The Role of Transparency in Reducing Corruption in the Extractives Sector

Speech by HELEN CLARK

Norad Policy Forum

08 October 2019, Oslo

 

Thank you for inviting me to take part in this Norad forum on the role of transparency in tackling corruption in the extractive industries sector.

Corruption is one of the most pressing challenges faced by many resource rich countries today. Overcoming it is vital to mobilising domestic resources for development and ensuring that citizens benefit from the extraction of the resource endowment of their countries.

Transparency and accountability are not new areas of focus for me. I was a politician and in leadership positions for many years in New Zealand, which is ranked as one of the most transparent countries in the world.

Then, during my time as Administrator of the United Nations Development Programme from 2009 to 2017, I led reforms which saw UNDP ranked as the most transparent development organisation in the world during the last two years of my tenure.

Now I bring my commitment to transparency to my new role as Chair of the Board of the Extractive Industries Transparency Initiative (EITI).  I am committed to supporting the achievement of much greater levels of transparency and accountability in this key economic sector where those characteristics are often absent. EITI’s requirements help to shine light on places which are often kept hidden from public view – and where corruption may flourish.

EITI is one of several mechanisms in the global anti-corruption toolbox. In the thirteen years since it was established, it has promoted transparency as a global norm for extractive industries governance. EITI has also built trust and accountability in the countries where it has been adopted through its multi-stakeholder model which provides a unique platform for dialogue among government, civil society, and companies. 

The continuing efforts of us all to fight corruption are vital. According to the 2014 OECD Foreign Bribery Report, one out of every five cases of transnational corruption occurs in the extractives sector. Twenty per cent of the more than 200 enforcement actions pursued under the US Foreign Corruption Practices Act (FCPA) are linked to extractives, the highest rate among all industries.

EITI makes a valuable contribution to fighting corruption through the detailed and systematic work it undertakes to identify governance practices which are susceptible to corruption. Its Standard was updated this year, and the revision represents a further evolution in EITI’s history of setting global norms around transparency. Now, more data is required to be provided around key aspects of the extractives value chain, such as on contract disclosure, beneficial ownership, and project level reporting.

Let me make some further points about how EITI helps the fight against corruption:  

First, EITI reporting can and does expose suspicious deals and transactions - for example, by highlighting the lack of information available in countries which is needed to regulate the extractives sector effectively, and also by exposing discrepancies in payments. This information can then be followed up by other oversight and accountability actors.

EITI reporting addresses risks such as hidden ownership, opaque licensing procedures, and unaccountable revenue collection and management procedures. By requiring countries to disclose information on license allocation, revenue collection at national and subnational levels, sales of the state’s share of production, social expenditures, and operations of state-owned enterprises, EITI shines light on areas susceptible to corrupt practice.

EITI reporting can also expose government practices which are vulnerable to abuse. In Myanmar, for example, the first EITI Report revealed that the country’s state-owned enterprises were retaining about half of all extractive sector revenues in closed, highly opaque accounts without any formal oversight. In Papua New Guinea, the EITI Report disclosed that only two types of revenue streams were recorded in the national budget. These findings from EITI Reports have stimulated public debates on weaknesses in extractive sector governance in these countries. 

Second, EITI reporting provides anti-corruption actors with valuable contextual information, supporting discussion, monitoring, research and civil society advocacy.  For example, EITI Reports in Nigeria have been used by civil society to understand better the Nigerian national oil company’s oil trading business in its research on corruption risks in this area. 

Third, as mentioned earlier, the EITI is advancing global norms and practices on anti-corruption. These efforts are contributing to policy work in the OECD, the International Monetary Fund (IMF), the World Bank, and other similar organisations with whom EITI works in close partnership on topics such as beneficial ownership, artisanal mining, responsible sourcing of minerals and revenue collection. 

The EITI Board is now looking into how it can deepen EITI’s impact on anti-corruption efforts in member countries. A recent paper on this topic commissioned by the EITI recommended that EITI should further articulate the impact of its work in addressing corruption at the global and national levels, and engage more intensively with anti-corruption actors and companies on this. 

EITI has also shifted its focus towards making disclosures and open data a routine part of government and corporate reporting, so that governments and companies publish essential information about the sector directly on their websites in real time. This process aims to support more widespread use and analysis of the data, so that governments can be held accountable for the revenues they receive from the sector and there can be transparency about the identity of the actual beneficiaries of this money.

In conclusion, EITI’s role in raising expectations for extractives governance is critical. Stronger institutions and more open and efficient markets reduce the scope for corruption and help mobilise domestic resources for development.

I look forward to further discussion on our collective role in fighting corruption, and to identifying ways in which EITI and other actors from governments, international organisations, civil society, industry, and academia can align efforts towards achieving more transparency and accountability in the extractives sector.

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