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.