By Erik Solheim, Chair of OECD Development Assistance Committee (DAC)
I feel very upbeat and encouraged, having just come back from Australia, where I participated in the Mining for Development Conference and the global EITI conference, with a chance to visit Canberra in between.
Australia has had a fantastic last 20 years, with a booming economy. This is borne not just out of economic figures, but a real sense of how well Australia is doing. We had our own scientific proof of this all along, as Australia tops the OECD’s How’s Life Index for the third year in a row. But it is even better to get a real feel for this, and I can definitely understand why after having visited Sydney and Canberra.
Coming back to the economy: mining is obviously a very important part of Australia’s growth story. Flying over to Sydney via Singapore, you cannot help but notice the continental scale of the country, and it gives you a vivid impression of the rich natural resources in the soil. And that relates to a very important fact: Australia is a powerful demonstration of a hugely successful economy based, to a large extent, on natural resources.
This example of success could also be important for developing countries: With massive natural resource discoveries in many developing countries over recent years, there clearly is unprecedented potential for this to fuel growth, reduce poverty and contribute to overall development.
Unfortunately, the historical record of natural-resource rich economies is rather sobering, as most show a poor record in economic growth and development indicators. In fact, resource rich countries, and those dependent on extractive minerals like oil, gas and mining, have generally seen lower growth and worse socio-economic and governance outcomes than countries without such resources. This dilemma is often referred to as the “resource curse”. Fantastic success stories like South Korea and Singapore have no natural resources. The growth of China is also based on tapping global raw materials, not local ones.
Here is where the Mining for Development Conference and the Extractive Industries Transparency Initiative (EITI) come in. The Mining for Development programme, recently launched by AusAID, has created a lot of buzz and excitement. It’s exactly the kind of new thinking we need in development. It makes a lot of sense for countries like Australia to make their specialized expertise available to developing countries. Development agencies can be the conduit for such capacity exchange. This was exactly the point made by the numerous political leaders, civil society organizations and leading thinkers attending the conference. My country, Norway, has worked on resource issues in the oil and gas sector. I am really happy that Australia is now focusing on minerals.
The Global Conference of EITI was also very well attended, with over 1,500 high level delegates, including ministers, leading civil society organizations and many of today’s leading thinkers on the issue of natural resources management. Although just over 10 years old, the EITI has had an enormous impact on the global transparency agenda. Whereas signature bonuses and royalty payments were a huge source of corruption and bribery, that has now effectively been closed down in most countries. Governments and companies today accept that they must report – and account for – the funds paid to governments for extractive industry contracts. Of course, corruption evolves quickly, and systems to combat corruption must evolve with it –and the EITI is doing just that with the expansion of their standards.
Both the Mining for Development and the EITI conferences were very impressive, but I was equally impressed by the Australian aid programme overall. Australia deserves a lot of credit for its commitment to use its own good fortunes to help less fortunate neighbours in the Pacific region and in the rest of the developing world with a growing, and very effective aid programme, as formally recorded by the DAC Peer Review of Australia, which we completed just a few weeks prior to my visit.
We will need initiatives such as Mining for Development and EITI, and sharp programmes such as AusAID, to make sure we can best help developing countries achieve their goals. As the share of aid in financial flows to developing countries is shrinking, understanding how it can best be used to have the most impact is essential. Against this background, we will take a good look over the next two years at the ODA concept, but also much broader development financial flows.
I had a very stimulating and open debate with researchers and students from the Australian National University on the future of aid, and Australia’s role within this new landscape. The definition of ODA was an issue that many seem to care about. While there is a lot of demand to update the ODA concept, I also see a strong support for core elements that have to do with developmental objectives of such financing and its concessional nature. That is not a contradiction. Where all agree is what we measure, and how we measure it, allows us to best capture what is relevant for developing countries.
Initiatives such as EITI have completely changed the extractive industries governance landscape over the last ten years, and development agencies have come a long way in keeping up with the times and being willing to finance strategic issues with big-impact potential, such as mining for development, oil for development, and tax and development. If it were not for ODA, these initiatives would not have seen the light of day – but they can leverage resources at a scale far beyond what ODA ever could, and play a catalytic role for development.
About the author: Erik Solheim
Erik Solheim was appointed Chair of the OECD Development Assistance Committee (DAC) in January 2013. He served as a member of the Norwegian parliament for twelve years including as Minister of the Environment and International Development.