Ninth Meeting of the PD-NR, 31 January - 01 February 2018
Under the co-chairmanship of Chile, Germany, Guinea, Kazakhstan, Liberia, Norway, and United Kingdom, 22 government delegations from Africa, Asia, Europe, and Latin America, as well as representatives from 8 partner international organisations and institutions, and 48 major firms, industry associations, civil society organisations, academia, law firms and think tanks convened at the OECD on 31 January – 1 February 2018 for the Ninth Plenary Meeting of the Policy Dialogue on Natural Resource Development. International organisations and institutions represented included the African Legal Support Facility, the Commonwealth Secretariat, the European Union, the Extractive Industries Transparency Initiative, the Holy See, the Inter-American Development Bank, the UN Economic Commission for Africa, and the UN Conference on Trade and Development. H.E. Eng. Abdirashid Ahmed Mohammed, Minister of Petroleum and Mining, Federal Republic of Somalia, gave a keynote address and Mr Günter Nooke Personal Representative of the German Chancellor for Africa, Federal Ministry for Economic Cooperation and Development (BMZ) delivered closing remarks.
Work Stream 1 – Shared Value Creation and Local Development
Four new examples were validated for inclusion in the online Compendium of Practices, with a focus on enhanced local supplier and workforce participation in extractive projects in Chile, Oman, Uganda, and Mongolia. Participants emphasised the importance of collaborative, process-oriented, bottom-up approaches facilitated by governments whereby shared understanding and alignment across stakeholders can be built. Empirical data gathering on long-term supply and demand, industry requirements and barriers can support diversification efforts and enable the identification of sectors that can be developed at scale, while allowing for flexibility in setting common goals with industry, and readjusting to reflect shifting realities. Reporting on local procurement by extractive companies can also help overcome information asymmetries on procurement opportunities, and contribute to building data for government uptake to inform improved policy making. While addressing the sector’s low-emission transition, participants recognised the existence of a business case for integrating clean technology solutions, leading to cost savings, along with increased energy, emission and water-use efficiency, as well as for diversification of energy companies’ portfolios towards renewables. However, the lack of a strong carbon pricing signal and mechanisms to promote carbon capture and storage systems, as well as the perceived and actual risks associated with new technology absorption need to be tackled to scale up innovative practices. Governments have a crucial role to play in creating an enabling environment to accelerate the sector’s shift to clean technology, and to foster public-private collaboration to share potential operational and financial risks.
Work Stream 2 – Revenue Management and Spending
Direct cash transfers are a possible mechanism for governments to distribute natural resource revenues to citizens, in support of their development objectives. Participants considered that in developing country contexts, governments often face a dilemma, and using resource revenue to give cash to citizens may divert revenues from priority investments such as in infrastructure, health, and education. At the same time, cash transfers may be useful to smooth the transition for gradually phasing out fossil fuel subsidies, which tend to be poorly targeted and inefficient, yet popularly supported and thus often difficult to reform.
Work Stream 3 – Getting Better Deals
While discussing the consequences of changes in law on the durability of extractive contracts, participants distinguished between fiscal and non-fiscal changes. Participants recognised that changes in law reflecting evolving human rights, health and safety, and environmental international obligations and standards should not trigger compensation, unless they amount to an expropriation. However, concerns were raised regarding possible substantive new costs incurred by investors, preventing them from performing obligations under the contract. Fiscal changes over time were regarded as one of the main drivers for renegotiation. Participants converged on the need for governments to design a fiscal system that strikes a balance between ensuring a fair sharing of the financial benefits for governments and the investors, whilst maintaining the competitiveness of the fiscal regime under a range of outcomes to provide sufficient incentives for investors to invest. A fiscal system that provides for a combination of reasonable revenue certainty and is responsive to market conditions and outcomes will be perceived as more durable as it will reduce the likelihood of a change of the fiscal terms, and consequently the perception of risk.
