Report No. 13 to the Storting (2008-2009)

Climate, Conflict and Capital— Norwegian development policy adapting to change

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2 National responsibilities

Each country is responsible for its own development. Although much of the framework for development is determined by international factors, at the end of the day it is the nation state that is responsible for ensuring that development moves in the right direction and that the population’s rights are respected. The basis for development in any country is created through interaction between the state, civil society and the private sector.

States are expected to provide security and a suitable framework for economic activity, and to respect the freedom and human rights of their citizens. In return, citizens have a duty to pay tax, respect the state’s monopoly on the legitimate use of power, and comply with statutory restrictions on personal freedom. Functioning states are crucial if we are to meet global challenges that require broad international cooperation and engagement.

In recent years, Norwegian development policy has focused increasingly on fragile states – countries affected by crisis and war. State-building in these countries involves particularly difficult challenges, not only in relation to the state apparatus, but also in relation to civil society and the private sector.

Textbox 2.1 More than one million women elected representatives in India

Today, 42 per cent of local village councils in India (panchayats) are made up of women. This means that there are more than one million publicly elected women representatives in India – more than in all other countries combined.

Rules on the reservation of seats on the panchayats for particular groups were introduced in the 1993 amendment to the Constitution. They require one third of the seats to be reserved for women, and seats are also to be reserved for «Scheduled Castes» and «Scheduled Tribes». Around half the elected women representatives in India are illiterate.

Experience has shown that women representatives give higher priority to the development of social services, such as primary schools, health care, water, and a social security net for the poor, than their male colleagues. Studies also show that women help to ensure more effective use of local resources and reduce corruption.

Norway supports training and network-building programmes for women elected to panchayats through a cooperation project between the Indian NGO Aagaz Foundation and the Norwegian Association of Local and Regional Authorities. The project has a strong focus on mutual learning – what can these two countries learn from one another?

Figure 2.1 The Norwegian Association of Local and Regional Authorities
 supports training programmes for women representatives in India.

Figure 2.1 The Norwegian Association of Local and Regional Authorities supports training programmes for women representatives in India.

Source Photo: Norwegian Association of Local and Regional Authorities

2.1 A well-functioning state

A state must have a minimum of administrative capacity to be able to perform its functions. Its precise functions and objectives must be formulated at a legitimate level of government. Then there is a need for a reasonably well-functioning bureaucracy to implement political decisions and provide public services, a security system that ensures security for the general public, and a public finance system that is able to generate revenues and collect taxes. Sound development plans with budgets, preferably based on poverty reduction strategies, provide a good starting point for national ownership of development and make recipient countries better equipped for dialogue with external donors.

However, state-building is not just a technocratic process of building or strengthening government institutions. Without the ownership of society as a whole, institutions can end up as empty shells or being used to promote individual interests.

Elections and other processes that allow for popular participation in decision-making are a necessary element of the social contract and give the state legitimacy. Important decisions must be made by popularly elected bodies. Both ruling and opposition parties are vital for a vibrant democracy.

A democratic culture must have strong roots at local level. Decentralisation and autonomous local government often contribute to a more effective use of resources and can form the starting point for popular participation in local and national politics.

Support for democratic governance will not produce results until people experience concrete improvements. Competence-building is often necessary to improve the ability of publicly elected representatives to meet their democratic obligations to voters.

Textbox 2.2 Democratic governance and the UN Development Programme

The United Nations Development Programme (UNDP) is the UN’s global development network. It spends the equivalent of more than NOK 10 billion a year – almost half its budget – on promoting democratic governance.

On average, UNDP provides support in connection with elections somewhere in the world every other week, throughout the year. For states that have recently emerged from war, the first election is a critical step in the transition from war to peace. In 2005, UNDP helped Liberia hold the election that brought Ellen Johnson-Sirleaf to power as Africa’s first elected woman president. UNDP has established cooperation with parliaments in one in three developing countries, which includes support for training newly elected members of parliament. In Rwanda, UNDP has worked together with the United Nations Development Fund for Women (UNIFEM) to increase women’s opportunities to take part in political life. This undertaking has been successful: since the parliamentary election in 2008, more than 55 per cent of the representatives are women.

A great deal of UNDP’s work on democratic governance is in conflict areas during the early stages of reconstruction. In Darfur, a legal aid network has been established, and the lawyers involved have dealt with more than 2000 cases. They have been able to bring about the release of people who have been arbitrarily arrested and the conviction of criminals. More than 80 cases of rape have been dealt with by the judiciary, and those convicted have been sentenced to up to 10 years’ imprisonment. These efforts show that it is possible for long-term democratic development to create a legal culture, and promote respect for human rights. Moreover, establishing and strengthening democratic institutions will also help to prevent a return to conflict.

In 2007, UNDP came out on top in a study undertaken by the Overseas Development Institute in the UK on recipient countries’ perceptions of aid effectiveness and performance.

