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Tis the Season… For Conflict Minerals

I wanted to write a short follow-up to my last blog about the “resource curse.” In it, I discuss Charles Kenny’s recent article in which he challenges the idea of the resource curse under the premise that “resources” do not cause economic stagnation or conflict, bad policies and corrupt officials do. As such, the remedy proscribed is “improving institutions through greater transparency and oversight.”

Essentially, institutions matter:  move to eliminate high level government corruption, strength government oversight and transparency, and improve overall institutional capacity (from government to CSOs) within a country and this will help eliminate the symptoms of the resource curse- i.e. economic stagnation and, potentially, violent conflict. Unfortunately, anyone who has looked at Transparency International’s latest 2010 Global Corruption Barometer might get the feeling that increasing oversight and transparency in the public sector will be akin to turning a lump of coal into a diamond- it will require a tremendous amount of heat and pressure.

With that said, there are efforts afoot, aimed at trying to curtail government corruption and increase accountability and transparency in the extractive resource sector. Three such endeavors, which recently caught my eye, include:

  1. The first, mentioned in Kenny’s article, is the Extractive Industries Transparency Initiative (EITI). EITI brings together government officials, members of the extractive industries and civil society organizations through a process that requires the companies to disclose all taxes and payments to governments, and governments to disclose all payments received from these companies, so that both can be reviewed by an independent body and published in an EITI report. The end goal is to create greater transparency and bring to light any discrepancies in the bookkeeping.
  2. Another effort is being led by the Enough Project, who recently published its index called Getting to Conflict Free. This report ranks various electronic companies by measuring the extent to which they have attempted to clean up their supply chains so as to not include “conflict minerals.” More can be read about this in Madeleine Bunting’s article, The true cost of your Christmas laptop? Ask the Eastern Congolese.
  3. And finally, there was the recent passage (signed by President Barack Obama on July 21, 2010) of the Dodd-Frank Wall Street Reform and Consumer Protection Act –a.k.a. the Wall Street Reform Act, or simply the Dodd-Frank Act. While the act is enormous in scope and voluminous in terms of the number of regulations implemented, many recognize this act as one of the largest pieces of financial regulation passed since the great depression. Two lesser known sections of the legislation is:
  • Section 1504, which essentially requires natural resource companies –engaged in oil, natural gas or mineral extraction –to disclose payments as per the guidelines established through EITI (see above).
  • And section 1502, which could force retailers and natural resource companies to disclose whether their products/goods contain “conflict minerals” (gold, tin, tungsten and tantalum) from the war torn region of the Democratic Republic of Congo and its surrounding neighbors.

The question remains whether any of the above mentioned efforts will succeed in promoting greater accountability, transparency, and hopefully greater economic development in areas rich in mineral wealth, or whether they will create new and yet unimagined negative consequences. Already, large US retailers are lining up to protest the Dodd Frank Act -you can interpret that sign as you wish. One thing is for sure, as the push for more hi-tech, clean energies continues (almost all of which are incredibly dependent on rare earth or “conflict minerals”), this issue will undoubtedly demand greater attention in the coming years.

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