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Marcelo Giugale

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Transparency and Your Natural Resources

Posted: 03/ 7/2012 11:20 am

Wouldn't you want to know how much money your government gets from the companies that exploit your country's oil, gas or minerals? It doesn't have to be exact, but a ball-park figure? And how about taking a peek at the contracts that your leaders sign on your behalf (remember, you and your fellow citizens are the real owners of your national wealth)? And aren't you curious about where the money goes -- or went? It is a bit of a puzzle that only 35 countries in the world have agreed to join the "Extractive Industries Transparency Initiative" (EITI), an invitation dating back to 2003 to publish who pays how much to whom in the business of exploiting natural resources. Of those 35, only one (Norway) can be considered "developed" and 25 are African -- respect to them.

You would think that, by now, citizens and markets would have forced more countries and more companies to open their books. After all, commodity extraction is a five trillion-dollar a year industry that is projected to grow even bigger, as China and other newly developed countries compete for access to wells and mines. And that's only for the portion of the resources that we know about. To give you an idea, it is estimated that only a tenth of Africa's natural riches have been found (it would take a billion dollars to produce a full geo-data map of the continent). So, with prices bound to stay high and plenty of potential for new discoveries, you would expect breathing-down-their-necks public scrutiny of the whole thing. Nope. It hasn't happened. Why?

The first suspicion is crooked politicians. They obviously have no interest in transparency. They can find reasons not to produce the data, at least not in a way that is of any use to anybody. But that cannot be the full story. Remember, rich countries, with their relatively effective control of graft, have not signed up either. And we are talking about fighting corruption in someone else's country -- you have to be really principled to do that. (NB: It was not until 1997 that OECD countries signed a convention promising to punish their companies when they bribe foreign officials).

The second possibility is that disclosure can be technically tricky or costly. Should "payment" include the roads that companies build to mining sites? Should it cover the "social infrastructure" that oil corporations donate to local communities -- things like schools or clinics? What's the dollar value of those "gifts"? And who is the "government"? Federal presidents, state governors, municipal mayors, village elders, all the above? These are not trivial questions, and answering them year after year to keep the public up-to-date, can take up scarce civil-service capacity.

Third, it is possible that not enough time has passed since EITI started, so not enough country-to-country peer pressure has played out yet. Imagine, Cote d'Ivoire, Congo, Mozambique and Nigeria have joined, but France, Belgium, Portugal and Britain -- their respective, former colonial powers -- have not. Kazakhstan is in, Russia is out. Iraq is in, the U.S. is out. (To be fair, the U.S. is likely to enter soon). Will this imbalance weaken the appetite for disclosure among up-and-coming emerging countries -- the likes of Brazil, Russia, India and China, all of which have so far not taken part? It's difficult to say. But it is strange -- and somewhat of a dangerous brand -- that the quest for open access to information about extractive industries be confined to the less developed economies. It gives the (wrong) impression that the disclosure of payments is an imposition of mighty donors over countries in need.

Perhaps what delays the spread of EITI may be its focus on the "front end" of the value chain -- how much is paid to whom by those who extract -- rather than the "back-end" -- what those who got the money did with it. While absolutely necessary, just reporting on front-end payments can be a bit anti-climatic, especially as a catcher of media (and voters') attention. What headline is more attractive to you: "A Billion Dollars Paid to the Government" or "The Government Wasted a Billion Dollars"? You get the point.

Finally, one has to at least entertain the possibility that people just don't care enough about disclosure, so they don't put pressure on their governments to join EITI or to behave as if they had joined. Why wouldn't they care? The resources are theirs. Are they really? Most of us are at least five degrees of separation away from "our" resources. An extractive company, a mining or hydrocarbons minister, a minister of finance, parliament, and an education, health or transport minister, each takes decisions with our wealth on our behalf. We are then told that the local school, hospital or road has been paid for by revenues from the country's natural resources. Even for the most trusting of citizens, that's too tenuous a link to be believable.

Can the apathy (and disbelief) be broken? Maybe. Two ways. Put citizens in direct contact with their resources by transferring them a portion of the revenue directly and in cash -- yes, the technology for doing this already exists. And bet on cultural change. A few decades ago, few cared about the environment; today, it is an embedded cultural value, especially among the young. That was done through patient mass advocacy and education campaigns. The next step on EITI's future is less with governments and multinationals than with people.

 

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