CASM 6th Annual Conference, Antsirabe, Madagascar November 11-15, 2006 Strategic Environmental Assessment as a Tool for Minerals Policy* Gary McMahon Consultant * - Adapted from a presentation made in collaboration with Fernando Loayza, World Bank

STRUCTURE

Introduction: SEA and institutional analysis Institutional challenges of mining sector Implications for SEA The Sierra Leone Pilot Conclusions

INTRODUCTION

What is SEA? Strategic Environmental Assessment (SEA) includes analytical and participatory approaches integrates environmental considerations into policies, plans and programs and evaluates inter linkages with economic and social considerations.

Institutions and governance are Policy SEA Policies have significant effects on future projects and programs Induced development impacts are paramount in policies Political economy is crucial as policy impacts are influenced by powerful stakeholders Environmental Impacts are uncertain Institutions and governance are the main thrust of SEA

INSTITUTIONAL CHALLENGES IN THE MINING SECTOR

Institutional Framework Mining Policy Mineral rights Access to land & water Mining taxation Local/regional obligations Other Key Institutions Environmental regulations FDI regime Property rights, contract law, judiciary, dispute resolution mechanisms Indigenous peoples’ rights Labor laws

Institutional Challenges (1) Local production but national implications Leading sector for export & fiscal revenues Point source so more easily ‘corruptible’; powerful stakeholders against reform Distribution of rents (taxes) Inter-jurisdictional conflicts Large investments with long time horizons Long-term property rights Contingent contracts; dispute resolution Costs continue after site closure

Institutional Challenges (2) High capacity requirements Demanding macro policy capacity Mining administration including negotiations Local governance capacity Monitoring and enforcement capacity Socio-economic and technological heterogeneity Artisanal low-tech & difficult to control but high employment & complex sociological setting Large-scale high-tech & more controllable but low employment & wealthy sociological enclave

Results of Weak Institutions Mining sector held hostage to macroeconomic needs Property rights not well defined or well defended Rule of law difficult to enforce & superseded by short-term decisions Key stakeholders are marginalized or excluded Local and indigenous communities Small scale and artisanal miners Unsustainable local development Environmental and social impacts dominate Linkages, social capital and human capital undeveloped Boom and bust cycle

Implications for ASM Importance depends on generation of fiscal & forex revenues Government pays little attention to ASM otherwise (unless conflicts) Might makes right Security is a private affair Conflicts of ASM with larger-scale operations Policy focuses on needs of formal sector Reforms often irrelevant to ASM sector Collective action problems dominate in ASM sector Conflicts with local communities But no other options

IMPLICATIONS FOR SEA

Levels of institutional analysis (1) Political economy analysis Reforms distorted at policy-making stage Reforms only partially implemented Local issues subservient to macro goals Distribution of rents (and other taxes) Local benefits captured Legal and security issues Equity in property rights Enforceability of property rights, contracts, and laws in general Efficiency of judicial system Controlling potentially violent situations

Levels of institutional analysis (2) Capacity analysis Ability of local communities to benefit from new opportunities (governance, social capital) Capacity to M&E new laws & regulations (funding) Ability of civil service to use skilled people efficiently and retain them (funding) Local community issues Relationship between artisanal miners & lcs Relationship between large mining operations & lcs Skills development for mining jobs, provision of goods & services to mines, alternative income opportunities Infrastructure Informal institutions

Stakeholder Participation Intersectoral and multi-stakeholder coordination Trilateral dialogue: government, industry and communities Benefit sharing and greater equity between holders of mineral rights and natural resources property rights needs to be discussed Views and concerns of vulnerable stakeholders need to be incorporated in policy design and implementation

SEA Institutional Analysis Effectiveness requires to focus on key issues Institutional analysis should not be a standalone exercise Identification of environmental and social priorities Assessing likely significant effects of mining policy on priorities Assessing institutional weaknesses to address likely significant effects Adjust proposed policies to address institutional weaknesses, and Implement monitoring and evaluation mechanism for continuous learning

SEA and the ASM Sector Beyond measuring community impacts of ASM Recognition of ASM as important source of employment & income Understanding political economy of ASM Analyzing how current policies affect ASM behavior Designing innovative policies to overcome political economy and collective action obstacles SEA as a tool for ASM Forum for providing input to mining policy reform Identify major obstacles to better sectoral performance and institutional solutions to benefit all stakeholders

THE SIERRA LEONE MINING SEA PILOT

Prioritization of Issues Stakeholder analysis and identification of priorities Local consultants using existing knowledge base Emphasis on most vulnerable stakeholders Political economy and institutional analysis Report on international best practices Prioritization workshops (4) Stakeholders identify their top priorities Stakeholders provide policy proposals or key issues that new policies must take into account Ranking across impacts and across solvability

Policy Analysis and Recommendations From policies to priorities Effects of existing and proposed policies Transmission mechanisms are key 3 case studies—artisanal, mechanized small-scale, large-scale Measures to mitigate negative externalities Institutional and governance analysis Validation 4 regional validation workshops Draft reports and policy matrix National workshop Final report and dissemination

CONCLUSIONS

Evolution and functioning of institutions cannot be neglected; local knowledge of history and transmission mechanisms very important Policy reform must often include country specific institutional features for second best solutions to seemingly intractable sustainability problems Environmental solutions must be socially sustainable and social solutions must be environmentally sustainable The most state-of-the-art policy and institutional reforms may have perverse effects due to weak implementation or interest group capture