Many Countries Failing Test of Political Will to Implement Oil and Mining Industry Anti-Corruption Initiative

Tuesday, March 9 marks the deadline for candidate
countries to complete external "validation" of their implementation of
the Extractive Industry Transparency Initiative (EITI), a voluntary
initiative to increase transparent and accountable management of
natural resource wealth. Of the 22 countries subject to the deadline,
the fact that 20 have not completed validation will further test the
credibility of the EITI process.

While these countries are at various stages of implementation - some
making laudable progress - many have shown a lack of political will to
fully open their books on oil, gas, and mining payments in these
countries, says international aid agency Oxfam.

With more than half of the world's poorest people living in
countries rich in natural resources, the problems associated with oil,
gas, and mining booms - increased corruption, conflict, and
environmental degradation - are pressing concerns for Oxfam and its
partners around the world. Transparency of financial flows is an
important condition needed to unlock billions of dollars in oil and
mining revenues to help fight poverty.

Transparency and accountability

"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 too
often squandered or siphoned off by government officials," said Raymond
C. Offenheiser, president of Oxfam America. "The goal of EITI is to increase accountability and transparency in
those countries where it is most needed. It's disappointing that many
countries haven't yet cleared this hurdle, and it's clear that other
complementary measures focused on company and government disclosure are
urgently needed."

Only two countries - Liberia and Azerbaijan - met the deadline and
were subsequently judged compliant by the EITI board. While several
countries, such as Ghana, Nigeria, Mongolia, and Timor-Leste have
completed draft validation reports, others, such as Mali, Mauritania,
Niger, Equatorial Guinea, and Peru are further behind. According to
EITI's rules, countries that fail to meet the deadline will be "delisted" or dropped from EITI with
the option to reapply for candidate status. Countries have been advised
that they may apply for an extension if they provide evidence of
"exceptional and unforeseen circumstances" outside the country's
control that prevented them from meeting the deadline.

"The validation deadline was an important test of political will for
governments who say that they are implementing EITI. The EITI board
must carry out a fair, transparent process for granting any possible
extensions to ensure that the initiative maintains credibility. In
addition, supporting countries such as Spain should more actively
promote the implementation of EITI within their bilateral and
multilateral relationships," said Laura Ruiz Alvarez, extractive
industries advocacy officer of Intermon Oxfam (Spain).

A lack of transparency in the oil, gas, and mining sectors
- including secret payments, contracts, and opaque government budgets -
is a major contributor to the problems in these countries. Oxfam
affiliates and local partners around the world have pressed for greater
disclosure of information on payments from companies to governments,
contracts, and how revenues are spent.

Success where EITI is supported

Despite weak government capacity - as in many resource-rich
countries - Liberia was able to be validated and achieve "compliant
status" in 2009, proving that even very poor, post-conflict countries
can meet the deadline when EITI is strongly supported and promoted at
the highest levels of government. "For those governments truly
interested in implementation, millions of dollars of technical
assistance from donor governments are available. The board should not
accept sluggish government implementation as sufficient reasons for
extensions. If extensions are given, the board should explicitly
disclose the reasons for the extension cited by the country in its
request," said Offenheiser.

Since October 2006, a strong governance structure has been in place for EITI,
including a multi-stakeholder board including company, government, and
civil society representatives as well as a clear process for
implementation and validation. In 2008, the first 22 candidate
countries were given the March 9, 2010 deadline to assess their
progress as input into a board decision as to whether or not they are
fully "compliant" with the rules of the initiative.

The EITI board will consider all extension requests received by the March 9 deadline at its meeting on April 15/16. Oxfam International believes that any extensions given should be based on the existing EITI rules and contain a hard deadline
whereby a country failing to meet the new deadline would be
automatically dropped from the initiative without any further board
discussion.

Supporting civil society

Oxfam International has been supporting civil society partners
- many part of the global Publish What You Pay coalition - in several
EITI implementing countries who are working to ensure that their
governments faithfully follow through on EITI commitments. In several
EITI implementing countries, civil society activists promoting revenue
transparency have faced harassment, criminal charges, and jail time
merely for exercising their rights to freedom of expression as part of
their anti-corruption campaigning. Unfettered and independent civil
society participation at every step of the EITI process is
non-negotiable. In addition, transparency is needed in other areas to
ensure that citizens receive a fair deal from the development of
extractive industries. This includes disclosure of contracts and easy
access to government budget and expenditure information.

While the burden of implementation is on host governments, EITI does
not require international oil and mining companies to act unless host
governments decide to join the initiative. Given uneven EITI progress
to date, additional disclosure rules for oil, gas and mining companies are needed.

US could lead the way

One such measure, The Energy Security through Transparency Act
(ESTT), is a bi-partisan piece of legislation introduced in the United
States Senate in September 2009 by Senators Lugar and Cardin. This
legislation would require all oil, gas, and mining companies to
disclose payments to host countries and extend transparency as a truly
global standard for company operations. The ESTT Act would apply not
only to US companies, but to all companies registered with the US
Securities and Exchange Commission. This includes European companies,
such as Shell and BP, as well as those in emerging markets like China,
India, and Brazil. In addition to the US passage of this law, other
financial jurisdictions in Europe and elsewhere should pass similar
legislation.

"Those countries that are the headquarters for the global mining industry including Australia, Canada, and the US should also lead by example
by committing to become EITI countries themselves. They should also
emphasize the importance of EITI implementation in their bilateral
relations with resource-rich countries" said Serena Lillywhite of Oxfam
Australia.

"The decisions made by the EITI board following this deadline are
crucial for real progress in the global movement for oil, gas, and
mining industry transparency. Faithful implementation of the EITI,
complemented by other disclosure requirements, such as the Energy
Security through Transparency Act, will create a new global standard
for transparency and help citizens hold their governments accountable
for directing revenues to essential services like health and
education," said Offenheiser.