Norway is one of UNDP’s most important partners, and in 2007 was the largest donor to the UNDP core budget, with a contribution of NOK 770 million. Norway’s high level of funding is supporting long-term efforts on good governance. In addition, Norway provides substantial funding for individual funds and programmes and efforts in connection with humanitarian crises and natural disasters.

The Oslo Governance Centre was established in 2002. It takes an innovative approach to challenges relating to governance and the links between democratic governance and poverty reduction.

Norway’s engagement in democratic development is wide-ranging. Both through direct government-to-government cooperation and through the United Nations Development Programme (UNDP), we are working with national authorities on democratic reform, the holding of elections and training of elected representatives. Norway is well positioned to provide election observers, who can help to ensure fair and effective election processes. Our largest and most important contribution is support for various interest groups in civil society as a means of mobilising the general public. This work generally involves direct collaboration with Norwegian and international NGOs and interest groups.

Taxation is important for strengthening the contract between the individual and the state, which in turn can encourage the state to pay greater attention to the welfare of the population. People are likely to be more alert and quicker to demand good governance and sound financial management if revenues are generated from the population as a whole and local businesses. Development actors must be fully aware of this link, so that aid is used to foster a government’s responsibility for its own people, rather than creating a situation where governments are primarily accountable to donors.

Education and health

Education is a key factor for all other development, such as preventing war and reducing conflict, creating economic growth and adapting to climate change. Education is crucial for the continued efforts on health, rights, gender equality, democracy, and – of course – for recruitment to higher education and research. Access to education is a human right. It is the nation state’s responsibility to ensure that the whole population, including the most vulnerable groups, have access to education.

The UN’s Education for All conference in 2000 culminated in a commitment to the goal of all children having access to primary education by 2015. We are now halfway to this deadline. Good results have been achieved. The increase in the number of children starting school is particularly encouraging. However, much remains to be done. There are still 75 million children of primary school age who are not in school. Girls are significantly over-represented in this group. Helping these children is a key task. Another key task is to ensure that teaching is of a high enough standard, so that pupils leave school with a satisfactory level of knowledge and skills.

Access to education is poorest for children who are refugees or internally displaced or who live in countries in conflict. Most of the world’s out-of-school children live in such areas. The Government therefore intends to focus particularly on support for education in fragile states and countries affected by conflict. A large proportion of our funding to multi-donor funds in Afghanistan and the Palestinian Territory is for education. Support for education during humanitarian crises also helps to protect children and prevent them from becoming child soldiers or victims of prostitution.

For many years, a substantial proportion of Norway’s aid has been earmarked for primary education. With a view to achieving the best possible coordination of international aid, the Government wishes to focus more on multilateral channels in its efforts to promote education. This will also reduce the number of donors recipient countries have to relate to.

Figure 2.2 Millennium Development Goal no. 2 is to achieve universal primary
 education by 2015. In Mozambique, the proportion of children in school
 has increased from 43 per cent in 1999 to 87 per cent in 2007.

Figure 2.2 Millennium Development Goal no. 2 is to achieve universal primary education by 2015. In Mozambique, the proportion of children in school has increased from 43 per cent in 1999 to 87 per cent in 2007.

Source Photo: Ken Opprann

In countries that, as a result of long-term assistance, are in a better position to give priority to the education sector, Norway’s policy is to integrate funding for education into general budget support. This has been done for example in Tanzania and Zambia.

Norway is already the largest donor to UNICEF’s basic education and gender equality programme. We are also a significant contributor to the World Bank’s Education for All Fast Track Initiative and to the United Nations Girls’ Education Initiative (UNGEI), which is coordinated by UNICEF. This network, which aims to improve access to and quality of education for girls, is currently operative in some 30 countries. By taking an active part in the governing bodies for such initiatives, we can promote Norwegian views in areas to which we give priority without creating any additional administrative burden on recipient countries.

In addition, the Government is actively promoting primary education in a range of international forums. For example, Norway hosted the meeting of the High-Level Group on Education for All in December 2008.

Ensuring that the whole population has access to health services is also a national responsibility. The public authorities must, through their own policies, take the main responsibility for financing and regulating health services. They must facilitate broad cooperation that mobilises forces in local communities and allows different actors to offer services within a common binding framework. Funding for health services needs to be long-term and predictable, whether it comes from aid or from national resources, and must cover necessary investments and operating expenses for infrastructure, technology, medicines and personnel.

Everyone is entitled to the highest attainable standard of health. Good health is also one of the most important conditions for enjoying a meaningful and active life. Improving health helps to reduce poverty, for example by improving children’s ability to learn, increasing capacity for work and reducing sickness-related costs. However, better health cannot be achieved by building up the health sector alone; it is also necessary to ensure access to clean water, healthy food, an unpolluted environment, gender equality and, not least, education.

