Durable extractive contracts are aligned with the long-term vision and strategy, defined by the host government on how the extractive sector can fit into and contribute to broader sustainable development objectives.
1. Host governments need first to determine what strategies and national and local development objectives they want to achieve with their natural resource endowments (the vision) and how they wish to achieve such goals (the strategy). Host governments should develop, through an inclusive participatory process by all identifiable actors a long-term strategic vision for extractive industries in terms of their contribution to sustainable development, including economic, social, and environmental dimensions. While ownership of the vision should reside in government to ensure clear accountability, the governance for the development of the strategy should be more inclusive and involve national and local government as well as non-governmental stakeholders, including local communities and investors, with the objective of getting the buy-in of all stakeholders involved and an in-depth understanding of their interests and needs.
2. It is recognised that industry and market dynamics that are relevant to attracting investment and to shaping the strategic goals for the sustainable development of a nation’s natural resource endowment may not be fully understood by all stakeholders. Without prejudice to the government’s unique role in setting the vision, the involvement of non-governmental stakeholders in the process may help deploy a strategy that achieves the strongest positive result for all parties.
3. It is recognised that in practice there may not be full alignment between the investment horizon and/or investors’ strategic interests and the long-term vision and strategy of the host government. At a minimum, investors should endeavour to understand the government’s long-term vision and strategy. It is the role of host governments to foster investor and community understanding of the strategy and the means through which the long-term vision will be implemented.
4. Host governments should ensure a coherent, comprehensive interdepartmental approach to the implementation of the long-term vision, by reconciling any potentially conflicting internal objectives and being conscious of potential trade-offs. Recognising that host governments may not approve all projects as proposed, they should ensure that project proposals are consistent with their long-term vision and strategy for sustainable development.
5. The goals of the long-term vision should inform the government’s objectives in the negotiations and need to be properly reflected in the terms and conditions of the contract under which the investor will operate to help long-term interests prevail over short-term interests. Pressure for short-term gains that may arise from both the government and investors’ respective sides needs to be carefully handled. In order to be durable, extractive contracts should reflect an equitable balance between the host government’s long-term vision, integrating the concerns of local communities, and the legitimate interests of investors.