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Common ground: balancing rights and responsibilities for natural resource investments and community development

Executive Summary : Given globalization and rising demands for energy and raw natural resources, extractive industries and their investors deepen the search to the last reaches of the planet for fuel and material. Despite rapid urbanization, millions of people in remote and underserved regions from Colombia to Zambia increasingly come into contact if not conflict with mining, timber or agribusiness interests every day.

Investment and livelihood opportunities abound in these settings along with tax income for governments. These developments also bring risk, which can be brought into balance with opportunity when basic, good governance principles prevail. Avoiding conflict, opportunity costs and ecosystem damage while enhancing profits in the extractive industry often rests on the threshold issue of sufficient local buy-in to ensure the project’s long-term prospects. Balancing risks and rewards among multiple stakeholders presents a central challenge to investors and managers alike. A mutuality of interests in strengthened governance standards exists between stakeholder groups in mining, logging, agri-business and other natural resource industries. As opposed to a ‘cut and run’ situation of quick profit and plunder, these enterprises fare far better when investors, operators and local people find common ground to cooperate and search benefits. In that context, we offer a simple, durable, yet flexible contractual framework for local people, extractive industries and other key stakeholders to improve the conditions for negotiating and operating projects on the ground. It focuses on a rights-responsibilities axis of agreement that accounts for constraints such as weak capacity and ever-present poverty, ‘rent seeking’ and corruption. We include a one page “matrix” with an accompanying narrative illustrating how to frame key terms and conditions contractually for engaging stakeholders through a project cycle.

Industrial plantation in Sumatra

Natural Resource Investments in a Shrinking Global Landscape

Since the earliest agricultural settlements, the quest to control local resources including land, water and forests, has proven a dominant feature of human society. In more recent times, as the world has shrunk, land and natural resource laws and regulations have come to determine property relations. According to Western property law, all legal relationships exist between people, not people and things. When Magellan planted a cross on a Philippine island in 1521 and claimed to have appropriated all Filipino forbears’ sovereignty and property rights, he set in motion centuries of colonial usurpation of native lands. Four hundred years later, U.S. Supreme Court Justice Oliver Wendell Holmes in Carino v. the Insular Government affirmed in a unanimous decision that land occupied in the Philippines since time immemorial was never public land. By establishing private land tenure rights for Indigenous Peoples in the remote jungles of Southeast Asia, this decision provided a powerful precedent for challenging the myth that public lands are essentially unoccupied or unclaimed.

Post-colonial governments across the developing world, with Papua New Guinea a notable exception, have perpetuated the claim of state control and authority over all public lands, rendering land rights weak and vulnerable. Coupled with lack of financial, institutional and administrative capacity, governments and local communities often flounder trying to balance competing issues of ownership, user rights, and benefit sharing.

Photo by Elena Talbott.

Traditional or customary social and legal systems have long emphasized community management of ecosystems rather than individual or state centric ownership. They govern resource use remain today for hundreds of millions of people, although mostly unaccounted for or mixed and confused within modern legal systems. These overlaps often lead to tension between competing interests, underscoring the need to clarify and coordinate policies and laws particularly where conflict over resource allocations may arise. Customary practices and laws provide communities underserved by weak national governments with resilience in the face of grinding poverty and adversity. Yet they can also perpetuate ethnic tensions, gender discrimination, biases and violence against the poorest and most vulnerable people. Awareness of traditions as well as changing conditions and trends proves essential to working effectively in any cultural setting.

Today, global investors often demonstrate reluctance to engage in new business ventures in developing countries facing core challenges of peace and nation building as they emerge from civil war or conflict. Cambodia’s small landholders’ negotiations with multinational agri-businesses, for example, illustrate prevailing inequities in property rights and relations. Clarifying and securing land and resource tenure rights and responsibilities through post-conflict legal and policy reform can shift authoritarian, state control towards partnerships with local communities.

Girl in the Tsaranoro Valley, Madagascar

Managing risks related to property relations stands as a major challenge in the mining, forestry and oil and gas industries. Delineating property rights often depends on surveys, participatory mapping by communities, and presenting written evidence to back up community claims. These efforts to “bring state to custom” have demonstrated limited but significant results in Thailand, the Philippines, Indonesia and elsewhere. Their success relies on transparent sharing of cadastral data and judicial proceedings in forging new public-private partnerships to restore the environment and reconstruct society with trust between former adversaries. Information sharing, understanding of industry “best practices” and methodologies and practices in social-economic inclusion and priority setting continue to improve.

Unfortunately, the infamous “resource curse” abounds in post-conflict settings where populations and socio-economic expectations soar. Cessation of armed warfare can lead to plunder and ecosystem degradation. Instead of managing and exploiting natural resource assets for the nation’s development, those with access and power often adopt a looting mentality. Cease fires and peace agreements in the case of Burma/Myanmar, for example, can and allow a few well connected individuals and groups to make enormous profits at the expense of the country as a whole. At the same time, the inability for global investors to hedge long-term currency risks in local currencies often interferes with investment strategies.

Indonesia has suffered in many respects from poor natural resource governance since inception of the country in the late 1940s and early 1950s culminating with The Basic Forestry Law of 1967 signed by President Suharto which removed local control of forests to Jakarta. This led to Indonesia becoming a leading country globally in deforestation and forest degradation resulting in the end of armed warfare and the fall of the Jakarta-based, military government in the late 1990s. Too often, rampant, localized, overexploitation of frontier forest and marine ecosystems has replaced the Suharto regime’s centralized, authoritarian grip on natural resources. Much of Sumatra and large swaths of Kalimantan’s tropical forests have recently been burned and converted to palm oil plantations, generating discontent and marginalizing thousands of citizens. Despite impressive gains in civil society building; Indonesian democratization has also perpetuated, and, in some cases, exacerbated widespread natural resource overexploitation and ecosystem damage.