Norway played a prominent role in the establishment of the International Health Partnership (IHP), which is intended to help organisations taking part in the Global Campaign for the Health Millennium Development Goals to work more effectively together. The signing of the IHP Global Compact in September 2007 was an important step towards better coordination. This agreement sets out requirements for both donors and recipients of aid. Recipient governments agree to work together with international partners to determine how the IHP best can be implemented at country level. The first group of recipient countries to take part in this initiative are Ethiopia, Kenya, Zambia, Mozambique, Burundi, Nepal, Cambodia and Mali.

Without a dramatic change in pace, the MDG on reducing child mortality will not be reached until 2045. Malnutrition is an important factor. But there are also positive trends. The number of deaths from measles in sub-Saharan Africa was reduced by 75 per cent between 1999 and 2005, showing that the extensive vaccination initiative spearheaded by Norway is being successful. Today, child mortality is at the lowest level since records began, but it is still far too high.

Textbox 2.3 Education in fragile states

Children in fragile states have far poorer access to education than children in other developing countries. In line with the priority that Norway is now giving to fragile states, the Government has significantly stepped up support for targeted efforts to enable children in these countries to realise their right to primary education. Our main partners in this area are UNICEF and various NGOs, particularly Save the Children Norway and the Norwegian Refugee Council. These efforts include rebuilding schools and the education sector as a whole after natural disasters, and providing education services in fragile and conflict-ridden states. Education is also a tool in peace, reconciliation and reconstruction efforts.

UNICEF is a key actor in countries such as Sudan, Nepal, the Democratic Republic of Congo, Liberia and Sierra Leone. There were only 300 000 children in school in Southern Sudan in 2005, when the peace treaty was signed. Now, largely thanks to UNICEF’s «Go to School» initiative, more than one million Southern Sudanese children are attending school.

Save the Children’s global campaign Rewrite the Future aims to get three million children into school by 2010. It is also seeking to improve the quality of education for another five million children who are already attending school in conflict-affected areas. The programme aims to provide schooling as a means of protecting children. Norway is the largest donor to Save the Children’s and UNICEF’s educational efforts.

The MDG on reduced maternal mortality will not be achieved; indeed, the mortality rate for pregnant women will probably increase in certain areas. The high level of maternal mortality is mainly due to complications such as haemorrhages and infections, often as a result of unsafe abortions. Today, less than 60 per cent of women in developing countries, and less than 35 per cent in the least developed countries, have access to skilled health personnel during labour.

In 2007, the UN added a new target under the MDG on maternal health: to achieve universal access to reproductive health. This provides a stronger focus on gender equality and links the MDGs more closely to the platform for action from the World Conference on Women in Beijing, for example by highlighting health services for young people and family planning. These are also important in preventing HIV infection.

Non-communicable and lifestyle-related diseases such as cardiovascular diseases, cancer, chronic respiratory diseases and diabetes have become one of the most serious health challenges in both developing and developed countries. The incidence of such diseases is expected to increase most rapidly in Africa and the Middle East. Unhealthy eating habits and lack of exercise are causing an increase in obesity in developing countries, where malnutrition is also a problem. Tobacco kills up to half the people who use it. Misuse of alcohol is estimated to cause some 2.3 million deaths a year worldwide, and has serious consequences for health and development, including vulnerability to HIV infection. These figures are additional to the large numbers of people affected by communicable diseases, and entail a huge burden on health services.

Textbox 2.4 Global Campaign for the Health MDGs

Heads of state and government from a number of countries have joined forces to accelerate progress in reaching the health-related Millennium Development Goals (MDGs) through a global campaign. The Norwegian Government has spearheaded efforts to persuade leaders in both rich and poor countries to join the Network of Global Leaders and give priority to reducing infant and maternal mortality.

This has also led to new focus on investments in health systems combining various tools to achieve the three health MDGs. National authorities, aid organisations and civil society must have a common agenda if we are to achieve real improvements in the health of women, babies and young children. Some 250 organisations have joined forces in a global partnership to promote broad grassroots engagement in reducing child and maternal mortality

In order to deal with these health challenges, health services need to include a first-line service for both prevention and treatment, close to users, that is part of an effective continuum of care. In addition, hospital-based services need to be strengthened to be able to deal with complicated deliveries and incomplete miscarriages.

A shortage of skilled and motivated health personnel is a major problem in very many developing countries, particularly in rural areas. Both national authorities and donors must give higher priority to personnel issues, and focus on factors such as education, recruitment, distribution, pay and working conditions, incentives and support.

There is now sound scientific evidence that a health service based on good primary health care is generally best and cheapest. However, influential groups with prestige and economic interests vested in the development of medical technology are channelling resources towards more and more specialised and fragmented health services. Norway will continue to emphasise the importance of well-functioning primary health services in its dialogues with recipient countries.

