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International Development Policy | Revue internationale de politique de développement is a peer-reviewed, open access e-journal that publishes original, interdisciplinary, policy-relevant papers in the field of international cooperation and development. Anchored in Geneva at the Graduate Institute of International and Development Studies, it publishes contributions by researchers and reflective practitioners worldwide. Our articles aim to contribute both to scholarly discourse and to policy and practice in the field of international cooperation and development.
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The Globethics library contains articles of International Development Policy as of vol. 1(2010) to current.
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Trade-Related Illicit Financial Flows in Southeast Asia: Evidence from Extractive and Agricultural Commodities in LaosThe Association of Southeast Asian Nations (ASEAN) has emerged as one of the fastest growing collective economies in Asia. This fast growth is, however, accompanied by various challenges, including the trade-related illicit financial flows (IFFs) that deplete the tax revenues of the Association’s Member States. This chapter aims to shed light on the status of the trade-related IFFs present in the scale of trade mispricing that occurs between the ASEAN community and its global trade partners. To better interpret its findings, the chapter provides a legal framework analysis that highlights gaps in efforts to address these financial challenges in the region. Notwithstanding these gaps, certain Member States with substantial non-tax revenue streams have reduced reliance on conventional taxation, allowing for unique fiscal strategies. A comparative analysis of readiness among ASEAN Member States, meanwhile, reveals disparities, with advanced economies demonstrating robust legal systems while developing countries face challenges in implementing complex tax regulation. The chapter also examines the vulnerability of countries that lack robust legal frameworks, using the Lao People’s Democratic Republic (PDR), a landlocked, least-developed country dependent on extractive resources and agricultural exports, as a case study. By estimating the magnitude of trade mispricing of selected mineral and agricultural product exports, the chapter tries to present the consequential impact on potential tax revenue erosion and the economy. Its findings underscore the critical role of legal foundations in addressing the issue of IFFs, including the importance of transfer pricing rules in preventing trade mispricing. Based on these findings, this study encourages less economically developed, tax-revenue-reliant nations like Lao PDR to continue developing a transparent legal system, improve current trade databases, and enhance cooperation with international bodies. This study also suggests such countries explore alternative methods, such as simplified approaches, of estimating tax liabilities and curbing trade mispricing.
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Metals Streaming and Royalty Financing: A Framework for Assessing Mining Sector Financial Benefit–Sharing Implications for GovernmentsThis chapter offers a simplified approach to assessing the potential impact of metals streaming and royalty financing on government revenues. Subject to the availability and quality of information, a revenue impact ratio can be determined by comparing the potential revenues to the government from more traditional forms of financing with potential revenues to the government from metals streaming or royalty financing.The chapter considers the key features, advantages, and disadvantages of these alternative funding options for mining projects, and then develops an illustrative model to demonstrate their potential impact on government revenues. This forms the basis on which to identify the key challenges, and the policy considerations when addressing them.While metals streaming provides upfront capital and a potential hedge against price risk for producers, it could also limit the upside potential for both the mining company and the host government. On the other hand, royalty financing offers stable income streams and diversification opportunities for investors but may lack direct exposure to metal price increases.The ultimate risk faced by resource-rich governments as a result of an increase in the use of metals streaming and royalty financing arrangements is a suboptimal share of the potential benefits that will accrue from the mining operations. Specifically, the risk is of a reduction in taxable income and royalty revenue.At the heart of the policy considerations pertaining to resolving these challenges and risks is reducing information asymmetry between the government, the mining company and the streaming or royalty company. One important way to do this is to strengthen tax legislation and enforcement mechanisms. Implementing anti-avoidance rules, such as interest limitation rules, can limit the ability of metals streaming and royalty financing companies to exploit tax and other loopholes. Other features with which to strengthen the legislation include clear minerals pricing rules, and clearer provisions regarding withholding taxes.
