Putting an end to some slippery business practices

Salt shakers
July 2003

Putting an end to some slippery business practices
The Publish What You Pay (PWYP) campaign is an online call for mandatory disclosure of payments to and transactions with governments by multinational natural resource companies, their subsidiaries, and business partners.

Significant foreign investment in less developed countries occurs in the extractive industries such as oil, gas, and mining. Revenue from this investment makes its way to governments in the developing world in the form of taxes, fees, and other payments. If this revenue were effectively and transparently managed, it could serve as a basis for successful growth and poverty reduction. Catholic Relief Services estimates that in the coming years, oil extraction alone will generate $200 billion for nations in Sub-Saharan Africa.

However, the state and other institutions that manage these resources are often, in practice, unaccountable to the parliaments and ordinary citizens of their countries. Revenues from resource extraction are disclosed neither by the governments nor the companies involved. This lack of accountability facilitates embezzlement, corruption and revenue misappropriation. In extreme cases, access to resources fuels regional conflict and the resulting disorder is exploited to facilitate further large-scale misappropriation of state assets.

This problem extends to all countries where extractive resources provide a major portion of state income, where corruption is associated with this income, and where companies are not transparent about payments. Oil, gas and mining industries are important in over 50 developing countries, which are home to some 3.5 billion people and where 1.5 billion of these people live on less than $2 a day. Twelve of the world's 25 most mineral-dependent states and six of the world's most oil-dependent states are classified by the World Bank as "highly indebted poor countries" with amongst the world's worst Human Development Indicators. Recent extractive resource governance problems have been cited in, for example, Algeria, Angola, Azerbaijan, Chad, Congo-Brazzaville, Democratic Republic of Congo, Equatorial Guinea, Gabon, Kazakhstan, Nigeria, Sudan and Venezuela.

Organizers of the Publish What You Pay Campaign acknowledge that mining, gas, and oil companies cannot control how governments of resource-rich nations spend taxes, royalties, and fees. But they do have a responsibility to disclose the payments they make, so citizens can hold their governments accountable. Campaign members charge that companies which fail to do so are complicit in the disempowerment of the people of the countries to which the resources belong.

The campaign does not require the disclosure of commercially confidential information, but asks that the basic data on net payments made to government and other public authorities which they are required to disclose in many developed countries be published.

Because individual companies might be put at a disadvantage by disclosing information others fail to reveal, voluntary disclosure is not a viable option, according to the PWYP. Yet all companies and the investment community would benefit from a level playing field if regulators required disclosure. Furthermore, it would enable them to address the risks to reputation arising from lack of transparency. Disclosure would also enable the citizens of those countries to call their governments to account over the management of the revenues from resource extraction.

For more information:
"Bottom of the Barrel": a report from Catholic Relief Services

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