Financial management and anti-corruption efforts

Corruption and abuse of power prevent effective use of national resources and hamper economic growth. Widespread corruption is a symptom of poor governance as well as an obstacle to democratic development. Corruption is often defined as the abuse of a position of public power to gain personal advantage. It refers to any transaction between public and private actors involving the illegal conversion of public goods into private benefits; it may also involve the private sector and civil society.

Corruption undermines formal processes and political systems. Corruption during elections and in legislative assemblies makes elected bodies less accountable and representative. Corruption in courts makes it possible to sidestep the law, undermines respect for the law and for the courts, and makes it more difficult for people to uphold their rights. Corruption in the public administration reduces transparency, makes it difficult to get things done, and results in very inequitable distribution of goods and services.

Sound financial management is crucial for ensuring that state revenues are used effectively and is a vital tool for preventing corruption. This applies both to a country’s own revenues and to aid. New electronic systems for financial management make false accounting more difficult. Actual spending can easily be compared to the figures in the budget.

Transparency in financial management promotes democracy. Discussion of the government budget by parliament strengthens the role of elected representatives and makes them more accountable to the population. However, a number of other key functions must be in place to ensure accountability and confidence in the public administration. Independent auditing, as carried out by national auditor-generals, makes it possible to identify systematic weaknesses and dishonest public officials. The capacity to investigate economic crime and an independent legal system are also needed to develop general awareness of the fact that corruption is a crime.

Norway is working to prevent, disclose and prosecute cases of corruption. The fight against corruption is integrated into good governance efforts at local, national and global level. Particular priority is given to providing support for public institution-building and financial management, including support for national audit offices, anti-corruption offices and other institutions that exercise public control functions. Countries must be willing to establish transparent and robust financial management systems if we are to enter into cooperation with them on budget support.

Figure 2.3 Strong, independent media play an important role in the fight
 against corruption.

Figure 2.3 Strong, independent media play an important role in the fight against corruption.

Source Photo: Ken Opprann

Norway is at the forefront of efforts to intensify the anti-corruption work of multilateral organisations. UNDP has taken on a more active role in assisting partner countries with public sector reform and anti-corruption efforts. Norway has been a mainstay in the development of the World Bank’s governance and anti-corruption strategy. We are also helping to strengthen the development banks’ capacity through the secondment of anti-corruption personnel.

Norway supports an international network of corruption fighters that brings together investigators and public prosecutors from developing countries and their counterparts from Western countries to discuss anti-corruption strategies and cross-border investigation of corruption cases. The network also provides protection for members whose personal security is at risk.

Greater transparency and easier access to information about our own aid expenditure are important instruments in fighting corruption and making aid more effective. Norway therefore supports the recently established International Aid Transparency Initiative. It is important that all aid received is reflected in the budget of the country concerned.

Making use of Norway’s experience

Many developing countries have become interested in the Norwegian and Nordic social model: a mixed economy, a well-developed welfare system, firmly established routines for liaison between the social partners, and emphasis on gender equality.

Strong economic growth in itself is no guarantee for positive social development and poverty reduction. Growth can be concentrated in individual industries or areas, and the poor may well be excluded. Capital-intensive sectors, such as the petroleum and mining industries, can produce huge profits for owners and investors, without any spin-off benefits to the general population or the state. In such cases, the challenge is to find good political tools for sharing wealth more equitably without reducing the rate of growth. Well-­developed health and education services are ­crucial, but other social policy tools can also be very important.

There is a common perception that poor countries cannot afford to establish universal welfare systems. On the other hand, there is a growing conviction that social and welfare policy is a vital tool for both economic and social development in all countries, and that investments in these sectors should not be postponed until a certain level of economic development has been reached. Some people may experience a temporary loss of income after a natural disaster or because of economic fluctuations, as we have seen with the international rise in food prices and the financial crisis. In such situations, welfare schemes can prevent men and women who lose their jobs from being forced into poverty that undermines their ability to take part in value creation in future. Such schemes can help to stimulate local markets and can also provide social benefits by reducing hunger and improving health. There is also a close connection between parents’ incomes and child labour, and in a crisis, children will often be taken out of school to contribute to the household economy if no welfare provision is available. Access to food and cash transfers for disadvantaged groups is a question of rights, and the state has a direct responsibility to ensure that these are met. Pension schemes provide security against extreme poverty in old age and help to give the elderly higher status in the family and in society as a whole.

Norway started to provide various social security benefits at an early stage of its economic development, and found that this gave positive results. A number of developing countries have had similar experiences, and there is increasing interest in this area of international development.

