82699 ANNUAL REPORT As of December 31, 2012 EI-TAF Donors Meeting Offices of NORAD, Oslo, Norway March 1, 2013 I. INTRODUCTION This report has been prepared with a view to providing Extractive Industries Technical Advisory Facility (EI-TAF) donors with an update on progress made since the program’s inception in 2009. The report is divided into four sections: Section One provides an introduction to and background on EI-TAF; Section Two provides an update on the current status of the Facility and its activities; Section Three discusses emerging lessons; and the financial update, including Sources and Uses of Funds, is provided in Section Four. Background—Objectives and Expected Outcomes The objective of EI-TAF is to assist resource-rich, developing countries to correctly structure extractive industry transactions and related sector policies from the outset, thus reducing the risk of costly or politically difficult remediation at a later stage. The EI-TAF facilitates rapid-response advisory services and capacity building for extractive industry resource policy frameworks and transactions. EI-TAF also supports the production and dissemination of global knowledge products on extractive industry sector issues to help address the lack of an integrated body of good practice for sound extractive industry sector governance and management around proposed developments. The expected outcome from EI-TAF assistance is to level the playing field and ensure that resource-rich, developing countries, and ultimately their citizens, benefit from the exploitation of their extractive resources. A robust, results-based performance framework, including quantitative and qualitative indicators, will be developed and used to evaluate EI-TAF interventions. Key Components The EI-TAF has two key components: (i) rapid-response advisory services; and (ii) global knowledge management/good practice in extractive industries sector governance in support of grant implementation. 0 (i) Rapid Response Advisory Services Rapid-response advisory service activities by their nature cannot always be predicted, but are likely to focus on eligible countries with capacity needs in the following areas:  Contract negotiation for extractive industry transactions, including the cost of logistics of such negotiations;  Short-term capacity building for members of the beneficiary country’s negotiation teams, including studies to prepare for negotiations;  Technical assistance in support of a specific extractive industry transaction under review, to update the policy, institutional, fiscal, legal and regulatory frameworks of the country concerned, including revenue management and benefits sharing across levels of government and community; and  Technical assistance on structuring extractive industry licensing rounds, public offerings (tender/auction), and competitive and transparent tender packages to help resource-rich countries optimize the value of national extractive industry resources. In most cases, rapid-response advisory services are recipient executed as such services are channeled primarily to individual countries. Though none have yet been proposed, activities with regional/sub- regional organizations will also be considered under EI-TAF. (ii) Knowledge Management Knowledge management activities aim to facilitate the gathering and dissemination of good practices in extractive industry sector governance and support grant implementation through a standardized workshop around the Extractive Industries Source Book. A limited amount of funding from the EI-TAF is allocated to:  Provide a framework of good practices and discussion of issues that may be relevant for governments facing the task of making extractive industry resources available to private investors;  Gather and disseminate lessons of experience based on advisory services provided, including through publications, workshops, conferences, and the like;  Commission work urgently needed to address EI-TAF objectives (such as mining and infrastructure); and  Training for negotiations. Demand-driven Approach Provision of support for rapid-response advisory services is demand-driven. Requests for assistance are generated via:  Direct requests from resource-rich, developing country governments;  Sector dialogue between SEGOM and resource-rich client countries;  Dialogue between other World Bank staff and resource-rich client countries;  Commitments in World Bank Country Assistance/Partnership Strategies, linkages to World Bank lending operations, analytic work, technical assistance, and so on;  Dialogue between other stakeholders (e.g., donor partners) and resource-rich client countries. Requests for support for rapid-response advisory services are assessed along the following lines: 1  Level of political commitment and national ownership. Degree of commitment of a government and stakeholders to implement sound sector governance, including readiness to move on reform steps needed.  Country capacity gaps/needs. The assessed capacity gaps (especially in fragile states, IDA- eligible, and post-conflict countries) in a country in which the EI-TAF interventions could have a high pay-off and impact.  Resource dependency and poverty impact. The size of the extractives sector and revenues to the economy and exports—and the poverty-alleviation potential from rapid-response advisory services.  Demonstration potential in sub-region context. Potential for demonstration effect to “pull� other countries in the sub-region to adopt sound sector governance principles (e.g. Aynak Tender).  Potential for sustainable investment. Impact in terms of facilitating sustainable private sector investment in the country’s extractives sector.  