Judiciary, Multi-Stakeholder Groups have crucial role to play in monitoring Natural Resource Funds – Chatham House

Nov 19, 2018 News

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By Kiana Wilburg

Whether or not rules are in place, independent oversight bodies have important roles to play in holding governments to account for the management of Natural Resource Funds (NRF).
This was recently noted by Chatham House, a non-governmental organization based in London whose mission is to analyze and promote the understanding of major international issues and current affairs.
Chatham House explained that in many countries, the courts are explicitly mandated to determine the constitutionality of legislation and ensure government compliance with laws, including those governing natural resource fund management. Where the courts are free from political interference, Chatham House said that judicial review is a strong form of independent oversight insofar as courts are able to enforce their decisions on the government.
Chatham House said, “Some countries are not brave enough to embrace this type of independent oversight. But the evidence is overwhelming to prove that this is an extremely powerful form of ensuring transparency and accountability in the operations of the NRF. In 2008, the Timor-Leste Appeals Court found that a $290.7 million withdrawal from the Petroleum Fund by the Government was illegal. The rationale was that it violated the 2005 Petroleum Fund Law requirements that the government provides a detailed explanation for the withdrawal and that petroleum revenues be managed for the benefit of current and future generations. The Court was able to order that the money be returned to the Fund.”
Turning its attention to the importance of Multi-Stakeholder Groups, Chatham House said that some countries have established formal forms of these oversight bodies to reinforce and support the work of traditional bodies such as Parliament and the Judiciary or to provide an additional source of regulation.
Chatham House said that in Chad, Ghana, and Timor-Leste, civil society persons such as Chartered Accountants, trade unionists, traditional leaders, and central bankers, form formal oversight committees for their country’s NRFs.
The transparency body said, “Ghana’s Public Interest and Accountability Committee, for example, is mandated by law to monitor the management of petroleum revenues as outlined in the Petroleum Revenue Management Act. Timor-Leste’s Petroleum Fund Consultative Council, which consists of various civil society persons is mandated to advise Parliament on how the country views the operations of the fund as well as recommendations for improvement…”
CONSENSUS NEEDED
In agreement with the views expressed by Chatham House is the Natural Resource Governance Institute (NRGI). Since the coalition administration announced the discovery of oil in 2015, the NRGI has been offering advice on how Guyana can ensure that this finite resource turns out to be a blessing instead of a curse. With respect to Guyana’s desire for a Natural Resource Fund, the Institute said that consensus among stakeholders is necessary if it is to be successful. Without it, NRGI said that Guyana would be running the risk of being trapped in a cycle where rules governing the use of the Fund are constantly thrown out, or altered to suit the liking of any party in power.
One of NRGI’s most respected economists and experts on NRFs, Andrew Bauer, has spoken extensively on this matter. The economist said, “You need consensus because what is going to end up happening is that you can put together the nicest laws with the most beautiful rules and if the new party comes into power (and they aren’t in agreement with it) they can throw it out. So it is not particularly useful to have something that can be thrown out every few years.”
Bauer said that consensus building is critical to the success of any Natural Resource Fund as politicians and oversight bodies are unlikely to enforce rules unless they have a feeling of ownership over them.
He said that there are many models of consensus building. The NRGI consultant said that these include: parliamentary debates, public surveys, and political ententes.
In Norway for example, Bauer pointed out that the political parties negotiated the fiscal rules so that each would abide by them once they entered government.
Pointing to another example, the economist said, “One of the most amazing stories is Ghana in West Africa. In Ghana, before they put the NRF in place and the fiscal rule, the Ministry of Finance ran around the country to almost every small town and village and they asked people how much money they think the government should save, how much money they think the government should spend and what it should be spent on.”
The economist added, “And when they got feedback, they fed it into the fiscal rule. The value of that showed up years later when the government tried to break the rules and locals were calling into the local radio stations saying, ‘Well this is crazy! The government is doing a horrible job…’ There was public outcry and the government stopped …So it is really important to have everyone on board.”
On that note, Bauer stressed that it is crucial that the coalition administration follow suit and engage in cross-country consensus building exercises before the establishment of the Fund.

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