FINANCE: Self-Policing of Extractive Industries a 'Dismal' Failure

  • by Charles Fromm (washington)
  • Tuesday, March 09, 2010
  • Inter Press Service

Twenty out of the 22 current candidates to join the Extractive Industries Transparency Initiative (EITI) 20 have not fulfilled the basic requirements to have their candidacy assessed by Tuesday's deadline, raising serious doubts about their commitment to disclose their revenues from oil, gas, and mining, the New York-based rights group said.

The EITI is a voluntary initiative designed to establish greater transparency through standardised reporting requirements for the proceeds companies and governments obtain through natural resources.

A multi-million-dollar effort, EITI enjoys the backing of governments and civil society organisations around the world as well as that of multilateral institutions such as the World Bank and International Monetary Fund.

'It's easy for governments to sign up for the initiative and claim they are open about the money they earn from lucrative natural resources,' said Arvind Ganesan, HRW's director of business and human rights. 'But the proof is in whether they actually do what they promised, and so far the results have been dismal.'

Out of the 22 countries that applied for validation in 2008, only Azerbaijan and Liberia were found to be 'compliant'. Guinea voluntarily suspended its candidacy.

Membership in EITI is based upon an external review of the candidate countries' adherence to the basic standards of the programme.

Civil society organisations hope the increased disclosure and monitoring can help fight the rampant corruption and human rights abuses that often plague resource-rich countries.

In order for a candidate country to gain membership to EITI, they must first meet certain criteria, including the publishing of a national report that discloses all payments and government revenue from oil, gas and mining companies.

Governments must also make a commitment to formally engage civil society in order to begin the 'validation' process. The country has two years to prove their compliance.

However, in February, EITI's board denied Ethiopia's candidacy, referencing an Ethiopian law that bars civil society groups from engaging in human rights and governance issues.

Ethiopia is not the only candidate country imposing serious constraints on civil society, particularly independent organisations focused on human rights and on reducing corruption. Equatorial Guinea, for instance, does not permit independent human rights groups to obtain legal registration and has a history of brutally repressing domestic criticism.

According to HRW, Equatorial Guinea, 'despite having signed up to join the initiative in 2008, only hired a firm to carry out its validation review on the eve of the deadline to complete the validation process.' It is, however, just one of 19 remaining countries that are still engaged in the implementation process and who have completed only superficial steps to comply with EITI.

Last year, HRW released a report detailing a wide range of issues related to corruption, financial mismanagement, and political instability related to western central African countries' massive oil wealth.

'These industries generate billions of dollars per year in poor countries. The revenues amount to far more than official aid flows and could fund health, education and other essential services, but are often squandered or siphoned off by corrupt elites,' Bennett Freeman, an Oxfam board member and EITI civil society board member, said prior to an EITI meeting in February 2009.

Freeman is referring to the 'resource curse', the theory that explains why many countries that are endowed with natural resources actually have development indicators lower than those without them. This curse has plagued many of EITI's candidate countries and is a large reason for the initiative's existence.

One of EITI's stated goals is the 'belief that the prudent use of natural resource wealth should be an important engine for sustainable economic growth that contributes to sustainable development and poverty reduction.'

Tuesday's deadline affects the 22 countries accepted as candidates in 2008. Ten other candidate countries, including Afghanistan and Iraq, joined more recently, and have later deadlines.

© Inter Press Service (2010) — All Rights ReservedOriginal source: Inter Press Service

Where next?