Measures targeted at the more developed part of the economy will, over time, also help to improve the prospects for development for the poor. Growth of the middle class leads to increased expertise and productivity, greater demand for goods and services and the development of local markets. The middle class is an important mouthpiece for change in various areas, speaking out for a free press, respect for human rights, better conditions for the private sector and access to information about the public administration, and condemning corruption. The middle class is often a strong advocate for better infrastructure and public services, such as health and education.

Norway has valuable experience of developing primary industries in a thinly populated country, using cooperatives and strong agricultural organisations as the backbone of the system. We have developed a good model of tripartite cooperation between employers, the trade union movement and the state. We have also made significant progress in promoting equality in general – in addition to gender equality – by ensuring statutory rights for various groups who had previously been subject to systematic discrimination.

Where there is interest, Norway will continue to share its experience with countries that wish to focus on equitable distribution of welfare services and equality in their development. This is particularly relevant in cases where we provide general budget support in the form of government-to-government aid, as this provides an opportunity for a broader dialogue on the development of society as a whole and not just particular sectors.

The Government will:

  • ensure that aid provided for capacity development is designed to enhance recipient countries’ ownership of the development process

  • continue to provide support for direct cooperation between Norwegian political parties and their sister parties in developing countries

  • give priority to measures designed to secure the right to education in fragile states

  • put more focus on the right to services and on initiatives that are particularly important for children, young people, women and vulnerable groups, including sexual and reproductive health services and initiatives to prevent the spread of HIV infection

  • strengthen national health systems with an emphasis on capacity building

  • channel more of Norway’s aid funding to the health and education sectors through multilateral organisations such as the UN, the World Bank and the global health funds

  • direct more attention to the criteria for success in the support we provide for anti-corruption institutions and strategy development

  • give particular priority to anti-corruption efforts in countries where we provide support for the petroleum and mining sector, and in countries that are carrying out post-conflict reconstruction activities

  • strengthen the anti-corruption efforts of the multilateral organisations

  • help to develop greater transparency in recipient countries with regard to international aid flows and how they are used, for example by seeking to ensure that funding provided to the public sector is reflected in the government budget

  • share Norwegian experience of social planning, including the development of welfare services, tripartite cooperation between employees, trade unions and the state, our organisation of primary industries in cooperatives and agricultural organisations, and our efforts to promote equality.

2.2 Strong civil society

A diverse and dynamic civil society is an important supplement to elected bodies and is a vital factor for democratic development. But a well-functioning civil society cannot be developed without a broad range of actors with the capacity to become involved in social development, such as academia, the media, the private sector, political parties, the cultural sector, religious communities, traditional institutions and voluntary organisations.

Civil society gives people the right and opportunity to influence social development, improve their own living conditions, and provide support for the poor and underprivileged so that their voices can be heard and their interests brought into focus. Civil society is an arena where individuals come together on a voluntary basis on behalf of themselves or others, working either directly or through voluntary or other organisations.

Free and independent media are an essential part of a viable democracy. A critical press can bring abuse of power and corruption to light. It may provide the only protection against abuse for opposition and other groups. The objective of Norwegian support for free and independent media is to support efforts to strengthen transparency and democracy and improve governance. We provide both legal and technical assistance to strengthen the position of the media, promote media diversity and availability, and help to ensure that the media have access to information in connection with decision-making processes.

Figure 2.4 The difficult questions about relationships and identity
 raised in Ibsen’s play 
A Doll’s
 House are still relevant today. The ­voices of the
 main characters, Nora and Helmer, continue to be heard in the public
 debate all over the world. Cultural development can be both an end
 and a means in a country’s development process.

Figure 2.4 Lusaka Playhouse, Zambia.

Source Photo: Rodney Lobo

Cultural institutions and organisations play a vital role in fostering a vibrant civil society with open arenas for broad debate. Artists, performers and intellectuals play an important role in forming public opinion, and are able to reach a broad section of the population through various forms of cultural expression and other activities. This means that these groups are important agents of change in development processes.

Civil society organisations can provide an important supplement to public services, particularly in the health and education sectors, where public services are – for various reasons – often inadequate. Their activities can show a way forward in countries where the standard of public services has fallen below an acceptable minimum. As independent actors they have an arena to test new ideas and models that can later be tried out on a larger scale and, if appropriate, integrated into the public system.

In recent years, there has been a tendency in several countries to tighten legislation governing civil society organisations and their activities. Norway will make it clear that it is the state’s responsibility to facilitate diversity and growth in civil society by providing good legal, economic and political framework conditions for voluntary engagement, including freedom of expression and the right to organise.

Textbox 2.5 Access to information makes it possible to exert an influence

The World Alliance for Citizen Participation (CIVICUS) is a network of more than 450 organisations in developing countries that has been carrying out assessments of civil society – its structures, environment and values – since 2004. Assessments have now been carried out in more than 50 countries and have gained broad recognition from national authorities, international donors and academic communities.