Value for Money. Overall cost-efficiency of activities, which should aim to ensure value for money, consistent with appropriate standards of quality. II. CURRENT STATUS OF ACTIVITIES Rapid-response Advisory Services The current allocation of projects reflects the distribution of the Bank’s policy support around oil, gas and mining. Bank task team leaders on this broader dialogue serve as the point of contact for EI-TAF requests, prepare documentation and supervise implementation of the grants. A concentration of mining-based EI-TAF grants reflects the activities of mining teams during the EI-TAF start-up period (2009 – 2012); and the number of oil & gas grants is expected to increase as those teams engage in- country more deeply, and there are now a number of projects in the pipeline. Geographically, the portfolio of activities under EI-TAF spans the globe (Latin America, Africa, and South Asia), but there is clearly a concentration of projects in Africa. Moving forward, African countries will remain a source of demand for advisory services, but the team will work towards a more diversified country portfolio. Moreover, the portfolio also reflects a priority given to governments facing time-bound decisions around new proposals, selected from a larger pool that included the possible renegotiation of existing development agreements. Since the trust fund’s inception in 2009, over US$7.6 million has been committed across the portfolio, financing country-specific projects and global projects. Three projects have completed (Liberia, Mexico, and Rwanda) for a total amount of US$1.7 million. Active country-level grants include: Colombia, Guinea, Kenya, Kyrgyz Republic, Liberia (Regional Petroleum Sector TA), Mauritania, Mozambique, Pakistan, Seychelles, and Sierra Leone (total commitment amount US$5.8 million). The pipeline of 11 potential projects includes Republic of Congo, Guatemala, Guinea, Haiti, India Orissa State, India Federal, Lesotho, Mauritania, Morocco, Pakistan, and Peru (total value US$5.0 million). Projects in Cote d’Ivoire, DRC, Guinea Bissau, Mongolia, and Togo are also under discussion. 2 EI-TAF Consultant Pool for Advisory Assistance In an initial effort to expedite the deployment of advisers, the World Bank team pulled together a consultant roster on which EI-TAF recipient countries can draw. This roster is now being used to provide governments with vetted long or shortlists of consultants that fit the profile of the type of assistance sought. Going forward, the EI-TAF proposes creating a mechanism whereby a group of pre-qualified consultants will be contracted through the Bank under a retainer-type arrangement. These arrangements will be particularly relevant in Bank-executed projects, allowing task managers to rapidly deploy experts on a short-term basis, enhancing grant administrative efficiencies. Knowledge Management The Extractive Industries Source Book (www.eisourcebook.org) was financed through a grant from the Development Grant Facility (DGF), and is the primary knowledge management tool and product, developed through the EI-TAF. The aim of the EI Source Book is to support the EI-TAF in building capacity for large-scale transactions in the extractive industries in client countries, when used as a capacity building tool. The Source Book is being piloted as an orientation guide and knowledge resource for EI- TAF activities (i.e. EI-TAF Balochistan). Through a global collaborative partnership, the preparation of the Source Book builds upon research from leading academic/research industry institutions having core specializations in the extractive industries. Development of the EI Source Book was led by the University of Dundee in partnership with the World Bank and the Global Knowledge Consortium.1 To date, activities under the Source Book have included: (a) preparation of a narrative (guide) document on international good practice in the oil, gas and mining industries organized around the EI Value Chain; (b) development of an online wiki-like website to host the narrative, which is complemented by a comprehensive annotated bibliography, training materials, case studies, and other documents; (c) comprehensive knowledge gap analysis to guide the EI Task Group on the selection of frontier topics with operational relevance to be developed into knowledge products; (d) preparation of knowledge products to fill some of the identified knowledge gaps; and (e) establishment of a global consortium of knowledge centers on the extractive industries. Five principle knowledge products have been developed by our partners, including on: i) upstream gas terms; ii) granting mineral rights; iii) public infrastructure and mining; and iv) community development agreements; and v) model mineral development agreements. In addition, preparation of three new knowledge products on resource corridors, geo-data as a public good, and a template for contract disclosure was recently commissioned. In addition, in conjunction with the E4D Knowledge Partnership initiative, in Fall/Winter 2011 the Source Book underwent a series of three regional “soft launches� bringing together stakeholders from within the Bank, civil society, government and industry in (1) Jakarta, Indonesia (October 2011 to coincide with the EITI board meetings); (2) Tunis, Tunisia (November 2011 in partnership with the African Development Bank), and (3) Washington, DC (December 2011). These regional launches culminated in a final launch in Brazil in November 2012. 1 The EI Global Knowledge Consortium (GKC) is led by the University of Dundee, and includes the Universities of Witswatersrand (South Africa) and Queensland (Australia), Adam Smith International (ASI), International Council on Mining and Metals (ICMM), Revenue Watch Institute (RWI), the African Center for Economic Transformation, Global Witness, and others. 3 Since 2012 marked the final year of DGF financing for the EI Source Book, continued maintenance and funding for the coming years will need to be determined. The University of Dundee has submitted a proposal for approximately US$50,000 from April 2013 to July 2013 for (a) maintenance and update of the Source Book, and (b) preparation and implementation of a Forward Business Plan, for EI-TAF Donor consideration. III. Emerging Lessons/Issues The following lessons/observations from EI-TAF implementation to date have emerged:  Bank v. Recipient Executed Activities: As discussed in previous EI-TAF donor meetings, recipient execution of rapid response activities has proven difficult in many of our client countries, due to weak capacity and lack of experience with World Bank trust fund procedures on the part of the ministries usually involved. By contrast, those activities that have been executed by the Bank on behalf of the client were relatively more responsive to filling the capacity needed for a successful transaction, with quicker implementation on the ground. The EI-TAF team will continue to use Bank execution where appropriate within the Bank’s Trust Fund Policies. The amendment to drop the staff costs cap will help this effort going forward.  