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The Battle over Policies to Curb Trade-Related Illicit Financial Flows: Findings from a Q-methodology StudyIllicit financial flows (IFFs) deprive low-income countries of essential revenues while donors’ willingness to fund aid budgets dwindles. IFFs related to foreign direct investment and trade include transfer mispricing, trade mispricing and profit shifting. Policy options to curb IFFs range from short-term fixes to mid-term measures that adjust legal instruments and improve coordination between countries, to more fundamental structural reforms that require a longer time horizon. Which policies are effective and should be pursued is a highly contested point, slowing down the progress of reform. This is unsurprising as reducing IFFs involves a distributional conflict: more for those deprived of revenues now means less for those who currently benefit. We conduct a Q-methodology study among IFF policy experts. We use Q-methodology to reveal participants’ policy preferences and tease out lines of contestation and areas of agreement to identify the policy space available in which to advance reform. We find tensions existing amid preferences for short-term fixes and for more comprehensive structural reforms; tensions regarding the question of extending legal liability to those facilitating and assisting in the creation of IFFs; and tensions over whether and to what extent host countries should be empowered to curb IFFs using their legislative sovereignty. Policy measures to increase targeted transparency that is directly actionable to tax administrations in host countries are the most likely to garner approval from all stakeholders.
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Tax Reforms in Hydrocarbons and Mining in Chile, Colombia and Peru 2021–2023The objective of this chapter is to analyse the impact of recent tax reforms implemented by newly elected governments in Chile, Colombia and Peru, with special emphasis on the extractive industries. We focus on the need to improve the domestic capacity of tax and other revenue collection if the United Nations Sustainable Development Goals are to be achieved.Tax reform projects are an important tool for natural-resource-rich countries as they allow them to promote tax progressivity by levying wealth and capital income, as stated at the First Latin American Summit for an Inclusive, Sustainable and Equitable Global Tax Order, held in Cartagena, Colombia in July 2023.This chapter analyses the results of the various policies, the difficulties encountered, the need to reach a consensus for tax reforms to be approved, the link between tax reforms and international proposals, and the extent of the changes needed to increase tax collection in order to meet outstanding social and environmental challenges.
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Measuring Illicit Financial Flows: New Data and MethodsA major source of illicit financial flows (IFFs) out of developing countries accrues from the under-invoicing of commodity exports. This erodes the tax base of resource-rich developing countries, and hence their capacity to mobilise domestic resources for development. The Sustainable Development Goals (SDGs), adopted in 2015, specifically call on states to reduce IFFs and enhance domestic resource mobilisation. Yet a weak capacity to assess the magnitude and drivers of the phenomenon has limited the ability of developing countries to effectively curb IFFs. This has been compounded by a lack of consensus over IFF definitions together with poor data and weak methods. Drawing on six years of interdisciplinary research into commodity trade–related IFFs, this chapter examines novel data sources and recent methodological advances that researchers and regulators can draw upon to better capture and eventually reduce IFFs. It situates such advances within the fast-expanding literature on domestic resource mobilisation, taxation and IFFs, focusing on three major channels; namely, trade mispricing, abusive transfer pricing and tax evasion through wealth offshoring. The chapter concludes by discussing the scope for improved data collection and evidence generation. This, together with global taxation reform, can greatly contribute to effectively enhancing domestic resource mobilisation in developing countries.
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Prescriptive Pricing and Stabilisation Clauses in Investment Agreements‘Prescriptive’ pricing methods, which employ reference prices and fixed margins for tax purposes, have gained prominence as a pragmatic approach to combatting commodity trade mispricing and tax evasion, especially for countries with limited tax administration capabilities. While these methods hold promise for facilitating enforcement, reducing administrative burdens, and curtailing abusive tax avoidance practices, concerns have arisen about their potential deviation from established international rules and principles. The perceived risk of legal liabilities and investor claims, including ‘unfair treatment’ under investment treaties, acts as a significant uncertainty factor in the adoption of such methods. Thus, the present chapter addresses the legal aspects of ‘prescriptive’ pricing methods within the parameters of international investment law, offering a multifaceted perspective on challenges involving the scope of defence arguments that states can mobilise under international investment law to justify such methods and exploring the right and duty of states to regulate corporate conduct and economic activities under human rights law, as well as the practical limitations to this approach in present lawmaking practices.