CIVICUS is helping to foster a common understanding among national civil society actors of their strengths and weaknesses. Through its broad and inclusive work process, it has also boosted confidence in civil society among the general public, the media, the private sector and among donors. In some cases this has given national authorities a more positive view of the role these organisations can play.

Norway has supported the efforts to develop an index that measures the status of civil society in various countries. This index has proved valuable for UNDP in its efforts to promote national, democratic ownership of performance in this area. The index can also be used to strengthen the dialogue on governance in countries where there has traditionally been little collaboration between national authorities and civil society actors.

The Government will:

  • help to foster a dynamic and diverse civil society in developing countries that promotes the interests of the general public and gives a voice to their views, through support for local, international and Norwegian organisations

  • highlight the importance of the state providing a good framework for civil society organisations’ activities

  • seek to safeguard the right of the free media to fulfil their role as watchdogs of democracy.

2.3 A viable private sector

A dynamic private sector is crucial for economic growth and development. The private sector is best developed on the basis of cooperation with the state. The state must take responsibility for providing framework conditions that facilitate well-functioning markets, including energy, transport and telecommunications infrastructure, and financing opportunities. Political and economic stability is vital for stimulating investment.

Sound management of renewable resources

Around 75 per cent of the world’s poor live in rural areas and depend to a large extent on fisheries and agriculture for their livelihoods. The high food prices on the world market since 2007 led to renewed hope of an upturn in the agricultural sector, including in poor countries. However very little benefit from the rise in prices has trickled down to small-scale farmers, especially in Africa. This is partly because the national authorities in these countries have given priority to subsidies and import restrictions to keep prices down for their growing urban populations. Other reasons are inadequate infrastructure and market access and low levels of technology and expertise.

Many African countries have significant potential in agriculture, forestry, fish farming and other economic activities based on natural resources in rural areas. The management of water resources is an important factor in this connection.

Access to agricultural inputs for small-scale farmers is another critical factor for increasing productivity. Norway’s experience of cooperation with Tanzania and Malawi has shown that strategic collaboration between the public and private sector can improve farmers’ access to seed and mineral fertiliser and thus improve food security. The Government has therefore entered into a strategic partnership with Yara International ASA to ensure deliveries of mineral fertiliser to East Africa. This will include various activities in Malawi, Mozambique and Tanzania with the common goal of reducing poverty and improving food security.

Women account for 50 per cent of Africa’s agricultural production, and 70 per cent of food production. However, in most African countries, women do not have full rights to own or inherit land. Strengthening women’s land rights will not only enhance gender equality but also promote economic growth by stimulating activity and investment in agriculture.

Climate change is altering the conditions for food production in a number of countries. Previously arable land is becoming drier, traditional seed varieties can no longer be cultivated because they are no longer suitable for the climate, and fish and other marine resources are coming under pressure as a result of changes in sea temperature, acidification and damage to coral reefs.

It is important to adapt agriculture to changes in the climate and ensure that agricultural production does not have adverse impacts on the climate, for example by increasing deforestation or by using non-climate-friendly technologies.

Textbox 2.6 Fishing regulations in Vietnam

Norway provided support for the development of a new fisheries act in Vietnam, which came into force in 2003. Cooperation is being continued on the development of regulations, capacity-building, and awareness-raising activities. An innovative tool in the development of rules and regulations is the pilot model approach. Regulations are tested in a specific geographical area, and then finalised on the basis of practical experience. Regulations for the allocation and leasing of fish-farming facilities, registration and inspection of fishing vessels, harbour management, local management of shrimp farming and the application of the fisheries act to the production of shrimp larvae are currently being tested. A review concluded that the pilot model approach produces satisfactory results.

The development of the fishing and fish-farming sector is providing opportunities for private sector development and economic growth in many developing countries. Fish is a valuable renewable resource that is a source of nutrition, food security, income and employment. Some 70 per cent of all fishing and 90 per cent of all fish farming takes place in developing countries, including China. Exports of fish and fish products provide these countries with important export revenues, greater in fact than the total net export revenues from coffee, bananas, rice and tea. Norway has important expertise in the fisheries sector that is in demand.

Norway’s development policy is to foster interest in partner countries in sustainable natural resource management. This can be achieved, for example, through steps to strengthen legislation and its enforcement, and by making clean energy solutions more attractive than conventional, polluting alternatives. We want to provide expertise and funding for countries that have the political will to give priority to sustainability in their development process.

Figure 2.5 Many poor countries are rich in resources. The challenge is
 to ensure that these assets benefit the whole population.

Figure 2.5 Many poor countries are rich in resources. The challenge is to ensure that these assets benefit the whole population.

