The role of transparency in fighting corruption in the extractive sector

EITI Global Conference: Plenary Session 4

Session Summary

This plenary session explored EITI’s role in addressing corruption in the extractive sector and provided a platform for debating broader policies related to transparency measures, enforcement mechanisms, and intra/inter-governmental cooperation. It highlighted some of the significant corruption risks that the EITI addresses, as well as the structural limitations it currently faces. Starting from the existing global consensus that, in many countries, extractives sector corruption can deprive the population of resources needed to reduce poverty, the panelists discussed the strategies and measures put forward by resource-rich countries to tackle corruption.

Speakers

Moderator: Ms Mathilde Mesnard, Deputy Director for Financial and Enterprise Affairs, OECD

Speakers:

  • Hon. Mahamudu Bawumia, Vice President, Republic of Ghana

  • Hon. John Penrose, Minister and Anti-Corruption Champion, U.K.

  • Mr Bolaji Owasanoye, Executive Chairman of Independent Corrupt Practices Commission, Nigeria

  • Mr Paul McDade, CEO, Tullow Oil

  • Mr Alexandre Vidigal de Oliveira, National Secretary of Geology, Mining and Mining Transformation, Brazil

  • Ms Alexandra Gillies, Advisor, Natural Resource Governance Institute (NRGI)

  • Mr Tur-Od Lkhagvajav, Co-Founder and Chairman of the Board, Transparency International, Mongolia

Session Details

The session was moderated by Mathilde Mesnard, Deputy Director for Financial and Enterprise Affairs at the OECD, and brought together speakers from government, industry and civil society. The panelists examined EITI’s potential in supporting anti-corruption efforts in a country, such as using requirements in the standard to address certain risks (hidden ownership, opaque licensing procedures and unaccountable revenue collection and management procedures). They furthermore discussed efforts aimed at embedding transparency in the sector, and the relevance of accountability in order for transparency to have real value. Some government representatives underscored how for effectively tackling corruption, cooperation between different areas of government are fundamental. There was a consensus among the panelists to “break silos”, and to create synergies between different transparency policies and measures. The panel also highlighted the need to draw a connection between sustainability in natural resources, shared prosperity and transparency – underlining the latter as the key component for leveling the play field in the sector.

The speakers all agreed that the EITI can be an important element in the fight to eliminate corruption in the sector, but that there is a need for better coordination and cooperation between various agencies and initiatives, both national wide and globally, in order to effectively tackle corruption.

Mathilde Menard, in opening the session, provided context for the session, outlining the extractive sector’s heightened exposure to corruption risk: According to data drawn from the monitoring of the implementation of OECD integrity standards,[1] one in five cross-border corruption cases occurs in the extractive sector. Further, OECD data indicates that SOEs operating in oil, gas, and mining industries reported witnessing more corruption-related acts than their counterparts in other sectors. She framed the session’s questions around the responsibilities of key stakeholders in promoting integrity: governments, companies, and non-governmental and inter-governmental stakeholders, including civil society and the media.

Hon. Mahamudu Bawumia mentioned that a direct consequence of transparency measures in Ghana was improvements of the revenue take of the country. He highlighted how transparency policies have opened up the debate for further discussions on the governance of the sector. He claimed that transparency has brought along increased public trust, given that policy makers are now, to a greater extent, held accountable by the public: “Transparency speaks for the voiceless (...) EITI is a voice for the people who are not there. If you implement EITI - it safeguards the interest of the poor”. Despite this, he mentioned that there are still many vested interests: “when you’re fighting corruption, it’s like fighting demons and principalities”.

Hon. John Penrose, emphasized how the EITI can be an effective tool for creating an audit trail for the public to scrutinize. In his opinion, the EITI, and the data being published through the initative, is a powerful idea that deserves more traction in other sectors as well. He highlighted the role of EITI for establishing a precedent for BO reporting in the extractive sector – something the UK is trying to build on more widely through its BO register. He briefly outlined the key role that BO transparency plays in the UK National Anti-corruption Strategy.             

Bolaji Owasanoye, explained ways in which the EITI has complemented Nigeria’s anti-corruption agenda and the impact it has generated. He emphasized the need for extending the focus on BO transparency to not only profit-making companies, but also to charities and trusts, as these, in his opinion, often are the vehicles employed for corruption and money laundering. He said that the EITI has been effective in opening up a closed sector, “turning a light on who is dodging taxes”.  

