Natural Resource Governance

Natural resources can bring considerable wealth to a country, contributing to livelihoods, food security and the green economy, as well as generating trade and enterprise at local, national and international levels. But with large volumes of revenue at stake, the extractives sector is also often associated with poor governance, corruption and even outright conflict.

The large amount of rents generated by natural resource revenues provide incentives for rent-seeking, corruption and patronage, and can lead to poor and inequitable investment and spending practices. Corruption risks can occur at every step of the extractive value chain, from awarding of mineral, oil and gas rights, regulation and management of operations, revenue collection and management, to commodity trading and public spending. The governance of extractive industries is therefore critical in determining whether natural resources can benefit or harm the country.

Corruption in the management and exploitation of natural resources can have tragic implications for the environment. Bribes paid to public officials to overlook illegal and unsustainable practices can lead to the degradation of natural resources, the contamination of waterways, and the displacement of local communities, among others.

Several dimensions of governance are instrumental to ensure sustainable exploitation and fair distribution and to ensure that the use of natural resources contributes to development outcomes. Revenue and contract transparency through initiatives such as the Extractive Industries Transparency Initiative (EITI) have been promoted as a means to increase accountability in the context of natural resource revenue management.

However, transparency alone is unlikely to attain sustainable development outcomes in the management of natural resources. Transparency must be supported by strong regulatory frameworks, competent and strong institutions, flexible, collaborative and adaptive management practices, a solid understanding of the political economy at the local level, sound and sustainable fiscal regimes and a leadership commitment to using revenues for the benefit of all.

Transparency International has three programmes addressing these issues: climate finance, land and mining. For further information, see Transparency International's Initiatives on Natural Resource Management.