sharing in governance of extractive industries

If working with mining, Canadian aid needs to get more sophisticated

In the Canadian government’s current review of international assistance, there is a great deal of discussion on the role that the private sector can play in global development. This review is taking place in the context of the United Nations’ recently launched Sustainable Development Goals, which correctly recognize that the private sector must be involved in order to create the meaningful economic and social development required to end poverty.

Of note for the government in this regard is whether our international assistance should engage with Canadian mining companies. The previous Conservative government undertook pilot projects that saw Canadian aid funding go to projects by non-governmental organizations that also received contributions from Canadian mining companies. For example, in Ghana the Canadian government provided funding to a World University Service of Canada project that Rio Tinto contributed to as well.

These projects were controversial, to be sure. Many civil society organizations attacked them as Canadian aid money being spent on projects in the service of controversial companies.

However, seemingly lost in this debate was much discussion of the actual merits of any of the projects in question, and whether they were an effective use of scarce aid dollars. Their proponents largely seemed content that aid was involving the private sector at all, and the actual outcomes of the projects seemed of secondary concern. Their opponents, on the other hand, seemed unwilling to ever consider whether real development and poverty reduction could result from engaging with the mining sector.

It is time that Canada becomes more sophisticated in its aid work that partners with the mining sector, and other parts of the private sector for that matter as well. We need to move past the question of whether or not Canadian aid should work with private sector partners, to deciding under what conditions this should happen, and with which companies.

The question to be answered when a new project of any kind is proposed is whether it will lead to meaningful economic and social development as compared to other projects. Put another way: does this create the most impact per aid dollar?

In some cases this may mean that working with a Canadian mining company may actually result in an effective aid project. With mining historically contributing so little to real development in countries in sub-Saharan Africa, for example, this actually means the opportunity to improve both governance and the economic impacts of mining operations is large.

This also means that Canadian aid money could at times be used to work with non-Canadian companies, again, if it will lead to more meaningful development than other projects being considered by Global Affairs Canada. Doing so would also help ensure and signal that we are moving away from “tied aid” once and for all.

In other cases, however, working with the mining sector may not be a suitable development strategy for particular countries. Other sectors and other companies will simply offer far greater opportunities to leverage the private sector for development. In these cases, no level of Canadian mining presence in the country should bias where our aid money goes.

What is particularly clear, though, is that Canadian international assistance should not be used for any sort of project that is basically a philanthropic community investment program. It is the responsibility of governments to provide infrastructure and public services, and neither Canadian mining companies, nor NGOs, should be taking that place.

Canadian mining companies do not have providing social services and building community centres as their core competency. Having a mining company donate to a local soccer league or open a health clinic is hardly harnessing the private sector for development.

Instead, if working with mining, Canadian aid should focus on how to leverage the most meaningful potential impacts of private sector activity, including skills training, technology transfer, local purchasing, and shared infrastructure. It is through these avenues that countries including South Korea and China leveraged incoming foreign direct investment to develop, and these examples provide more meaningful models of private sector engagement to guide our aid.

In addition, Canada will be doing itself no favours by choosing mining companies as partners that engage in unethical behaviour such as tax evasion or those who refuse to adhere to the concept of free, prior, and informed consent.

No company is perfect, of course, and it can be very difficult to judge allegations against mining companies for their actions in remote areas overseas. At the very least, however, it seems reasonable to avoid working with companies that have consistently had allegations raised against them from credible observers, when there is a large number to choose from that have never faced such consistent conflict.

It’s time to raise the bar on how Canadian aid works with all parts of the private sector, and especially our mining sector. Our assistance should be guided by the goal of creating the most impact possible, and we need to chose our partners based on this above all else.

This piece was originally published in The Hill Times on Wednesday, July 27, 2016.

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