Background
- Environmental and Economic Impact
- Social Challenges
- Transparency
THE IMPORTANCE OF TRANSPARENCY
Revenues from extractive industries(oil and gas development and mining) are a source of income for governments of more than 50 developing countries, including many where Oxfam America and our affiliates work, including Peru, Ecuador, Mali, Ghana, Chad, Nigeria, Angola, and Azerbaijan. These roughly 50 countries are home to approximately 3.5 billion people, 1.5 billion of whom live on less than $2 a day.
When properly managed and developed with the participation of affected communities, these extractive industry revenues should serve as a basis for poverty reduction and economic growth. Too often, though, these revenues are squandered, fuelling corruption, conflict and social divisiveness.
Revenues from extractive industries investments make their way to governments in the form of royalties, taxes, fees, and other payments. The amount of these payments is dictated by contracts between the government, selling non-renewable assets on behalf of the country’s citizens, and large oil, gas and mining companies.
In practice, the state and other institutions that manage these resources are often unaccountable to the parliaments and ordinary citizens of their countries. More often than not, extractive industry contracts and revenues are kept secret. This lack of accountability facilitates embezzlement, corruption and revenue misappropriation. In extreme cases, access to resources fuels local and regional conflicts.
Mining, gas, and oil companies cannot control how governments spend taxes, royalties and fees. But they do have a responsibility to disclose the payments they make so citizens can hold their governments accountable. Companies that fail to do so are complicit in the disempowerment of the people of the countries to which the resources belong.
The mismanagement of extractive industries wealth has gained more prominence in the international arena in recent years. Oxfam America is a leading member of the Publish What You Pay campaign (PWYP). PWYP was founded in 2002 and now has over 300 members worldwide, including Oxfam America and many of its partners.
In response to pressure from organizations such as PWYP, the World Bank now requires disclosure of extractive industries revenues for any project it finances. In addition, a voluntary international effort, the Extractive Industries Transparency Initiative (EITI), has gotten off the ground with the support from governments and oil, gas and mining companies. EITI, though, is weakened by its voluntary nature and does not require the disclosure of contracts.
Oxfam America believes we need to go a step further. Because individual companies might be put at a disadvantage by disclosing information others fail to reveal, voluntary disclosure is not a viable option. All companies and the investment community would benefit from a level playing field created by mandatory government regulation. Furthermore, it would enable them to address the risks to reputation arising from lack of transparency.
Follow the links to learn more about the importance of transparency to help ensure that the economic benefits from extractive industry projects reach the poor.