Knowledge Dissemination: The EI-TAF team recognizes the need to create a standardized set of capacity building/training resources to provide an orientation around some basic concepts on the extractive industries. The training tools will be targeted toward community, civil society, and policy- makers, and will be organized around the EI Value Chain, focusing on issues such as contract negotiations, legal and policy frameworks, gender and community benefits and consultation, developing economic linkages and integrated land use planning, and infrastructure. Training tools will be developed and hosted within the Extractive Industries Source Book. The aim of these tools will be to enhance the rapid response nature of the EI-TAF by providing stakeholders with an immediate, baseline knowledge of the oil, gas and mining industries.  EI-TAF Consultant Pool for Rapid Response: As described above, over the next few months a mechanism will be established to pre-qualify a pool of EI-TAF consultants to be contracted through the Bank under a retainer-type arrangement. These arrangements will be particularly relevant in Bank-executed projects, allowing task managers to more rapidly deploy experts on the ground on a short-term basis.  Expansion of EI-TAF Activities: Going forward, the number of EI-TAF activities is expected to continue to grow through (a) SEGOM country-based activities including ongoing mining and a deepening of oil and gas dialogue at the front-line; (b) cross departmental support from other World Bank teams engaged on policy issues such as licensing, contract enforcement, fiscal regimes and revenues management; and (c) referral from other donor-led dialogue, as was the case in Sierra Leone and Rwanda. Beyond the expansion of existing activities, the EI-TAF will continue to receive requests to support capacity building around the negotiation of associated infrastructure (power, road, rail, pipelines and ports). This lends an opportunity for “greener options� that might include alternative site selection and routing, and cleaner technologies that might include hydro development. Our work in Guinea (Additional Financing) provides a good example of this trend. 4 IV. FINANCIAL UPDATE Operating Structure 1. The World Bank’s Sustainable Energy, Oil, Gas and Mining Unit (SEGOM) is responsible for administering the EI-TAF (including fiduciary and M&E responsibilities), preparing the EI-TAF work plan, supervising activities, organizing donor meetings and reporting to donors. 2. The EI-TAF donors meet annually to (a) review and approve the EI-TAF Progress Report (work plan), including proposed activities (pipeline) and estimated budgets; (b) review and approve the EI-TAF Financial Report; (c) review the lessons and experiences of the implementation of the EI-TAF activities, including results achieved; and (d) provide strategic guidance to the EI-TAF Team on the implementation of the activities. Given EI-TAF’s rapid-response, demand-driven nature, it is possible that requests for assistance not included in this work plan will come up over the course of the coming year and all such new projects will be circulated for review and comments by the donors. 5 3. Sources of Funds. Table 1 shows the sources of funds as of December 31, 2012. A total of US$25.1 million has been pledged to the EI-TAF by the current six donors (US$23.7 million received). Table 1: EI-TAF Annual Contributions from Donors FY09-13 (US$ ‘000) Total Pledges Receipts % of Not Yet Country FY09 FY10 FY11 FY12 FY13 FY09-FY13 Total Received Australia – AusAID 4,002 4,002 17% 1,032 Belgium – Ministry of Development Cooperation 1,292 1,202 5% Canada – Canadian International Development Agency 10,070 10,079 43% IFC – FMTAAS 1,000 400 500 850 2,750 12% Norway – Oil for Development 2,282 778 419 859 4,337 18% 451 Switzerland – State Secretariat for Economic Affairs 1,000 200 1,200 5% Total from Donors 1,000 3,682 1,478 15,350 2,151 23,660 100% 1,483 World Bank – Development Grant Facility (DGF) 500 500 500 1,500 TOTAL 1,000 4,182 1,978 15,850 2,151 25,160 1,483 7. Agreements from last meeting. At the EI-TAF Donors Meeting in April 2012, Donors agreed to amend the EI-TAF Administration Agreements to achieve the following: (i) add back the expense category Extended Term Consultants that was inadvertently omitted from the eligible expenditures list during the Amendments in March 2012; and (ii) drop the current 20% cap on Bank staff time and travel charges for EI-TAF. These changes will be reflected in the Amendments to be drafted and signed in March 2013. 8. Uses of Funds. Table 2 shows the Disbursements of Funds received as of December 31, 2012. Table 3 shows proposed pipeline uses of funds totaling US$5.0 million. Total funds received as of December 31, 2012 were approximately US$23.7 million equivalent, with approximately US$1.5 million pledged but not yet received. Of these funds, the total budget for FY13-15 is US$13.6 million allocated for current and pipeline grants and US$2.8 million for global knowledge and general/fiduciary activities. There is a funding available balance of approximately US$8.9 million as of December 31, 2012. Table 2: EI-TAF Disbursements, FY10-13 (US$ ‘000) Actual EI-TAF Disbursements Total Activities Allocation FY10 FY11 FY12 FY13 FY05-13 Country-specific grants (Actual and Planned) Africa 7,087 300 467 1,377 902 3,046 East Asia 100 0 0 0 0 0 Europe and Central Asia 500 0 90 63 31 184 Latin America 2,458 0 0 179 82 262 Middle East and N. Africa 200 0 0 0 0 200 South Asia 1,750 0 0 456 96 352 Total Country-Level Grants * 12,095 300 557 1,875 1,111 3,843 Technical Assistance by Bank 1,493 22 137 238 165 562 Global Knowledge and Learning 1,626 54 73 43 135 305 Fiduciary 658 149 109 96 47 401 Administration Fee 473 473 TOTAL USES OF FUNDS 16,345 526 876 2,252 1,457 5,584 6 Issues for Discussion/Decision by the Donors  The new Africa Region Trust Fund for Extractive Industries was launched in October 2012 under the leadership of Mr. Makhtar Diop, World Bank Vice President for Africa. France has provided US$10 million in support and the World Bank is currently actively pursuing other donors. The envisaged size of the fund is US$50 million. The new fund has a regional focus on Africa and is meant to complement EI-TAF's global approach. The thematic focus of the new Trust Fund will be broader than EI-TAF: 1. Legal advice to secure improved contractual terms from investments in extractive industries; 2. Technical assistance to address environmental risks; 3. Technical assistance to address social risks; and 4. Advice on policies for developing backward and forward linkages for extractive industries.  