RIGHTS: Oil Firms Asked to Disclose Payments to Governments

By Sanjay Suri Reprint | | Print |

Sanjay Suri

LONDON, Jun 15 2002 (IPS) - Leading non-governmental organisations (NGOs) have teamed up with international financier George Soros to launch an appeal to transnational companies to publish what they pay to governments in developing countries.

The “Publish What You Pay” appeal comes after growing concern that transnational oil and mining companies are paying corrupt governments billions of dollars a year. People in those countries never get to see the benefits of much of the money the governments get.

Under the new proposal a full disclosure of the net taxes, fees, royalties and other payments that oil, gas and mining companies make to governments should be a precondition for the companies being listed on international stock exchanges and financial markets.

The coalition of more than 30 NGOs includes Amnesty International, Christian Aid, Friends of the Earth, Global Witness, Oxfam, Save the Children and Transparency International.

Speaking at the launch of the appeal at the International Institute for Strategic Studies (IISS) in London Thursday, Soros said “secrecy over state revenues encourages ruling elites to mismanage and misappropriate money rather than invest in long-term development.”

The appeal by the group says that if the revenue to governments from extractive industries such as oil, gas and mining is managed effectively and transparently, “it could serve as a basis for successful growth and poverty reduction.”

The appeal is based on a report that says that usually “revenues from resource extraction are disclosed neither by the governments nor the companies involved.” This lack of accountability “facilitates embezzlement, corruption and revenue misappropriation,” the report says. “In extreme cases access to resources fuels regional conflict and the resulting disorder is exploited to facilitate further large-scale misappropriation of state assets.”

The report points out that oil, gas and mining industries are important in more than 50 developing countries, which are home to about 3.5 billion people, and where 1.5 billion of these people live on less than two dollars a day.” It says that “resource governance problems” have been reported recently in Algeria, Angola, Azerbaijan, Chad, Congo-Brazzaville, Democratic Republic of Congo, Equatorial Guinea, Gabon, Kazakhstan, Nigeria, Sudan and Venezuela.

Simon Taylor from Global Witness says: “Our investigations in war-torn Angola suggest that at least one billion dollars every year for the last five years – about one-third of the state income – went missing from the government’s coffers, most of which came from oil.”

Julius Ihonvbere from the Africa Centre for Constitutional Development in Nigeria says “in Africa we face a situation where billions of dollars from oil, mining and gas revenues go missing leaving us dependent on international assistance to feed our people.” Full disclosures of payments are needed because “you cannot manage what you cannot measure.”

The report says that such companies cannot control how governments spend the taxes, royalties and fees they pay. “But they do have a responsibility to disclose the payments they make so that citizens can hold their governments accountable,” it says.

The appeal makes it clear that the group is not asking companies to disclose commercially confidential information “but rather to publish the same basic data on net payments made to government and other public authorities which they are required to disclose in many developed

countries.”

It is asking for all publicly traded resource companies to be required by regulators to disclose payments they make to governments.

The report says that voluntary disclosure is not an option because it could put some companies at a disadvantage. “Yet all companies and the investment community would benefit from a level playing field if regulators required disclosure,” it says. Among other things that would help companies “address the risks to reputation arising from lack of transparency.”

The report points to an emerging consensus within the international community in favour of corporate social responsibility and increased transparency. Some recent signs have been a European Parliament resolution, guidelines adopted by OECD (Organisation for Economic Co-operation and Development, a group of rich nations), the United Nations secretary-general’ s Global Compact, and the Global Reporting Initiative.

The appeal is focused on resource companies because it says “natural resources are held in trust by the state for the ordinary citizens of a country.” Citizens therefore “have a clear right to information about the management of revenues associated with their resources.”

The report points also to the “paradox of plenty” in many developing countries. About three-quarters of Africa’s trade is in the natural resource sector, the appeal says. By 2003, it says investment in African oil will exceed 10 billion dollars a year, which is about two-thirds to three-quarters of all U.S. investment in the continent.

“Revenues from resource exploitation are therefore the major source of income for many governments in least developed countries,” the report says. At the same time, it says that resource-rich governments “use low tax rates and patronage to dampen democratic pressures and spend an unusually high fraction of their income on internal security.”

That has consequences on poverty and child malnutrition. The appeal says that states dependent on oil and mineral wealth are a quarter more likely to have civil conflict.

The report says that extractive industries are becoming increasingly located in less developed countries where civil society and government transparency are proportionately weaker. Because of the long horizons of investment involved, companies cannot easily divest from conflict areas, the report says, and “the role of resources in funding conflict are likely to deepen over time.”