Congressional briefing on EI transparency tackles resource curse
20 June 2006
The Publish What You Pay coalition organized a briefing at the House of Representatives to highlight the lack of transparency and pervasive corruption in oil, gas and mining sector projects in the developing world.
On June 20, at the Rayburn building of the House of Representatives, four speakers from varying backgrounds addressed some of the issues regarding extractive industries. The briefing, called "Reversing the Resource Curse: The Need for Transparency in the Oil, Gas and Mining Sectors", was co-sponsored by the offices of Congresswoman Diane Watson and Congressman Ed Royce and organized by the Publish What You Pay (PWYP) Coalition.
The speeches covered several different topics while there was broad agreement about the detrimental effects of corruption. David Goldwyn, President of Goldwyn International Strategies LLC, an international energy consulting firm, and former Assistant Secretary of Energy for International Affairs argued that the EITI should be at least a minimum standard and outlined 10 lessons learned from his experience cultivating transparency in a Nigerian oil project:
- The initiative to promote transparency has to be domestic
- It takes a considerable amount of planning
- It takes a lot of money
- You should expect a lot of resistance, even more so from the government than the companies
- It takes a lot of training (for civil society, media, regulators and legislators)
- Disclosure can be overwhelming (there is often too much to make public without wasting resources)
- Recurrent audits help deter corruption
- This sort of process helps the company by building integrity into the system
- Transparency can help the political debate if it is informed
- And it can help the country progress overall
Mr. Goldwyn was particularly critical of the US Government's role and offered some advice. He noted that at present, the US does not make a big commitment or effort to improve minimum standards and that it needs to acknowledge where progress is being made and validate the initiative. Also, the US has the ability to provide technical assistance that can help with regulation. Finally, added focus on legislature associated with transparency could use US support.
Following Mr. Goldwyn's remarks Joseph Bell, a partner at Hogan & Hartson and pro bono counsel through Columbia University’s Earth Institute to Saõ Tomé & Principe regarding oil revenue management and oil policy, explained the uses of a resource fund. The three main points that were emphasized as reasons to set up a resource fund to manage the revenues generated by natural resources were:
- Transparency and Control (facilitates tracking, permits public monitoring and avoids disguised payments)
- Savings (because resources are finite, it preserves the value of the resource and the income from the fund can be used for expenditure)
- Stabilization (to control commodity price swings)
By structuring funds to be transferred electronically, Bell noted that there will be an automatic electronic record of the transaction which would force the government to account for the money coming in to the state budget. One area where Bell thought the EITI fell short was that while it can match the money coming in with the money going out, it is not able to track the dollars that are never seen such as those lost in a defective bid process.
The third speaker read a statement written by a source wishing to remain anonymous. The writer is reportedly a well-respected activist from Africa who works intensively on extractive industry transparency issues. The author chose to conceal his identity for fear of retribution from his country's government. The statement, available below, underlines the unfortunate association of corruption with natural resource wealth as it reads, "By all accounts, the discovery of oil in Equatorial Guinea has accentuated the inequitable distribution of power and resources." One of the key conflicts in Equatorial Guinea is President Obiang nearly complete control of the oil industry. With a stranglehold on the country's main revenue Obiang is capable of exerting crippling control over the general population and silencing any hint of opposition. As a concluding remark, the author offered that, "creating and demanding a system of transparency in the extractive industry is crucial because it offers the best hope of reducing corruption, establishing democracy, and fueling sustainable economic development in “petrolist” states like Equatorial Guinea. If we, collectively, can expose the actions of corrupt government officials and hold them accountable for the revenues generated by the country’s shared resources, we can begin to eradicate corruption and advance good governance and sustainable economic development."
The last speaker on the panel was the Policy Director for Pacific Environment, Doug Norlen. As much of his work focuses on the reform of bilateral and multilateral organizations, Norlen emphasized the importance of applying pressure on Export Credit Agencies (ECAs) and Multilateral Development Banks (MDBs) such as the World Bank and Regional Development Banks (RDBs) such as the European Bank for Reconstruction and Development (EBRD). He recognized the International Finance Corporation's (IFC) adoption of minimal information disclosure standards as a step in the right direction but urged that pressure should continue to be applied as much work still remains to be done.
Pointing to the controversial case of the Sakhalin II oil and gas project in Russia, Norlen explained the importance of the disclosure of contracts. In that particular case, once the contract was obtained and analyzed, it became apparent that the government would receive substantially less revenue (approximately 45% less), generated by the project, than was otherwise expected.
As a final thought, Norlen agreed with David Goldwyn's assertion that the US government should take a greater lead in pushing for transparency. As the US is a major stakeholder at the MDBs and ECAs, it has the ability to influence decisions and is one of the few players that is able to encourage basic standards and greater accountability, if it so desires.
Additional Resources