Expanding the scope of EI-TAF: Based on lessons learned during the first few years of operations and further discussions with EI-TAF donors, the EI-TAF team will continue to explore opportunities to expand the scope of the trust fund to provide support to capacity building around infrastructure, licensing, contract monitoring, and design of fiscal regimes and tax administration. These gaps were initially discussed with the International Monetary Fund (Managing Natural Resource Wealth Topical Trust Fund—MNRW), whose activities are focused further downstream on revenue management. As recommended by EI-TAF donors, the World Bank holds regular consultations with the IMF MNRW.  Knowledge Component of EI-TAF: A great deal of success has been achieved under the knowledge management component of EI-TAF through the development of the Extractive Industries Source Book and its associated knowledge products. The Bank fully recognizes the continued need to support the development of knowledge on extractive industries for frontline operations. Donors to the EI-TAF have expressed varying views around sustaining the knowledge component within EI-TAF after the closing of the DGF funds. This remains a point for discussion. The following potential knowledge management activities have been added to the Uses of Funds table, for consideration by the donors:  EI Source Book (Post-DGF): As described above, CY12 marks the final year EI-TAF will receive support through the Development Grant Facility. As such the development of a sustainability plan for the Source Book is currently underway.  Negotiations Training (IBA): The International Bar Association has proposed a training program for the negotiation of Mine Development Agreements. The objective is to train developing country governments on the effective negotiation of mining contracts with foreign investors.  Governance Index (RMG): Raw Materials Group has proposed an annual survey which scores the performance of mining in developing countries, on various indicators, as useful information for both mining companies and countries looking to attract investments in their natural resource sector. The mining index and accompanying report will be developed for four countries to start: Botswana, Finland, Papua New Guinea, and Zimbabwe.  Contract Transparency (WBI): The research would look at the issue of contract transparency in the broader “contracting� context, i.e. outlining the importance of a chain of actions: reducing the importance of contracts by strengthening legislative and regulatory frameworks, contract negotiation, and monitoring compliance. It would evaluate the effect of the different ways of publishing contracts, based on review of how, where, and why contract transparency currently takes place, in which countries disclosure is occurring but is not legislated, when in the process contracts are disclosed, in what form, what content is published, how the legal language for contract disclosure is framed and what the source of the obligations is. Finally, it would evaluate the impacts of contract disclosure to date. This 7 will include but not be limited to assessing impacts on investment, and whether the information disclosed has been used to monitor compliance or promote informed debate about the costs and benefits of the extractive industries sector.  Results Framework: The EITI MDTF team has circulated a program-level results framework to the EITI MDTF Management Committee for discussion. Once the EITI framework is finalized and agreed with the EITI MDTF donors (including most of the EI-TAF donors), the framework will be adapted to EI-TAF and shared with the EI-TAF donors for review and discussion. 8 Table 3: EI-TAF Uses of Funds (as of December 31, 2012) Inception to Date Actuals Projected FY13-15 Expenses Supervision Expenses Supervision Total General, Fiduciary and Administration Fee 1,053 - 292 - 1,345 General Activities 153 - 11 - 164 Program Management 210 - 132 - 343 Program Administration 191 - 124 - 315 Administration Fee 473 - - - 473 Project Pipeline 25 - 25 - 50 Country-Level Grants 3,842 562 2,978 231 7,613 Active Grants 2,326 365 2,978 219 5,888 1. Colombia: Strategic mineral resource areas tenders) 82 31 497 19 629 2. Guinea: Key constraints in large mining investments 403 39 97 11 550 3. Kenya: Oil and Gas Legal Framework 7 19 593 31 650 4. Kyrgyz Republic: Full review of mining investment climate 183 51 317 13 564 5. Liberia: Regional Petroleum Sector TA - - 225 50 275 6. Mauritania: Aid in power agreement for mining sector 183 53 217 7 460 7. Mozambique: Addressing bottlenecks in negotiating MDAs 550 33 200 77 860 8. Pakistan: Capacity building to Balochistan's mining sector 352 48 148 2 550 9. Seychelles: Petroleum agreement tender 50 41 450 9 550 10. Sierra Leone: Build capacity to review existing MDA 516 50 234 0 800 Completed Grants 1,516 197 0 12 1,725 1. Liberia: Build capacity for contract negotiation 1,000 55 0 0 1,055 2. Mexico: Build capacity on royalties system 179 49 0 0 228 3. Rwanda: Hydrocarbon Exploration License 337 40 0 12 389 4. Yemen: (no grant signed) - 53 - - 53 Pipeline Grants 0 0 4,925 600 5,525 1. Congo, Republic of: Mining TA Dialogue - - 475 50 525 2. Dominican Republic: - - 350 50 400 3. Guatemala: Mining - - 500 50 550 4. Guinea: Build capacity to negotiate large-scale infrastructure - - 350 50 400 5. Haiti: Mining - - 350 50 400 6. India Orissa State: - - 500 50 550 7. India Federal: - - 500 50 550 8. Lesotho: - - 350 50 400 9. Mauritania: Mining negotiations - - 500 50 550 10. Morocco: - - 200 50 250 11. Peru: - - 500 50 550 12. Togo - - 350 50 400 Knowledge Management 126 0 1,286 0 1,412 Knowledge Management – General 35 - 19 - 54 Support of Global Knowledge Exchange 23 - 57 - 80 IBA (completed) 25 - 0 - 25 Sierra Leone Tonkolili contract (completed) 18 - 0 - 18 Contract Monitoring and Compliance (completed) 25 - 0 - 25 Pre-Competitive Geo-Data 0 50 50 Knowledge Management on Fiscal Regimes 0 - 50 - 50 Mongolia – Mineral Law Review - - 10 - 10 Peru – Update of Foundation Study - - 20 - 20 Contract Negotiation Training (IBA) - - 500 - 500 Contract Transparency (WBI) - - 80 - 80 Governance Index (RMG) - - 300 - 300 Source Book Continuation - - 200 - 200 Total Uses of Funds (actuals and projected) 5,021 562 9,481 831 15,895 Balance available from funds received 12/31/2012 9,385 9 Annex Table 1: Extractive Industries Technical Advisory Facility (EI-TAF) Active Projects Project Title Brief Description Approx. Task Team Status Grant Leader Amount US$000’ Colombia One of Colombia’s strategies to increase the developmental 579 Daniele La Porta The project is divided into two components which focus on (i) impact of the exploitation of its best mineral assets was the developing a tender methodology for the competitive bidding creation of strategic reserves for key minerals such as gold, of SMRAs, which will include the drafting of template PGEs, copper, iron-ore, phosphates, uranium and coal. The tendering documents; and (ii) capacity building around strategic mineral reserve areas are to be tendered to increase mineral tendering processes, including workshops and the level of technical, environmental and social responsibility, programmed study tours to review and learn from which makes for a more rational use of strategic minerals international best practices. The project has been approved owned by the country aiming at obtaining the best conditions and will begin implementation in early 2013. and benefits for the state. The development objective for this grant is: improved legal/regulatory frameworks and technical, environmental and social standards for the undertaking of transparent and non-discretionary competitive tenders for strategic mineral reserve areas as well as enhanced capacity for the Colombian Ministry of Mines and Energy for the preparation of bidding packages for future tendering processes.The activities would include an evaluation of the "auctionability" of the selected areas. Deliverables would include tendering packages for up to three strategic mineral reserve areas to be selected. It is expected that the tenders be carried out by the GoC resulting in new exploitation concessions with better terms for the country. Guinea: Extractive Aimed at supporting the government to address key 500 Boubacar Project has been approved and started implementation. Industries Technical constraints to the realization of proposed large mining Bocoum Component 1: review selected mineral development Advisory Facility investments, specific activities as follows: (a) facilitate agreements. Component 2: strengthen policy, institutional consensus and shared vision amongst stakeholders in the and regulatory reforms. Component 3: develop a shared development of the mining and hydrocarbon sectors in vision for the management of the minerals sector. Guinea—in response to a time-bound proposal for mining/infrastructure developments; (b) build the capacity of the GoG to review mineral development agreements in response to a time-bound proposal for mining/infrastructure developments; and (c) support updating of the legal, regulatory, and fiscal framework in the mining and hydrocarbon sectors. Kenya Oil and Gas Ministry of Energy (MOE), acting as the policy maker and 600 Alexander The EI-TAF grant will support the following activities: 1) regulator for the industry, does not yet have the Technical assistance and capacity building to the Ministry 0 Legal Framework experience needed for negotiation of natural gas contracts. Huurdemann of Energy on the development of gas terms for exploration A number of exploration licenses for offshore blocks have and production contracts and negotiation practices, based been issued. There is an expectation that these blocks will on international best practice, which will attract private be mostly gas-prone and a number of international oil and investments while maximizing the Government take from gas companies have asked the MOE to propose gas terms future production revenues; 2) Review of the current for the contracts prior to signing exploration contracts. petroleum legal and regulatory framework with a view of However, the Ministry of Energy has asked for more time bringing it in line with best international practices for on account of its lack of experience in negotiating gas future developments and engagements with oil and gas terms. Therefore, Ministry of Energy has requested funding exploration; 3) Technical assistance to the Government of from the Extractive Industries Technical Advisory Facility Kenya in drafting a comprehensive petroleum policy and, (EI-TAF) managed by SEGOM 4) Support to the Government of Kenya to raise its awareness about the gas sector and to enhance its preparedness to deal with the risk of spills during offshore exploration for oil and gas. The activities will be phased with the objective to prepare gas terms at earliest opportunity in support of the Government’s negotiations with the private sector. Kyrgyz Republic: In the Kyrgyz Republic, EI-TAF financed a full review of the 500 Gary McMahon Phase one will be Bank-executed and will focus on providing Mining Sector TA mining investment climate, including a review of licensing, capacity building to MNR and other mining sector legal, regulatory and institutional arrangements in support of stakeholders on the country’s legal and regulatory the Togolak Gold Tender. Based on the review, which was frameworks in the minerals sector. Due diligence of the shared with the authorities, a three-day seminar was organized mineral deposit will also be conducted during this stage of EI- to build capacity around mining legislation, regulations, fiscal TAF. A scoping study of mining community engagements in arrangements, and on mining tender procedures. Kyrgyz republic will be conducted and a framework for further engagement proposed. Particular attention will be paid to social issues around the Togolok deposit. This phase will finance 2 workshops, focusing on a review of the legal/regulatory framework, and on the community engagement/social aspects of the mining sector, respectively. A total budget of US$300,000 is proposed. Provided that Phase one initial results are positive, EI-TAF will move to Phase two. Phase two will finance advisors and workshops required to accomplish the proposed objectives regarding carrying out