Tougher standards to fight corruption in the resources industry

By Sue Lannin, ABC News

More of the world’s governments have signed up to measures designed to reduce corruption in the global resources industry.

Around 3.5 billion people live in poor countries that are rich in resources but they do not see the trillions of dollars that flow from their mineral and energy reserves.

Last week, the United Kingdom and France joined the Extractive Industries Transparency Initiative (EITI), which requires countries to fully disclose taxes, royalties and other fees they receive from oil, gas and mining income.

About 40 countries have now implemented the voluntary scheme and about $US1 trillion in revenue has been disclosed.

Australia has launched a pilot EITI scheme but is not yet fully compliant.

Despite recent reforms in the US and the European Union, Australia does not require mining and energy companies to publicly reveal the taxes and royalties they pay to governments around the world for natural resources.

Federal Minister for Resources and Energy Gary Gray said in his written speech prepared for the EITI conference in Sydney last week that transparency for transparency’s sake was not necessarily the best policy.

“While I recognise the benefit for governments to better understand and negotiate market conditions, exposure of sensitive project, contract and other market information will distort market competitiveness,” he said in the speech.

But the senior policy manager for extractive industries at Oxfam America, Ian Gary, says investor pressure is mounting in Australia for more openness.

“I think Australia certainly needs to join the US as well as the European Union in putting in place mandatory disclosure requirements for companies that are on the Australian stock exchange,” he said.

Around 1,000 people from 100 countries attended the biennial EITI conference, including government officials, non-government organisations and mining and energy firms.

The conference approved new standards which make countries release information about production volumes and mining licences on a project-by-project basis.

Jonas Moberg, the secretary of the EITI Board, says transparency is becoming a reality in the energy and mining industries although there is still room for improvement.

“What the new standard seeks to do is to make sure that’s linked to contract transparency that will now be encouraged,” he told the ABC.

NGO says EITI merely symbolic

However, NGOs would like to see the standards tightened further as some of the new rules merely “encourage” countries to increase disclosure.

Environmental NGO, Global Witness, has called EITI a “totemic reformers club”, saying corrupt countries such as Nigeria are members.

Daniel Kaufmann, president of the Revenue Watch Institute, says the new EITI standards are a step in the right direction.

“Compared with the past it’s significant progress but we are not there yet,” he said.

Mr Kaufmann says contract transparency and disclosure of the ownership of mining licence holders should be mandatory as corruption in the mining and energy industries is rampant.

In its latest Resource Governance Index, the Revenue Watch Institute says Myanmar is the most secretive country in the world when it comes to revealing the income it receives from its natural resources.

Mr Gary says the problem is that the EITI code is voluntary and is dependent on good governance and strong rule of law.

“In many countries they simply haven’t taken the step to disclose,” he said.

“And in those countries that are part of the EITI process we see big problems with implementation; for example, disclosures that happens many years after actual production,” he said.

While conceding that Nigeria has serious problems with corruption, Mr Moberg, says the country has improved its EITI reporting standards.

Mozambique mining minister Esperanca Bias told the ABC that her country is committed to EITI.

“We are revising our mining law. The cabinet [has] just approved the petroleum law. We hope in the next session the parliament can clear those two laws also with the fiscal regime laws,” she said.

Oxfam is also targeting the world’s major oil companies, Exxon Mobil, BP, Shell and Chevron, because of their support for legal action challenging disclosure rules for the oil industry in the US.

The companies sit on the EITI board and Mr Gary says they need to change their stance.

“It’s completely unacceptable that those companies should participate on the board of an international transparency initiative while at the same time supporting this litigation,” he told the ABC in an interview.

Human rights concerns over resettlement

Rio Tinto and Brazilian miner Vale are also under fire from Human Rights Watch.

The NGO accuses the big miners of worsening the lives of people in northern Mozambique who were resettled to clear the way for coal mines.

Rio Tinto says it takes the issue of resettlement very seriously and Vale says it managed resettlements based on respect for human rights.

Earlier this month, brickworkers who lost their livelihoods because of the mines blocked the main railway in the region which transports coal.

Ms Bias says the Mozambique government is trying to address concerns about displacement.

“The mining activities are new in Mozambique,” she said.

“We need to have more dialogue among companies, communities and government.”

HRW senior researcher Nisha Varia, who wrote the report, says the Mozambique government has a poor record on human rights and consultation with affected communities.

“Communicating with affected communities and working with other parties such as civil society groups is one of the weakest areas so far,” she said from Mozambique.

“The government really needs to increase its engagement [to make] sure people know what their legal rights are.”