Parliaments and Extractives

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Comment by Matteo Pellegrini on February 17, 2011 at 16:58

Hi everyone 

 

please have a look at this piece by Keith Myers on Parliaments and Extractive Industries in Africa 

http://revenuewatch.org/news/news-article/international/african-dem...

 

all the best 

 

Matteo 

 

http://revenuewatch.org/news/news-article/international/african-dem...

Comment by Cindy Kroon on July 28, 2010 at 15:49

Nigeria: Cislac - No Corporate Social Responsibility Clause in Petr...
27 July 2010
Abuja — The Petroleum Industry Bill (PIB) lying before the National Assembly, did not include the provision for Corporate Social Responsibility for oil and gas companies, nor did it stipulate clear guidelines for the administration and maintenance of proper health and safety standards that companies must employ while exploring.
This was revealed by the Executive Director of Civil Society Legislative Advocacy Centre (CISLAC), Mallam Auwal Rafsanjani, at a press briefing on PIB, yesterday in Abuja.
Corporate social responsibility is system of self-regulation that is moulded into a business' polity, which makes the enterprise monitor its effect on the society and environment while keeping with international standards and local law.
Rafsanjani pointed out the flaw which could potentially make oil and gas companies controllers of their host communities, because according Rafsanjani, the Bill also curbs the duration of suits to twelve months; unreasonable, considering the expansive and expensive nature Oil suits.
Even while extolling the PIB's advantages as necessary because "the Petroleum Legislation and especially, the fiscal regimes in the industry are no longer in tune with current realities in the country or in accord with international best practices," the CISLAC executive decried the enormous loopholes that the Bill contains.
Amid the PIB's shortfalls, Rafsanjani said, was its ineptitude at holding companies accountable to their host communities, and also the unreasonable number of Petroleum agencies which makes some of these bodies seem like mere replicas of other directorates.
Some of the proposed Directorates include; The Nigerian Petroleum Directorate, The National Petroleum Inspectorate, Petroleum Products Regulatory Authority; National Petroleum Asset Management Agency, Nigerian Petroleum Research Centre, Petroleum Technology Development Fund and National Frontier Exploration Fund.
Rafsanjani also faulted the proposed funding of these agencies in the PIB, which provides a cut of "'fiscalized' crude Oil and Gas to be paid into an account and shared among the proposed Petroleum Directorates." This he described as downright unconstitutional and if allowed may lead to litigation and dissent.
CISLAC similarly challenged the proposed privatization of the NNPC in section 136 of the Bill which would see the Corporation turned into a Limited Company with its shares in private hands while Government retains ownership, as a "sneaky way to finally privatise the Nigerian Oil industry."
Concluding, the CISLAC executive expressed his concern for the lacklustre treatment the Bill is still receiving at NASS, he stressed that the recommendations given by CISLAC must be taken into account, changes expediently made and the Bill should be passed into Law before the year runs out in order to save the "extractive sector from corruption and inefficiency."

Comment by Cindy Kroon on July 23, 2010 at 21:07

Nigeria: Senate Wades Into NNPC Insolvency Imbroglio
22 July 2010
Abuja — THE claims and counter claims over alleged insolvency of the Nigerian National Petroleum Corporation, NNPC, came to a head at a hearing of the Senate Committee on Petroleum Upstream, yesterday, as the Group Managing Director, GMD, Austine Oniwon, was confronted with his letter claiming that the corporation was insolvent.
The Senate Committee had summoned the NNPC boss and the Minister of State for Finance, Remi Babalola, to ascertain the truth in the controversy over whether or not the insolvency claim was the brainchild of the minister.
Babalola said he merely echoed the letter at the last Federation Accounts Allocation Committee, FAAC, last week, which he said was to enable members know why NNPC said it was not in a position to refund an outstanding N459 billion revenue to the Federation Account.
Narrating how the N1.5 trillion being claimed from the Federal Government accumulated, the NNPC boss stated that when the Department of Petroleum Resources, DPR, was to be established, the then President directed the NNPC to release N651 million for the take off but that it had never been refunded.
Oniwon added that when a sugar company was to be established, the President (unnamed) also asked them to release another $18 million which also has never been refunded to date.
The Senators led by the committee chairman, Sen. Lee Maeaba, who expressed shock at the propensity of the Federal Government to direct NNPC to release funds without recourse to due process then ordered the corporation to present its annual accounts since 1999.
While expressing surprise that NNPC budget was approved only by the board of directors, the Senate committee members also requested the Group Managing Director to return to the National Assembly this morning with copies of the law authorising such approval.
They directed that NNPC submit to it copies of its budgets and approvals for such budgets in the last 10 years.
Babalola had earlier told the joint committee that when the NNPC first deducted funds from Federation Account, N85 billion was involved.
He said the promise was that it would be paid the following month, but added that rather than the corporation refunding the following month, more was withheld.”
He noted, however, that “at that time, we all believed that the cash flow problems would only last for a short time.”
A four_page letter personally signed by the GMD, however, revealed that the corporation was making losses from selling petroleum products at below cost of products/import parity.
Oniwon’s letter stated: “Specifically, N880 billion in direct losses resulting from the difference between the landing cost of petroleum products and the regulated ex_depot price.”
On crude oil and petroleum products losses from vandalized pipeline network, it NNPC boss said: “About N113 billion in direct losses from illegal siphoning of crude oil and petroleum products from NNPC’s pipeline network as well as extraordinary repairs for damages by vandals, surveillance and security costs.”
It added that another N99 billion in inventory holding cost of petroleum products required to maintain a 30_day product availability under the National Energy Security Strategic Reserve Programme.
The NNPC said it was “facing severe hardship in effecting payments to products suppliers (Over $5 billion outstanding as at June 30, 2010), adding that some bills are even over nine months overdue.”
According to the letter, the controversy over insolvency stemmed from item 5 under Notations where the NNPC said “NNPC is insolvent as current liabilities exceeded current assets by N754 billion as of December 31, 2008” and item 6 which said, “NNPC is incapable of repaying the N450 billion owed to Federation Account unless it is reimbursed the N1.15 trillion requested from the Ministry of Finance.
“In the light of the foregoing, we request the Honourable Minister to kindly consider and approve that NNPC repays the N450 billion owed to the Federation Account only from funds released by the Ministry of Finance in reimbursement of the N1.156 trillion it invoiced to the ministry”.

