|
|
|
|
Transparency in Extractive Industries |
| Published On: 04-26-2005 |
|
Related Issue Briefs:
|
|
|
The most recent international effort to fight corruption in natural resource extraction, such as payment of bribes to government officials in developing countries, is the Extractive Industries Transparency Initiative (EITI). The initiative was first proposed by UK Prime Minister Tony Blair in September 2002, in an effort to ensure that countries benefit developmentally and economically from removal of natural resources.1
Governments and companies involved in extraction projects have long been criticized for the use of bribery, which reduces the net benefit flowing to the central treasuries of host countries. The fact that many resource rich countries operate under non-democratic regimes that do not have to answer to the public makes resource extraction contracts more susceptible to corruption.
The potential for economic growth in such countries is stymied, as bribery often persuades officials to take kickbacks in return for granting permission to drill or mine, and revenues from extraction projects can end up in Swiss bank accounts instead of in national treasuries for use at home. Only two of the world’s top ten oil-producing countries are considered to be democratic—Norway and Mexico2—where officials are more likely to be held accountable for their actions.
The EITI is a voluntary initiative supported by a coalition of governments, investors, companies, and members of civil society. The UK is currently leading the EITI, acting as the international EITI secretariat, and the G8 and other industrialized countries have shown support for the initiative.
Most recently, Norway promised to pay $250,000 to the EITI technical assistance trust fund within the World Bank, which is aimed at supplying resource rich developing countries with the required funds to initiate EITI programs (the UK previously allocated ₤1 million to the fund). By joining the EITI, signatory governments agree to adhere to the core principles of the initiative . This means countries must publish payments received from oil and mining companies operating in their country and submit revenue figures to independent auditors while cooperating with local NGOs and stakeholders from civil society.3
The EITI has given governments of developing countries a chance to curb criticism directed at them for their allocation of oil revenues. At the EITI conference held in London last March, a number of countries, including Nigeria, Cameroon, Bolivia, Azerbaijan, Kyrgyzstan, and Ghana signed on to the EITI. Some pledged to integrate the EITI principles into law by June 2005, affirming their commitment to promote transparency in their countries.
Nigeria has been widely criticized for bribery in its oil industry and its misallocation of oil revenues. The government of Nigeria has hired Hart Group, a consortium of independent auditors, to conduct a five-year audit of the activities in the oil and gas sector, as part of its Nigeria Extractive Industries Transparency Initiative (NEITI). The Azeri government has published its first report on its receipts from oil companies operating in Azerbaijan.4
The World Bank, International Monetary Fund (IMF) and a number of international NGOs have been involved in the campaign. The World Bank endorsed the EITI last year in a follow up to its own review on Extractive Industries (Extractive Industries Review). The Bank now provides specialist staff resources to EITI and integrates EITI principles into its country programs. Furthermore, the Bank is responsible for maintaining the EITI technical assistance trust fund and the management of the EITI website (www.eitransparency.org)5. The IMF has commended those countries that have taken steps to join the EITI.
At the same time, outgoing Bank President, James Wolfensohn, has noted that other factors such as free elections, independent judiciary and independent media are necessary to support the development of nations rich in natural resources.6
NGO’s such as Global Witness, Transparency International and Oxfam have expressed support for the EITI, but remain concerned that the guidelines are limited in monitoring payments from companies to governments. They have initiated a “Publish What you Pay” campaign to push extraction companies to disclose the payments which they make to host governments.7 Without companies disclosing these payments, it remains difficult to determine what kind of payments flow into national funds from extraction companies and whether bribery is part of the process.
Oil companies expressed agreement with the general principles of the EITI at the conference in London, but varied in their attitudes towards disclosure. Chevron Texaco argues that auditor approvals of two aggregated figures, gross revenues paid and received, would be sufficient.8 Exxon-Mobil limited their involvement in the EITI by characterizing it as “government to government dialogue.”9
A few oil companies have been more cooperative; Statoil, the Norwegian state-controlled oil company with operations in 29 countries, has agreed to publish a breakdown of its tax payments to each country around the world. In its Substantial Development Report for 2004, the company disclosed that it paid US$2.6 million in signature bonuses to the government of Brazil to secure the operatorships for six deepwater blocks in three licenses on the Brazilian continental shelf.10
The commitments that were made in London at the EITI conference have made the efforts to fight corruption in natural resource extraction more structured and institutionalized, but more support and cooperation from both the government and private sectors is needed.
1 EITI Website, www.eitransparency.org
2 Marina Ottaway, Tyranny's Full Tank, New York Times, March 31st 2005
3 Alan Beattie, Deal Signed to Expose Bribery in Extractive Industries, Financial Times, March 18th 2005
4 Global News Wire, Azerbaijan Releases First Transparency Initiative Report, March 16th 2005
5 World Bank Press Release No:2005/387/S, World Bank Says Transparency Key to Development in Resource-Rich Countries.
6 International Oil Daily, Transparency Plan Advances, March 21, 2005
7 Marina Ottaway, Tyranny's Full Tank, New York Times, March 31st 2005
8 Energy Compass, Crporate governance: Oil transparency comes to town, March 25, 2005
9 International Oil daily, April 21 2005, Nigeria Outlines Plan to Audit Oil Sector
10 Statoil Substantial Development Report 2004, http://www.statoil.com/STATOILCOM/HMS/SVG03503.NSF/Attachments/chapter/$FILE/kap3_e.pdf |
|
|
|