the mining tender and achieving the outcome of a structuring mining (namely gold) public offerings (tender/auction), compiling a competitive and transparent tender package and capacity building of involved stakeholders, focusing mainly on staff from the MNR. This phase will be Recipient-executed and will start 6-9 months after launch of Phase 1. Liberia: Regional The project is intended as a flexible, multi-year program to 225 David Santley Implementation of the project is at an early stage. Petroleum Sector TA improve the ability of key institutions to carry out 1 government’s policy-making and regulatory functions in the emerging petroleum sector. Assistance will be delivered by means of periodic missions to Ghana, Liberia and Sierra Leone by Bank petroleum specialists and consultants and through workshops, policy papers, and other knowledge products. An allocation of Bank Budget will support policy dialogue with the three governments by the Bank TTL and regional events on topics common to the three countries. Trust Funds (EI-TAF and PGI) will be brought in to supplement the BB and to support country-specific activities identified during the periodic Bank missions. Mauritania - Gas-to- In line with the objective of EI-TAF to provide transaction- 400 Silvana Tordo A law firm specialized in energy related transactions was hired Power Negotiations oriented consulting services, the activities under this project in February 2012, and has been working alongside the GoM Technical Assistance will finance capacity building aimed at moving the identified negotiation team to help review the legal and regulatory Project transactions towards contractual closing. In particular, structure necessary to implement the project. However, the Consultants will assist the Government of Mauritania’s (GoM) project implementation schedule originally envisaged by the negotiation team in: (i) structuring and reviewing the sponsor has suffered some delay, owing to difficulties in contractual arrangements related to the GoM’s participation in agreeing on the sizing and siting of generation and the power utility company; (ii) reviewing the terms of the Gas distribution infrastructure. The final decision is expected to be Supply and Purchase Agreements; (iii) reviewing the reached by the end of February-beginning of March 2013. The contractual arrangements related to the construction and parties still anticipate financial close to occur by the end of operation of the power plant; and (iv) defining negotiation June 2013. strategies. However, negotiations will be conducted by the GoM’s negotiation team without the participation of the Consultants. The Consultants will also develop recommendations on the required legal, regulatory, licensing, and fiscal adjustments driven by the transaction. Mozambique: Aimed at addressing immediate regulatory and capacity 750 Ekaterina In November 2011, the Ministry of Mineral Resources Extractive Industries- bottlenecks towards successful negotiations of new mineral Mikhaylova requested to include new eligible activity for this grant – Technical Advisory development agreements, the activities under this project specifically support for liquefied natural gas (LNG) Facility include: (a) supporting government's negotiations and infrastructure negotiations. As a result, the grant closing date technical teams on Chibuto Mineral Sands Project tender; (b) will be extended until June 30, 2013 to allow for sufficient updating mining cadastre to enable issuance of large-scale time for implementation. There has been some grant mining licenses through tenders in accordance with implementation delays due to (i) a delay with opening the regulations; and (c) updating the current legal and regulatory designated account (now opened); and (ii) delay on the framework for the management of large-scale mining Chibuto tender due to non-compliance of the investor (the associated with the tender. framework agreement with the investor was cancelled in November 2011; the new bid was issued in December and the proposals are due in April 2012 -- thus the grant will provide assistance only starting in April, starting with the bids evaluation). The mining cadastre contract is under review. Pakistan (Balochistan) Launched in August 2011, the EI-TAF assistance to the mineral 500 Daniele La Porta In October 2011, in coordination with Balochistan and federal 2 Technical Advisory rich province of Balochistan focuses on building capacity in one counterparts, the World Bank team carried out the first two Facility of the country’s most impoverished and perhaps unstable workshops to introduce global norms of large-scale mineral regions, where if structured properly, the mining sector could development to a mix of policymakers, civil society have a significant impact on the economic development of the representatives, media reps, and community leaders. The province and the communities around a mine. As the provincial workshop was held in Islamabad and was facilitated by a team government embarks on awarding one of the country’s first of mining industry experts, aimed at training key stakeholders contracts for large-scale mining, capacity building is in response on global mining norms. to a time-bound proposal for resource developments and will In April 2012, the World Bank team hosted, in collaboration center on: (a) global norms to establish governance and with other donors, a round table discussion, targeted towards support policy formulation, leading to strong mineral provincial secretaries (mining) from around the country and development agreements and (b) the evaluation of technical relevant representatives of the federal government. The reports, including feasibility studies associated with the award round table was lead by the government and aimed to build of mining concessions. capacity around sector promotion and to establish a forum for dialogue between provinces. Seychelles Oil and Gas The development objective of the project is to provide time- 500 Alan The funded activities will include: 1) An assessment of the bound assistance to the Government of the Seychelles to build Cunningham 1976 Petroleum Act and the Model Petroleum agreement to capacity and to remove information asymmetries that would determine what amendments, if any, are desirable to ensure otherwise impede the Government from implementing that the legal and contractual foundations for the transparent competitive transactions for hydrocarbon development. The promotion, evaluation and award of petroleum agreements is technical support, beginning ahead of an anticipated 2013 in place. This activity will address possible weaknesses in the licensing round, would be guided by "good fit" international procedures and criteria used in negotiating petroleum norms and policies and build understanding of operational and agreements. 