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Introduction to resource transparency

 

For many developing countries, the sale of natural resources such as oil, gas and minerals, has the potential to provide vast sums of public money to lift millions out of poverty. Revenue from natural resources provides the best opportunity for economic growth and poverty alleviation. To put this in perspective: in 2008 exports of oil and minerals from Africa, were worth approximately $393.9 billion. This figure is nearly 9 times the value of international aid to the continent which amounted to $44 billion.

And that’s just an example of the evidence of the scale of wealth in Africa or in extractive industries in general. The potential wealth, on the other hand, may be far greater as Africa is considered the ‘next frontier’ in terms of discovering new resources.

It’s clear then that, natural resources simply dwarf aid spending. They are the best foundation that many impoverished countries can take advantage to build a better future.

But secrecy in the management of the massive revenues from oil, gas and mining companies in countries like the Democratic Republic of Congo, Nigeria and Angola has meant that the country's impoverished people have seen little or no benefit. For example in Angola, a Global Witness report in 2004 found that one in every four oil dollars earned went missing. At the same time one in four Angolan children died before the age of five from preventable diseases.

In fact, secrecy of payments made by companies to governments for the sale of these national-owned treasures often facilitates and even encourages corruption, violence and conflict. As a result, over half of the poorest billion people on the planet live in countries that are rich in natural resources.

The companies who pay governments for theses resources, and Western governments who regulate company financial reporting, could play a critical role in lifting this destructive veil of secrecy. By publishing what they pay to foreign governments for the right to operate in their territory, citizens of resource-rich countries would be able to ‘follow the money trail’ and use this information to hold their governments to account. It empowers them to demand better from the governments so that the revenues can be used for desperately needed services like schools and hospitals.

And this is what happened in the United States.

Last year the US took a landmark step towards greater transparency by introducing a law which requires all oil, gas and mining companies listed on the US stock exchange to disclose all payments they make to foreign governments.

The President of the United States, Barack Obama even mentioned it at the United Nations’ Millenium Development Goals Summit last September. To quote him in full,

We also know that countries are more likely to prosper when governments are accountable to their people. So we are leading a global effort to combat corruption, which in many places is the single greatest barrier to prosperity, and which is a profound violation of human rights. That’s why we now require oil, gas and mining companies that raise capital in the United States to disclose all payments they make to foreign governments.

If the US has done it. Why can’t the UK?

The good news is there is a movement of people, organisations and MPs that are pushing for the introduction of a similar law in the UK. Just like their US counterparts, they’re motivated by the desire to make it harder for corrupt officials to steal from their own people and stifle their development.

In the past two weeks three significant events occurred moving transparency off the shelf and into the mainstream.

First, as we blogged last week Finance Minister George Osborne announced that the government would be pushing for companies in the extractive industries to publish what they pay to governments in resource-rich countries.

Second, Anas Sarwar MP tabled a 10 Min Rule Bill in the House of Commons calling for similar legislation like that passed in the US requiring disclosure.

Third, across Europe an international coalition of organisations held a conference in Paris to discuss how to continue pushing for better and improved transparency standards.

The UK has the opportunity to be a leader on this campaign but we need to make it happen is demonstrated public support.

This is all happening now and you can be a part of it.

At the Global Poverty Project we will be playing a role in the public movement calling for greater transparency standards. That’s why we’ll be publishing a whole set of material around this issue because we want to see it change and together we can make it happen.

Join our Justice Campaign.

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