The US must move quickly to continue as a global leader in “The Transparency Revolution.”
Jana Morgan is the National Coordinator of Publish What You Pay US.
I was pleased to hear British Prime Minister David Cameron announce in a recent speech at the 2013 Open Government Partnership (OGP) Summit that the UK was making several important commitments in the country’s new National Action Plan to increase transparency and combat corruption, several of which are focused on improving governance of the extractive industries. (View a video of Cameron’s speech here.)
Cameron used a comparison between Equatorial Guinea and Botswana to explain how resource-rich countries can be plagued with corruption, graft and poverty, or the “resource curse,” which is facilitated in large part by a complete lack of transparency about payments made to governments and government expenditures:
Look at the difference between Equatorial Guinea and Botswana – both blessed with bountiful, precious natural resources.
For years, payments for Botswana’s diamonds have been managed by transparent institutions – and that wealth has been shared with the nation.
Whereas for decades, Equatorial Guinea has seen its mineral wealth siphoned off by a corrupt elite – all under a veil of secrecy.
A few people have got rich, but the majority have stayed gut-wrenchingly poor a tragic result of broken institutions and a closed, secretive government…The truth is this – closed governments breed poverty.
Cameron noted that although Equatorial Guinea’s GDP per capita is higher than that of Portugal and Greece, government corruption and opacity around natural resource payments has stunted the country’s development. He credits one of the key factors allowing Botswana to avoid the resource curse is its transparent institutions, and stated that the OGP is “helping drive a transparency revolution around the world.”
Specifically, the UK has committed to:
- Complete transposition of the European Union (EU) Accounting Directives in 2014;
- Ensure that UK-listed and UK-registered extractives companies publicly publish payment data by 2016, as called for by the EU’s Accounting and Transparency Directives;
- Create a publicly accessible central registry of who actually owns a company registered in the UK, i.e. so-called “beneficial ownership” information; and
- Achieve candidacy status in the voluntary Extractive Industries Transparency Initiative.
The EU Accounting Directive, coupled with the EU Transparency Directive, requires EU-listed, and large, EU-incorporated, oil, gas, mining and logging companies to publicly publish their payments to host governments around the world. This will include payments such as royalties, taxes and licensing fees, and will be disclosed by country and by project. These directives will provide citizens from resource-rich countries across the globe with unprecedented access to vital information to hold their governments to account.
Other Global Commitments
Cameron’s comments come at a time when momentum around transparency in the extractive industries has been rapidly gaining speed. Kicked off by the US passage of a groundbreaking transparency provision known as Section 1504 of the Dodd-Frank Act, other countries have quickly followed suit with their own transparency laws. The EU Transparency and Accounting Directives were passed this year, with a number of other EU countries such as Germany, France, Norway Sweden and Denmark agreeing to fast track transposition into their national laws. The Canadian government is moving forward with developing a similar transparency provision after commitments made by Prime Minister Harper at the June 2013 G8 summit.
US Commitments to Come?
Dodd Frank Section 1504 was crucial in developing a global transparency standard, but the final implementing regulations issued by the Securities and Exchange Commission (SEC) in August 2012 came under legal attack by the American Petroleum Institute and the US Chamber of Commerce. Following a decision by the DC District Court, the rule was vacated on very narrow grounds and sent back to the SEC to be reworked. Although the law is still intact, the SEC must now provide further justification for the regulatory choices made in a new rulemaking process.
The UK’s commitment to fast track transposition adds pressure on the SEC to swiftly schedule a new rulemaking for Section 1504, lest the US lose its position as a leader in global transparency efforts. Senior members of the US Senate, as well a group of 44 international investors with assets under management worth more than $5.6 trillion, have called on the SEC to swiftly move the rulemaking process forward. An important first step is to add 1504 to the public rulemaking calendar.
Although the US was not able to give a full report at the OGP Summit due to delays stemming from the government shutdown, it was able to provide a preview of its second OGP National Action Plan. The preview states that the second National Action Plan will make admirable commitments to move forward with US Extractive Industries Transparency Initiative candidacy, as well as to support beneficial ownership legislation that would deter corrupt activities such as money-laundering and tax evasion.
I am concerned however that this may not be enough for the US to continue as a global leader in transparency and anti-corruption efforts in the extractive industries. I would like to see the US follow the example of the UK and commit to making beneficial ownership registries public. I also believe it is important that the final version of the US National Action Plan state clearly that the US is committed to using Section 1504 “…as a valuable tool in promoting increased transparency around the world.”