- Aligning ELLED policies with private sector interests
Aligning ELLED policies with private sector interests
There is wide recognition within the private sector that ELLED approaches can be a critical component of risk mitigation strategies for proposed and operating extractive industry sites, and contribute to social licence to operate. Projects that do not demonstrate a reasonable level of economic and social benefit for host countries and their communities are prone to poor relations with host communities and governments, leading to conflicts, delays, and even the prevention of project construction. A study by Davis and Franks found that a “mining project with capital expenditure of between US$3-5 billion will suffer costs of roughly US$20 million per week of delayed production in Net Present Value (NPV) terms, largely due to lost sales.” (Davis and Franks 2014, p. 8) These considerations are similarly recognized by the investment community that finances these projects and looks to mitigate risk and volatility across projects.
Therefore, to increase industry buy-in in ELLED policies, this means working with industry early in the policy development process to identify opportunities where all parties can meet their individual objectives while aligning with one another. For the private sector, strategies that align with core business activities and that make financial sense over the long-term are generally more supported. ELLED policy development processes that involve little or industry consultation often struggle to get support and can risk being designed in a silo where they do not reflect either the needs of industry or the local capacity to meet the outlined requirements.
This form of regulation that comes over the top, not only jeopardizes industry buy-in and potentially future investment, but also can limit success of ELLED initiatives from the outset if the requirements do not reflect reality. Designing ELLED policies with all key stakeholders participating from the outset is a key strategy to increase successful outcomes and align all stakeholder interests.
Sections of the ELLED Framework that focus on this needed alignment with extractive industry companies are:
- For direct Jobs from Extractives, to align with mining or oil and gas companies requires governments understand the skills required in each sector, and for them to identify needs and opportunities through assessment of potential extractive industry projects.
- In Supplying Extractives, the opportunity to align with industry comes about through properly assessing the current ability for the economy to supply goods and services to a proposed or existing extractive industry project, and using this information to work with extractive industry companies on the most appropriate Local Procurement Policies, Agreements, and Requirements. Central to this is for extractive industry sites to align with government on ways to categorize supplies, through Defining Local.
- Of course designing and using shared infrastructure and potential resource corridors is at its heart, a process of governments aligning and working with extractive industry companies to achieve mutual benefit out of the infrastructure created for the sector’s activity.