Op-ed by Director of Global Witness, Simon Taylor.
While oil, gas and minerals are by far the largest sources of state revenue for the world’s poorest nations, these resources, which should help fund development and sustainable economic growth, all too often turn out to be a curse, leading to increased poverty, child malnutrition and civil conflict.
At the heart of this paradox is the secrecy surrounding payments by oil and mining companies to governments – a lack of transparency that provides the perfect cover for corruption and embezzlement by ruling elites.
That is why Global Witness, 30 other international organizations and the international financier and philanthropist George Soros last week initiated an international campaign calling for legislation requiring companies to disclose payments they make to governments for the resources that they use.
Global Witness is devoted to exposing links between the exploitation of natural resources and the funding of conflict and corruption. The organization’s work in the world’s conflict zones has highlighted the double standards of the world’s resource extraction industries and the dispossession that results.
Before the launch last week of the “Publish what you pay” campaign, Global Witness’s main focus has been Angola. Although Angola earns from $3 billion to $5 billion from oil each year – an estimated 87 percent of state revenue – three-quarters of the population are forced to survive in absolute poverty on less than $1 a day.
More than 30 percent of Angolan children die before reaching the age of 5 and one child now dies of preventable diseases and malnutrition every three minutes (480 every day). Overall life expectancy is a mere 45 years.
The cause of these state failures is more complicated than just the country’s 40-year conflict; this in itself became an excuse for massive public losses and private gains. At least $1 billion – perhaps a third of state income – is believed to have gone missing from the state’s coffers every year for the last five years.
One of the main channels of revenue misappropriation was highly overpriced arms-deals with enormous kickbacks to top officials and their bagmen, such as those uncovered in the miasma of dirty dealing around France’s “Angolagate” arms scandal at the end of 2000. This is in stark contrast to the $200 million that the United Nations barely managed to collect to feed Angola’s 1 million internally displaced people, who are dependent on food aid.
At the center of this “paradox of plenty” are the multinational oil companies operating in Angola, such as Chevron-Texaco, ExxonMobil and TotalFinaElf, and their refusal to reveal any information about the payments they make to governments for the resources that they use.
When ordinary citizens are left without the most basic financial information, they cannot call their governments to account for their management of public resources. Oil companies make themselves complicit in the disempowerment of ordinary people by failing to tell them what resources are worth – information they routinely provide in the developed world.
The problem is widespread and occurs in all countries where natural resources provide a major portion of state income, where corruption is associated with state income, and where companies are not transparent about payments: Algeria, Angola, Azerbaijan, Burma, Chad, Cambodia, Congo-Brazzaville, Democratic Republic of Congo, Equatorial Guinea, Gabon, Liberia, Indonesia, Kazakhstan, Nigeria, Sudan, Venezuela and Yemen.
The chairman of ExxonMobil, Lee Raymond, has said that it is not his company’s duty to tell a government how to spend its money and that payments for resources are “commercially confidential.” Such statements are disingenuous.
“Transparent” companies are not telling governments what to spend their money on, they are merely letting the real owners of resources – the citizens for whom the state holds those resources in trust – what they are paying. And if oil companies routinely provide information on payments to every developed country in the world, why should payments to Angola or any other developing country be “commercially confidential”?
When BP-Amoco announced that it would be transparent, the response from the Angolan government was immediate: The company was threatened with having its concession terminated. It is clear that companies doing the right thing may face having their licenses reassigned to less scrupulous competitors.
There is a simple way to level the playing field, however. Publicly traded oil, gas and mining companies should be required by national securities regulators, such as the U.S. Securities and Exchange Commission, to publish a breakdown of net royalties, fees and other payments made for the products of every country in which they operate as a condition for being listed on international stock exchanges and financial markets.