Resources Policy 37 (2012) 241–250 Contents lists available at ScienceDirect Resources Policy journal homepage: www.elsevier.com/locate/resourpol Perspectives on community representation within the Extractive Industries Transparency Initiative: Experiences from south-east Madagascar Shirley M. Smith n, Derek D. Shepherd, Peter T. Dorward School of Agriculture, Policy and Development, The University of Reading, PO Box 217, Reading, Berkshire RG6 6AH, UK article info abstract Article history: This article critically examines the nature and quality of governance in community representation and Received 4 November 2010 civil society engagement in the context of trans-national large-scale mining, drawing on experiences Received in revised form in the Anosy Region of south-east Madagascar. An exploration of functional relationships between 5 January 2011 government, mining business and civil society stakeholders reveals an equivocal legitimacy of Accepted 6 January 2011 certain civil society representatives, created by state manipulation, which contributes to community Available online 25 February 2011 disempowerment. The appointment of local government officials, rather than election, creates a JEL classifications: hierarchy of upward dependencies and a culture where the majority of officials express similar views D7 and political alliances. As a consequence, community resistance is suppressed. G3 Voluntary mechanisms such as Corporate Social Responsibility (CSR) and the Extractive Industries I3 Transparency Initiative (EITI) advocate community stakeholder engagement in decision making O1 Q3 processes as a measure to achieve public accountability. In many developing countries, where there is a lack of transparency and high levels of corruption, the value of this engagement, however, is Keywords: debatable. Findings from this study indicate that the power relationships which exist between Corporate Social Responsibility (CSR) stakeholders in the highly lucrative mining industry override efforts to achieve ’’good governance’’ Extractives Industry Transparency Initiative through voluntary community engagement. The continuing challenge lies in identifying where the (EITI) responsibility sits in order to address this power struggle to achieve fair representation. Large-scale mining & 2011 Elsevier Ltd. All rights reserved. Trans-national mining Governance Rio Tinto Madagascar Africa Developing country Development Minerals Resource rich Globalisation Introduction policies, whereas host governments typically receive minimal mining revenues. Essentially, large-scale mining has expanded into With the global demand for minerals increasing, companies certain vulnerable countries without effective regulatory control headquartered in developed countries are expanding into develop- (SAPRIN, 2002, p. 144–155). It is also suggested that undervalued ing countries where reserves are relatively unexploited and plenti- land and resources enable trans-national mining corporations to ful. One continuously debated topic in this regard is the convenience increase their profits. of operating beyond national boundaries for a number of reasons The World Bank, a major investor in extractive industry linked to lower operating costs, including low wages, plentiful projects, advocates that mining-led development in developing labour and weak governance with less public scrutiny and fewer countries creates employment and downstream industries, and, statutory requirements. Structural adjustment and policy reforms, in the process, increases household income and reduces poverty such as those advocated by the World Bank, have increased private (World Bank, 2004). Specifically, the Bank both asserts that large- investments in mining: companies benefit from attractive fiscal scale mining creates income which governments can use to finance national social and environmental programmes with a focus on poverty reduction (World Bank, 2008), and acknowl- n edges that responsible management and distribution of these Corresponding author. E-mail addresses: [email protected], revenues is a challenge to many governments (Weber-Fahr, 2002, [email protected] (S.M. Smith). p. 2). Many developing countries that are major exporters of 0301-4207/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.resourpol.2011.01.001 242 S.M. Smith et al. / Resources Policy 37 (2012) 241–250 mineral resources have high levels of corruption, low levels of south-east Madagascar. Two common themes emerging from the democracy and do not have an appropriate governance frame- industry-specific initiatives and the broader literature concerning work. Dependence on mineral revenues can exacerbate these Corporate Social Responsibility (CSR) are explored further: (i) the harmful aspects, in turn, furthering corruption, authoritarianism, voluntary nature of their application; and (ii) the role and value of government ineffectiveness, high military spending and civil war stakeholder engagement, with particular emphasis on civil society (Ross, 2001). It has been observed that many resource-dependent representation and the responsibility of international donors. The countries grow more slowly economically and socially than underlying implication is that stakeholder engagement facilitates resource poor countries, resulting in low levels of education, ‘‘good governance.’’ living standards and life expectancy as well as high levels of poverty and child mortality. Much has been written about this paradox, popularly referred to in the literature as the ‘‘Resource Mining sector reform and the evolution of QMM in Curse’’ and the World Bank’s potential involvement in this Madagascar dynamic1 (see e.g. Atkinson and Hamilton, 2003; Auty, 1993; Sachs and Warner, 2001; Pegg, 2003, 2006; Stevens and Dietsche, Madagascar, a designated biodiversity hotspot, experiences an 2008; Ross, 2001). imbalanced focus towards environment and conservation issues Although the extractive industry has been under sustained rather than socio-economic development. Large-scale mine pro- pressure to improve its performance (Carter, 2005), much of the duction is a relatively recent development in Madagascar: studies focus has been on environmental issues, with comparatively less examining the impact of large-scale mining projects on local attention paid to interrelated socio-economic issues (Hilson, 2002). community identity are therefore scarce. There is even less Social problems were at the forefront of the Global Mining Initiative analysis of governance in the country’s extractive industries, (GMI) embarked on by nine large mining companies in the late- particularly perspectives from the grassroots (Sarrasin, 2006). 1990s. The aim of the GMI was to change the way in which the There is potential for Madagascar’s mineral resource revenue mining industry operated; through an exploration of ‘‘the role of the to be directed at socio-economic development programmes cap- sector in the transition to sustainable development‘‘. The outcome, able of facilitating rural poverty alleviation. The situation else- the Mining, Minerals and Sustainable Development (MMSD) project, where in sub-Saharan Africa is extremely discouraging: evidence acknowledged the industry’s failure to convince stakeholders of its from studies carried out in the region suggests that revenues ‘‘social licence to operate’’ or fully address the challenges of poverty rarely impact positively on the poorest 20% of the population and alleviation, job creation, capacity-building and skills creation, govern- may, in fact, worsen their situation (Ross, 2001). Resource ance, gender equity and stakeholder engagement (IIED, 2002,p.xiv dependency may also negatively affect Madagascar’s fragile 2 3 and 363–366). The Extractive Industries Transparency Initiative (EITI), state. Since independence, the country has experienced periods which would build upon the foundation laid by the EIR and the of single party dominance, civil uprising against the government MMSD project, is an externally validated voluntary scheme which resulting in military rule followed by elections of disputed fair- aims to strengthen governance through greater transparency and ness due to the manipulation of voters and the suppression of accountability in countries dependent on revenues from extractive opposing political parties. Political scandals, election irregulari- industries. Its principles acknowledge the value of a well-informed ties, corruption, bribes and violent civil unrest have been wide- broader stakeholder group encompassing governments, companies spread over the past decade (Randrianja, 2003; Ploch, 2009). and civil society in the context of transparency and governance. The influence of the World Bank in extractive industry devel- Member countries’ governments must comply with criteria which opment in sub-Saharan Africa can be seen in the region’s three include a focus, inter alia, on the active engagement of civil society as generations of mining codes. The first generation, established in a participant in the design, monitoring and evaluation of the EITI the 1980s, advocated liberalisation, privatisation and state dereg- process (Department for International Development, 2006; Extractive ulation. The second generation focused on capacity-building and Industries Transparency Initiative Secretariat, 2008). The EIR and good governance, but, in allowing self-regulation in the private World Bank guidance on Social and Environmental Assessments sector, failed to address statutory