Many countries rich in natural resources are mired in poverty because of corruption and mismanagement of these resources. We believe that better disclosure and management of revenues paid to governments in resource-exporting countries by companies can deter corruption, minimise investment risk and ensure that these funds are used in the long-term interests of these countries and their citizens.
The Hong Kong Stock Exchange set an important global precedent when it required extractive companies to produce a one-off report on their payments to governments when listing. More recently the US government passed the Dodd Frank Wall Street Reform and Consumer Protection Act which included a provision requiring oil, gas and mining companies to disclose payments to governments annually and on a project-by-project basis. Similar legislation has been agreed in the European Union.
Chinese disclosure regulations will be necessary to create truly global transparency standards. Currently there are no specific regulations in Hong Kong or elsewhere in China concerning ongoing disclosure of payments made to foreign governments by listed oil, gas and mining companies.
In January 2013, Global Witness and Chinese consultancy SynTao published a report on exploring the potential role of the Shanghai Stock Exchange to improve extractive company disclosure and transparency. The report, “Transparency Matters: Disclosure of payments to governments by Chinese extractive companies”, presents a rigorous assessment of the tax payments made by Shanghai-listed extractive companies to governments in resource-rich countries in 2010 and 2011. It finds that while several companies positively stand out in the amount and quality of information they publish, much more could be done by the companies and regulators to enhance reporting beyond existing requirements. Greater transparency could help to promote a better business and investment environment for Chinese companies, enhance China’s reputation abroad and promote international development.
At the international level, China has occasionally endorsed the principles of the Extractive Industry Transparency Initiative (EITI), an international voluntary scheme which promotes greater transparency of revenue payments from the extractive industries to governments. In particular, China supported the UN General Assembly Resolution which highlighted the importance of Member States promoting transparency and the G20 Pittsburgh declaration that supported EITI participation. Chinese companies have also demonstrated a willingness to comply with EITI transparency requirements in various countries.
Chinese anti-bribery legislation
The introduction of China’s amendments to the country’s Criminal Law regarding commercial bribery was a welcome development and reflects the government’s intention to keep up with progressive international anti-corruption standards, such as those stemming from the UN Convention against Corruption. Corruption, particularly in developing countries, can have devastating impacts by diverting vast amounts of money from much-needed investment in social services. Similar to anti-corruption legislation in the United Kingdom and elsewhere, Chinese government resources should be set aside to make enforcement possible as a first step. Potential cases of overseas corruption should be investigated, both to ensure credibility to the law’s anti-corruption credentials and China’s international reputation.