2) Capacity building in the modeling of administrative issues typically associated with these activities. petroleum agreements and an assessment and recommendations regarding the tax and fiscal regime that will apply to future petroleum agreements. This activity will help to remove information and capacity asymmetries between the Government and potential investors. 3) Commercial and legal assistance in the promotion and evaluation of petroleum agreement proposals. This activity will address current limitations in Government staff capacity to fully and effectively conduct this specialized function. Sierra Leone Technical The Grant will finance the services of a multi-disciplinary team 750 Mamadou Barry Implementation of this project is continuing. A review mission Advisory Facility of five specialists to build capacity of Government of Sierra took place in December 2012. The project is expected to close Leone (GoSL) to review existing mining development in June 2013. agreements and negotiate new ones. The objective of the project is to strengthen the Government's capacity to assess time-bound investment proposals, review or negotiate terms for mining development agreements (in line with the Mines and Minerals Act of 2009), and manage the concession granting process. 3 Annex Table 2: Extractive Industries Technical Advisory Facility (EI-TAF) Closed Projects Project Title Brief Description Approx. Task Team Status Grant Leader Amount US$000’ Liberia - Support from The objective of this project is to assist the Government of 1,000 Ekaterina This project has been successfully and fully implemented. Extractive Industries - Liberia to (a) build capacity with contract negotiations and Mikhaylova/ Lessons learned included: Individual contract negotiations can Technical Advisory management of mining concession process, and (b) move three Mamadou Barry inform wider legal and regulatory reforms. Transaction’s close Facility identified extractive industries transactions towards is not easily predictable as it depends on several factors contractual close. The Grant will provide technical advice on outside the grant's control. So the ambitions of the Grant due diligence and evaluation of mining proposals, make should be limited to capacity building rather than promising recommendations on selection of proposals and on the that a deal will close because of the technical support. The required regulatory adjustments to provide level playing field long term benefits of the grant cannot be achieved if the for future investors. It will also provide capacity building to Client does not have a stable team for negotiations. The improve sector governance. overall outcome was a repository of information on all aspects of mining concessions, an iron ore cash flow model to be used in negotiations to test the impact of various decisions on economic returns, and recommendations for follow up reforms. The outcome is likely to be sustainable because the government has already embarked on some of the recommended reforms. The Grant has substantially improved government's ability to analyze investment proposals and negotiate concessions. EI-TAF has helped to attract new resources: WB additional financing for EGIRP ($1.6 million), USAID GEM project (about $8 million allocation to capacity building on concessions; GIZ (mineral governance project and EITI). The database of reports and background documents related to the project served a knowledge exchange tool. It is available on-line to authorized users. EI-TAF findings played a major role in government's decision to review the legal and regulatory framework of the mineral sector. Coordination by the client is very important for successful implementation. Where capacity is weak, consideration should be given to hiring a single firm to do the coordination and quality control. Government needs to understand the limitations of the grant and request it only when transactions are close to being finalized. EI-TAF findings should have a follow up to address policy shortcomings. The grant size may be inadequate for countries like Liberia, Sierra Leone, Guinea where multiple transactions worth several billions of dollars are being 4 considered. To be effective, the grant should be provided to complement ongoing programs rather than as a stand-alone assistance. Given the rapid-response nature of the grant and the need to support transactions that are driven by the private sector, Bank normal approval procedures (particularly for procurement clearance) need to be flexible and responsive to client needs. Mexico Royalties This project aims to achieve the following objectives: 1) 179 Daniele La Porta All activities under this project have been successfully Reform for the Support an assessment of Mexico’s legal, fiscal and regulatory implemented. Some of the highlights from this project Mineral Sector framework for the adoption of a new fiscal regime for the include: (i) Royalty Options Based on a long- list of best mining sector – in response to a rapid increase in in-bound practice “royalty� options identified and presented by the investments; 2) Build capacity around international best World Bank team, three fiscal options were jointly selected by practices on fiscal reforms for the mining sector with the the Secretaria de Economia and Secretaria de Hacienda. A consideration of the adoption of mineral royalty instruments detailed roadmap was prepared and discussed with Secretaria vis-à-vis the Mexican framework in response to a rapid increase de Economia listing the alternative steps that would be in inbound investments; 3) Support an assessment and build necessary for the implementation of a royalty scheme. After capacity around the implications for the adoption of royalties the selection of the royalty type, a selection of the best legal and other fiscal regimes for different Mexican