By Miles Litvinoff
The campaign to open up the secret deals between multinational oil, gas and mining companies and governments around the world is making progress. On 1 December, UK government regulations came into force requiring UK-based extractive companies to report their payments to governments anywhere in the world, country by country and project by project. The first UK company reports are due to be published in 2016.
This welcome news makes the UK the first European Union member state to implement key provisions in the 2013 EU Accounting Directive. It comes after three years of wrangling involving political representatives and officials, industry and civil society since the European Commission first published proposals in 2011.
Not a moment too soon. Corruption and revenue mismanagement are widespread in the global extractives sector and have been for decades. Most people in resource-producing developing countries are poor and see few if any benefits from the wealth generated by oil, gas and mining in their countries. What they do experience, locally and nationally, are the severe downsides: environmental damage, loss of livelihoods, police brutality, political instability and violent conflict.
Country examples of what’s been called the “resource curse” include Angola and Nigeria, DRC, Azerbaijan and Indonesia. And it’s not just governments that misuse the money. Companies are often in cahoots with them, as appears to have been the case with Shell and Eni’s notorious OPL 245 deal (both companies have denied allegations).
Corruption is a human rights problem. Hundreds of millions of the world’s poorest people urgently need public investment in their human and social development. Their governments have accepted international obligations, for example through the United Nations’ International Covenant on Economic, Social and Cultural Rights, to progressively achieve their citizens’ human rights to food, health, shelter, water, sanitation, education and decent work. This requires well-managed state investment – not a big business free-for-all.
With global aid budgets restricted, developing countries must look to their own resources and domestic revenues to fund the public programs needed to help lift their people out of poverty. The sums potentially available from exploiting oil, gas and minerals are vast. As ONE has reported, in 2012 exports of oil and minerals from Africa were worth $438 billion – nearly eight times the value of agricultural exports and more than nine times the value of international aid.
But time is not on our side. Oil, gas and minerals are non-renewable. There will be only one chance to ensure that a fair share of the profits from exploiting these finite resources is used for the long-term benefit of poor communities in the countries where extraction takes place. In Ghana, Tanzania, Uganda and other African countries that have recently started to develop extractive industries, the opportunity may only last a few decades.
So while it’s good that the UK has put down an important marker on fighting corruption through transparency, there is a long way to go to achieve the global extractive industry transparency standard that campaigners worldwide are calling for. The 27 other EU member states must quickly follow the UK’s lead.
The US Securities and Exchange Commission – which has delayed implementing similar reporting requirements under the US Dodd-Frank Act Section 1504 for over four years – must act promptly. And we need other major jurisdictions, including Australia, Canada and the BRICS countries, to introduce laws along the same lines.
Getting the right laws in place is a huge step. Beyond this, we also need to ensure that companies and governments publish the payment information as open and machine-readable data, as the UK has committed to do. Citizens and civil society will then be better able to use the company payment reports to hold companies and governments to account, so that public scrutiny acts as genuine deterrent against wrongdoing.
Alongside mandatory reporting regimes, we also have the more voluntaristic Extractive Industries Transparency Initiative (EITI), which matches company payments against government receipts to shine a light on discrepancies. Now in its second decade, the EITI is becoming more useful and meaningful as the information published by each participating country is required to be more comprehensive, and as major developed economies such as the US, the UK, France and Germany join the growing number of African, Asian and Latin American countries that participate.
Further ahead still are two even bigger battles. The first is to achieve tax justice and to reduce extreme inequality in our desperately unjust world. The second is to ensure that companies and governments reduce the many harmful human rights impacts and environmental consequences of business operations – locally, nationally and internationally. Are we up for it?