Report / June 16, 2003

Global Witness Statement to the Extractive Industries Transparency Initiative

Global Witness is one of the founder members of the Publish What You Pay (PWYP) campaign of over 120 NGOs that are calling for governments, especially those in the G8, to take leadership and promote transparency over resource revenues worldwide (see The coalition is calling for Northern stock market regulators and international accounting standards to require resource extraction companies to report their net payments to all governments as a condition for being listed on stock markets.

The PWYP coalition is participating in the UK Government’s Extractive Industry Transparency Initiative (EITI), which is exploring options to promote transparency and wise use of oil, mining and gas revenues worldwide (see

Revenue transparency is a fundamental requirement for economic growth in many of the world’s poorest countries. Revenues from oil, mining and gas are critically important in about 60 developing or economic transition countries. Of the 3.5 billion citizens in those countries, some 1.5 billion live on less than US$2 per day, representing over two-thirds of the world’s poorest people. The World Bank identifies 12 of the world’s most mineral-dependent states and six of the most oil-dependent states as Highly Indebted Poor Countries with amongst the world’s worst human development indicators.

In many of these countries, governments do not provide even basic information about their revenues from natural resources; nor do multinational resource extraction companies publish any information about payments made to governments for access to those resources. Thus, the ordinary citizens of the country - who often own those resources under the Constitution - have no information with which to call their government to account over the management of revenues.

As well as improving company disclosure, the statement argues that it is very important to increase the transparency of government revenue streams from production sharing agreements or national companies. The EITI principles and its reporting schedules are a valuable first-step to this end, but they must be reinforced by appropriate conditionality on relevant bilateral and multilateral development and economic restructuring assistance, resource-backed loans from banks and export credit agency funding. In addition, the World Bank and the IMF should be required to mainstream revenue transparency across their lending and technical assistance portfolios.

Global Witness is highly concerned that the voluntary approach explicitly proposed by the EITI will not work where it is most needed. The EITI meeting on June 17th 2003 takes place against the backdrop of an unprecedented number of major corruption and embezzlement scandals in the extractive sector - involving several billion dollars of financial impropriety - that demonstrate that some political and business elites directly benefit from the current lack of transparency in the oil business. These include the ‘Kazakhgate’ scandal, ‘Elf Affair’, Angolagate, Halliburton's tax avoidance in Nigeria, and revelations in the LA Times that a large portion of Equatorial Guinea's oil revenues being kept under the President's direct control in an offshore account.

Revenue transparency is a priority for development, good governance, and international energy security. Without it there can be no accountable government in resource-rich-but-poor countries. The only losers in our proposals to require transparency through a series of joined-up regulations would be the corrupt few-who are already rich enough to be quite beyond our sympathy. The EITI is a welcome step in the right direction but, given the economic benefits to those cheating the system, the international community must move beyond a purely voluntary approach to deliver real change and to require companies and governments to come clean on the revenues generated by natural resource exploitation.