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The Role of Tax Expenditures in Enabling Illicit Financial FlowsThe role tax expenditures play in fostering or facilitating illicit financial flows has so far not been studied extensively. We provide an explorative overview of the linkages between tax expenditures and illicit financial flows in both source and recipient countries. In a second step, we focus on three kinds of mechanisms. In source countries we analyse the role of special economic zones and tax expenditures that target the extractive sector. In recipient countries we study the use of patent boxes and related mechanisms to attract intangible assets. Bilateral tax treaties, meanwhile, can act as facilitators of illicit financial flows because they provide legal devices with which to shift profits away from source countries, and add another layer of complexity to the tax system. To address the use and abuse of tax expenditures in this context, the transparency, tax certainty and simplicity of tax systems should be strengthened by any government trying to protect its tax base.
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Curbing Illicit Financial Flows in Commodity Trade and BeyondEstablishing a more transparent, effective and equitable and framework for trade and taxation is crucial to enabling commodity exporting states to mobilise domestic resources for sustainable development. The current drive to reform the global governance of taxation offers opportunities, but takes place in the context of heightened North–South tensions, reduced trust in multilateralism and calls for deeper decolonisation. Drawing on a six-year multidisciplinary research project involving academic institutions from commodity exporting and trading countries, this chapter presents a research framework that the authors used for the study of illicit financial flows associated with commodity trade. It discusses major findings, and recommendations as to how to counter the ensuing tax base erosion in resource-rich developing countries. The latter can consider a range of policies and innovative measures to rein in commodity trade mispricing. But this is not enough. States hosting major trading and financial centres have to simultaneously address a range of pull factors. At the global level, fair taxation reform is key and must preserve a sovereign policy space, in which commodity exporting states may adopt context-specific solutions aligned with their institutional capacities. Finally, this chapter introduces the thematic volume of International Development Policy on illicit financial flows in the commodity sector and beyond.
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Illicit Financial Flows, Extractive Sectors, and the Energy Transition: Building State Capacity to Finance the SDGsStates play a crucial role in the capture and allocation of commodity revenues shaping development outcomes. This chapter examines their capacity to address illicit financial flows and better finance development programmes, focusing on energy transition revenues. It first reviews the main findings about state capacity to harness commodity revenues to reach key Sustainable Development Goals. It then explores the complex interplay between state capacity, commodity-based financial flows, and development processes in the context of the energy transition. Highlighting the diversity of state capacities among commodity-dependent countries and possible energy transition trajectories, the chapter discusses opportunities and challenges resulting from changes in the volume, type and price volatility of commodities, and associated illicit financial flows associated with the energy transition. State capacity must anticipate and respond to shifts in dependence on fossil fuels to energy transition minerals and renewable energy production in order to avoid repeating illicit financial flow patterns associated with the ‘resource curse’ and poor development outcomes.
