NGOs, CIDA AND THE EXTRACTIVES: A GUIDE FOR THE PERPLEXED

Notes for Remarks at Conference, Toward New Public-Private Sector Partnerships for Sustainable Development in Resource Extraction Industries,

Institute for the Study of International Development, McGill University,

Ian Smillie

March 29-31, 2012

Let me begin by clearing away some cobwebs that tend to confuse discussions about public-private sector partnerships in resource extraction industries.

A month or so ago, a Canadian academic who once worked at the World Bank wrote an article about public-private partnerships, saying that this concept was controversial only in Canada. He said that other donor governments see no problem in working with the private sector. He pointed out that foreign direct investment is three or four times higher than ODA and that the private sector is a “rare source of desperately needed innovation in development”. He went on to say that “no country has ever aided itself out of poverty”.[1]

This kind of article, all too common in what passes today for development discourse, is as misleading as it is unhelpful. Public-private partnerships are far from new or rare in Canadian development assistance. CIDA’s Industrial Cooperation program supported 2,250 projects with private sector firms in the decade after 1995, spending $1.1 billion on them between 1978 and 2005. This was controversial, however, in part because many of the projects were more about creating Canadian commercial advantage in developing countries than they were about local development, and because CIDA’s own evaluation found that only 15.5% of the projects had actually been successful.[2]

Nobody, however, doubts the innovative and developmental potential of the private sector. And no serious aid commentator has ever suggested that aid was the only—or even the most important—contributor to development.

SUSTAINABLE DEVELOPMENT AND THE EXTRACTIVE INDUSTRIES

History and context are important to the success of any undertaking, and they are especially important in understanding the challenge facing those who aim for a kinder, gentler extractive sector, one that is part of a sustainable development paradigm rather than an impediment. So let me set the stage, as I see it, for the kind of conversation we need to have.

First, it is perhaps worth saying that in themselves, the individual operations of extractive industries are inherently unsustainable. The purpose of a mine is simply to dig out all the gold or tantalite or bauxite. Those who benefit from the operation would undoubtedly like the resource to continue forever, but it will not. Eventually the mine will close, and new opportunities will present themselveselesewhere.

So the immediate development question has more to do with how mining is initiated and carried out, how the benefits are distributed during the lifetime of the mine, and what happens when it closes.

Some of the most violent social upheavals in history have revolved around these issues. The Tonypandy coal mining riots of 1910 and 1911 in Wales, the violent nine-day British General Strike of 1926 and the UK coal miners’ strike of 1984-5 were defining moments in British thinking about these questions. They polarized political life, tore communities apart and changed public thinking about labour and mining—each in its own way—for a generation to come.

We’ve had similar moments in Canada. The violent 1949 Asbestos strike—La Grève de L’Amiante—was a formative moment in the history of Quebec and in the careers of labour leader Jean Marchand and two young journalists, Gérard Pelletier and Pierre Trudeau.

These conflictsare now history in Britain and Canada, but such stories are not history in developing countries, and each one that is blessed with mineral resources also knows the problems they can bring.

The governments of some developing countries manage the challenge well, many do not. Many developing countries have had, and continue to have their own versions of Tonypandy and La Grève de L’Amiante. Some of the conflicts are localized and unseen; some require Security Council intervention and the creation of hugely expensive peacekeeping forces. Growing awareness of the problem has raised demands for a different approach to mining and oil extraction, including much greater transparency on the allocation of rights and the payment of royalties, a closer watch on the social and environmental impacts of mining and an end to the phenomenon of “conflict” minerals. UN Security Council expert panels have been set up to look into the relationship between minerals and war; an Extractive Industries Transparency Initiative has been created, new EU Transparency and Accountancy Directives are in the works, and in the United States the passage of the Dodd-Frank Act aims to require mining companies to demonstrate that the minerals they import into the United States from the great lakes region of Africa are conflict-free.

THE CANADIAN CONTEXT

In Canada, home to more extractive sector companies than any other country, the debate on these issues has generated much more heat than light in recent years, and it is worth recalling some of the events that have led to the vexed and complicated context in which we now find ourselves.

In 2006, the government initiated a series of discussions on CSR and the extractive sector in a process that became known as the “roundtables”. Led by the Department of Foreign Affairs and International Trade, the process included other government departments and an advisory group representing the extractive industries, NGOs, aboriginal communities and academia.

