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sharing in governance of extractive industries

Open modeling will help governments: whether they admit it or not

We have seen how public interest models can put the power of analysis into the public domain, help raise the level of understanding around the financial engine of oil..., and channel advocacy into highly targeted requests for information to produce still more clarity.

But where are governments in all this? If public interest models can reveal weak spots in the negotiations or monitoring process, are they simply going to be a stick to beat officials with?

We believe not. Some officials in some governments might stand to be embarassed by the new insights that modeling will bring and the insight they will provide into decisions that have been taken in the past. But the net impact of public interest models will be to help government fulfill its management roles in two key ways.

First, they will act as a great leveller across all arms of government.

We know that part of the problem of Resource Curse, when it happens, is dysfunctionality within government – crucial documents and information held by a few individuals, the big picture they represent often not embedded as institutional knowledge even within agencies dedicated to management of these industries. And then there is exclusion of broader arms of government, despite the fact that many institutions have some role to play in and around extractive industries, such as finance ministries, investment boards, tax and revenue authorities and district administrations.

In theory, the raw documents reaching the public domain are available to them as to anyone else. But in practice the resources to sift and compare, to synthesise and analyse all these different sources are beyond many state institutions in the Global South.

Models can act as a good point of departure for this broader constituency. Line ministries, national oil companies and other specialised agencies will no longer be sole authority on these projects and their financial flows. The impact of this may be more subtle than outright civil society campaigning, but potentially it is just as transformative.

Once open financial models are normal, we might even think of a Panopticon principle at work. Officials who currently have sole say in how new projects are developed may think carefully about positions taken in negotiation if they know that others will at some time in the not too distant future have the tools to be able to assess those decisions for themselves. For those involved in contract monitoring, in making sure existing projects deliver what they are supposed to, that time lapse is shorter, since models can provide notional results of what should be happening as up to date as the data that goes into them.

The second way in which public interest models can help government officials is that in any well constructed model the inputs are held and adjusted separately to the calculation engine. This means that government officials who have better data than the model has been able to source from public domain can easily plug their own data in, instead of the model’s default assumptions, and get a better version of the analysis.

I realised this when I happened to see a state company official in front of a model immediately go to the production estimate of a field in a model and change it to a very specific number. I would put money on it being the current estimate for recoverable reserves for that field within the company as a whole.

In an ideal world, such better information would be returned to the public domain and we could create a virtuous circle of ever improving information. But even if not, the government’s own knowledge base will have been strengthened. The model will have reduced the “asymmetry of information” it faces compared to the big and capable companies.

What this means is that there should be every effort to bring governments into an open modeling approach, even as the commitment to publish models for broad public scrutiny remains unwavering. Dialogue and training in broad government circles will be a key part of any public modeling agenda. It also means that the international community should support public modeling as a support to and potential tool for the government – whether this is officially acknowledged or not.

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