Source Photo: Fredrik Naumann/Felix Features

Responsible management of non-renewable resources

It is a paradox that a significant proportion of the world’s poor live in countries that are rich in resources, such as oil, gas, copper, diamonds and gold. One-fifth of the world’s oil and gas exports are from Africa and as much as 40 per cent of the population in sub-Saharan Africa live in countries that the International Monetary Fund (IMF) considers to be rich in resources. Increased demand for petroleum products and other minerals in recent years has led to a significant increase in prices, and the interest in exploiting these resources has grown. Many developing countries have attracted major foreign investments in this area, and have had a considerable increase in government revenues, for example from taxes, ownership interests and the sale of licences. It is too soon to judge what the consequences of the dramatic fall in oil and other commodity prices in the autumn of 2008 will be.

Income from the extraction of oil and other mineral resources can lead to significant poverty reduction in many developing countries. But this requires high standards of management. Experience has shown that countries that are rich in natural resources often have lower economic growth than others. In general, their economies are subject to stronger cyclical fluctuations than is the case in other countries. One of the reasons for this is major fluctuations in commodity prices; in the autumn of 2008, for example, oil prices fell from USD 150 to USD 50 during the course of one month.

One of the most serious problems is the tendency for resource-rich countries to be more vulnerable to corruption and misuse of funds. For example, government officials may establish fictitious enterprises for the purpose of siphoning off revenues from the exploitation of natural resources for their own gain. Large revenues combined with weak institutions and legislation have, in certain developing countries, held back democratisation and in the worst cases led to civil war. This is why the term «resource curse» has been coined to describe the situation that many poor countries with major natural resources have ended up in.

Forty years of petroleum production have given Norway valuable experience of managing oil resources in a way that promotes sustainable economic growth and the welfare of the population as a whole. This is experience that Norway can share with others. Many developing countries are interested in our expertise and experience with a view to developing a comprehensive framework that will enable them to avoid the resource curse. The purpose of the Oil for Development initiative, which was launched in the autumn of 2005, is to promote lasting poverty reduction and sustainable economic and social development. It takes a broad approach, including competence-building and institutional collaboration on resource, financial and environmental management. Good governance is a cross-cutting issue. Norway hopes that Oil for Development will also help to bolster petroleum-related business activities through support for building competence in the supplier industry. The initiative has grown rapidly as a result of increasing demand. Today, Oil for Development cooperation has been established in 25 countries.

Textbox 2.7 The Extractive Industries Transparency Initiative

It is a paradox that in many developing countries with important natural resources, economic growth is low and the risk of violent conflict is high. Income disparities also tend to be higher in these countries. The Extractive Industries Transparency Initiative (EITI) was established to promote transparency concerning revenues from the petroleum and mining industries in producer countries. Transparency encourages sound management of these revenues and can thus be an important factor in poverty reduction. A lack of transparency in these areas has made it possible for elite groups to become very wealthy in some resource-rich countries.

The EITI is working to ensure that transparency in the extractives sector becomes a global norm and that a greater proportion of the revenue from these industries is used to promote fair social and economic development. It is thus a key development policy player. Greater transparency in revenue flows will also promote greater stability in the world’s energy regions.

More than 20 countries with rich resources are already implementing the EITI criteria. An additional 20 countries are considering joining the initiative. Altogether, these countries make up more than half the world’s most resource-rich countries. Countries that join the EITI can seek assistance from the World Bank, the African Development Bank and the Asian Development Bank. The initiative has also won the political support of the G8 and receives financial support from a number of countries, including the US, Germany, Canada, Italy and Norway.

The EITI does not just work with countries. It also provides a partnership between governments, extractive companies and civil society. For example, it provides civil society with information about revenues from the extractives sector that can be used to hold the governments accountable for how these revenues are used.

In order to strengthen the EITI’s credibility, it is important that Western countries also undertake to comply with the initiative’s criteria. The Norwegian authorities and our national oil and gas company StatoilHydro have taken part in the initiative since 2003. StatoilHydro’s payments to governments in countries where the company is operating are published in its annual reports. Norway held the third EITI international conference in 2006, and is currently hosting its international secretariat.

Norway is the first Western country to have declared that it will fully implement the EITI criteria. Norway already practises transparency concerning the payments from petroleum companies to the government authorities. EITI compliance means that companies must report payments to an independent EITI administrator, and that the government authorities must report receipt of payments to the same body. A multi-stakeholder committee must also be appointed to monitor the implementation of the EITI criteria.

The Government’s aim is for the entire validation process – including drawing up regulations, reporting payments and verification of results – to be completed in the course of 2009.

Informal sector

For a large proportion of the population in the least developed countries, the main source of income is from the production of goods and services in the informal sector. This is growing faster than the formal sector, and experience shows that economic growth has to be very high before any major reduction in the informal sector is seen. Generally, the informal sector is characterised by low productivity, low wages, poor working conditions, high risk, a lack of rights and inadequate social goods. A large proportion of those working in the informal sector are women.

