Curbing corruption in extractive industry takes more than disclosure

Reducing government corruption will require more than simply requiring companies, particularly in extractive industries, to publicly disclose more financial and operating data, speakers agreed at a Sept. 18 Brookings Institution event. Information should be more readily available and reach people in communities that are directly affected, they said.

“A coordinated global effort to combat corruption can make the world a better place to live, but it’s not going to be easy,” observed International Monetary Fund Executive Director Christine Legarde in her opening remarks. The effort goes hand-in-hand with regulatory reform, rule of law, and strengthening financial institutions, she said.

“There is evidence that control of corruption has improved around the world, but we need to do more,” said Natural Resource Governance Institute (NRGI) Pres. Daniel Kaufmann during a discussion centered on government corruption and the oil, gas, and mining industries. “We need to go beyond the obvious in transparency, and address how to achieve the critical aims while taking into account a country’s unique aspects and major challenges of implementation.”

Kaufmann noted that NRGI, Brookings, and Results for Development have jointly initiated a study that will focus on private research looking beyond transparency to accountability, the power data can have to help improve corruption control, and partnerships that are essential in helping provide better information for investors.

“I think there may been a plethora of initiatives that have ignored the political aspect of the situation. There have been obstacles along the way,” said Ian Gary Oxfam America accountable development finance director. “We need to look at how new initiatives will build on, and not duplicate, other efforts. We have to ask what happens when governments know what the right thing to do is, and simply don’t do it.”

Sheila Khama, energy and extractives global practice manager at the World Bank, said, “It is true that there is a lot of data, but a greater issue may be access. We need to make sure the data reaches the people who need it most. It should be not just disclosure, but dialogue around the data. What is it telling us? How can we use it to empower the public to press politicians for improvements? The data needs to be current so it can trigger changes in policy, development, and investors’ information.”

Include state-owned entities

Noting that the World Bank and its International Finance Corp. affiliate also are studying ways to build on progress addressing global resource policy problems, Khama suggested that continuing to examine the role of national governments remains critical. “In many cases, the government is the country’s largest investor. This makes it necessary to extend the data disclosure to state-owned entities,” Khama said. “My sense is that when states regulate, they overlook disclosing their own operations.”

Geoff Healy, chief external affairs officer at BHP Billiton, said that the Australian natural resources company recognizes the importance of building public trust. He said this will require:

• Making the corporate sector, governments, and civil society more accountable.

• Having more information host governments report through the Extractive Industries Transparency Initiative (EITI) on a project-by-project basis.

• Standardizing reported information so it is inclusive and worthwhile for all actors.

“So much work has been done in the past decade to improve transparency. It’s important now to ask the difficult question about what all this work has led to for citizens in these countries,” Healy said.

Kaufmann said, “Transparency alone won’t deliver the goods. It has to be matched with protection of civic spaces. The transparency initiative is not complete. We have seen some cases where it has been used by governments to cover up problems. Some even have arrested citizens while they have been serving on EITI.”

Oxfam America’s Gary said, “There’s been a divorce between transparency and human rights initiatives. I don’t know how you can separate the two. When you have a multi-stakeholder group where people from civil society are arrested, it’s hard to see progress. Where data is being used, it’s having an impact.”

Local partners are crucial in implementing initiatives, Kaufmann said. “EITI, with all its issues and faults, addresses this issue with its multi-stakeholder approach. Civil society has an equal say with government and industry. That’s an area of collaboration,” he said.

Khama said reaching local populations is a very real problem that can’t be solved simply with disclosure requirements. “We believe it’s important to provide data, and then supply it to local communities so they can decide where it can be applied,” she said. Those communities also need to be able to bring evidence of what they see happening forward to the national government.”

Gary said along the natural resources value chain, the first decision point previously was considered when governments should offer resources. Oxfam argues that it should come earlier when indigenous populations can weigh in on whether they even want a proposed project, he said.

Khama generally agreed. “We originally started out assuming the state was the biggest beneficiary. We need to decide who really needs to get the benefits. That’s where considering indigenous populations comes in,” she said.

“We have found the majority of EITI member countries already are implementing contract disclosure requirements,” said Kaufmann. “But we need the support of civil society and government to push for more. We need more collaboration. More of the industry needs to cross the Rubicon and make full disclosures. At this stage, nothing should be off the table.”

Source: Oil & Gas Journal