‘How much do we get?’ An update on transparency of revenues from the sales of natural resources

Abstract

Examples of mismanagement and abuse of resource revenues continue to abound in countries with huge natural resource wealth and struggling with governance. Transparency is no silver bullet but rather a key element of a growing dialogue leading to change and hopefully to better governance. Thanks to the work undertaken by the Extractive Industries Transparency Initiative (EITI) and several NGOs, the issue of transparency of revenues from the sales of natural resources, in particular crude oil, is receiving increased attention. As more information is becoming available, also through to the inclusion of this stream of revenues in EITI reports, interested parties can better grasp the economic importance of sales of resources and the many risks associated with such transactions, resulting from corruption or from inexperience and lack of skills needed to maximize profits. Currently, discussions on how to further improve data collection are being conducted under the auspices of the EITI, notably with the creation of the EITI Working Group on Commodity Trading, and benefit from the support of NGOs such as the Natural Resource Governance Institute (NRGI) and Public Eye. The Organisation for Economic Co-operation and Development (OECD) also recognized that a concerted effort by producer countries, commodity trading hubs and OECD countries home to companies active in trading is necessary to tackle corruption and rent diversion and drive collective global action. National legislators so far refrained from enacting transparency regulations that would require resource purchasing companies to disclose the amounts they pay to selling governments and state-owned enterprises. Despite the failure of the United States to implement Section 1504 of the Dodd Frank Act and the withdrawal of the world's largest economy from the EITI, there are reasons to believe that the transparency trend will continue. The first trading company voluntary disclosures and tehcnological advances can contribute to more accurate data collection and corroboration. EITI has shown that it can effectively lead the way and mobilize stakeholders around the issue of transparency of revenues from the sale of resources. While the attention remains on the technical aspects of the disclosure of revenues and payments, it is important not to lose sight of the overarching goal. The impact of EITI and of any other national and international transparency initiative on the people in resource-rich countries ultimately depends on the ability of concerned citizens to interpret the information collected, and on the willingness and capacity of governments to undertake reforms which such information show to be necessary.