III. The Extractive Industries Value Chain

A basic premise of the Source Book is that effective management of the EI sectors requires careful attention to all stages of the EI value chain and that they be viewed as belonging to a whole.

If policy-makers are to grasp the opportunities and meet the challenges of natural resource management, their actions need to be informed by an appreciation of the interconnectedness of governance mechanisms. The Good Practice recommendations of the Source Book need to be grounded in a political economy context: that is, the constellation of specific local features that will shape the application of Good Practice. However, they also need to be linked to the integrated character of the institutional arrangements that are involved in resource management . In the Source Book this feature is grasped by means of the Extractive Industries (EI) Value Chain (below). 

The EI Value Chain emphasizes five distinct features in the natural resource management process. A resource-dependent country has to move through each of these. They cover: the organizational matters that are a perquisite for commencing activities, particularly the establishment of a legal and contractual framework; regulation and monitoring of operations; the collection of taxes and royalties; revenue management and distribution and sustainable development policies and issues, as illustrated in the five chevrons above. The first four may be understood sequentially but the fifth chevron attempts to capture a number of related considerations that influence (more or less) all of the activities in the extractive industries. It differs from the other chevrons too in being primarily policy- rather than rule-based. In Section III of the Source Book, the four chapters follow closely the links of this EI Value Chain. Its advantage is that it offers a way of examining in a comprehensive way the relevant parameters of governance. It allows us better to illustrate how Good-Fit Practice policy interventions can be made in an integrated manner to transform natural resource potential into resource wealth but in ways that facilitate their sustainable development.

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