stakeholders; approach to carry out the necessary reforms was presented. and 4) Support the preparation of a consultation roadmap for (ii) Community development investment In discussions with the adoption of a new fiscal regime for the mining sector. policy-makers there was a strong preference not to create a new statute requiring a tax revenue distribution system, but an acceptance that direct investment by miners in mining community development should be encouraged. The proposed example legislation presented in the report was discussed and a roadmap was prepared, taking into account the different options and respective timetable for the fiscal reform. (iii) Amendments to mining law and regulations The review of Mexico’s current fiscal regime for the mining sector identified the need for updates to the current mining law and regulations so that the sector is in line with best international practices. Rwanda - Support Aimed at supporting the Government of Rwanda in the 337 David Santley After some delays in initiating the implementation of the from Extractive preparation, negotiation, and finalization of a Production Grant activities, Rwanda is now making good progress. A draft Industries Technical Sharing Contract (PSC), this project consists of the following Production Sharing Contract (PSC) has been prepared and the Advisory Facility activities: (a) technical advice on drafting and negotiating PSC, economic and technical reports have been delivered. An (b) designing an economic/fiscal model to assess the fiscal and important negotiation session with the investor is scheduled financial impact of proposed contract terms under a variety of for early 2012 after which the PSC will need to be finalized economic conditions of the Recipient; and (c) preparation of a and the enabling policy and legislation drafted. The GoR has medium-term and final report on the final outcomes of PSC. prepared a Work Plan detailing the timing for these activities, which has been reviewed by the Bank team and found to be acceptable. The grant has now closed and a completion report is being prepared. 5 Annex Table 3: Extractive Industries Technical Advisory Facility (EI-TAF) Potential Pipeline Country Background Proposed Objectives Sector Implementation Approx. Period Grant (estimate) Amount US$000’ Republic of Following the Government priority, the project will The project is composed of 3 components: Component Mining To be 475 Congo Mining initially focus on the Zanaga iron-ore mining project. The A) Training related to mining negotiations. Proposed determined TA Dialogue extent to which the project could expand to both the output: - Development of a negotiation methodology Zanaga and the Mbalam/Nabemba projects will be and calendar, focusing on the Zanaga project (see explored in the first phase of the project. attached a recent presentation of the process by the company) - Trainings on iron-ore market and project development, financial forecasting and fiscal revenues, environmental and social aspects, mining infrastructure developments Component B) Advisory activities related to the review of legal and fiscal frameworks. Proposed output: Recommendations for legal and regulatory adjustments based on lessons from past and current negotiations Component C) Development of a skills gap analysis for mining sector institutions. Proposed output: Recommendations for further institutional capacity building (especially a skill gap analysis) Dominican Mining Sector – identification stage; first mission planned Mining Sector Assistance (preliminary discussions). Mining To be 350 Republic in March 2013. determined Guatemala Mining Sector – request from government, but still Mining sector assistance (preliminary discussions). Mining To be 500 preliminary. determined Guinea – Second phase funding. First phase aimed at supporting The objective of the proposed second phase of funding Mining To be 350 Second Phase the government to address key constraints to the under the Guinea EI-TAF grant is to provide the determined realization of proposed large mining investments, specific government with advisory services aimed at activities as follows: (a) facilitate consensus and shared strengthening its technical and financial negotiation skills vision amongst stakeholders in the development of the on mining ancillary infrastructure to enable meaningful mining and hydrocarbon sectors in Guinea—in response progress toward infrastructure licensing and to a time-bound proposal for mining/infrastructure development in the short term, and in so doing create developments; (b) build the capacity of the GoG to conditions for the mining companies to fulfill their review mineral development agreements in response to engagement to exploit and export iron ore within the a time-bound proposal for mining/infrastructure next 2-3 years. developments; and (c) support updating of the legal, regulatory, and fiscal framework in the mining and hydrocarbon sectors. Haiti Mining Sector (preliminary discussions) mission The objectives would be to update the legal and Mining To be 500 completed in March 2013. regulatory framework for extractive industries, build determined 6 capacity for policy and negotiation of mining agreements, and provide transaction advice during negotiations of mining conventions. India Orissa Mining Sector – identification stage; first mission planned Mining sector assistance (preliminary discussions). Mining To be 500 State in March 2013. determined India Federal Mining Sector Mining sector assistance (preliminary discussions). Mining To be 500 determined Lesotho Mining Sector Mining sector assistance (preliminary discussions) Mining To be 350 determined Mauritania – Phase II Mining The objective of the activity would be to enhance Mining June 2012 – 500 Mining Government of Mauritania’s negotiation position and February 2013 Negotiations capacity prior to final negotiations of mining deals in 2012/13 with Xstrata (iron ore), Kinross (gold), Bumi (iron ore). Morocco Mining Sector Mining sector assistance (preliminary discussions) Mining To be 200 determined Peru Mining Sector – identification stage Mining sector assistance (preliminary discussions). Mining To be 500 determined Togo Mining Sector – identification stage; mission planned in Mining sector assistance (preliminary discussions). Mining To be 350 March 2013. determined 7