Work Stream 4 – Domestic Resource Mobilisation (tackling BEPS and corruption)
Further to the launching of the Thematic Dialogue on Commodity Trading Transparency last June, participants recognised that home countries, host countries and companies involved in commodity trading have a shared responsibility to improve transparency and accountability in commodity sales transactions that relate to the state’s share of production. Participants noted the need for broadening the engagement with trade hubs, with a view to collect more data to inform the dialogue moving forward. Participants agreed on a roadmap to develop a global reporting template for payment disclosure by companies involved in commodity trading; to operationalise due diligence guidance to tackle specific risks of rent diversion and corruption; and to develop a template to support SOEs in selecting buyers, linking up different strands of work across the OECD and coordinating with other international organisations, including international financial institutions. Participants welcomed the support of the G20 Chair Argentina for the work of the Thematic Dialogue, and noted the opportunity to make meaningful contributions to the G20 Agenda, with particular respect to state-owned enterprises. Participants further welcomed progress under the BEPS in mining project on tax incentives, excessive interest deductions by multinational mining enterprises, and the challenges countries are facing with ensuring accurate and credible mineral product testing, whether this is done by governments, industry or independent parties abroad. Several countries reported significant progress in improving their testing controls, and in developing systems that satisfy both the industry and government, including the possible involvement of International Financial Institutions to ensure company compliance with best practice, by adding this expectation as a condition of project financing.
Session 2 - Disclosure of commodities’ sales payments: what are traders doing?
Thematic Dialogue on Commodities Trading Transparency by Mr. Joseph Williams, Senior Advocacy Officer, NRGI
Evidence and mitigation measures for corruption in the trading of oil and minerals by Mr. Olivier Longchamp, Responsible for tax and international finance, Public Eye
Session 4 - Natural Resource Revenue Management and Spending: Thematic Focus on Direct Distribution Cash Transfers
Mongolia’s Experience with the Direct Distribution of Natural Resource Revenues through Cash Transfers by Dr. Baldorj Baatartsogt, Expert, Former Head of the Mineral Resources and Petroleum Authority of Mongolia
Session 5 - Mobilising Resource Revenues from the Mining Sector: Tackling Leakages and Building on the OECD/G20 Actions on Base Erosion and Profit Shifting
IGF-OECD BEPS in Mining Program: an update by Mr. Dan Devlin, Senior Tax Advisor, Extractive Industries, OECD Centre for Tax Policy and Administration and Dr. Howard Mann, Associate & Senior International Law Advisor, Inter Governmental Forum on Mining (IGF)
Closing remarks by:
Mr. Federico Bonaglia, Deputy Director, OECD Development Centre
Welcoming remarks by:
Mr. Mario Pezzini, Director, OECD Development Centre
Session 6 - Compendium of Practices on the Framework on Collaborative Strategies for In-Country Shared Value Creation: thematic focus on local procurement and reporting
In-Country Value (ICV): Products made and services provided by skilled Omanis, in Oman by Mr. Mohammed Al-Ghareebi, In-Country Value Development Manager, Petroleum Development Oman
Chile's World Class Suppliers Programme by Ms. Jane Korinek, Trade Policy Analyst, Trade and Agricultural Directorate, OECD
Procurement Spending in Context by Mr. Jeff Geipel, Managing Director, Mining Shared Value, Engineers Without Borders Canada
Closing remarks by:
Mr. Günter Nooke, Personal Representative of the German Chancellor for Africa, Federal Ministry for Economic Cooperation and Development (BMZ)
18-19 Dec 2013: Inaugural Meeting | 3-4 June 2014: Second Meeting | 17-18 Nov 2014: Third Meeting | 29-30 June 2015: Fourth Meeting | 2-3-4 December 2015: Fifth Meeting | 22-23 June 2016: Sixth Meeting | 30 Nov-1 Dec 2016 : Seventh Meeting | 15-16 June 2017 : Eighth Meeting | 31 Jan – 1 Feb 2018 : Ninth Meeting