Paul McDade, emphasized how transparency secures a more even playing field, stating “that’s what we want as a company. We want to compete on an even playing field when we apply for new licenses”. He highlighted EITI’s requirement regarding contract transparency, which enhances the EITI reporting framework as a mechanism for addressing the companies’ priorities in their fight against corruption. Nonetheless, he said that in some circumstances greater transparency has not necessarily led to better accountability. He focused on the supply chain as a critical area and said that from his company’s perspective, this is one of their biggest risks.

Alexandre Vidigal de Oliveira, drew on the lessons learned from the Lava Jato corruption scandal in Brazil when explaining that the country experienced an important legislative reform, including corporate liability for corruption cases – a legal rule that was inexistent in Brazil until 2013 (“The country could finally sanction those who were found guilty of corruption.”). He also described their leniency programs, which have been helpful for prosecuting the corruption cases with more and better information. He highlighted the need for multiple tools to tackle corruption, such as the possibility for whistleblowers to come forward, to have a strong judicial system, and to have in place effective prevention measures: “If you take each measure in isolation, you wouldn’t be able to make any traction.” Finally, he focused on the transnational character of corruption, and the need for international cooperation.

Alexandra Gillies noted how “EITI is shining a light on the right places”) and mentioned that this will probably increase in line with new reporting requirements on BO from 1 January, 2020. She also highlighted EITI’s core strengths being the ability to identify government processes that are more prone to corruption: “EITI aims for a very systemic form of transparency”. She mentioned that EITI reports provide useful context information for anti-corruption officials, and as such, help create a platform for more evidence-based decisions. EITI’s main limitation is the way in which it can be “used” by some actors who highlight their participation in the EITI without really being engaged in the fight against corruption. This could be seen as “white-washing”, and as such, undermining its direct impact in fighting corruption.

Tur-Od Lkhagvajav emphasized the need for protecting and strengthening civil society’s role in fighting corruption. He explained that “Transparency has a simple formula: Openness and accountability”, and said that while there has been progress on implementation of the standard, there has also been a regression in terms of democratic space: “civic space is shrinking world-wide (…) 36 implementing countries have experienced attacks on civil society activities”. He remarked that the future of EITI stands on civil society. Civil society plays a vital role in guaranteeing meaningful mainstreaming and the use of published data. He called for a closer cooperation between initiatives such as the EITI and OGP, and that they need to join efforts to enlighten the shrinking civil space around the globe.

 

[1] These include the OECD Anti-Bribery Convention, the OECD Guidelines for Multinational Enterprises, the OECD Guidelines on Corporate Governance of State-Owned Enterprises, and the OECD Anti-Corruption and Integrity Guidelines for State-Owned Enterprises. For more information see: OECD Foreign Bribery Report, 2014 (https://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm) and State-Owned Enterprises and Corruption: What Are the Risks and What Can Be Done?, 2018 (http://www.oecd.org/fr/corruption/state-owned-enterprises-and-corruption-9789264303058-en.htm)

Q&A

The questions revolved mostly around beneficial ownership transparency, as a key element in the anti-corruption agenda. Some of them also focused on embezzlement, as well as on the “human rights dimension” connected to civil space. Regarding the first issue, the common response from the panelists was that for specific circumstances in which BO registers disclosed information that can be misused or expose the safety of certain individuals, such information (i.e. personal address) could be withheld from the public.

Nonetheless, both Penrose and Owasanoye explained that these exceptions should be done only on very specific and justified cases (for example for those whose physical safety could be threatened). In terms of money laundering and embezzlement, the Vice-President of Ghana highlighted the need to tackle smuggling from both a law enforcement and a market perspective. Finally, on the “human rights dimension”, Gillies emphasized the need for stronger enforcement of the civil society protocol as a key element in the EITI process.

Background

EITI Principle 5 underlines “the importance of transparency by governments and companies in the extractive industries and the need to enhance public financial management and accountability.” There is an expectation that transparency will lead to improved accountability and help reduce corruption, and that by making systems transparent and information available by default, corrupt practices will be more difficult to hide and easier to detect. Disclosure of information along the value chain and oversight by a multi-stakeholder group of the data being disseminated should help increase transparency and accountability, identify governance gaps and reduce the space for corruption and leakage. Thus, the EITI Requirements seek to address areas that have been identified as particularly prone to corruption risks, including licensing, beneficial ownership, SOEs, commodity trading, and revenue collection and management.

Livestream Recording

This session can be viewed from 07:48:00