The final report set out recommendations for a CSR framework of good conduct for Canadian mining, oil and gas companies operating abroad. The framework would have established standards and reporting obligations for Canadian companies and would have created an ombudsman to investigate complaints and evaluate compliance with the standards.

Most of it didn’t happen. The government pondered the recommendations for two years and in the end dismissed most of them. NGOs that had participated in the exercise were outraged, not just at the dead end they had reached after a long and difficult road to consensus with industry and government officials, but at what they saw as backroom industry efforts to lobby against the very recommendations they had helped to negotiate.

They were further angered in 2010, with an industry campaign to kill C-300, a private member’s bill that proposed giving the government authority to investigate complaints against mining companies operating abroad, and to withhold public money from offenders. And then, in September 2011, CIDA announced that it was providing matching support for projects that three Canadian NGOshad developed with mining companies in Burkina Faso, Peru and Ghana. This announcement became a lightning rod for public controversy and for the NGOs whose work on the roundtable recommendations had been thwarted.

Not least among the issues was the fact that the combined profits of the three companies in 2010 was said to be more than $4 billion. Many commentators said that CIDA should not be using taxpayer dollars to subsidize the CSR activities of Canadian mining firms abroad. And some—in the unkind way of the uninformed—said that the NGOs in question had simply sold themselves into prostitution.

I raise these points not because some people are right and others are wrong, but to describe the highly politicized setting in which our discussions take place.

The substance of the three projects hardly matters. In fact the critics don’t really care whether they are good, bad, or indifferent.

Coming at a time when CIDA had cancelled funding for several well respected but campaigning NGOs, a time when CIDA had yet again moved—or even hidden—the goalposts for “normal” NGO co-financing, a time when dozens of NGOs were having to stall or cancel projects because of lengthy CIDA decision-making delays, the announcement of funding for these three NGOs was like salt rubbed hard into deep wounds. Pierre Gratton, President of the Canadian Mining Association, said what many feared: “There is a policy shift under way, and it’s one we’re encouraged by.”[3]And that, of course, only made matters worse.

THE ROLE OF CIVIL SOCIETY

Let’s step back from the fray, if we can, and ask ourselves a few questions.

  • First, are all companies in the extractive sector doing bad things? Of course not.
  • Are they all paragons of virtue? Of course not.
  • Is it legitimate for NGOs to be critical of what they see as injustice, and is it legitimate for them to work to influence public policy? Absolutely.
  • Is it wrong for any NGO to collaborate with any mining company anywhere in the world? Ever? Of course not.

But again, context matters. Robert Putnam’s ground-breaking 1993 book, Making Democracy Work: Civic Traditions in Modern Italy, placed civil society in an entirely new light. He compared development and democracy in Northern and Southern Italy and asked why one was so underdeveloped and the other so advanced. The answer had nothing to do with climate, or natural resources or great leaders. The significant variable was the development of civil society and civic traditions in the north, and their absence in the south. In the north, guilds and unions, self-help groups, cooperatives and the vast array of horizontal relationships they created had acted in some cases as a supplement to the state, in others as an alternative to the state. They served as watchdogs and pressure groups, holding rulers accountable for their actions.

In the south, associational life was stunted, as was democracy and economic development.

Putnam’s book became essential reading for international development organizations during the 1990s because it provided a new perspective on voluntary action and civil society. And for a time, the capacity building of civil society in developing countries became an important part of the development canon.

But memories fade andimportant lessons are sometimes forgotten. As donors began to put more emphasis on the governmentsthan on the governanceof developing countries, many forgot Putnam’s message, seeing NGOs once again as a sideshow in the development matrix—servants of government or somewhat irrelevant versions of Florence Nightingale, ministering to the poor and the sick, but not really part of the main show.

WHY DOES CIDA FUND NGOs?

CIDA created its matching grant window for NGOs in the 1960s in order to recognize the good work they were doing with donations from Canadians who were already funding international development through their tax dollars. Matching these donations was a way of encouraging two things: more good work and more private donations. On the “good work” front, Canadian NGOs were innovators and teachers; they reached people that government and bilateral assistance could not, and they carried the maple leaf to communities and countries beyond CIDA’s reach. They did the kinds of things Putnam talked about, creating horizontal relationships in developing countries, rather than vertical. NGOs were funded because they were development organizations in their own right.

