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DEVELOPMENT: Lifting the ‘Resource Curse’

Marina Litvinsky

WASHINGTON, May 18 2009 (IPS) - Four new countries have joined the Extractive Industries Transparency Initiative (EITI), a global effort to set concrete standards for the transparent management of revenues from the oil, gas and mining sectors.

Albania, Burkina Faso, Mozambique and Zambia joined the list of 26 candidate countries now implementing the EITI process, the EITI board announced Monday in Washington.

“The EITI gives governments and citizens a sorely-needed blueprint for legitimate dialogue about the management of natural resources,” said Karin Lissakers, director of the non-profit Revenue Watch Institute.

“Without a healthy conversation between civil society and policymakers, the countries richest in oil and mineral wealth remain the most vulnerable to all forms of economic, political, and social exploitation and unrest,” she said.

The EITI board held a series of meetings with diverse stakeholders in Washington last week, hosted by the bank. The bank has been a supporter of EITI since it was put forward in 2002.

“I am encouraged that more countries from Africa and other regions of the world are joining the EITI process and recognising the benefits of greater transparency in the extractive industries sector,” said Somit Varma, World Bank director for oil, gas, and mining.


“It is, however, only when countries take full ownership of this voluntary initiative that it can succeed. The World Bank is committed to supporting governments in this effort,” he said.

It was also announced that three new countries would become donors to support EITI implementation through the bank.

Ten donor countries and the European Commission currently provide funding to the World Bank-administered EITI Multi-donor Trust Fund (MDTF), which provides technical assistance for implementation – Australia, Belgium, Canada, Finland, France, Germany, the Netherlands, Norway, Spain, Britain and the European Commission.

Finland just joined as a donor country, and the U.S. and Switzerland will be joining the donor group soon.

An important theme at the series of meetings was planning for EITI validation, the oversight mechanism for country implementation. Twenty-one of the EITI candidate countries are facing a deadline in March 2010 to complete EITI validation.

Through EITI, countries bring together companies, civil society and government representatives to monitor and account for payments being made to governments by extractives companies operating in their country.

Countries that have met all of the reporting and operational indicators set out under the EITI guidelines and completed a rigorous validation process are then considered to be EITI compliant, establishing that a country’s revenue reporting standards in its extractive sector have achieved a greater level of transparency.

In February, oil-rich Azerbaijan was named the first EITI compliant country.

“It is impressive to see all the efforts in EITI implementing countries to prepare for validation and meet the EITI standard. The international community recognises such efforts and supports these governments and their stakeholders in their implementation of the EITI,” said Dr Peter Eigen, EITI board chairman.

According to the bank, 3.5 billion people live in countries rich in oil, gas and minerals.

For some time now Africa’s natural resource abundance has caused it to suffer from what many call the “resource curse”. The exportation of these resources has contributed to widespread poverty, corruption, conflict and environmental degradation across the country.

In 2000, the situation in Africa was brought to light when the U.N. General Assembly recognised that “conflict diamonds” are a crucial factor in prolonging brutal wars in parts of Africa. In Angola and Sierra Leone, conflict diamonds fund the purchase of arms and other illegal activities by rebel groups.

Likewise, in the Democratic Republic of Congo (DRC), armed groups profit from the sale of the “conflict minerals” tin, tantalum, tungsten, and gold, which are used in electronics around the world, by forcibly controlling the mines and exacting bribes, or taxes, from transporters, local and international buyers, and border controls.

Members of the EITI see it as a way for their countries to attract much-needed foreign investment, which has dwindled in the recent economic downturn.

“Mining companies are indispensable partners in development,” said Ernest Bai Koroma, president of Sierra Leone, at a recent groundbreaking ceremony of the African Minerals Company, Ltd.

“The partnership between them and the government works best in an atmosphere of trust and integrity,” he said. “That is why my government took the decision to increase transparency in the exploitation of our mineral resources through our membership of the Extractive Industries Transparency Initiative (EITI) and the recent review of mineral rights.”

However, some caution that if citizens are to truly benefit from their countries’ resources, all participants in their extraction and sale must agree to full disclosure and accountability.

“Joining the EITI is a first step, and one that sends a strong signal of government’s commitment to transparency,” said Obiageli Katryn Ezekwesili, Africa regional vice president of the bank, in an editorial for The Independent.

“Going further, if citizens are to reap the benefits from mining revenues, transparency is needed throughout the entire resource stream, from how contracts are awarded and monitored, to how taxes and royalties are collected, to how investment choices are made and executed,” she said.

Earlier this month, in an effort to stem the flow of money from mineral mines fueling the DRC’s brutal civil war, the U.S. Senate announced new bipartisan legislation that would force U.S. companies to track and disclose the country of origin of minerals used in common electronic products.

The Congo Conflict Minerals Act that would require U.S. companies selling products using tin, tantalum or tungsten, to disclose the country of origin of the materials to the Securities and Exchange Commission. The legislation would also require the State Department to closely monitor the financing of armed groups in mineral-rich areas of eastern Congo.

 
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