Comment by Cindy Kroon on July 20, 2010 at 16:59

As already discussed here, one of Parliament's functions is indeed the one of lawmaking. There are 2, or 3 if you want, other functions that parliament can use to harness extractive industries for development.
The institution of parliament can use its constitutional rights to influence and counter the resource curse. A legislature effectively carrying out its three core functions – oversight, representation and lawmaking – is critical to the success of natural resource management.

Through its representative function parliament can make sure the voices, preferences and interests of the public are heard, respected and articulated. Parliamentarians’ outreach to their constituents in general and on natural resources management in particular is relevant in this context. Parliament can ensure effective public participation in the political process. Where the legislator represents constituents that have extractive industries resources, there is a direct interest. Parliaments are uniquely positioned to understand and monitor the effects of extractive industries on the citizens and act as a bridge among the government, private sector and civil society. Through public hearings, interviews with the media, constituent outreach, and other methods, legislators can build public awareness about extractive industries and the problems it identifies. Parliaments provide the potential to serve as a forum for multiparty consensus on extractive industries’ policies, and thus for countrywide support and ownership.

Parliamentary oversight refers to checks on the implementation of the law by the executive. One of the main functions of parliament is its work in scrutinizing the operations of the executive, that is, exercising the oversight of the implementation of the law from the angle of performance and accountability and, especially, the use of the finances granted to the executive for its work. Perhaps most important for natural resources management, parliament is a key institution of accountability: through their oversight function parliaments and their committees can investigate natural resource-related issues. They can engage in the monitoring and evaluation of government policies, thereby reducing possibilities for patronage and other forms of corruption. Legislatures are mandated to scrutinize government activities, and their task is to make sure that programs are implemented effectively and legally, and funds are accounted for properly. By effectively using oversight tools such as the question period, conducting public hearings, and inviting people to testify before committees, legislators can help to make sure that the extractive sector is managed well. Legislatures have developed several tools to assist them in practicing oversight. It depends on the constitution and the Standing Order which oversight tools Parliament can use. The most important oversight tools are question period, the committee system, interpellations, the ombudsman, debates, plenary hearings and committee hearings, and request of documentation.

Lastly, Parliament holds the ‘power of the purse’ (control over public expenditures) with respect to the review and passing of annual country budgets. Given the need to link extractive industries profits to the national budget and national revenues and expenditures, an understanding of natural resources linkages to the national budget process is necessary for development of national strategies.

In my opinion it would be particularly useful to analyse a parliament's activities regarding the extractives sector and find out where the major bottlenecks are.

Comment by cari votava on July 14, 2010 at 16:04

There are probably a lot of issues relevant for fruitful discussion on Parliaments and Extractives, and the role Parliaments should play. I think their first role is being innovative in laying a proper legal framework to enhance transparency and deter corruption.

In each country there are probably many things which can be done, and all depend on the shape of the existing legislative system. However, one cheap and easy place to start would be to consider enacting a law which requires that simple criminal background checks be conducted on entities/individuals which are short-listed candidates under consideration for receiving licenses or concessions, not only in extractive industries, but in other sectors defined as "nationally important" by the government.

In many countries, a lot of corruption and related money laundering occurs when "critical" licenses or concessions are granted to people who are criminals or connected with criminals or organized crime groups. Every country has several different ministries/agencies authorized to grant various licenses/concessions. Although many of these agencies may conduct "due diligence" screenings on the financial resources of the applicant, and/or the technical competence/experience, it is likely that few have the competence to conduct background checks to ensure short-listed applicants do not have a track record for criminal activities.

A law which would prohibit ministries/agencies authorized to grant "critical" license/concessions from awarding 'critical' licenses/concessions without a criminal background check/screening would be simple to implement, as well as extremely low cost, and would likely go far to prevent criminal involvement in a country's critical sectors. It is not necessary that staff of each ministry/agency conduct such background checks themselves, as they may lack experience in criminal investigations. One option is to have the service centralized within a law enforcement unit, national security agency, or anti-corruption unit, as these officials are more likely to have skills to conduct such screenings.

Practical considerations might necessitate stipulating reasonable deadlines within which reports resulting from such screenings such screenings are reported back to the referring agency, while giving the agency doing the criminal background check the right to ask for additional time in cases where information is found that warrants more time for deeper investigations. Such system would also help to prevent officials from granting critical licenses and concessions to family members, or associates which is another way that corruption can occur.
I hope this suggestion is useful.