But that changed. Over the years, CIDA created new funding streams with more generous matching in order to attract NGOs into new countries and new sectors. And more recently CIDA’s “responsive” approach has been turned on its head. CIDA now proposes sectors and countries, and NGOs must submit bids, competing against each other for funding. The process is slow, costly, disruptive to on-going NGO activities, and almost completely unpredictable. It is demoralizing and it is the very antithesis of what is required to foster sustainable development.

It flies in the face of lessons about the importance of a vibrant civil society. It forces NGOs to make their own mission and interests subservient to those of the donor, transforming them into what David Korten called almost 25 years ago, “public service contractors”.[4]

This may seem like a long-winded distraction, but it’s key to understanding the current debate. CIDA may very well have funded the three controversial NGO projects with mining companies because the projects areentirely worthy. But CIDA required no competitive bidding, and the Minister clearly said that a major attraction was the relationship with the mining companies. For her it seemed to be as much about boosting Canadian commercial interests abroad as anything else. She told one reporter that she did not separate Canada’s trade and foreign policy interests from Canadian development goals. She added that she would like to see NGOs working with corporations in manufacturing, industry and tourism as well.[5]

THE CRUX OF THE MATTER

Given the long and complex history of extractive industries in developing countries, and given the more recent controversies in Canada, the window for constructive public-private engagementinvolving NGOs is narrow, to say the least. All such partnerships and funding arrangements will be subject to close and perhaps unfair scrutiny by the mining industry’s most vocal critics, and without any forward movement on the formalization of ethical watchdogging, most are likely to be condemned out of hand.

That said,thereareareas where public-private partnerships might work. In 2006 during the roundtable process, the Prospectors and Developers Association of Canada (PDAC) commissioned a study[6] to examine the drivers of conflict where Canadian mining firms were involved, and this is perhaps not a bad place to start.

Contextual drivers of conflict relate to the political, social and environmental setting; issues over which a company has no direct control but which it might need to address. “Company practice drivers” of conflict include actions more closely controlled by the company, actions which could mitigate or exacerbate a conflict situation.

Among the contextual drivers there are two broad domains. First, the area of governance, where conflict may be exacerbated by high levels of corruption, midstream changes in the regulatory environment, weakgovernment capacity for environmental regulation, and problems of militarization and impunity for government agents. In the social domain, problems revolve around the interpretation of requirements for consent and consultation with local communities; the impact of mining activities on traditional livelihoods, notably farming; conflicts generated by and with artisanal miners encroaching on company concessions; local fear and/or lack of understanding about mining practices; and legacy issues left behind by other companies and other conflicts.

There are several areas here where NGOs might be of assistance, where they can do things that the company, the government and others cannot do. But in most, the appropriate relationship is likely to be a fee-for-service arrangement between the company and the NGO, and all are fraught with risk. ODA funding—in the form of a CIDA contribution, for example—will in most casesbe unwarranted and even inappropriate unless a generic issue is being tackled, away from immediate company operations. An example of this might be capacity building for environmental regulation, one of the recommendations contained in the roundtable process.

Are there guidelines for NGOs that want to avoid controversy, but do see opportunities for engagement with Canadian mining companies abroad? Here are five to think about:

  • First, understand that if you get into any kind of a service delivery mode for a company, there are likely to be repercussions. Use the Tabloid Test: ask yourself how a hostile tabloid journalist might write about what you are planning. Microfinance for poor women? No problem. Training people for the mining sector? Not so clear cut.
  • Second, make sure that any potential funder is clean—in terms that you can explain to your mother. Many charities won’t take money from arms manufacturers or tobacco companies. If a mining firm has developed a bad reputation, or has half a dozen NGO lawsuits in its background, think twice. Any attempt to co-opt you into being part of their cleanup—“greenwashing” as it’s called in the environmental sector—is an invitation to controversy.
  • Third, find out what the communities around the operations of a potential mining partner think about the company. If there are legacy issues orhard feelings, you probably won’t get very far off the company compound.
  • Fourth, research the company’s relationship with government. Are there current or historical issues of due process? Transparency? Probity? If yes, these could impinge on your own relationship with government.
  • Fifth, understand that if you divert programming attention from your own mandate to that of another party—whether a mining company or that of a funder like CIDA that does not apparently distinguish between Canada’s commercial or foreign policy interests and its own mandate, then you’ve got a serious problem.[7]

The ODA Accountability Act, however,is clear about CIDA’s mandate: it “lays out three conditions that must be satisfied for international assistance to be considered as ODA under the Act. These conditions are that assistance: