More transparency needed in managing natural resources

More transparency needed in managing natural resources

George Soros, Chairman, Soros Fund Management, Open Society Institute,
Project Syndicate

Many developing countries that are rich in natural resources
are even poorer than other countries that are less well endowed.
This is because natural resources serve as an enticing prize to
fight over. Many countries with significant mineral deposits or
valuable cash crops are in the grip of repressive or corrupt
regimes or torn apart by armed conflict. This problem has come to
be known as "the resource curse."

Now a broad movement has emerged to tackle the resource curse.
Global Witness, a small British NGO, acted as the pioneer when it
campaigned to close the Thai/Cambodian border to Khmer Rouge
timber exports, ending illegal trade in teak and other rare
hardwoods. The resulting loss of revenue played a key role in the
demise of that genocidal organization.

Global Witness next turned to the problem of diamonds in
Angola, and a campaign against "conflict diamonds" led to the
Kimberley Process of Certification. Last year, Global Witness,
together with more than 60 groups from around the world, launched
"Publish What You Pay," a campaign to force resource companies to
disclose their payments to developing country governments. It was
endorsed by the British government, and many oil and mining
companies responded positively.

I am proud to be associated with Global Witness and the
"Publish What You Pay" campaign. But "Publish What You Pay" is
only the first step in tackling the resource curse. Governments
must disclose what they receive and, even more importantly, they
must be held accountable for the way they use their revenues.
That is what Caspian Revenue Watch, which I also support, seeks
to accomplish.

Caspian Revenue Watch aims to build the capacity of civil
society in the new states surrounding the Caspian Sea, through
research, training, and partnerships, to monitor the collection
and expenditure of government revenues from the extractive
sector. Greater accountability could result in a greater
contribution to meeting the UN's Millennium Development Goals
than most other initiatives.

Here the Chad-Cameroon oil pipeline sets a valuable example.
The World Bank financed the project on the condition that Chad
commits itself to complete transparency and uses the revenues for
poverty reduction. A stringent supervisory mechanism was put in
place with civil society participation; almost immediately, the
Chad government was caught diverting a US$25 million signature
bonus for arms purchases. Unfortunately the mechanism expires
when oil actually starts flowing. Obviously that arrangement must
be extended.

British Prime Minister Tony Blair announced an Extractive
Industries Transparency Initiative (EITI) at the World Summit on
Sustainable Development in Johannesburg last September. The need
for greater transparency in the management of resource revenues
was endorsed by the G8 declaration at Evian this June. This was
followed by a high-level meeting hosted by the UK government in
London in June and attended by governments, major oil and mining
companies, international financial institutions, and
representatives of civil society.

The overwhelming majority of the 59 participants at that
meeting endorsed the principles of EITI. A few producing
countries volunteered to be pilot cases in which the government
and all the companies involved would disclose revenues and their
use according to templates designed by the UK team. The
volunteers were East Timor, Ghana, Mozambique, and Sierra Leone,
with other important resource-rich countries indicating that they
may follow.

This is a promising step forward, but there is always a danger
that a declaration of principles and a voluntary approach will
turn into a sham. Public opinion must be mobilized to keep
governments and companies to their promises.

It is civil society that has moved the process this far, and
it must become even more deeply engaged, particularly in the
producing countries, to maintain the forward momentum and ensure
that the movement succeeds in lifting the resource curse once and
for all.