STATE OF EXTRACTIVE INDUSTRIES TRANSPARENCY IN ASEAN: CHALLENGES

AND OPPORTUNITIES FOR SUB-NATIONAL

FABBY TUMIWAINSTITUTE FOR ESSENTIAL SERVICES REFORM SUBNATIONAL CONFERENCE ON EXTRACTIVE

INDUSTRY TRANSPARENCY INITIATIVEDavao City, August 22-23, 2013

Source: Bloomberg, 23 August 2012

International Initiatives on Mineral commodities Transparency

• Transparency of origin of mineral and supply chain– Dodd-Frank Act section 1502 – SEC Rules on Conflict

Mineral – Conflict-Free Smelter Program by Conflict Free-Sourcing

Initiative• Companies disclose and communicate about smelters of their

supply chain• 120 companies participates globally

• APEC Ministers Responsible for Mining (APRM), • APEC Anti-Corruption and Transparency Working Group

(ACTWG) looking at the illicit trade (forest products and minerals)

• Extractive Industries Transparency Initiative

South East Asia: a Mineral Rich Region

Investment and Extraction Hot Spot

• Indonesia (cooper, gold, nickel, tin, coal) and Philippines (gold, cooper, nickel) are leading mineral producer countries in Southeast Asia and Pacific.

• Exploration budget for SEA and Pacific (excluding Australia) in 2011 was about $1 billion, increased 39% compared to 2010– China maintained 4% of total exploration budget (excluded

government-owned mining co)– Indonesia, Philippines, PNG together are accounted 80% of total

exploration budget, 68% of all exploration sites in the region. • Southeast Asia/East Asia is important player in the global

supply chain, both as producer and consumer.

Resource Governance Index of Asia & Pacific Countries (2013)

RGI measured: • Institutional and legal

setting• Reporting practice• Safeguard and quality

control• Enabling environment.

Energy and Mineral Cooperation in ASEAN

• Energy and Mineral cooperation are key cooperation under Economic Community of ASEAN

• Key Cooperation: – Vientiane Action Programme (2004 –

2010) • ASEAN Minerals Cooperation Action

Plan (AMCAP 2005-2010, 2011-2015)• ASEAN Plan of Action for Energy

Cooperation (1999-2004, 2004-2009, 2010-2015)

– Ministerial Bodies:• ASEAN Ministerial Meeting on Minerals

(AMMin)• ASEAN Ministerial Energy Meeting (AMEM)

ASEAN Minerals Cooperation: Six Policy Direction

Manila Declaration on Intensifying ASEAN Minerals Cooperation Manila, 16 October 2008:

1. ENSURE continuous development and utilisation of the mineral resources of the ASEAN Member States to enhance the sustainability of the resources and maximise the benefits to the community and the national economy, providing the necessary safety net and shield from global financial and economic turmoil;

2. ACCELERATE cooperation to work towards the facilitation and enhancement of trade and investments in minerals through harmonisation of mineral policies, incentives and taxation, standardisation of mineral resource information, and systematised flow and exchange of resource and trade information;

3. ENCOURAGE cooperation to develop policy guidelines and standards for ASEAN Best Mining Practices to promote environmentally and socially sustainable mineral development in the ASEAN region;

4. STRENGTHEN the development of institutional and human capacity building in the geological and minerals sector to ensure and adequately address the current needs and future demands of the ASEAN minerals industry and economy;

5. PROMOTE a platform for dialogue in which the private sector and ASEAN Dialogue Partners can more effectively and efficiently collaborate in mutually beneficial minerals cooperation activities in support of the building up of the ASEAN Community;

6. FOSTER concerted cooperation and joint approaches in international and regional fora in minerals such as in Asia Pacific Economic Cooperation (APEC) activities and the forthcoming United Nations Committee on Sustainable Development’s Meeting in 2010, among others;

Promoting Good Governance in Extractive Industries in ASEAN

EITI was firstly introduced by Indonesia in the ASEAN Senior Official Meeting on Energy in Brunei on May 2011.

In August 2011: First Government of Indonesia sponsored Regional Workshop linking energy security and governance standard such as EITI, attended by reps from ASEAN countries, and ASEAN energy cooperation bodies (ASCOPE).

Outcome of the Regional Workshop was reported to the ASEAN Ministerial Meeting on Energy in Brunei, Sept 2011.

EITI was introduced to ASOMM and has been agreed by ASEAN Ministerial Meeting on Mineral to be part of Capacity Building Program of ASEAN Mineral Cooperation Action Plan 2011-2015, in Hanoi Dec 2011.

EITI under the ASEAN Energy & Mineral Cooperation

ASEAN Ministerial Energy Meeting (AMEM, Brunei Sept 2011)• “Indonesia proposed to include the Extractive Industry

Transparency Initiative (EITI) in the mainstream work of EAS energy cooperation to promote transparency in the extractive industries, building on the excellent foundations of the EITI works. While concurring on the importance of promoting transparency, the Meeting tasked the ASEAN SOME and EAS ECTF to discuss this proposal and submit appropriate recommendations for consideration at the next EAS EMM meeting.“

ASEAN Mineral Cooperation (Hanoi, Dec 2011)• “The Ministers noted the Extractive Industries Transparency

Initiative (EITI) that is knows as international quality standard on revenue collection in mineral sector and agreed to the proposal to include capacity building on revenue collection in mineral sector, and agreed to the proposal to include capacity building on EITI in ASEAN Mineral Cooperation Action Plan (AMCAP) 2011-2015.”

State of EITI in ASEAN Countries

Philippines: Candidate country to implement EITI

Philippines: Candidate country to implement EITI

Indonesia: EITI Implementing

country

Indonesia: EITI Implementing

country

Myanmar: Candidate country to implement EITI

Myanmar: Candidate country to implement EITI

Vietnam:Gov Study and

study the adoption of EITI

Vietnam:Gov Study and

study the adoption of EITI

Cambodia: Considered to

implement EITI principles

Cambodia: Considered to

implement EITI principles

The case for Sub-National Extractive Industries Transparency Initiative

• Decision to implement EITI in national level is usually complex – both political and process wise.

• National process usually involve less participation from local government and local communities.

• Sub-national EITI could be seen as “pilot” or “exercise” process for country to adopt full EITI implementation.

• Sub-national EITI could capture local dynamics and adopt more measures beyond “transparency” indicators.

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

Sub-National EIT

ASEAN Sub-National Extractive Industries Transparency (EIT) Network

Sub-National EIT

Sub-National EIT

• Irreversibility: how to make non-renewable resources an asset that benefits all.

• Legacy: how to overcome the enclave nature of industry.

• Creating wealth with equity: avoid “Race to the Bottom” – investing and distributing fairly

• Diversifying economy: escape from “Dutch Disease”

• Governance deficits: corruption, rent-seeking, poor participation

Thinking Beyond Transparency

• Transforming the way ASEAN countries do mining • New Mining Framework:– RESPECT Human Rights– PROTECT Environment, Land and Water– MAXIMIZE Local economy and benefits for local

communities– TRANSPARENT Revenues Collection and Management– ENSURE Sustainable Mining Practices (Artisanal, Small

Scale and Large Mining)

THANK YOU

Email: fabby@iesr.or.id Website: www.iesr.or.id www.eiwatch.net