Transparency in extractive industries must have more ambitious goals

by Katherine Baldwin | Thomson Reuters Foundation
Thursday, 3 March 2011 16:56 GMT

Many campaigners want contracts between governments and companies to be published as well as details about revenue

PARIS (TrustLaw) – A global standard designed to stamp out corruption in the oil, gas and mineral industries must set its sights higher on sustainable development, poverty eradication and good governance in resource-rich countries, supporters of the standard said on Thursday.

Since 2002 the voluntary Extractive Industries Transparency Initiative (EITI) has been working to convince companies in the extractive industries to publish what they pay and governments to disclose what they receive to enable civil society to hold leaders and corporate executives to account.

But the public reporting of investment and revenue flows is just the first step in what should be a more ambitious project that delivers real impact on the ground.

“The promotion of good governance and transparency in the payment of receipts in extractive industries will significantly contribute to the discouragement of corrupt practices,” said Armando Guebuza, president of Mozambique, a resource-rich country but also one of the world’s poorest nations.

“But transparency is not an end in itself but a means to make poverty history,” Guebuza told delegates at an EITI conference in Paris.

Many of the world’s poorest countries are also rich in oil, gas and minerals but campaigners say revenue from natural resources too often lines the pockets of a powerful elite and does not benefit the people or feed into economic growth.

The EITI’s aim is to arm civil society with information on investment and revenue figures to ensure resource wealth is being used fairly. The EITI has designated 11 countries as compliant, which means they meet EITI standards on the publishing of payments between governments and companies. There are 35 candidate countries, which are progressing toward the EITI standard.

But compliance with EITI reporting standards is just the beginning of the process, said World Bank Managing Director Sri Mulyani Indrawati.

“The transparent publishing of payments and revenue is only one step in the chain. The World Bank is working along the whole extractive industries chain, from improving contract negotiations … to ensuring more effective tax collection so that revenue is used for sustainable growth and poverty reduction,” she told delegates.

“Transparency is critical in allowing us to shine a light on where there are problems, but this should also translate into tangible benefits for resource rich countries and all their citizens,” she added.

The extractive industry is the largest provider of Foreign Direct Investment into developing countries and payments for gas, oil and minerals in some resource-rich developing countries can provide well over half of total government income, according to ONE, the non-governmental organisation founded by U2 singer BONO.  If spent well, this income could transform countries.

Instead, resource wealth over the years has propped up corrupt regimes and helped leaders trample on the human rights of their citizens, campaigners say.

EXTENDING EITI’S REMIT

Many transparency campaigners believe the EITI should now extend its remit beyond the publishing of revenue information to cover contracts between governments and companies and the allocation of exploration and production licenses.

Limiting the EITI to revenues does a disservice to the people of resource-rich countries, said Alfred Brownell, senior campaigner and founder of Green Advocates, a Liberian civil society organisation that is involved in Liberia’s EITI process.

"(Liberians) want to look into contracts, budgets, impact. They want to look at the whole value chain of natural resource management, not just focus on revenues,” Brownell told TrustLaw on the sidelines of the EITI. “This is the heartbeat of the EITI.”

“The citizen now can sit at the table and demand some accountability but we need to structure that and move that beyond just showing the money to see the impact of the money – that’s where the EITI needs to go,” he said.

Liberia was the second country to gain EITI compliance, in October 2009, and has since pioneered the expansion of the EITI to cover contracts and to encompass its forestry and agriculture sectors. Many campaigners want the EITI or similar charters to cover other industries, including timber, agriculture and fisheries.

“We have included contract transparency in our EITI legislation. If it happens in Liberia, it can happen anywhere else,” Brownell said. “And if Liberia is doing forestry and agriculture, it means other countries can do forestry and agriculture.”

CEMENTING THE EITI

To cement the EITI’s benefits, countries must remain politically committed to it, civil society empowerment must be nurtured and supported and countries must build on the EITI platform to reform other institutions and bring transparency to their public finances, said the World Bank’s Indrawati.

“What is needed are bold steps in countries to build institutions and tackle the barriers – from political economy factors to vested interests to corruption – which prevent continued reform and better governance,” she said.

Civil society must also be protected as it campaigns for more transparency in extractive industries, Simon Taylor of the campaign group Global Witness, told delegates at the conference.

“How do we get to the stage where compliance means that civil society is genuinely able to ask the difficult questions without being penalised?” Taylor asked on Wednesday, referring to cases where EITI campaigners have been harassed or arrested.

Delegates at the conference said the EITI had gained new relevance in the wake of the recent upheaval in the Middle East and North Africa. The unrest in Libya particularly showed the importance of curbing corrupt regimes that pocket wealth from natural resources and often use this wealth to turn on their people, they said.

“This comes at a moment in history where the importance of transparency in the use of natural resources is becoming very, very clear indeed,” George Soros, financier and founder of Open Society Foundations, which campaigns for open democracies, told the conference.

 

 

Our Standards: The Thomson Reuters Trust Principles.