Oil, mining industry anti-corruption efforts moving too slowly; mandatory regulations needed

By mborum

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DOHA, QATAR — Voluntary approaches to increasing transparent and accountable management of natural resources wealth are making sluggish progress, says international aid agency Oxfam. On the eve of the fourth global conference of the Extractive Industry Transparency Initiative (EITI) in Doha, 16-18 February, EITI should be commended for putting in place a strong governance structure, but additional mandatory disclosure rules are needed to make oil, gas and mining industry transparency a true global standard for all countries and companies.

With more than half of the world’s poorest people living in countries rich in natural resources, the problems associated with oil, gas and mining booms—increased corruption, conflict and environmental degradation—are pressing concerns for Oxfam and its partners around the world.

"These industries generate billions of dollars per year in poor countries," said Bennett Freeman, Oxfam board member and civil society EITI board member. "The revenues amount to far more than official aid flows and could fund health, education and other essential services, but are often squandered or siphoned off by corrupt elites."

A lack of transparency in the oil, gas and mining sectors—including secret payments and contracts and opaque government budgets—is a major contributor to the problems in these countries. Since 2002, the global Publish What You Pay civil society campaign, including many Oxfam affiliates and local partners, has pressed for greater disclosure of payments from companies to governments, contracts and information on how revenues are spent.

The EITI is a voluntary initiative designed to increase transparency of payments by companies to governments. Since October 2006, a strong governance structure has been put in place for EITI, including a multi-stakeholder board including company, government and civil society representatives; a clear process for implementation and for third party verification of performance ("validation"); and significant international assistance to countries willing to undertake the Initiative.

Unfortunately, the EITI has had limited reach and, while some progress has been made in many countries, the EITI has yet to be truly tested. "We wish more countries were closer to validation. For any voluntary initiative, the proof is in the pudding and the pudding is validation," said Freeman.

"The EITI board's main challenge now is to ensure that the validation process is followed through for signatory countries. This has to be a main goal going forward, and it can only be achieved by guaranteeing the highest level of transparency in the process," said Maria Dolores López Gómez from Oxfam’s campaigns and policy department.

Civil society activists promoting revenue transparency have faced harassment, criminal charges and jail time in countries such as Gabon and Congo-Brazzaville—merely for exercising their rights to freedom of expression as part of their anti-corruption campaigning. "Gabon has served on the EITI board while at the same time imprisoning good governance advocates and independent journalists. Such a failure to respect the active role of civil society and human rights violations at home threaten to greatly weaken the EITI," said Ian Gary, senior policy advisor for extractive industries with Oxfam. "Unfettered civil society participation at every step of the EITI process is non-negotiable."

Twenty-four countries have become EITI "candidate" countries, but more than fifty developing countries are resource-rich. EITI does not require companies to act unless host governments decide to join the Initiative and the countries that need transparency, and EITI, are those least likely to join or to credibly implement the Initiative. Therefore, other mandatory measures need to be taken—and quickly.

The Extractive Industry Transparency Disclosure (EITD) bill was introduced in the US House and Senate in 2008. This legislation, expected for reintroduction in 2009, would require all oil, gas and mining companies disclose their payments to host countries and extend transparency as a truly global standard for company operations. The EITD Act would apply not only to US companies, but to all companies registered with the US Securities Exchange Commission (SEC). This includes European companies, such as Shell and BP, as well as those in emerging markets like China, India and Brazil.

In addition to the US passage of the EITD, other financial jurisdictions in Europe and elsewhere should pass similar legislation. In tight credit markets, extractive industry companies are seeking financing from public sources, including regional development banks and export credit agencies. All international financial institutions—including regional development banks such as the African Development Bank, Asian Development Bank and Inter-American Development—should require the disclosure of payments as a pre-condition for finance.

The next year will be crucial for real progress in the global movement for extractive industries transparency. Faithful implementation of the EITI complemented by new mandatory disclosure requirements will create a new global standard for transparency and help citizens around direct money to poverty reduction efforts that need it the most.