Working at the local level to support sustainable mining
Mining companies are increasingly accepting the business case for sustainable community investment (SCI), as it can help companies secure their social license to operate, add value to shareholders, and engage communities and stakeholders who are affected by the company’s operations.
If done well (that is, if it does not promote community and government dependency on company funding and is targeted to citizens’ and government’s visions and needs) effective community investment can be considered a key indicator of the project’s success. However, mining projects are occurring in many countries where active decentralization policies are taking place and indeed, there has been a global trend towards government decentralization in the past 20 to 30 years..
In developing countries in particular, mining companies need to be aware of the issues and challenges related to decentralization and local government planning, and the implications for sustainable community investment initiatives.
Recognised as a basic dimension of democratic governance and a process that often spans decades, decentralization involves the transfer of authority and responsibility, resources, and personnel from the national to sub-national governments.
In theory, decentralization can promote more efficient provision of public goods and services while considering local citizens’ preferences and needs more closely. By serving as a focal point for public participation, local governments can help strengthen democratic and transparent decision-making processes.
This is relevant to the mining sector since responsibilities that affect the sector are often transferred from central to local government, including powers to promote and develop regulations that may influence the costs and operations for mining business.
Indonesia is an example of a country undergoing decentralization. Since 1998, increased autonomy and responsibility for decisions have been devolved to the regency, district, and village governments. New structures of government have been put into place including direct elections of local government representatives, accountability of these representatives to the people through a locally elected parliament.
As with other decentralizing countries, responsibilities for addressing poverty, social and economic development have been devolved to the newly formed local governments. These governments have become prime decision-makers and providers for healthcare, education, water and sanitation and other infrastructure.
Local government capacity to undertake community planning, budgeting and program implementation is essential to ensuring these services get to their communities. However, there is often a lack of clarity on central, regional and local government roles and functional assignments in service delivery, which can undermine local governments’ ability and commitment to effectively support community development planning.
Newly formed local government leadership structures can be weak, and their capacity to design and implement development plans often limited. Unaccustomed to the scale of responsibility and/or financial resources placed at their disposal, they may be reluctant to make decisions, or may make choices that do not improve peoples’ lives in a meaningful way.
Other challenges pertaining to the resource sector include lack of transparency and monitoring of fiscal transfers from central to local governments (limiting local government resources), overlapping mining regulations and lack of, or poor supporting policy and regulations for effective resource based investment.
Conflict can arise when national governments oversee decisions on mining concessions and rights without previous informed consent of local governments and communities potentially affected by the mining development. This can negatively impact the ability and rights of local governments to direct development policies and social and economic welfare of its citizens.
When considering a project in a decentralizing country, mining companies will need to understand the unique and varying challenges that exist in order to develop and implement SCI policies and strategies that:
• promote synergies between corporate initiatives and local government development goals, objectives and initiatives, and
• provide opportunities for cost sharing where possible and capacity-building
This understanding can be supported via two related processes: a) conducting an institutional assessment, and b) engaging in local participatory development planning processes.
An effective institutional assessment identifies administrative and fiscal arrangements between national and local government institutions, and main sources of local government revenue (i. e. intergovernmental transfers, local revenue generation, user charges and taxes, etc.).
National and local government structures, functions, responsibilities and management capacity are defined, along with the non-government institutions’ role and capacity in supporting regional and/or local development within the Project area.
The analysis should determine policies and programs (for example national and local poverty reduction and economic development strategies and plans) that are supported by international financial institutions (e. g. World Bank or the UN), central, regional and local government and non-government agencies, along with sources and sufficiency of funding amounts.
Institutional assessments can draw upon, and be integrated with social and economic issues scoping information collected during mine feasibility studies as well as baseline information collected during the environmental and socioeconomic assessment.
The results can guide mining companies as to local development needs and priorities, funding gaps and how best to enhance sustainable development priorities, programs and funding mechanisms by integrating into initiatives that may already be in place.
In decentralizing countries, local governments are obligated to undertake development planning processes as a mechanism to meet their increased responsibilities to their communities. In this context, new legislation and regulations typically exist for community participation in local-level policy, planning and program implementation. For example, In Indonesia, musrenbang (translated as participatory development planning) is a process for developing and implementing local government plans to improve the lives of community members.
As delineated in Indonesia’s decentralization legislation, each community is expected to prepare a development plan, indicating its vision for its own future. The process is conducted based on administrative levels of government, starting from the village level, then progressing to Sub-district and finally the Regency level where the Regency Development Planning Agency (Bappeda) systematizes musrenbang results into Regency Development Plans document.
Bappeda, lead by Bupati (Head of Regency) obtains approval from legislation to formalize the Plans. By taking part in this process, companies can enhance relationships with local stakeholders, obtain better understanding of community needs, update company’s information on local government policy and plans and monitor local dynamics.
Ultimately, these plans can help a company determine how to “fit in,” and promote maximum sustainable results from its social investments. However, local institutional capacity to support participatory planning is often weak or evolving under newly decentralizing systems. This is particularly evident in developing countries where human and financial capital are limited.
Mining companies can work with professionals who understand the local planning context and who are experienced working with local leaders to help identify community’s needs and priorities, strategies to meet those needs, including financial issues, timelines and steps to take.
This may mean that mining companies need to collaborate not only wit
h local governments, but with other resource-based companies in the area, NGOs, and international development agencies who are supporting government planning capacity. Working with local government and community leaders whose values, decision-making process and interests may differ from corporate approaches and priorities is challenging. However, respecting local priorities and concerns, and taking time to develop grass-roots, site-specific approaches to development usually results in more meaningful sustainable development initiatives.
Aldi Muhammad Alizar, SE is a Social Consultant based in the Jakarta, Indonesia office of Golder Associates. Contact: 62+21.252.1975; aalizar@golder.co.id.
Roxanne Scott, M. P. A., M. Ed is a Senior Socioeconomist in the Vancouver, BC office of Golder Associates. Contact: 1+604.296.2820; rescott@golder.com.
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