorest regions and countries are hurt the most. Capital flight from oil-rich countries in Africa is five times higher than from the non-resource rich countries.

The potential gain from such flight is also highest. Our research at UNDP shows that in 2008 LDCs lost approximately USD 28 billion in illicit outflows of capitals. Ending illicit flows and investing the revenue gained wisely, could go a long way in accelerating poverty reduction to meet the MDG target by 2015.

Commissioner Piebalgs spoke strongly on this topic yesterday when addressing a panel on the LDC agenda. He emphasized the need to develop international instruments to ensure companies and international actors comply with laws and meet ethical standards.

Through the UN Global Compact, UNDP and others work with multinational companies and businesses committed to ensuring that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere. More must be incentivized and encouraged to join.

Second, we know that the capacity of the institutions which negotiate contracts levy and collect taxes, monitor and oversee integrity, is vital.

Through its governance programmes, UNDP supports countries to develop and strengthen these key capacities – across the spectrum of involved institutions relevant to the management and oversight of natural resource wealth - including national planning authorities, ministries of finance, budget departments, parliaments and public accounts committees. UNDP is working to establish a more coordinated approach to this support – with partners and all relevant actors.

UNDP for example supports the Liberian government to develop local capacities to manage mineral and oil resources effectively and transparently & establish mechanisms which will ensure the sustainable use of revenues for poverty reduction initiatives.
We are deepening our support to Sub-Saharan African countries to improve natural resource management. Our technical assistance aims to countries establish informed, transparent and well-negotiated contracts that reduce the risk of corruption and lop-sided deals, as well as build institutional capacity for monitoring the implementation of contracts and collection of revenues.

Even in difficult places such as Afghanistan, UNDP has been able to raise revenues. UNDP training to improve revenue management has led to an increase in the filing of tax returns and a jump in revenues in more than 30 municipalities - increasing the income from regular revenue sources by as much as 490 percent - over the last three years.

The third thing we have learned is the potential of technology to transform national natural resource sectors – to be more transparent and accountable.

From cellphones to social media ICT has proven to be an effective tool in the fight against corruption. UNDP, for example, supports efforts in Kenya to enable citizens to use crowd-sourcing technology to report bribery attempts anonymously.

Science and technology is also essential to facilitating and investing in a country’s ability to add value in production chains linked to natural resources. In doing so - they are important to help propel a wider base of economic growth, job creation and a more durable prosperity.

To share and apply such lessons learned, UNDP supports and facilitates cross-country and in particular South-South Cooperation. UNDP has distilled and share lessons learned from Azerbaijan, Botswana, Chile, Norway and others who have succeeded in managing the revenues from their mineral riches in an efficient, transparent and accountable manner.

Through a unique public-private partnership and strong state institutions Botswana has been particularly successful in securing the revenues from its vast diamond reserves and investing increased resources in health and education.

With the support of partners Mongolia established a Fiscal Stability
Fund to help protect against the volatility of commodity prices and has established an anti-corruption agency.

In a historic move, Ecuador opted to forego revenue from oil exploitation in Yasuni’s Ishpingo-Tambococha-Tiputini fields in order to conserve biodiversity, protect indigenous people’s rights, and avoid CO2 emissions. It has signed an agreement with UNDP to establish a Trust Fund that will leave an estimated 846 million barrels of crude oil lying under the Yasuní National Park, a World Biosphere Reserve since 1989. The trust fund ensures a transparent and accountable management of the fund for the intended purposes.

UNDP is also leading the effort more generally, to strengthen national systems for the transparent, equitable, credible and accountable management of UN REDD+ funds targeted at protecting forests and local livelihoods. Together with FAO and UNEP we are providing support to Bhutan, Nepal, Kenya, Mongolia and the Philippines.

I am convinced that natural resources can help drive human development if managed in transparent, inclusive, and sustainable ways. I understand that in the coming session of the General] Assembly a resolution will be put to Member States which states your commitment to achieve this.

This will be an important step – demonstrating a global commitment to transparency and accountability in the management of natural resources. UNDP looks forward to supporting your national efforts to advance this end agenda and in so doing spur inclusive growth & advance sustainable human development.

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