International efforts to clamp down on bad deals struck with resource-rich but fragile developing economies are starting to make an impact, according to a range of stakeholders canvassed by Emerging Markets.
But some of them warned implementation was still spotty and that multilateral institutions could do more to force transparency onto powerful corporates and reluctant governments.
Clare Short, chair of the Extractive Industries Transparency Initiative (EITI), said fragile African resources producers could work together to get a better deal from corporate giants.
EITI’s 19 African member governments “should perhaps link up to give a stronger response”, confronted by companies who “hide dubious business practices and contract terms behind client confidentiality,” the former British development minister told Emerging Markets.
More governments – such as new oil producer Uganda – should sign up to EITI, which commits resources producers to publishing details of their income flows and corporates to declare all revenues they pay to the government, she said.
Ugandan MP Remigio Achia agreed that was necessary. “We still don’t get anything like sufficient detail of contracts to scrutinize the revenues,” she said. Achia, who is deputy chairman of the parliament’s budget committee, complained that lack of data and scrutiny opened producer governments to “transfer pricing” and tax avoidance.
Another problem is the weakness of some administrations relative to the size of the companies. “A lot of [developing country] tax administrations are not strong enough to tackle these big [oil and mining] companies,” Short said. “There is some transparency out there, but there is still some bad practice out there too, it’s a mixed picture,” she said.
Uganda’s Finance Minister Maria Kiwanuka said the prescriptions were well known but that the implementation was the critical issue. “We can’t say we don’t have all the information,” she said.
Daniel Balint-Kurti of resource transparency campaigners Global Witness told Emerging Markets that policy makers must make development aid conditional on transparency and anti-corruption measures, both on the level of policy and in practical terms. “Donors, including the World Bank and IMF, should apply pressure to make basic governance measures such as tenders and revenue transparency obligatory.”
IMF deputy managing director Naoyuki Shinohara agreed that “more capacity-building is needed”, to reinforce transparency. “We have to think about what the IMF can do,” he told a seminar this week.
Adding to the pressure is Dodd-Frank legislation in the US, which includes measures obliging companies to publish what they pay and check their supply chains to exclude conflict minerals. The European Union is now considering its own version of Dodd-Frank.
The controversial US legislation became active only in August, when the Securities and Exchange Commission published implementation regulations.
Governance expert Paul Collier said Dodd-Frank could have an impact, but it should be widened to other countries. Canada’s plethora of registered resources companies do not have similar standards to meet.
Collier, who is the architect of the Natural Resources Charter, said that it was time for the G8 to act in order have a global impact. The G8 forum was relevant, he said, because even with China’s rise, its member countries are “still where the majority of resources companies are based”.
Global Witness this week published recommendations to enshrine “transparent and accountable management” into revisions to Democratic Republic of Congo’s mining and oil codes.