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Potential Illicit Financial Flow Risks in Ghana’s Gold-for-Oil TransactionThis chapter presents multidisciplinary perspectives on a unique barter trade arrangement—the Gold-for-Oil (G4O) policy initiated by the government of Ghana in November 2022. First, it uses econometric analysis to examine the economic motivation for the policy, that oil importation is the major driver of the depreciation of the domestic currency against the US dollar. Second, it provides a political economy overview of the policy, highlighting the governance issues surrounding the policy’s formulation and implementation processes. Third, it examines existing legal and regulatory frameworks, asking if due process was followed in these processes. The econometric analysis shows that although there is a positive and statistically significant long-run relationship between Ghana’s domestic currency depreciation and oil imports, the effect size is not large (the long-run oil import elasticity of the exchange rate is about 0.20), suggesting that even under the best case scenario of policy implementation within the right legal regime, the G4O initiative will not be a panacea for the perennial exchange rate volatility problem. The political economy and legal analyses highlight issues of insufficient consultations, disregard for legal foundations that might facilitate illicit financial flows (IFFs) through smuggling and illegal gold trade, the lack of transparency in the implementation of the policy and the pricing mechanisms that could increase the risk of IFFs through mispricing, and insufficient operational clarity. To enhance the policy’s effectiveness, it would be necessary to establish a comprehensive legal framework, foster stakeholder engagement, ensure transparency, and coordinate efforts among all parties. There should also be a general focus on reducing unnecessary importations and boosting exports. All these could reduce the risk of IFFs and ensure that Ghana’s natural resources are optimally utilised for the benefit of the population.
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Missing DollarsInternational Development Policy | Revue internationale de politique de développementInstitut de hautes études internationales et du développement, 2024-05-27Illicit financial flows (IFFs) associated with commodity trade erode the tax base of resource-rich developing countries. Efforts to curb IFFs and reform taxation stumble over enhanced North–South tensions but remain crucial to helping poorer countries mobilise domestic resources for development. The 17th volume of International Development Policy examines this key part of the wider agenda to restore trust in the multilateral system, calling for a more transparent, effective and equitable trade and tax framework. Based on a six-year multidisciplinary research project encompassing academic institutions in commodity exporting and trading countries, its 24 authors offer a mix of theoretical and empirical contributions and discuss findings of macro- and micro-level studies. The book sheds new light on issues such as addressing push and pull factors through domestic and international policy measures, the preferences of key stakeholders for short-term fixes versus long-term policy reforms, and prescriptive approaches and other options to address tax base erosion in resource-rich developing countries. Carbonnier, G., F. Brugger, E. Bürgi Bonanomi, F. M. Dzanku and S. Insisienmay (eds) (2024) Missing Dollars. Illicit Financial Flows from Commodity Trade, International Development Policy | Revue internationale de politique de développement, 17 (Geneva, Boston: Graduate Institute Publications, Brill-Nijhoff), DOI: 10.4000/poldev.6067 Forthcoming paperback version: https://brill.com/display/title/69256 Contributors: Ama A. Ahene-Codjoe, Angela A. Alu, Latdaphone Banchongphanith, Fritz Brugger, Elisabeth Bürgi Bonanomi, Humberto Campodónico, Gilles Carbonnier, Fred M. Dzanku, Christian von Haldenwang, Adubea J. Hall, Sthabandith Insisienmay, Philippe Le Billon, Victor S. Mariottini de Oliveira, Rahul Mehrotra, Armando Mendoza, Lucas Millán-Narotzky, Irene Musselli, Irma Mosquera Valderrama, Ekpen J. Omonbude, Joschka J. Proksik, Agustín Redonda, Viriyasack Sisouphanthong, Latdavanh Songvilay, Abigail A. Tetteh.
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Green Masquerade: Neo-liberalism, Extractive Renewable Energy Transitions, and the ‘Good’ Anthropocene in South AfricaThis chapter examines the ‘green’ energy developments apparent in the South African government’s energy policy and renewable energy programme. In 2011, the South African government introduced the Renewable Energy Independent Power Producer Procurement Programme as a new policy imperative for electricity generation from renewable energy sources through publicprivate partnerships. The Programme has been hailed for attracting a huge amount of direct foreign investment in climate mitigation in South Africa. This chapter analyses the material nature of the Programme and the publicprivate partnership investment conditions, based on a case study of the Tsitsikamma Community Wind Farm in the Eastern Cape in South Africa, an electricity generation project initiated prior to the introduction of the Independent Power Producer renewable energy programme on community reclaimed land. This community was a willing partner in the wind energy investment partnership. Despite their inclusion in this techno-capitalist development project, however, the material well-being of members of this community remains unchanged, as does the degraded state of the commercial agricultural land involved. The chapter argues that the capitalist neo-liberal logic of alternative ‘green’ energy interventions in investment models such as this renewable energy programme is embedded in the machinations of the extractivist productivist model through ‘new’ forms of financialisaton for capital accumulation.