Community leader in Aceh, Indonesia

Finding Common Ground: Mutuality of Stakeholder Interests

Framing property laws, financial policies and investment regulations within the context of appropriate customary practices and rules increases the chances of local participation. Countries with relatively strong democratic or governance traditions and practices have proven better suited to natural resource and other investments by diminishing uncertainties and risks. By addressing systemic inequities and flaws in negotiations and land and resource disputes and anchoring extractive enterprises with well timed, concrete steps, project managers can leverage good governance and build trust with local stakeholders.

Enforcement and compliance make up the rule of law and undergird all contracts and agreements between people. Enforcement executes laws and rules while compliance ensures capacity. Both remain in too short supply in many countries. Strengthening land and natural resource rights and clarifying roles and responsibilities depends on both government and civil society. Do they have the requisite capacity to build and provide the institutional, legal, and administrative support necessary to reach local communities and remote ecosystems? Information and knowledge sharing, training, research and dispute resolution inform compliance and support participatory mapping, community title recognition and registration, gender analysis and other activities that fill out an effective suite of activities to encourage local stakeholder engagement. Satellite-based information communication technologies (ICTs), including relatively inexpensive and ubiquitous mobile phones, along with a proliferation of laws continue to unfold potential new opportunities and risks for natural resource extraction and development.

To quote Latin American Politics and Society 50:4, p. 92

Free and prior informed consent of local communities and transparent and equitable benefit-sharing mechanisms can bring affected communities into the mainstream of a natural resource dominant development model. Extant models for such mechanisms are few and offer little demonstrated success in the field. The Extractive Industries Transparency Initiative (EITI) shows promise; it has initiated legal reforms and welcomed environmental and institutional support in its transition. Emerging economies need to know about revenue-sharing models. Alaska’s Permanent Fund and Liberia’s post-conflict forest reform process provide examples of ways to (relatively) transparently distribute a share of revenues from natural resources exploitation with its citizens. Perhaps national EITI affiliates can be established with international support to build capacity to improve the management of resource wealth following the model employed in Liberia as part of national reconstruction effort in the Democratic Republic of the Congo, Burma/Myanmar and elsewhere.

The following narrative accompanies the one page accompanying matrix for a simple framework for helping identify, agree to and implement basic agreements between key stakeholders.

A Contract Negotiation Framework: Forging Resource Rights and Responsibilities Agreements:

The proposed framework rests on representation, transparency, accountability and equity; four foundational good governance principles. It depends on patient sequencing of activities in concert with demand-driven development. Establishing a contractual relationship to delineate resource and property rights and duties, provides coherence and focus to negotiations between stakeholders.

Forest destruction for palm oil production in Malaysian Borneo

Negotiated Rights and Responsibilities:

People generally attain only what they negotiate. Under international and national law, all people are endowed with certain, inalienable rights. International law continues to expand the scope of universal human rights including the right to food and the recognition of indigenous human rights. Land tenure and property rights, on the other hand, are limited and defined by their associated responsibilities or duties. For each right, access to public forest lands and the right to practice traditional swidden agriculture, for example, relies on a concomitant duty such as maintaining long enough fallow to sustain the soil for other uses. Mining companies, for their part, earn their right to extract wealth from the ground by virtue of taxes to the host government and whatever infrastructure, services or resources they invest in the nation and local communities. Extraction enterprises can be strengthened by focusing on simple contracts, “agreements between two or more persons which creates an obligation or not to do a particular thing”. Competent parties, clear subject matter, legal consideration (the cause or price of inducement in the contract) and mutuality of agreement and obligation define a contract and frame natural resource management agreements and property rights. Ownership is not absolute; and almost invariably local people do not hold full fee simple ownership or unmitigated usufruct rights. Instead, a spectrum of rights and duties from short-term leasehold to long-term community management concessions exists.

Risks and Assumptions:

Experience and literature make clear that there are no panaceas, nor any two countries or ecosystems the same. Every country setting guarantees its own set of cultural, historical and political conditions. Yet a nimble and nuanced approach recognizing the variables and unmanageable factors of development including ecosystem damage and abrogation of property rights allows for relative success in an imperfect world.

Timber plantation on peatland in Indonesia.

Monitoring and Evaluation, and Adaptive Management:

The different levels of programming and options for addressing natural resource governance in extractive industries requires rigorous planning and results monitoring. Strategic, local people friendly sequencing in scale, timing and content provides a path to address crucial cultural conditions, social trends, market forces and political risks. The illustrative Rights/Duties negotiation framework anchors specific interventions, structured around sequencing the essential tasks necessary to define and achieve meaningful results. These include clarifying the parties’ interests, strengthening local peoples’ position at the negotiating table, and coordinating policies, investments and activities around encouraging the integration of modern and customary law.


Mitigating and adapting to myriad climate and ecosystem changes on a planet with over seven million new people every month depends on managing finite land, food, fuel and natural resources in an increasingly interconnected world. The landscape settings for extractive industries in developing countries often include large areas with many different public and private actors including government officials, local communities, migrant populations, businesses, and international aid or non-governmental organization workers. Defining each important group and their respective positions vis-a-vis others in negotiating their rights and duties, sets in place a framework for negotiating sustainable ecosystem management. Working to establish a level playing field for local people, the basis for sustainable development, begins with identifying those impacted within any given area and their property rights and concomitant duties. Without this starting point, the promise of development remains broken.

Group of Turkana in Northern Kenya


Kirk Talbott, Esq., is a member of the DC Bar and a Visiting Scholar at the Environmental Law Institute.

Gabriel Thoumi, CFA, Certified Ecologist, is a frequent contributor to

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