The World Bank has announced efforts to create a $50 million trust fund for use by African countries negotiating mineral, oil and gas contracts. The money would be spent on securing advice from lawyers and from technical advisers like engineers and chemists during negotiations with energy and kining companies.

As my colleague Emma Bryce noted here last week in a post about the Berlin-based group OpenOil, multinational companies are generally better equipped in negotiations to advance their own interests than many Middle Eastern or African governments are. “Ministers who earn $3,000 a month just aren’t comfortable hiring lawyers who bill that for a morning’s work,” said Johnny West, the founder of OpenOil, said in an interview.

The imbalance in information and power can lead to unfavorable deals for governments that mean hundreds of millions of dollars of lost revenue over a contract’s lifetime, and often, a failure to pull in enough proceeds to benefit local infrastructure or other development efforts.

Like many other organizations, the World Bank sees contract negotiations as a powerful intervention point.



“Working there can have a real multiplier effect,” said Patrick Heller, a senior legal adviser for the Revenue Watch Institute, which has been a partner to the World Bank on similar initiatives. “Paying for these support services at the outset could costs thousands, or even millions upfront, but the outcome from that will be many times greater.”

As the World Bank noted, Africa holds 15 percent of the world’s oil reserves, 40 percent of its gold, and about 80 percent of its platinum metals.

Mr. West of OpenOil said that while he found the approach compelling in principle, he worries that that offering technical expertise alone risks ignoring the complex and deep political challenges present in many African countries. But the World Bank effort is not blind to that concern.

“Transparency is the natural best friend of poor people in Africa,” said Phil Hay, acting spokesman for the World Bank’s Africa Region. Projects supported by the trust fund would have to meet two criteria: first, they would need to meet standards set out by the Extractive Industries Transparency Initiative, a program that publicizes the taxes and revenues paid by companies alongside those collected and spent by government, allowing for a clear assessment of discrepancies between the two. Second, all contracts would need to be made public.

The Extractive Industries Transparency Initiative “is a powerful tool for oil and mining revenue transparency,” Mr. Heller said. And if a contract is published after it’s signed, this “obviously puts a lot more pressure on government to get a good deal, and on companies to make deal that they can justify to shareholders and citizens,” he said.

The World Bank is also collaborating with groups like the African Development Bank and the Blair Initiative to help ensure that contract revenues are allocated effectively.

Finally, Mr. Hay emphasized the importance of media scrutiny, public activism through social media and the complementary work of watchdog groups like Global Witness. It is hoped that a durable transparency will emerge from this blend of formal and informal safeguards, he said.

The World Bank is in the early stages of fund-raising but expects that the fund will be able to offer support tailored to the particular circumstances of each country and contract. “We want to make sure this bonanza gets invested in the long-term policies of tomorrow,” Mr. Hay said.