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Aluminium in Suriname (1898–2020): An Industry Came and Went, but its Impacts on the Maroon Communities RemainSuriname was one of the first countries in the global South to produce aluminium. The establishment of this industry, including the hydroelectric dam that was meant to power it, was the key idea upon which Suriname’s entire dream of modernity and independence was constructed. Negotiations with the Aluminum Company of America (Alcoa) resulted in Suriname accepting a treaty under which hardly any benefits accumulated in the country itself, while the establishment of the industry caused loss of land, environmental damage and the deculturation of the Surinamese Maroon communities. After these revolted against the state, Alcoa left the country, leaving behind an ‘aluminium landscape’ where aluminium is no longer produced, but where the original population, insofar as its members have not moved to the cities, is still heavily affected by the changes caused by the Surinamese aluminium boom.
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Global Afterlives of ExtractionThis volume of International Development Policy brings together post-extractivist imaginaries, diverse and ever-evolving forms of resistance and contestation, and a growing recognition of the paradox of ‘green’ extractivism. Despite the pervasive narrative that more rather than less mining is necessary to achieve decarbonisation, there is now growing recognition that the current model of economic development based on fossil fuels and resource extraction is not sustainable in the long term. The introduction to this volume acknowledges the complex and ongoing legacies of extraction and the urgent need to move beyond extractive models of development and towards alternative pathways that prioritise social justice, environmental sustainability, democratic governance, and the well-being of both human and non-human beings.
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National Resources, Resistance, and the Afterlives of the New International Economic Order in BangladeshOver the last two decades in Bangladesh, a well-organised resistance to coal mining in the north-west, and to onshore and offshore gas exploration, has been animated by concerns over dispossession of land, and plans to export much of the coal and gas to be extracted in the name of financial viability. As such, these movements might be read as resistance to ‘extractivism’ in a ‘literal sense’. In scholarship on resistance to resource extraction in Bangladesh, significant attention has been given to the tensions that appear to arise between ‘resource nationalist’ opposition to foreign-owned or export-oriented extractive operations, and (some) supposed resource nationalists’ accommodation of fossil fuel extraction in the name of energy sovereignty and development. In this chapter, I argue that this apparent tension in understanding resistance to extractivism dissolves when the New International Economic Order (NIEO)―which centred on attempts to assert permanent sovereignty over natural resources and empower postcolonial states to negotiate with extractive corporations―is foregrounded. In Bangladesh, sovereignty over natural resources and the primacy of domestic courts in disputes over resource extraction are frequently enacted, much to the displeasure of international extractive industry corporations. Focusing on attempts to enact the spirit of the NIEO by Bangladeshi courts, and arbitrators locking horns with extractive industry corporations, I suggest that ‘resource nationalist’ mobilisation against unjust forms of resource extraction can at times be understood as resistance to the international legal architecture that frames extractive corporations’ relationships with postcolonial states, rather than to extractivism in the ‘literal sense’.
