Subject: GU: Window on the world

Window on the world

Transparency rules for developing countries rich in natural resources need global application. Murray Armstrong writes

Wednesday June 8, 2005
<>The Guardian

On July 1 the youngest country in the world, Timor-Leste (what we used to call East Timor) will score a significant first goal in the fight against corruption. That Friday will see its petroleum laws, being finalised this month, come into effect. They will control exploration, development and exploitation of resources and, crucially, the distribution of revenues. That requires transparency. Put simply, everything that is paid is published.

Mari Alkatiri, the country's prime minister, said at a recent meeting in London: "We want to avoid the curse as it has affected many developing nations." The "resource curse" as it has come to be known, is the social decay, the political dictatorship, the financial dishonesty, and the conflict and instability that has visited many poor nations that are rich in raw materials.

"In our three short years since independence," said Alkatiri, "we have developed a reputation for transparency." Consultations on the petroleum laws, which the prime minister envisaged as "a tool that can contribute to the wise management of Timor-Leste's petroleum resources, to the benefit of current and future generations", took place in public and were broadcast on radio and television. The teams visited remote parts of the country and talked to village leaders.

All gas and oil revenue will now go into a fund dedicated to social and economic development. This wealth, according to Alkatiri, is "for human development and the elimination of poverty". That development is defined by law, and government withdrawals from the fund can only be made with the permission of parliament. Revenues and taxes coming from major corporations will be an open book and a code of conduct for public officials has been established with legal powers to examine unexplained personal assets.

Transparency in Timor-Leste came about partly because of an organisation put together by the British government. While its name does not easily roll off the tongue, the Extractive Industries Transparency Initiative (EITI) has achieved some significant successes since it was launched by Tony Blair at the 2002 Johannesburg earth summit.

Ten countries are now at different stages in implementing the principles and methods devised by the body and another 11 have endorsed the programme and are preparing to adopt the criteria.

The government of Azerbaijan signed a memo of understanding with energy companies and local non- governmental organisations last November, and in March published an independent auditor's report detailing payments made by oil companies and receipts by the government.

Kyrgyzstan was the first country to publish information in the form recommended by EITI when it detailed revenue from the gold mining industry in October last year.

In Nigeria, for years near the top of the world corruption league, President Olesgun Obasanjo has directed all government departments and oil companies operating in the country to give full cooperation with the transparency auditors and, to show he means business, has provided security guards for the team. Their first task is to reconstruct a picture of all payments paid and received in the last five years and to report monthly to a working group composed of government, industry and NGOs.

Nasir Ahmad El-Rufai, federal minister in the Nigerian government, said at the London conference hosted by Hilary Benn, minister for international development, that the audits taking place will be physical as well as financial, to identify and tackle theft of crude oil from pipelines and illegal bunkering. "The poor governance of our relatively substantial cumulative earnings from oil - about $300bn (?165bn) - in the last four decades has had the most devastating impact on our national growth, development, and therefore quality of life of our large population of about 150 million," he said.

But he warned that the "oyster of the corrupt" is still flourishing and pointed to the "glaringly worrying silence" about the "large scale thievery from public treasuries" by previous government officials who still have "comfortable housing within the territories of several G8 countries, all of whom are subscribers to the EITI principles." Repatriation of these monies, he said, "should be an important aspect [of policy] by the government of the UK in its current leadership of both the G8, the EU and its specific Commission for Africa initiative."

These moves have been welcomed by NGOs such as Transparency International (TI), whose chairman Peter Eigen said: "It would be good if developed nations were to set an example in all of this instead of merely requiring it of poorer countries. Moreover, TI would like to see the principles and process reinforced and further empowered by a UN general assembly resolution."

This is echoed by the Publish What You Pay Coalition, a group of 270 worldwide NGOs, which has called on the Gleneagles summit to "send out a clear political message supporting revenue transparency efforts around the world". Mike Aaronson, director general of Save the Children, also sees Gleneagles as being the place where the G8 countries could set the standard for global reporting. "It would help if it was a mandatory requirement in the rich countries to oblige companies to disclose all payments," he says.

The tragedies of corruption are continuing. A recent report from Global Witness showed $1.1bn missing from Kazakhstan, with an American merchant banker, James Giffen, still awaiting trial in New York, accused of taking kickbacks worth $78m; missing money in the Republic of Congo is currently running at about $250m a year; $1.7bn has been salted away somewhere by officials in Angola; Equatorial Guinea's treasury is missing $500m; and in the tiny island of Nauru, halfway between Hawaii and Australia, the entire Nauru Phosphate Royalties Trust, worth more that $1.4bn, is unaccounted for.

"Every time that Nigeria spends eight times the amount it spends on health annually to service its huge external debt," said El-Rufai, "the world fails that poor child in rural Nigeria, rather than our powerful elite and their international partners, who borrowed, stole or wasted the money in the first place."

On side

Countries implementing some or all of the EITI guidelines:

Azerbaijan, Republic of Congo, Ghana, Kyrgyz Republic, Nigeria, Sao Tome and Principe, Timor-Leste, Trinidad & Tobago, Niger, Came

Countries that have endorsed the principles:

Angola, Bolivia, Cameroon, Chad, Democratic Republic of Congo, Equatorial Guinea, Gabon, Guinea, Niger, Peru, Sierra Leone


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