Defeating the Paradox of Plenty at the Negotiation Table

With the energy of a start-up, CONNEX fuses independent negotiation expertise into a broader governance agenda for the world’s poorest countries.

The G7, the world’s most elite club for heads of state, is not a club that has a track record of decisive action towards intractable problems. CONNEX, the initiative on Complex Contract Negotiations assistance, may be one exception that has escaped attention. Its function is to tackle the resource curse of the extractive industries in some of the world’s poorest countries. Also known as the paradox of plenty, resource rich countries enjoy lower economic development, less democracy, higher environmental degradation and more frequent and violent conflict. It is one of those evergreen development challenges.

Mix extractive industries with poor countries and a cycle of large investment deals, poor governance, corruption, instability, conflict, expropriation and divestment seems inevitable and self-repeating.

While an off-the-shelve solution remains elusive, most emphasis by development wonks has been on intervention at the governance level. It makes sense but it is awfully broad in scope, long-term in results and with gradual improvements highly vulnerable to setbacks in other parts of the cycle. The idea for CONNEX was first considered at UNCTAD in the nineties. It then passed through various forms and pilot stages at Colombia University’s CCSI and Peter Eigen’s Humboldt-Viadrina Governance Platform (Eigen is also the founder of Transparency International and the Extractive Industries Transparency Initiative (EITI)).

If the poorest countries could obtain high-quality and impartial negotiation support in their deals with multinationals a win-win-win cycle could occur.

Effective negotiation support would first allow for better agreements benefitting development across the social, economic and environmental domains. Second, more sustainable investment deals for multinationals with agreements that last longer, cause significantly less friction and conflict with society and are more profitable in the long-term. And third, a gradual and sustained improvement in the investment climate, benefitting national and foreign stakeholders well beyond the extractive industries.

Eventually the 2013 Monrovia Declaration settled on three very specific interventions to intervene in the resource curse cycle through the prism of negotiation support:

1. an information-sharing and coordination mechanism;

2.  a contract negotiation support center; and

3. a rapid response advisory unit on negotiations.

At the 2015 G7 meeting hosted by Germany, President Johnson Sirleaf of Liberia provided strong backing to the initiative. As President, Johnson Sirleaf had herself lead a renegotiation of contracts with all major extractive multinationals in Liberia. She was intimately aware of the difficulties of that process and how failure to get to far more sustainable and fair agreements could jeopardize progress in other development areas. These difficulties are not first and foremost a problem of power imbalance.

Countries, including the poorest ones, wield considerable power towards multinationals, especially if they have already invested heavily. The significant imbalance lies in the capacity to fully get to grips with the complexity of understanding prior agreements and the details of new ones. In the long-term this imbalance does not do the extractive industries a favor: the risk of expropriation or conflict rendering operations impossible is always looming.

”First pre-negotiation support measures have been provided in countries such as Liberia, Mali, Guinea, Kyrgyzstan, Tanzania and Mozambique.”

Following the 2015 G7 meeting, Germany took the lead on moving from concept to implementation. In 2017, the CONNEX Support Unitbecame operational. Its secretariat, run from Berlin and hosted by Germany’s international cooperation agency GIZ, has the appearance of a development start-up. Because Germany does not have multinationals in the extractive industry it is seen as a more honest broker in levelling the playing field between public officials and multinationals. They bring together a multitude of resources for officials and fund, at short notice, the deployment of independent experts, ranging from industry experts to lawyers to geologists to financial analysts. First pre-negotiation support measures have been provided in countries such as Liberia, Mali, Guinea, Kyrgyzstan, Tanzania and Mozambique.

The key question, perhaps, is not so much whether the intervention logic makes sense. At the minimum it helps to start leveling a very unequal playing field between multinationals and capacity-strapped governments. Beyond that, it could do far more for stability and investor confidence in the long-term.

The question that is most intriguing is why countries in “the north” do not see the same intervention logic for their own government apparatus.

Perhaps here the problem is one of too much capacity within government. The policy substance is so well understood by senior civil servants that independent external advice on negotiation is hardly considered. So whereas Royal Dutch Shell (on the maligned Groningen Gas Deal) or the business conglomerates building Berlin’s ever-delayed Brandenburg airport hires a battalion of external laywers, negotiation experts and former senior civil servants to advice them on megadeals with governments, the latter suffice merely with their own civil servants. Through that prism, the ideas behind CONNEX are about greater agreements for the public good anywhere.