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The ‘Alterlives’ of Green Extractivism: Lithium Mining and Exhausted Ecologies in the Atacama DesertGreen technologies designed to mitigate climate change through renewable energy and zero-emissions transportation currently depend on lithium-ion batteries, which require ‘critical materials’. Like nickel, graphite, manganese and cobalt, lithium is a key component of batteries that store energy for electric vehicles, smart devices and renewable power plants. Although lithium is present all over the globe, one of the main commercial lithium reserves is in the Puna de Atacama, a desert region at the borders of Chile, Argentina and Bolivia. Resulting from a collaborative study for the Natural Resources Defense Council and the Plurinational Observatory of Andean Salt Flats, this chapter examines how the reliance on brine evaporation as an extraction method for lithium mining exacerbates conditions of ecological ‘exhaustion’ in the Puna de Atacama. The study is based on ethnographic and historical research primarily conducted in Chile with environmental activists, Indigenous leaders, scientists and policy practitioners. Furthering the concept of ‘alterlives’ to examine not only exposure to downstream chemicals but also the in situ alteration of life at mining sites upstream in the chemical supply chain, the chapter analyses environmental injustices inherent to green extractivism across multiple scales. It considers under what conditions Indigenous and local participation may contribute new models and standards for monitoring and offers policy recommendations to prevent further social harm and environmental damage.
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‘We are nature defending itself’—The Forest of Dannenrod Occupation as an Example of Contested Extractivism in the Global NorthExtractive activity is not limited to mining; it also occurs in the other forms of large-scale landscape destruction, including the deforestation involved in extensive infrastructure projects. Yet while resistance to activities such as fracking and coal mining has been intensively investigated within the extractivism debate under the collective term ‘contested extractivism’, resistance to the extraction of renewable parts of nature such as woodland has, by comparison, been somewhat neglected. Likewise, the academic debate has focused mostly on case studies from the global South. We argue that opposition to the felling of more than 85 hectares of woodland in the Forest of Dannenrod (Germany) for the construction of a highway is an example of contested extractivism in the global North. We portray the protest as a clash between extractivist and anti-extractivist notions in Europe, the latter partly transitioning into post-extractivist imaginaries. And although the area was felled in 2020, we argue that this opposition marked a turning point for the German environmental justice movement and sparked a national debate, despite persistent support mechanisms for wood extraction and negative media reports.
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Contesting Extraction: Challenges for Coalition Building between Agrarian and Anti-mining MovementsIn the context of a global expansion of the extractive frontier, building broad protest coalitions is key for emancipatory and non-extractive future transformations of the countryside. Yet even though movements in both the agrarian and the mining sector struggle against the enclosure of land and the loss of livelihoods in rural areas, inter-sectoral coalitions remain scarce. This chapter therefore aims to identify challenges to inter-sectoral coalition building between movements struggling against extractive projects in the agrarian and the mining sector. Based on a case study of Senegal it shows that mutually exclusive identities, missing ‘bridge builders’, and different policy spaces constitute key challenges for the building of coalitions. Furthermore, extraction plays out differently in the agrarian and in the mining sector. Different regulations and economic histories as well as distinct impacts of extractive activities on land and nature provide different incentives and challenges for claim making in the two sectors. In order to understand resistance to extraction, it is therefore key to stay attuned to the different impacts extractive investments have on the ground.
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Logics of Extraction and of the Valorisation of Culture: The Role of Post-extraction Investment in the Creation of Inequality in ChinaWhat sort of social and economic arrangements are enabled by an extractive economy and its successors? How are patterns of social stratification influenced by these processes? Drawing on ethnographic evidence collected in a tourist destination town in Yunnan that is surrounded by iron mines, I argue that the underlying logics of extractivism persist into the development of a service sector economy (in this case, tourism). The specific case documents economic and social change in a community being reshaped by an emergent cultural tourism industry. New logics of extractivism are motivated by an assumption that peripheral capital is raw and unchanging and exists to be processed, monetised, and consumed by core elites. Even as the makeup of economic sectors change, the national periphery continues to be a site of raw resources to be extracted and valorised by elites and other stakeholders from urban cores. The effect of this extractive tourism industry is to flatten, ossify, and ‘legibilise’ culture in ways that prioritise performance and experience over the agency of local people. The resulting reformation of cultural practice creates new forms of inequality, here marked by gender and ethnicity.