The informal sector will be important for a large part of the population in poor countries for the foreseeable future. It is unrealistic to expect the formal sector to be able to create a sufficient number of new jobs in the short term. Efforts to safeguard the rights of those working in the informal sector must therefore be given higher priority. The International Labour Organization has developed a set of rules for this area, including a convention on home work (1996) and a resolution on the informal sector (2002).

The reports of the Commission on Legal Empowerment of the Poor are vital tools in this work. The formalisation agenda seeks to increase political awareness of the fact that legal empowerment of the poor benefits the whole of society, and that the whole economy is strengthened when the market functions for everyone. A society where only a limited part of the population takes part in the formal economy is not sustainable in the long term.

Textbox 2.8 Oil for Development in East Timor

East Timor is one of the Oil for Development initiative’s ten core cooperation countries. These efforts are of a long-term nature. In 2002, it was clear that the country needed to develop institutions and legislation to manage its petroleum resources in the best interests of the general population. In 2003, Norway and East Timor entered into a five-year agreement on petroleum cooperation. Prior to this, Norway had provided expertise for East Timor’s negotiations with its neighbouring countries on ownership issues and delimitation of the continental shelf. Over time, this cooperation and sharing of expertise has been expanded to include institutional collaboration between ministries of petroleum, finance and the environment. This is in line with Oil for Development’s integrated approach to the three main themes in the initiative: resource management, environmental management and revenue management.

Norwegian experts in East Timor play an important role. Experts from the Norwegian Ministry of Finance and the Norwegian Petroleum Tax Office are linked up to the Ministry of Economy and Development in East Timor, and the Norwegian Petroleum Directorate also has personnel in its sister organisation. In addition, the Oil for Development initiative offers courses, conferences, seminars and training programmes in both East Timor and Norway.

East Timor’s petroleum sector – both the activity on the continental shelf and the establishment of an institutional framework – has developed rapidly. In 2005, Norwegian lawyers helped to develop the country’s petroleum legislation. In recent years, East Timor has had important revenues from gas and condensate production on the Bayu-Undan field in the Australia/Indonesia Zone of Cooperation. Norway assisted with the implementation of a successful first licensing round in East Timor waters in 2006. There are plans to drill a number of exploration wells in these areas in 2009.

Despite limited production, the revenues from petroleum activities are already of importance for this small economy. Petroleum revenues were estimated to be equivalent to just over 400 per cent of the non-oil gross national income in 2008. The country’s strong dependence on petroleum resources underlines the importance of sound management. Ensuring that it is possible to use petroleum revenues without affecting the general income flow has been an important step. In 2005, East Timor established a petroleum fund, through a specific petroleum fund act, that was modelled on Norway’s Government Pension Fund – Global, with assistance from Norwegian experts.

In addition to continuing to provide assistance with resource and revenue management, the Oil for Development initiative will also expand its advisory services in the field of environmental management. Institutionalising environmental responsibility and implementing a planned environmental act are key tasks in this respect.

Transparency in the public administration and good governance are vital aspects of institution building in East Timor. The Norwegian efforts have helped the country in its preparations for full compliance with the Extractive Industries Transparency Initiative (EITI).

Tourism

The tourist industry is growing. According to the World Tourism Organization (UNWTO), the number of tourists worldwide will triple over the next ten years. Cultural monuments and sites and natural heritage generally constitute the resource base for the tourist industry. Many developing countries are rich in such resources, and Norway has a long tradition of assisting poor countries in developing an institutional framework and management plans that take into account the local community, sustainable development and protection of cultural and natural heritage.

The aim is to develop a sustainable tourist industry that ensures local ownership, promotes local business and long-term employment, and has positive effects on the environment, social structures and culture.

Textbox 2.9 Tourism creates opportunities for growth

The conservation of World Heritage site Ilha de Moçambique during the 1999–2008 period has had many positive ripple effects for society as a whole. It has multiplied the number of tourists, and led to a large increase in the number of jobs and the resumption of local lime production. It has also fostered greater historical awareness, generated debate, and led to a stronger sense of identity.

The Government will:

  • promote equal ownership and inheritance rights for women and men

  • promote framework conditions for sustainable business development in the agriculture and fishery sectors

  • further develop the strategic partnership with the chemical company Yara on providing better access to mineral fertiliser for farmers

  • encourage developing countries that are rich in natural resources to use their revenues to ensure sustainable economic development and promote the welfare of the population as a whole

  • emphasise how important it is that natural resources are exploited in an environmentally sound manner that allows for co-existence with other users both on land and at sea

  • further develop the Oil for Development initiative, with emphasis on resource management, environmental protection and revenue management

  • help to build competence in the petroleum-related local business sector to ensure greater ripple effects for the local community from petroleum activities

  • implement the Extractive Industries Transparency Initiative (EITI) criteria and strengthen international cooperation on increasing transparency in connection with the extractive industries.

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