OPINION:Business interests must not be allowed to block EU transparency laws for extractive industries
NEW EUROPEAN legislation on transparency for the extractive industry is an historic opportunity for the poor in resource-rich developing countries to benefit from their vast natural wealth. But Ireland and other EU member states need to resist strong lobbying from big business and adopt much stronger positions if the legislation is to actually work for poor people.
Proposals published by the European Commission, would amend EU directives on transparency and accounting requiring extractive companies to report how much they pay to governments in revenue, broken down by country and by project. This information would equip citizens to hold their governments to account for these vast sums of money – ensuring they are spent on schools, hospitals and the kinds of infrastructure that will encourage growth.
Investors will also benefit from the legislation. Last week billionaire investor George Soros supported the legislation, saying he wanted to know that companies he invested in have an “open and transparent relationship with governments, so that contracts are not at risk of being torn up”. Bill Gates has also indicated his support for the proposals.
But it is the resource-rich countries of Africa in particular that have the greatest potential to benefit from increased transparency. In 2006, mineral exports from the Democratic Republic of Congo were worth an estimated $1 billion, yet, the treasury received just $86,000 from mineral-related revenue. Oil, gas and mineral exports from Africa alone were worth $393.9 billion in 2008 – nine times more than the continent received in international aid ($43.4 billion) in the same year.
Crucially, as donor aid budgets come under increasing pressure, legislative changes such as these will help countries mobilise and account for their own resources and move beyond a reliance on aid.
The power of having this information in the open should not be underestimated.
In Sierra Leone, a network of civil society groups and partners of Christian Aid, successfully lobbied for the introduction of the Mining Act of 2009.
This provides for greater transparency in the details of mining contracts struck between companies and government.
Immediately after the signing into effect of the Act, civil society forced the renegotiation of the contract between London Mining Company and the government, securing in the process a more equitable agreement for the citizens of Sierra Leone.
In Brussels last week, several states, including Sweden, Portugal and France, indicated their support for the proposals, including the requirement for companies to report on a project-by-project basis, and for companies to report in each of the countries they operate in.
This would include reporting within EU member states, a recognition that we should be aiming for universal standards of transparency and that to apply standards elsewhere that we are not prepared to apply to ourselves would be hypocritical.
There is, though, significant resistance to these proposals. Recently, the American Chamber of Commerce wrote to EU commissioner Michel Barnier. It opposed the proposals on the basis that investors have not requested the information (which is factually incorrect), that developing countries could not cope with the information, and that it would impose significant costs on business.
The Irish Government appears to be buying into these arguments, resisting the ambition of the proposals on the basis of possible “administrative burden” on companies, and expressing concern that there may be “legal obstacles” to reporting within EU member states.
To put the administrative concerns of oil and mineral companies – the EU estimates the cost would be equivalent to 0.05% of turnover for the companies – ahead of the needs of these impoverished countries, where 1.5 billion people live on less than $2 a day is an absurdly narrow view to take.
This is also a value-for-money issue, where Irish taxpayers are entitled to expect that the money we spend on aid in many of these countries is being spent in the most effective and coherent way, and not undermined by other government policies – a commitment contained in the White Paper on Irish Aid.
Greater transparency and accountability of companies and governments have huge benefits for development including helping ensure aid spending has the maximum impact.
Europe and Ireland have a wonderful opportunity to realise the original motivation behind these proposals – to ultimately enable impoverished countries benefit from the resources of their own country.
To allow established vested interests to dilute the proposals to the point that they become useless to these countries would be selling out hundreds of millions of people for selfish corporate concerns.
Sorley McCaughey is policy and advocacy officer with Christian Aid